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Pitfalls of export-led growth

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By Prabhat Patnaik

After Sri Lanka and Pakistan, Bangladesh has become the third country in our neighbourhood to become afflicted by a serious economic crisis. It has asked for a $4.5 billion loan from the IMF, apart from $1 billion from the World Bank and $2.5-3 billion from multilateral agencies and donor nations. Though the government has put on a brave face, Bangladesh is facing a growing trade deficit, shrinking foreign exchange reserves, a rapidly depreciating currency, a record inflation and an energy crisis that has necessitated massive power cuts.

Ironically, Bangladesh was being hailed, just a few months ago, as a success story of “development”, and indeed, according to many development indicators, it had made remarkable progress. Female literacy had reportedly increased to 73 percent, infant mortality rate had become half that of Pakistan from which it had seceded in 1971, and its “Human Development Index” was higher than that of India, Pakistan and several other countries of the region. Many called it an “economic miracle” and not without some justification: a country that had been considered a “basket case” at independence, had pulled itself up quite remarkably to outperform all its neighbours, which is why the sudden emergence of economic difficulties for it has come as a big surprise to many.

As in the case of Sri Lanka, there is a tendency to blame “corruption” for the crisis; but, though corruption itself is reprehensible, this is an utterly facile explanation. More plausible is the view that the rise in international prices of a number of commodities, in the wake of the Ukraine War, has increased the import bill of Bangladesh to a point where it has simply run out of foreign exchange to pay for imports; for an import dependent country, this has created domestic shortages that have pushed up the inflation rate. And the shortage of foreign exchange, primarily dollars, also explains the depreciating exchange rate, despite the using up of foreign exchange reserves for stabilising it. The problem with this explanation, however, is that it focuses only on imports and makes no reference to Bangladesh’s reduced export earnings from garments that account for 83 percent of its total exports.

Some Bangladeshi economists have blamed the country’s monetary policy for the crisis: Bangladesh kept its interest rate unchanged for a long time instead of raising it. Had it done so, it would have been able to attract adequate private financial flows for financing its trade deficit; and in such a case the exchange rate would not have depreciated and remittances would not have dried up in expectation of such a depreciation. But this again is a superficial explanation; the problem lies much deeper, in the very nature of the strategy of export-led growth that Bangladesh, together with most other countries, has been following in the era of neo-liberalism.

The wisdom of pursuing a strategy of export-led growth has been discussed among development economists for at least half a century, ever since the so-called East Asian “miracle” started being contrasted with the comparatively sluggish growth experience of countries like India that were pursuing, in the World Bank’s language, an “inward looking” development strategy. This entire discussion, however, has missed an important element that plays a role in real life.

Among the various expenditures that constitute aggregate demand in an economy, some are autonomous while others are induced by the growth of aggregate demand itself. Exports and government expenditure are generally considered to be the two main autonomous items: consumption, for any given distribution of income, is supposed to be dependent on the level of income itself. There is no doubt an autonomous element in consumption too that is independent of income, but that becomes pronounced only in certain situations, for instance when goods hitherto unavailable to consumers suddenly become available.

The growth of demand and hence of output in an economy depends on the growth of the autonomous element of demand. And in a neo-liberal economy where being open to cross-border financial flows imposes limits on the fiscal deficit relative to GDP and also practical constraints on the government’s ability to tax the rich and stimulate demand without raising the fiscal deficit, exports become the main stimulus for growth. A neo-liberal economy in short is characterised by primary reliance upon export-led growth.

But the export-led growth strategy is not confined only to a neo-liberal setting. The government can deliberately encourage exports, rather than expanding the home market by enlarging its own expenditure, in which case we can have export-led rather than government expenditure-led growth, but with the government still being pivotal to growth; indeed, many argue that this was the case with East Asian countries.

We must distinguish between two cases among countries pursuing an export-led growth strategy: one where the countries earn systematically large current account surpluses and thereby build up their foreign exchange reserves, China being a prime example. In the case of such an economy, any adverse development in the world economic situation makes a difference only to the magnitude of the current account surplus, which affects the magnitude of accumulated foreign exchange reserves only marginally. The country therefore, can ride out such an adverse development without experiencing any crisis.

