The Politics of Economic Austerity


 “Just as political democracy is all that stands between individuals and an overmighty government, so the regulatory providential state is all that stands between its citizens and the unpredictable forces of economic change.” Tony Judt (Reappraisals: Reflections on the Forgotten Twentieth Century)

by Tisaranee Gunasekara

From time immemorial, humans have imaged their heavens, the ones in the sky and the ones on earth. Thomas More, dreamer and politician, saint and persecutor of religious dissenters, called his own version of the ideal state Utopia, a name he coined from the Greek, meaning no place. Perhaps he meant it as a signal or even warning. After all, utopias are not finished products but works in progress. They can be lodestars, but never reachable destinations.

Good governance was an effective electoral slogan. Contrary to the utterances of some ministers, the replacement of the Rajapaksa regime with the Sirisena-Wickremesinghe administration did not bring about good governance. That change merely enabled the long and never ending walk towards the utopia called good governance. Good governance is not and cannot be an achieved reality; at the very best it can be a set of guidelines to act within and a series of goals to work towards.

In Thomas More’s Utopia, several religions coexist in peace and even atheists are tolerated. Yet as the Chancellor of Henry VIII, More was notoriously intolerant and excelled at and exulted in burning religious dissenters. Politicians cannot be depended on to usher in any utopia, including the ones they themselves imagined.

Everywhere and always, politicians, most politicians, develop a tendency to abuse power irrespective of party or ideological affiliations. The uncouth conduct of the Minister of Higher Education is only the latest indication that getting rid of the Rajapaksas was far easier than getting rid of the execrable practices which became the norm under their rule. The best guarantee that the necessary journey towards good governance doesn’t end on the opposite shore is not action by this or that political leader but an optimum combination of fair laws, strong institutions and a citizenry willing to stand up for their rights.

Given the problems confronting Sri Lanka, two security guards ordering a couple out of the Independence Square might not seem like a big deal. It wasn’t and it was. That incident indicated that the tendency towards selective moral policing is alive and well in the post-Rajapaksa Sri Lanka and if left unchecked can turn into a scourge for ordinary citizens. The rapid response to this incident via social media and the satisfactory resolution of the matter are symbolic of the very real difference between the old and the new. The Rajapaksas could impose any arbitrary rule they liked, with near impunity; the absence of democratic space prevented ordinary citizens from raising their voices. Today that space exists to a considerable extent. Even when protests are met with state violence, the public can take their grievances to the Police Commission, re-rendered independent by the 19th Amendment. Such institutional safeguards are far more material in protecting the post-Rajapaksa democratic space than grandiose promises or lofty declarations by politicians who seem to think their governance is, by definition, good governance.

The institutional baby steps towards good governance are evident in the response to the controversial hit-and-run accident in Rajagiriya. Whether Minister Champika Ranawaka was responsible for the accident or not remains to be uncovered. But had this accident happened when Mr. Ranawaka was a powerful minister in the Rajapaksa administration, he wouldn’t have suffered any inconvenience, even if he had been manifestly, undeniably guilty. Most of the media would have been mute and all eye witnesses silenced. There would have been no outcry and no investigation. Today there is an investigation and the courts have ordered the police to record a statement from Minister Ranawaka and to arrest him if necessary. Perhaps the investigation will not uncover the truth, but the fact of its existence is a step forward. The commendable stance taken by the court is a sign that the rule of law is re-emerging, after the long Rajapaksa winter.

Some institutional progress and the emergence of a less indifferent and more involved citizenry – these are the real achievements of the post-Rajapaksa era. Economics will play a major role in deciding whether these achievements can be protected and enhanced or whether they will be obliterated in the interests of hanging onto or regaining power.

Economic Blues

The Rajapaksas went down to an unexpected defeat due to many factors. Rice and curry economics was one of them, perhaps even the decisive one, the most important reason which compelled a segment of the Rajapaksa support-base to change its political allegiance and vote for Maithripala Sirisena.

The Sirisena-Wickremesinghe administration can ignore the primacy of rice-and-curry economics only at its own peril.

The Prime Minister has promised that the substantial hike in the Value Added Tax will not cause changes in the prices of some consumer essentials. Even if this promise becomes a reality, the new tax measures cannot but cause an increase in the overall cost-of-living (including education and health costs) and a concomitant decline in living standards. And as is ever the case everywhere, this blow will fall with disproportionate hardness on those occupying the lower rungs of the income ladder. Indirect taxes are regressive in nature; they inevitably erode the purchasing power and the consumption levels of lower and middle classes. The resultant drop in demand can have ripple effects, contracting the economy, reducing growth levels, decreasing employment and income-generation and worsening absolute and relative poverty.

