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Sunil Bastian
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Post-war capitalism

A key issue in understanding the political economy of contemporary Sri Lanka is how we characterise the period after the military defeat of the LTTE in May 2009. I would call it 'post-war' rather than 'post-conflict'. A better way is to look at what happened in May 2009 as a point of historical transition, where there is a continuity and discontinuity with the preceding period. Probably we have seen an end to the period of violent challenges to the state that began in the early seventies. This is significant. It has created space for capitalist growth and political activism that was not possible before. But it is not an end of history, or a new beginning. It is a point of historical transition where some of the old problems remain and new ones are created.

With the defeat of the LTTE, the Sri Lankan state has managed to consolidate the juridical entity called Sri Lanka. The July 1977 election inaugurated a new phase of capitalist development in Sri Lanka, characterised by greater openness to global capitalism. However the political violence, armed conflict and control of a certain part of the country by the LTTE were barriers to achieving the full potential of capitalist growth. Although the war had an impact on the economy, it did not collapse in the manner usually depicted in the conflict literature. On the contrary, Sri Lanka managed to show an average of 5.1 per cent growth from 1978 to 2009.  Part of the reason was the concentration of the economy in areas away from the central theatre of the conflict.  For example, by the time negotiations with the LTTE began, 49.4 per cent of GDP was concentrated in the Western Province. This was an area endowed with the infrastructure, human resources and other facilities necessary for a market economy. Secondly, the opening up of the economy made external conditions much more important for the health of the economy. So long as global markets provided opportunities and the government could ensure security of the economically more important areas, the economy could function.

However the civil war excluded a significant part of the country from the process of capitalist growth. Now the military victory over the LTTE has opened up the Northern and Eastern Provinces for economic exploitation.  This is a key motivation for the central government to maintain control over development in the North and East. Although we now have elected provincial councils both in the North and East, the heavy presence of armed forces, especially in the North, combined with the centralisation of development policy-making at the centre and special role played by the Presidential Task Force based in the Ministry of Economic Development, ensure central control of economic development.

It is in this context that control and distribution has become a critical issue in the North and East. The Northern and Eastern Provinces contain within them the largest under-utilised area in the country. These areas are bound to be the focus of capitalist exploitation. However many of the institutions dealing with land issues have been undermined during the time of the war. This creates a better environment for all kinds deals and land grabbing.
 
The political forces that gave leadership to ending the war have changed the nature of the state in Sri Lanka. The key institution is the presidency. It is important to remember that President Jayawardene introduced the presidential system to ensure a centre of power independent of the pressures of the parliament, so that more liberal economic policies could be implemented. President Jayawardene, who led this process, talked about these policies in the mid-sixties when the UNP was in power. But he had to wait until 1977 to introduce them. Although the political parties around the SLFP criticised the presidential system when they were in opposition, once in power they prefer to enjoy the power than do away with the presidential system. Therefore the presidential system has become a structural element that maintains class power.

The presidency exists in a society where checks and balances on the executive are weak; the cancer of patronage politics, which has seeped into all spheres of Sri Lankan society, dominates; and the persistence of pre-capitalist social relations prevails. As soon as such a powerful centre of power is created these factors generate a political culture based on loyalty towards this centre. Therefore under every regime a highly personalised power structure gets built up around the president.

The military victory gave the political leadership that ended the war enough power to centralise the system even more. Constitutional amendments that were introduced to limit the power of the president have been removed. In addition, the two-term limit for anyone to hold the office of president has been done away with. In the context of an all-powerful presidency, this is a formula for indefinite rule by one person. The control of key positions of the state machinery by members of the same family has taken Sri Lanka's dynastic politics to a qualitatively new level. At present members of the same family hold key positions such as the presidency, speaker, Minister of Economic Development and the secretary to the Ministry of Defence. This creeping authoritarianism is buttressed by a powerful military, which now absorbs a significant amount of resources.

In the meantime, the electoral institutions that allowed the Sri Lankan electorate to change parties in power have been severely undermined. In a country where, from the seventies, every regime has tried all manner of tricks to continue their term, the prevailing electoral institutions and practices developed around them do not augur well for the continuation of democracy.

The undermining of the electoral system that gave the electorate an opportunity to change the regime in power began with the 1982 referendum, which the incumbent regime rigged using all possible means. In addition, in contrast to the first-past-the-post system of elections, in the current system of elections the most likely scenario is for the governing party to control some part of the state machinery when elections are held. For example, when presidential elections are held the governing party is in control of the parliament, and vice versa. This makes it easy for the governing party to utilise state resources for the benefit of the ruling party during elections. This contrasts with the first-past-the-post system, in which a caretaker cabinet ran the government once parliament was dissolved. In addition, the bureaucracy became relatively neutral once parliament was dissolved, because they did not know which party would be in power on the day after the general election. Therefore Sri Lanka could hold relatively free and fair elections. This is no longer the case.

Making use of the stability created through the defeat of the LTTE, the Rajapakse regime is continuing the economic policies that are more open to global capitalism which were begun in 1977 by the UNP. Large-scale infrastructure projects are rationalised on this basis. The regime has taken steps to make use of opportunities within global capitalism focusing on areas such as foreign investment, trade, migrant labour and tourism. Foreign aid has been mobilised for this purpose. The government has secured financial support from the IMF. Financial markets have been further liberalised.