Many other countries, however, belong to the second category, where they run more or less perennial current account deficits, balance their payments through private financial inflows, and even when they build up foreign exchange reserves these are financed through borrowings, including from private financiers. India belongs to this category, as do the countries of South Asia in general, and indeed most countries of the global south.

In the case of this second group of countries, if there is a widening of the current account deficit because of some exogenous reason, whether a pandemic induced reduction in tourist earnings (as in the case of Sri Lanka), or a Ukraine War-induced increase in import prices, or a world recession-induced fall in export earnings (both of which have happened in the case of Bangladesh), its impact on the economy gets exaggerated because of the behaviour of private agents in general, and of private financiers in particular. This is because, when there is a widening of the current account deficit, and hence a greater need for private financial inflow, this very widening causes a greater financial outflow.

Private financiers expect the currency of the country that has seen a widening of its current deficit to depreciate, and hence, concerned exclusively with their own interest, take funds out of the country, thereby intensifying the foreign exchange problem for it. In fact, if things were left exclusively “to the market”, it is not clear that the country would ever reach an equilibrium in the foreign exchange market; but that is when the country approaches the IMF, and a loan from it creates expectations among private financiers that the depreciation of the exchange rate would be arrested, so that the foreign exchange market can come to some sort of an equilibrium. But the IMF demands a heavy price for giving a loan, in the form of a reduction in welfare spending, a winding down of the public distribution system, a handing over of the nation’s assets to foreigners (sometimes called “denationalisation” of assets) and so on.

It is this exaggeration of an initial shortfall in foreign exchange to a huge shortfall because of the behaviour of private finance, that occurs over an extremely brief period and pushes the country to the steely embrace of the IMF, which explains why countries suddenly go from being “miracles” to mendicants. The problem with export-led growth is precisely this: its apparent success can evaporate in a jiffy; and this happens when the pursuit of export-led growth makes the country dependent on the whims and caprices of globalised finance.

We have seen this happen in our neighbourhood, even to countries like Sri Lanka and Bangladesh which had notched up impressive human development achievements. With the world economy stagnating, and exports of several third world countries being hit by such stagnation, the list of mendicant countries is likely to grow in the coming days; and India despite its economic size and the large size of its foreign exchange reserves (though these are built up not from current account surpluses but from financial inflows) is by no means immune from it. The only saving grace in India’s case is its foodgrain self-sufficiency (though at very low levels of consumption) and external relations that would allow oil imports from countries “sanctioned” by imperialism. Even foodgrain self-sufficiency, however, would have disappeared if the Modi government’s three farm laws had been implemented; but the kisans saved the day for the country.

The idea of export-led growth had become discredited by the inter-war crisis of capitalism before it made a reappearance through neo-liberalism; with world capitalism confronting a new crisis, a change away from it is once again on the horizon.

(This article was originally published in the People’s Democracy)

https://www.networkideas.org/news-analysis/2023/06/pitfalls-of-export-led-growth/



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Opinion

The eternal pilgrimage of Hajj: A journey through faith, sacrifice and humanity

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Hajj pilgrims

Every year, the spiritual compass of the Muslim world turns towards the holy city of Makkah, where millions of pilgrims gather for Hajj — one of humanity’s oldest and most profound journeys of faith.

This year, too, the sacred valleys of Saudi Arabia are filled with the echoes of “Labbaik Allahumma Labbaik” — “Here I am, O Allah, here I am” — as Muslims from every continent respond to a divine call that dates back thousands of years to Prophet Ibrahim (Abraham).

Among them are thousands of Sri Lankan pilgrims, dressed in simple white garments, leaving behind worldly status, wealth and identity in pursuit of spiritual purification and closeness to God.

According to Muslim Affairs authorities, the Kingdom of Saudi Arabia has allocated a Hajj quota of 3,500 pilgrims for Sri Lanka for Hajj 2026, enabling devotees from across the island to undertake the sacred pilgrimage. The annual allocation is determined through agreements between Saudi Arabia and Muslim-majority and minority nations worldwide.

