The Central Bank Lesson: Public Pressure can right government wrongs


by Rajan Philips


It would be too trite to say that all is well that ends well. For some, the Central Bank governorship did not end well at all. For the new Governor, it is only the beginning. There have been all round commendations for Dr. Indrajit Coomaraswamy, far too all round perhaps for the liking of some in the government. The lunatic (f)lies about LTTE connection have been swatted away quite gallantly even by those who usually have opposition ointment ready for political flies. It is a sad fact of Sri Lankan public life that any Tamil and every Tamil, whatever the political or social location, must pass the Tiger test. Even the Sixth Amendment oath is not enough for the politically unhinged. Dr. Coomaraswamy has been appointed as Governor of the Central Bank in extraordinary circumstances, and extraordinary challenges await him. By all accounts, he not only has the competence but also the character, and most of all the goodwill of most people to succeed in his new assignment.

The circumstances of his appointment also raise non-technical expectations in addition to technical challenges. I can think of three such expectations. Economic and trade liberalizations and globalization over the last three or four decades have brought central banks and their governors from the esoteric obscurity of economics into public limelight. Ed Greenspan and his successors in the US, Mark Carney who was recruited from Canada to preside over the Bank of England, and India’s outgoing Reserve Bank Governor, Raghuram Rajan of the Chicago school are all national and international figures. Manmohan Singh was the reluctant ascendant from University Professor to Bank Governor, to Finance Minister, and finally India’s Prime Minister. They played a very public role in the alignment of the national economies to changing market and global circumstances. Sri Lanka may not need a celebrity governor but the process of liberalization that began in 1977 did not quite have the public identification with it of a bank governor. Not that there were no competent governors, but whether their competence and expertise were given scope and space to proffer disinterested advice is the question.

In fact, it is no secret that the last two governors were appointed to toe the political, rather the presidential/prime-ministerial line, not in any ideological sense but to act as cheerleaders and advocates for ambitious and ill-advised government initiatives and projects. First, it was mega development mania; now it is the megapolis mantra; and articulating the two regimes is the Port City. One would hope that the new governor will not be asked to cheerlead anything for anybody but layout the macroeconomic picture and let the economic fundamentals speak to the viability or the absurdity, and everything in between, of government initiatives. A second expectation would be to regularize the location of the Central Bank, which by law ought to be in the Finance Ministry, but has been brought under the Prime Minister’s jurisdiction by gazette notification. The new governor might be able to do little about this, but those who pressurized the government in regard to the governorship should also push the government to leave the institutions where they are supposed to be instead of moving them around like pawns to suit someone’s idiosyncrasies.

The third expectation is about succession. The best legacy plan in any institution must be the succession plan. The Sri Lankan public service has been gutted by undeserving and/or ill-equipped political appointments at all levels. It began with the police and administrative services, then infected the judiciary, and finally disgraced the Central Bank. The bank fared better when professional economists were few and far between the country’s two university campuses and the bank offices. Now Sri Lanka boasts of a strong fraternity of economists, but the political leaders wouldn’t pick the best and the brightest among them for public service or for ministerial portfolios. One would hope by the end of Dr. Coomaraswamy’s tenure, old practices of recruiting and nurturing talent for proper succession would have been restored. Hopefully as well, public pressure will keep pushing the government to honour its good governance promises in public service recruitments.


Protect Colombo’s

built heritage

The greater lesson from the Central Bank experience is that this government is amenable to positive pressure. I say this as a compliment to both those who took to political insistence and the President and Prime Minister who finally yielded positively to public concerns. The lesson is that the Prime Minister is not immovably stubborn, that the President and the Prime Minister do not always have to agree, and that it is sometimes good for them to agree to disagree and to compromise without overpowering one another for the greater common good. The takeaway from this experience could be that public pressure could be positively used to persuade the government to change direction for the better in other policy areas as well. Indeed, it must be so because the traditional conduits for transmitting pressure from the people to the government between elections – the parliament and the cabinet are hopelessly clogged up and dysfunctional. The less ranted about them, the better.

There is a difference between exerting positive political pressure to right government wrongs between elections, and negatively opposing the government as permanent preparation for the next set of elections – be it local, provincial, parliamentary or presidential. The central bank experience is an example of the former. Breaking coconuts at temples as a form of political protest is an example of the latter. Calling it a cultural form of protest is, well, just nuts. There are quite a few policy areas and initiatives for positive public pressure. Contrary to my own resignation about it, the Port City does not yet seem to be a done deal at all. True to form, the government makes fait accompli pronouncements quite prematurely in regard to many initiatives. So there seems to be room for positive manoeuvre and change on the Port City and more assuredly in regard to the megapolis initiative. The challenge, however, is that these initiatives are multi-dimensional and multi-faceted and are not amenable to finding a convenient target for public attention, as it was in the case of the Central Bank.

Last Thursday, The Island carried an opinion piece by Architect Ashley de Vos crying foul of mindless destruction of Geoffrey Bawa’s iconic architectural creations for questionable redevelopments. This madness has been going on for years. Colombo has had its belly turned inside out by charlatans of development. There is little regard or institutional protection for its built heritage. The municipal mania is for renaming streets after political and social leaders, but there is no scheme in place to recognize and preserve the dwellings where those leaders lived. Beautiful buildings are destroyed for car parks and serene dwellings are turned into clubs and eateries, killing urban memories and the character of a city. The bull dozers will make matters worse when they roll in to make megapolis happen. What is bad for Colombo will also be bad for our provincial cities when megapolis spills over from Colombo to outstations.

My point is to make Ashley de Vos’s cry a cause for public action. Just as the our natural heritage (environment) needs to be protected from the externalities of the Port City, Colombo’s built heritage needs protection from the ravages of mindless development. The layers and levels of government that weigh down the city are not interested in protecting its heritage, or providing basic services to its residents. They are interested in inviting developer barons who will develop for profit without paying anything for the infrastructure expansion that will be needed to sustain the new demands. In the afterglow of the Central Bank experience, protecting Colombo’s built heritage and keeping it a place of living for its people seems to be a cause worthy of public action.

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