Focus on inequality

Focus on inequality

Sunil Bastian

There is a possibility that Sri Lankans will participate in another presidential election before the end of this year. This election will be held after the country has faced what was probably the worst economic crisis in the post-colonial period. The primary reason for this was the Sri Lankan state’s inability to service loans from global financial capital. 

Capitalist transition within a state is a process that involves changing institutions or the ‘rules of the game’, so that markets become the primary mechanism for resource allocation. These changes must be legitimised at an ideological level. When institutions to establish markets are successful, they become ideas that seem to be natural and commonsense, thereby creating a hegemony. The establishment of the hegemony of markets is not a technocratic process, but a political process. Conflicts and struggles are always a part of this. Some of these struggles are at an ideological level. The process of capitalist transition takes place in a particular society with its own history. This means that capitalism is not some sort of a model. It is shaped by political struggles and historical processes in a particular context. Finally, it takes place within global capitalism. 

When you look at the history of capitalist transition in different countries, you can see how the process is shaped by the particular history of that society. This is seen in the trajectory of social policies within capitalist development. For example, in some countries individual responsibility is a central cultural concept. This has an impact on social policies. There are other countries where responsibility of society to take care of every individual is an established value. This gets translated into the state taking more responsibility and formulating social policies on this basis.

There is a direct relationship between the evolution of ideas on social policy and trajectories of capitalist development. When capitalist transition faces a crisis, and this has a social impact there is a search for new ideas. Within the history of capitalist transition in Sri Lanka, the late colonial period saw the beginning of a serious discussion on social policies. Many factors, such as the impact of the global recession in 1930s and the impact of world wars on global capitalism and the Sri Lankan economy, contributed to this. The ideas that emerged included ensuring a minimum level of food security, state responsibility for education and health, protecting the smallholder peasantry, and ensuring a minimum level of protection for the working class. An ideology of distributive justice underlined all these. These ideas dominated the social policy debate until 1977.

With the advent of the neoliberal period of capitalist transition, which began after regime change in 1977, other the ideas such as protecting the vulnerable, safety nets and poverty alleviation, began to dominate. The basis of this ideology is economic growth and trickle-down. This means economic growth is primary. When it happens benefits will trickle down to the poor. Economic growth is elevated to a fundamental condition that needs to be achieved to have a better society. For many economists it is almost like a religious belief. Even a cursory glance at developed capitalist countries where some economic growth has taken place show the fallacy of this idea. 

If we examine closely what is measured by the official poverty line, it is the ability of a household to obtain a certain minimum level of income to survive. This has been projected as a major development achievement. In measuring the level of poverty, the focus is on individual households. There is no analysis of power relations that ensures the particular level of income of a poor household. The moment you begin to analyse these power relations which maintain the minimum level of income to a household, you begin to understand the close link between poverty and inequality. Power relations that maintain some households at this minimum level of income also ensure a higher level of income to others. It becomes impossible to ignore inequality if you want to understand poverty. Recently inequality within capitalist transition has become a major area of research - even in developed capitalist countries. Thomas Piketty’s seminal work has opened this discussion in many countries. 

More than four decades of the more liberal form of capitalist transition has brought about major socio-economic changes in Sri Lankan society. With the deepening of capitalist relations of production, there have been major changes in the agrarian sector. The share of agriculture in the economy has significantly declined. In 1977, 30.7 per cent of the national output was from agriculture. By 2022 it had declined to 8.7 per cent. There has been a gradual deterioration in the viability of smallholder paddy. The 2019 Household Income and Expenditure Survey shows that only 8.6 per cent of income in the rural sector was from agriculture. The other side of this rural transformation is the growth of a population depending on wages. The growing working class is found in many socio-economic formations - organised, informal, sub-contractors, etc. A significant section of this labour are women. Some sections of the working class sell their labour in other countries. While the working class has grown, institutions that protect their rights and working conditions don’t operate in many sectors. What existed in the past has been gradually dismantled. On top of this, the growth of inequality in education and skills training has worsened the situation of the underprivileged.

The overall outcome has been the growth of a highly unequal society. Data from the Household Income and Expenditure Survey conducted by the Department of Census and Statistics shows that in 2019 while the richest 20 per cent of the population acquired 51.4 per cent of national income, the poorest 20 per cent had only 4.6 per cent. IMF policies imposed on Sri Lanka in order to protect the interests of global finance capital are bound to make the situation worse. Generating a policy debate focusing on inequality is the best way to begin a new discussion on social justice in Sri Lanka. An election campaign can provide a conducive environment for this. This is important for a country that has seen so much of violence due to socio-economic reasons.