Opinion

Are the Rajapaksas Neoliberal?

Summary

The actual proponents of neoliberalism might have a fit if told that the Rajapaksas are in their camp.

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According to the New Left – particularly student activists and academics – the Rajapaksas are “neoliberal”. The actual proponents of neoliberalism would be shocked to hear this allegation.

Any neoliberal economist in Sri Lanka could tell you that the bipartisan consensus on liberalization that existed since 1977 came to an end in 2004, when Mahinda Rajapaksa was voted President on a zero privatization platform.

From 1977 to 2004, a third of all SOEs were privatized. In contrast, Mahinda’s 10 years in power saw nationalizations in public transport, fuel import and distribution, insurance, hospitals, and even thriposha production.

Legal instruments like the Revival of Underperforming Enterprises or Underutilized Assets Act (2011) and the use of the military in economic activity, went completely against property rights and free competition, which are cornerstones of neoliberal policy.

Neoliberal economists will tell you that the Rajapaksa’s have no fiscal discipline, are highly protectionist, and waste tax-payer money on loss-making State-Owned Enterprises. Their penchant for printing money and building infrastructure is arguably more in line with Keynesianism.

Whereas Yahapalanaya attempted to introduce reforms to the Monetary Law Act to make the Central Bank politically independent, current Governor WD Lakshman is on record advocating for greater coordination between fiscal and monetary policy, ie: “politicization”.

In fact, Lakshman is one of the most authoritative critics of Sri Lanka’s relationship to the IMF and World Bank. A proponent of state-intervention, import-substitution and development banking, he called for “alternatives to neoliberalism” days after his appointment by the Rajapaksas.

The Rajapaksas have historically refused to submit to full blown structural adjustment, and have discontinued the Yahapalanaya-negotiated IMF program. State Minster Ajith Cabraal claims that Sri Lanka will never go to the IMF and accept neoliberal restructuring again.

On the policy front, the government has cut interest rates seven times this year, rather than letting the market decide. Meanwhile, credit ratings agencies have repeatedly downgraded Sri Lanka’s position, indicating a lack of confidence from neoliberal institutions.

Budget 2021 has proposed the creation of a national development bank, possibly the country’s first since the NDB and DFCC were privatized after the assassination of Ranasinghe Premadasa.

The Central Bank plans to introduce lending targets based on government-defined priority areas, departing from financial liberalization. One of the first financial reforms undertaken in 1977 was the abolition of such lending quotas.

Make no mistake, the Rajapaksas believe in private sector-led, FDI-funded, export-oriented growth, backed by the state and the military. They are categorically “capitalist” in that sense, but not “neoliberal”, which entails a specific set of policies.

From the ten principles of the “Washington Consensus” outlined by economist by John Williamson in 1990, the Rajapaksas violate every single one except for “deregulation”, which in itself is vague and applicable to many forms of capitalist development.

The New Left’s tendency to slap terms like neoliberal and fascist on anything it doesn’t like, and reverse engineer an argument to justify this conclusion, is idealistic and unlikely to win over the unconverted.

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