This is a reality which needs to be accepted and acknowledged by the government.

For those who voted in the Sirisena-Wickremesinghe administration hoping for a real and continuous improvement in their own economic conditions, this would be a bitter pill indeed. They will be disappointment and discontented; if these sentiments turn into political disillusionment, it can undermine the democratic gains of the post-Rajapaksa period. This threat can come both from a government resorting to repression to maintain stability and a racist-populist opposition advocating a return to the Rajapaksa past.

The planned reintroduction of capital gains tax is aimed at revenue generation and ensuring a less unfair distribution of the costs of economic austerity. That and the proposed increase in income tax are an indication that the government is trying to ensure that those who occupy the upper and upper-middle rungs of the income ladder too will have to bear some of the costs of the coming austerity. Once again these measures are necessary but not sufficient to contain popular discontent. If the economic situation is dire – and it is dire – and if people are being asked to tighten their belts, then the politicians must lead by example. That is absolutely essential to contain the political fallout of economic austerity.

In Sri Lanka, the political class has become a privileged-scree. Its members are exempt from taxes and enjoy a variety of rights and privileges which are denied to ordinary citizens. The politicians and not the poor are the real welfare kings and queens of the country. The oppressive increase in the VAT can never be justified in the public eye, if there is no reduction in the costly privileges enjoyed by the parasitic political class.

To survive the economic crisis, the government needs popular consent. Popular consent would be hard to come by if it looks as if the political class is enjoying the good life while ordinary citizenry, be they poor, middling or rich, suffer deprivation either absolute or relative. If the government fails to compel the political class to share the burden of austerity, the economic crisis will turn into a political crisis sooner rather than later.

The Possibilities and Dangers

of Hybrid Government

The recent history of Germany is helpful in understanding both the potential and the dangers inherent in a hybrid government.

Germany has been governed by a coalition consisting of the Christian Democratic Union (CDU) and the Social Democratic Party (SDP) for more than a decade. This coalition of the two traditional rivals brought the country rich politico-economic dividends. So long as the economy and society functioned properly, the absence of a strong democratic opposition mattered little. But with the refugee crisis placing burdens on the German economy and causing cracks in German society, the oppositional space began to be filled by a relatively new party of the hard right, the Alternative für Deutschland (AfD).

The hybrid nature of the Lankan government renders more doable the introduction of palliative measures to contain the political fallout of economic austerity. It also makes the costs of not doing so higher, because the benefits of failure will accrue primarily to those who are outside the current governing consensus, which means the Rajapaksa group and other Sinhala-Buddhist supremacist entities.

The Rajapaksa vision of development was akin to the Rajapaksa vision of nation-building – compulsive rather than consensual, structurally unequal and profoundly anti-humanitarian. The ethno-religious populism of the Rajapaksas served as a cover for their anti-popular economics, a ruse to reconcile the Sinhalese to their worsening economic plight. If the Sirisena-Wickremesinghe administration is compelled by the economic crisis to embrace the Rajapaksa brand of economics (tax the people and spend on themselves), rapid de-legitimisation will result. The current administration cannot seek refuge in faux patriotism as the Rajapaksas did, even as a temporary measure. Any attempt to use laws and the police to clamp down on public expressions of economic discontent will undermine the administration’s democratic credentials and thereby its raison d’être.

As Tony Judt pointed out, in France a segment of the working class and the poor, disproportionately affected by economic austerity, became the vehicle of growth for the right wing National Front of Le Pens (father and daughter). These people were "looking for someone to blame and someone to follow" and found a home in the neo Fascist right, "whose programme consists of one long scream of resentment" (Reappraisal). It is easy to imagine the lay and ordained extremists in Sri Lanka presenting themselves as the saviours of economically threatened Sinhala-Buddhists. Since the Lankan left traditionally contained within itself some germs of national-socialism, it would be easy for the racist right to don the multiple cloaks of progressivism, anti-imperialism and anti-capitalism and blame ugly Americans, encroaching Indians, rich Tamils, richer Muslims or conspiring Christians for the economic plight of poor Sinhala-Buddhists.

This danger cannot be met with laws, propaganda or the more overt uses of state power. It can be met only with an economic strategy which is fair, which ensures that the burden of economic austerity is distributed proportionately between the rich and the poor, the powerful and the powerless. A degree of economic justice is possible even in times of austerity. It is also a vital political necessity. It is through economic justice the ranks of extremists can be depleted until they turn into a permanent minority which is always able to have its say but never ever its way.

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