Since early this month at the Bandaranaike International Airport in Katunayake, emotional scenes unfolded as families bade farewell to departing pilgrims with tears, embraces and prayers.

Elderly parents clutched prayer beads, children waved anxiously, while relatives sought blessings from loved ones embarking on the once-in-a-lifetime spiritual journey.

For many Sri Lankan Muslims, performing Hajj is not simply travel — it is the fulfilment of a lifelong dream nurtured through years of prayer, sacrifice and savings.

In villages, towns and cities across Sri Lanka, preparations for Hajj often begin months or even years in advance. Some families save gradually over decades, while elderly pilgrims regard the journey as the culmination of a lifetime of devotion.

Hajj is the fifth pillar of Islam and is obligatory for every financially and physically able Muslim at least once in a lifetime.

Yet the pilgrimage is far more than a religious obligation.

It is a journey deeply rooted in the story of Prophet Ibrahim, known as Abraham in Christianity and Judaism, and revered across the Abrahamic faiths as a towering symbol of faith, obedience and sacrifice.

Islamic tradition recounts how Prophet Ibrahim was commanded by Allah to leave his wife Hajjar and infant son Ismail in the barren desert valley of Makkah. With unwavering faith in God’s wisdom, Ibrahim obeyed.

Left in the scorching desert with little water or food, Hajjar desperately searched for water for her thirsty child, running seven times between the hills of Safa and Marwa.

Her determination, courage and trust in God are immortalised in the rituals of Hajj today.

Pilgrims reenact Hajjar’s desperate search by walking between Safa and Marwa, symbolising perseverance, faith and hope even in moments of despair.

According to Islamic belief, Allah answered Hajjar’s prayers by causing the miraculous Zamzam well to spring forth beneath baby Ismail’s feet — a well that continues to provide water to millions of pilgrims centuries later.

Another defining moment in Ibrahim’s story is commemorated during Hajj and Eid-ul-Adha — the willingness of the Prophet to sacrifice his beloved son in obedience to God’s command.

As Ibrahim prepared to carry out the sacrifice, Allah replaced Ismail with a ram, signifying that faith, sincerity and submission were greater than the act itself.

The symbolic stoning of the devil during Hajj recalls Ibrahim’s rejection of Satan’s temptations that sought to discourage him from obeying God.

Thus, every ritual of Hajj carries profound historical and spiritual meaning.

The pilgrimage is not simply movement through sacred spaces; it is a reenactment of timeless lessons in obedience, sacrifice, patience and devotion.

One of the most remarkable aspects of Hajj is the extraordinary equality it represents.

Pilgrims, regardless of nationality, race, language or social class, wear the same simple white attire, known as Ihram.

Presidents, businessmen, labourers and farmers stand side by side in prayer, under the blazing Arabian sun, erasing worldly distinctions and affirming the Islamic belief that all human beings are equal before God.

Religious scholars often describe Hajj as the world’s greatest annual demonstration of unity and humility.

The spiritual climax of the pilgrimage occurs at the plains of Arafat, where pilgrims spend hours in prayer and repentance seeking divine forgiveness.

Many Muslims believe that a sincerely accepted Hajj cleanses a believer of past sins and marks the beginning of a spiritually renewed life.

Upon returning home, pilgrims are honoured with the title “Hadji” or “Hajji,” a distinction that carries immense respect within Muslim communities, including in Sri Lanka.

Traditionally, a Hadji is viewed as someone who has fulfilled one of Islam’s most sacred obligations and returned with heightened spiritual responsibility.

However, Islamic scholars emphasise that the title is not merely ceremonial.

“The true significance of becoming a Hadji lies in personal transformation,” a Colombo-based Islamic scholar said.

“A pilgrim is expected to return with greater humility, compassion, honesty and social responsibility. Hajj is not about status; it is about becoming a better human being.”

Across Sri Lanka, mosques have been conducting special prayers for pilgrims, while families gather to seek blessings before departure.