However there is a difference in the policies of this regime, especially in relation to the role of the state in the economy. All indications are that we have come to an end of neo-liberal reforms of the state. The peculiarities of the economic ideology of the Rajapakse regime come from its commitment to a centralised state and the role of the state sector in the economy.

In post-independence Sri Lanka, the commitment to a large state sector in the economy has come from various political currents. Contrary to widespread belief, it was not only the left that favoured an important role for the state. The right also looked towards the state to achieve various development goals. This was especially in the era of five-year plans of national development before neo-liberalism became hegemonic. For example, the UNP regime of 1947 and the SWRD Bandaranaike government of 1956 looked towards the state for industrialisation. For Sinhalese nationalists, too, the state was instrumental for various nationalist goals, such as redressing economic discrimination committed during the colonial period, and protecting the economy from foreign domination. The left looked towards state control of the main sectors of the economy as an important step towards socialist transition. For the left, the state was also seen as a vehicle of economic growth and social justice.

While these were the principal ideological currents with regard to the role of the state in the economy, in reality the state sector was used for various other objectives. It became a means of settling scores with political opponents by nationalising their assets, a source of employment for political catchers, and a source of patronage for politicians of the regime in power.

The state that the Rajapakse regime is refusing to reform has all these characteristics. It is saddled with loss-making government institutions that ultimately have to be subsidised by public funds. The public sector has become unwieldy. Public resources have to maintain large cabinets and various perks for the politicians. From time to time it has expanded by creating jobs for political reasons. It is riddled with patronage politics. The main outcome is that the state has been undermined by the regime. The persistence of this highly centralised, dysfunctional state is now saddled with significant defence expenditure.

The other important element buttressing post-war capitalist development is Sinhala Buddhist nationalism. Contrary to the belief of liberals, who normally places nationalism and capitalism in opposite camps, there is enough evidence to show that these two phenomena can easily supplement each other.

The hegemony of Sinhala Buddhist nationalism provided the necessary support for the regime in power to pursue the military option. The Rajapakse regime projected the military campaign against the LTTE as a patriotic war. However it is a patriotism that defends a sectional interest. Given the nationalist history of Sri Lankan politics, this patriotism is about defending the country of Sinhala Buddhists.

Political forces backing Sinhala Buddhist nationalism are a key factor that supports three of the most important elements that creates better conditions for the development of capitalism. These are maintaining the spatial consolidation of the state, supporting a highly centralised presidential system and continuing of the strength of the armed forces at the present level. All these factors are critical for further development of capitalism.   

An important issue to consider in this context is the role of these political forces in dealing with social contradictions that further development of capitalism is bound to throw up. At the level of the elite it is clear that Sinhala-Buddhist nationalism does not have any problem with capitalist growth. In fact there are a significant new section of capitalists who at the same time are the patrons of strengthening Sinhala Buddhist nationalism. This has been the case in the past and there is no surprise it is happening now as well. But how about their position on issues such as inequality, which is an inherent characteristic of capitalism? For example, in the struggle to equalise educational opportunities in the past, there was a clear division between the English-educated westernised elite and the Sinhala educated rural middle classes. The latter was in the forefront of the politics of equalising opportunities in education. This seems to have disappeared in the post-war context. One of the most important social changes that has happened since the liberalisation of the economy is the rise of a new middle class that comes from a semi-rural/rural Sinhala-speaking background. Their need at present is not the struggle for equality in education, but to ensure that they get the benefits provided by state education as well by the market.

It has never been easy to understand Sri Lanka's political economy by focusing only within the boundaries of the national state. It is necessary to place Sri Lanka in a global context. During various periods of Sri Lanka's history so-called external factors have impinged on our history in different ways. This took a qualitative shift during the colonial period, which is sometimes called the first wave of globalisation. From the early 1970s Sri Lanka's political economy developed in a context characterised by a new wave of globalisation.    

A major challenge for Sri Lanka's political economy in the post-war period will be the contradiction between the particular logic of state power characterised by the features described above, and the demands of capitalist growth based on markets, private capital and openness to global capitalism. Certain aspects of the logic of state power evident in post-war Sri Lanka contradict with the logic of capital that is always global. In addition Sri Lankan state has to manage its international relations within a global political order that is showing signs of significant changes. How Sri Lanka resolves these contradictions will be an important issue to monitor.

Some of the questions are related to the economy. At present it is manifested acutely in the problems faced by the external account in the macro economy. Discussions, especially in the business pages of the newspapers, constantly cover these issues focusing on questions such as balance of payments, foreign debt, foreign aid etc.

But there is also the larger question of how Sri Lanka will deal with the more complex issue of  the changing world order. In the post-independence period, with all its flaws, the notion of non-alignment gave the country a set of ideas to guide its foreign relations. In contrast to a concept such as 'national interest', non- alignment is a concept that helped us to conceptualise the world. This concept is no longer relevant. Unfortunately nothing else has replaced it. To complicate the matter the world order is definitely undergoing a shift that is epochal. The patterns of this change at global level are still being worked out. Unfortunately, in this complex context, Sri Lankan foreign policy seem to be ad hoc, largely driven by internal compulsions, and often changes not only with the party in power, but also depending on who holds the presidency. This means Sri Lanka is still a long way from developing a new set of ideas with which to deal with the globalised world in the twenty-first century. 
 

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