The pilgrimage season also creates a unique emotional atmosphere within Muslim communities, where neighbours visit departing pilgrims and homes become centres of prayer and reflection.

Saudi Arabia has introduced extensive arrangements this year to facilitate the pilgrimage, including digital crowd management systems, improved transport networks, upgraded accommodation and enhanced healthcare services.

Sri Lankan diplomats and officials, stationed in Saudi Arabia, have been coordinating closely with Saudi authorities to ensure the welfare and smooth movement of Sri Lankan pilgrims throughout the pilgrimage period.

Sri Lanka’s Ambassador to Saudi Arabia, Ameer Ajwad, recently inspected facilities in Mina, prepared for Sri Lankan pilgrims, and reaffirmed efforts to provide a safe and spiritually fulfilling Hajj experience.

As millions circle the Holy Kaaba in prayer, Hajj continues to stand as one of the most extraordinary gatherings on Earth — a timeless spiritual movement connecting humanity across borders, cultures and generations.

For Sri Lanka’s pilgrims, the sacred journey is not merely a passage to Makkah.

It is a journey into the soul — a return to the eternal lessons of Prophet Ibrahim, Hajjar and Ismail — lessons of sacrifice, endurance, obedience and unwavering faith that continue to inspire humanity centuries later.

By Ifham Nizam

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Remembrance Day, 19 May 26: Was it traduced?

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War Heroes Memorial

‘Ferocious in battle, Magnanimous in victory (Col Tim Collins- Brit Army)

Sri Lanka commemorated the 17th anniversary of the end of the 30-year Eelam conflict with a moving War Heroes Remembrance Day ceremony on 19 May 26 at the monument on the Parliament grounds. It was a solemn occasion when the Nation paid tribute to over 29,000 Defence and Police people (women and men) who died in the conflict. Sadly, politics, aberrations and theatrics were also on display.

The gravity of the sacrifices made and consequences of the Eelam war and two Southern terrorist insurgencies (1971 and 1988-9), are felt mostly by those who lost their loved ones in the conflicts as the nation mourns with them. Any hesitation to pay tribute belittle the fallen.

It was regrettable to see that the ceremony was also political. Why were the general public excluded from honouring the fallen? It defies understanding that such actions could take place at an event held sacred by the nation. Is there any other country where citizens are prevented from laying wreaths at a National Remembrance monument?

In the UK, from where this ceremony originates, 10,000 veterans (of an army of 109,000 -just half of Sri Lanka’s) take part in the march past every November. They are selected by their regimental associations from thousands of applications on a first come first served basis. Public access is unrestricted with numbers attending being the only barrier to viewing.

It is shocking that in Sri Lanka while public access is denied (selectively?), ‘invitations’ are given to attend a national Remembrance Day. They were restricted to just three government nominees! Who made this unwise decision and why?

Did the other government cohorts object to being invited? Would they have been embarrassed to come? Is the purpose of this to prevent prominent actors in the victory from receiving overwhelming accolades if they attended? Was there a fear of gate crashing? Perish the thought.

What is the need to make political speeches at an event to honour the nation’s dead? Couldn’t the speeches be made in Parliament or broadcast the day before? Seeing VIPs enjoying a joke at this ceremony hurts.

When laying wreaths at the monument, national customs should be followed by all, as in the past. A traditional low bow with hands clasped humbly, as at funerals, should be the form. In the West the head is bowed. It is unnecessary to imitate Americans by placing one hand over the heart when bowing, as on CNN. Bringing the other hand over the midriff elaborates but is an awkward addition.

The dress for all civilians attending should be similar, respectful and appropriate as for formal events and uniform, matching that of the retired military.

This is the time for the nation to remember and reflect for a moment on the dead in conflict, not only of the Military and Police who sacrificed their lives in thousands doing their duty but also of the innocent civilians who died in tens of thousands. Or, is it that some, other than the NOK, who survived in the North and South, have become hardened to death and do not wish to recall how appalling the losses were? Has death lost its meaning if also not its sting?

During 1988-9, when 60,000 died in 13 months (over 100 a day), a tea planter in Bandarawella was shot dead by Southern terrorists for hoisting the national flag on Independence day.

In the Eelam conflict just one regiment, (regiments are the core and heart of the Army), Gemunu Watch, lost 3,424 KIA and 4,272 WIA. The Imperial British Army after WWII lost 2551 (just over half of the Gemunu Watch number) in war in Korea (1949-51), Falklands (1982), Iraq, Afghanistan (20 years) and 40 years of insurgency in Northern Ireland. (SL Army infantry regiments (SL Light Infantry, Sinha, Gemunu, Gajaba and Vijayba) had about 19,000 of 21,000 of the Army KIA. That is the enormity of the sacrifices made by our indomitable military. Who then struggled to find heroes in the military?

Fisher Weerasuriya from Matara and farmer Vernugopal from Jaffna who never knew each other were brought to a place hundreds of miles from their villages, to blow each other’s brains out. ‘Had they a quarrel? Busy as the devil is, not the smallest. Their political leaders had fallen out; and instead of shooting one another had the cunning to get these blockheads to shoot each other’ (transcribed from ‘Sartor Resartus’ – Carlyle). Do Sri Lankan politicians who stirred the pot not know this when they fervently say they hope to prevent conflict in the future?

Is it correct then to exult that 6,000 troops died in the last phase of the war? Is that an achievement? As FM Montgomery said of the WW1 British Army “Good fighting Generals of the war appeared to have complete disregard for life’.

Reparations are claimed by the winners in wars between nations. After civil conflicts there should be reconciliation. There should be no humiliation. When will commemoration of the dead be national in Sri Lanka? How many from communal minorities attend this ceremony? Every citizen from North to South should be welcomed to attend Remembrance ceremonies in the future. That will hopefully help to sow unity.

The military died without a murmur for their companions so that the nation would survive. Let next year’s commemoration be a truly national event where the focus is on those who died while veterans in large numbers and the next of kin together with the general public, are warmly welcomed.

“If it be life that awaits, I shall live forever unconquered: If Death I shall die at last strong in my pride and free”. – Scottish National Memorial

 

by Old Soldier

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Undermining the democratic political framework

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Aragalaya betrayed? ‘The treason of the intellectuals’ in the age of populism – Part II

The JVP/NPP conceptualisation of the ‘Jathika punarudaya’ (national renaissance) interpreted the Sri Lankan Renaissance as the aspiration to regain the moment we lost in the global modernisation project, which is believed to have emerged in the twentieth century as a result of the Western European Renaissance and Enlightenment imagination. Jathika punarudaya values modernity as the era of citizens based on a representative democratic model founded on a common social contract. It values human rights, civil rights, and political rights as the core of modernity. It values social interventions based on the values of social justice and collectivism. But is the current government acting on the basis of those renaissance beliefs that they claim to believe in?

This government came to power within the framework of bourgeois parliamentary democracy. However, the opposition alleges that the government is working to limit the right of the opposition to question the government’s actions within that framework, and within Parliament itself. The continued postponement of provincial council elections by the government has been criticized as a delay in the implementation of decentralised political power, especially in provinces inhabited by Tamils and Muslims.

The promise to abolish the executive presidency and restore a parliamentary-based political power structure continues to be postponed. This has drawn attention as a possible way to suppress trade union activities and intimidate political activists through repressive laws such as the Public Security Act and the Emergency Law, which are continuously implemented through the authoritarian use of the power of the executive presidency.

‘Honest party leadership,’ not the institutional system

The JVP, the core political party of the current government, which insists that its members are honest, claims that even if they violate certain rules and regulations in the course of governing, there is nothing wrong with it because it is not done for personal interest but for the common good. This implies that this government does not rely on rules, regulations, and a system of institutions built to last, but rather on the leaders of its own party, the JVP, whose leaders believe themselves to be honest. The system of institutions established on rules and regulations is for the rest of the people.

Attempts to subjugate institutions and public opinion to the government’s opinion

It is apparent that the government wants to implement its pre-designed agenda without any hindrance. To that end, the government is trying to subjugate all institutions and public opinion to its sole opinion. The most striking example of this approach is the government’s attempt to implement, without any genuine public discussion, neoliberal reforms formulated by previous governments regarding national education, which will have a decisive impact on the future of the country. The leadership brags that the proposed education reforms will be implemented as originally designed, regardless of any criticism or objections.

The government sets up committees at the local level claiming to represent the public, but people complain that they exclude anyone who does not conform to their way of thinking.

Freedom of expression

Civil rights activists say the current government’s continued use of the Online Safety Act, which was passed by the previous government despite public opposition, poses a serious threat to freedom of expression. Freedom of expression has been suppressed under the guise of legality. The government has made it a policy to summon and question individuals who criticise the government—even national-level politicians—at the CID. This amounts to intimidating its critics.

The government has not only broken its promises by failing to repeal the existing PTA but is also attempting to pass a new anti-terrorism law that local and international civil rights organizations have unanimously condemned as even more repressive. It has been stated that there is scope for the proposed new law to intensify the current use of anti-terrorism law as a weapon to suppress freedom of expression.

The Arts Council has become an arts police!”

The latest instance of the government’s attempt to curb freedom of expression that has come under serious public criticism is the detention of four books by a Sri Lankan writer, Theebachelvan, who writes in Tamil, by Sri Lankan Customs when they were brought into the country from India. Later, a statement issued by the Director of Customs said that two of the novels would be released based on recommendations issued by the National Arts Council and the Literary Council, while the other two would not be released based on the recommendations of those boards and the Ministry of Defense.

The statement that The Arts Council has become an arts police!” sums up the public protest that arose questioning the legal and moral rights of the members of the Arts Council and the Literary Council who have received political appointments” to measure and mark the boundaries of freedom of speech and expression at their own discretion” by giving such recommendations and assuming a power that they do not have.

Going beyond this general situation, the serious question that has been raised is: on what basis did Customs consider the views expressed in the two books by Theebachelvan that have been censored to be equivalent to the crime of ‘sedition’ under Section 120 of the Penal Code, which was cited as the reason for the detention? A related question is whether there is a connection between the allegation of sedition and the fact that the writer is a Tamil from Kilinochchi.

The irony here is the intervention of the current government’s Minister of Culture, the heads of the Arts Council under the Ministry of Culture, and its own literary sub-council in deciding this matter, along with the follow-up statements defending the government’s decision made by the same authorities, as well as by writers, artists, intellectuals, and academics who have been holding positions under the current government and those who have not.

There was strong public criticism that these individuals—who were believed to have held radical, liberal views on freedom of expression and ethnic rights before the current government came to power—have been appointed to various positions under the current government and now approve its repressive decisions in the name of ethnic reconciliation.

The following sentiments extracted from the comments made by Sumathy Sivamohan on her FB page, expressing her shock at a statement made by one of the leading Sinhala writers involved in making such statements, encapsulate the essence of the public criticism of the issue:

I am shocked at [name of the person]’s words on the detainment of Theebachelvan’s works by Customs. … The radicalness, the liberalness, are just thin veneers of their Sinhala-only stances. …. Now, they talk of Reconciliation. Reconciliation via Repression. …. Reconciliation, my foot! …. reconciliation is in your head, I think …. [I am] outraged. But now, [I] am certain of one thing. This is the bluff and bluster of liberals. …. That [name of the person] and others think, when Sinhala people think there’s reconciliation, there’s reconciliation, smacks of very deep-rooted racism

I don’t understand the argument, ‘we have to protect this government’ sentiment, touted by many liberals, who in intimate circles voice criticism. And these are the same people who supported the LTTE too, when it suited them—their liberal Sinhala agendas. … Now, they are blubbering …. it is shocking, for it whisks the mask off the faces of these liberal faces. There is a side of Sinhala liberalism that slavishly supports sentiments pertaining to the LTTE. They are the same, they are all the same. Those radicals, those liberals, those everybody, who think because they are Sinhala they have superior knowledge of matters. Sickening.” (reproduced with permission). (To be continued)

by Kumudu Kusum Kumara

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