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A Layman’s long-view of the economy

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by Kumar David

Experts rarely layout the longer view of Lanka’s impasse in simple words. Political manifestos are all boringly much the same except a difference in emphasis between the roles of state and market. I do not touch on a What Next Programme today; that will have to wait. I wish to take a step back and measure processes not persons. We need first to appreciate that both the consumer side and producer side have been transformed between Independence and now.

In previous times mass consumption needs were simpler; now even the less well-off classes and all but the lowest stratum in the village have more complex expectations; books and apparel for school kids, tuition-masters, consumer durables – fridge, microwave, gas-cooker, a motorbike or a scooter, and money to sometimes take a three-wheeler, better clothes, jeans, shoes, the list goes on. There is explosive growth not only in the amount but also range and variety of consumer demands across the social spectrum. And I must mention the quality of housing and furnishing. This is not the snotty elite; I refer to maybe 70 or 80 percent of people in towns and villages.

A simple agricultural economy as in colonial times cannot generate the surplus required to meet these expectations of a much-expanded population. In an agricultural economy the value of output minus costs of production (including farmers labour time) is too small to generate a net economic surplus to carry this burden. (The plantation sector of course produces a large surplus). This is transformation number one, the consumption side.

There have also been advances to a degree in the production side. Local industry in the broad sense that includes the capitalist sector, state enterprises after the mid-1950s and often forgotten but very important small and medium enterprises (SME) have expanded, somewhat. (The contribution of SMEs to the economy, in production, services – repair shops, computer services and trade – is significant). Still, the gross surplus generated in production is inadequate to (a) plough back for sector expansion and (b) satisfy growing consumer needs.

The extended nature of consumption and the somewhat muted progress in production together characterise Sri Lanka’s stifled transition to economic modernism. I speak here of the economic side, not of life-style, cultural, educational and political progress. Furthermore, alterations in the rural sector has created an excess labour pool that the agricultural economy cannot absorb. This together with population growth has led to a demand by the young for jobs in the modern sector which it cannot satisfy because this sector is struggling to expand.

Allow me to summarise what I have said. There has been a large if not explosive expansion in consumption but a by no means matching response in production. It is also vital to bear in mind that the surplus value (that is output-value net of all costs including labour) created in manufacturing, services, plantations and SMEs, must put aside a portion for expanded reproduction. In other words, a part of the profits in manufacturing must be ploughed back for expanded reproduction. But Sri Lanka is a democracy, every one of us jealously guards our democratic system. When you have growing mass consumption, inadequate surplus generated in production and also democracy, the outcome is inevitable; Political Populism!

Political parties, leaders and budgets have no option but to resort to theoretically off-radar methods not only to survive but also to maintain social stability. Otherwise you get strikes, unsustainable wage demands, hartal-1953, electoral avalanches (1956, 1970, 1977, 1994-Chandrika, 2019-20 Rajapaksa landslides) and now in 2022 an explosion on the streets. I do not gloss over corrupt leaders, rampant robbery by political classes and monumental policy blunders but these subjective elements have to be placed side by side with evolved economic imbalances. The failure of material conditions is more important than the robber barons, but let’s not pause here to argue about chickens and eggs.

You would have observed that I have so far assumed a closed or autarchic economy. That is, I have not said anything but cross-border influences – trade, export-import, foreign investment and indebtedness. In the case of a small dependent economy, in an age where globalisation is sweeping like wildfire across the world and bending even mighty China to its will, to ignore the ‘border’ is like talking about an unclothed emperor.

Take-off into modernism failed in Lanka because economic conditions for take-off did not come to fruition. And add another aspect, nationalism. Sinhala nationalist extremism and its child a Tamil nationalist civil-war undermined economic development. The counter example that is quoted frequently is Singapore. The thesis that basic material factors are interwoven with the independent actions of decision-making elites is not new, some people have a name for it, the dialectic, but never mind, no ideology today.

But there is no escaping that the political dimension influenced the consumption-production contradiction and had deep influence on how take-off into modernism took effect in countries whose economies modernised. The Singapore way curtailed racist-populism but satisfied consumption expectations (housing first), in South Korea the tool was harsh repression till the capitalist class expanded the economy, then the dictatorship was overthrown in the late 1980s releasing the nations democratic energies.

Taiwan’s is far too complicated a story of economic take-off and political democratisation to recount here. These are examples of take-off into economic modernity and democracy. Eastern Europe pulled off economic take-off under the Stalinist gun and democratisation after the Berlin Wall tumbled. Among smaller countries, Cuba, Nicaragua and Venezuela have failed the tests of both democratisation and economic take-off for reasons outside the scope of this essay.

The previous paragraph was something of a digression. I wish to return to the significance of turning away from the autarkic road (closed-economy) to economic modernisation and return to the theme of cross-border flows; that is globalisation, external economic relations and foreign investment. The chances of economic take-off in a closed economy (that is generating sufficient surplus in domestic industry and manufacturing alone to bridge the ever-widening consumption-production imbalance) is zero.

Sri Lanka is the classic example of that failure. We have fiscal deficit, money printing, balance of payment deficits and gigantic foreign debt. Even if Gautama Buddha, Jesus Christ and the Prophet were President, Prime Minister and Finance Minister (in any order) this outcome was inevitable in a country that has for 70 years been unable to raise production to match consumption. In truth Lanka is not a closed economy, but it has not been open enough to modernise production, trade, investment, technology and thinking.

Enter trade and investment

Investment from abroad whether the capitalist West or China is the lifeline if after these chaps take away their profits there is, first, expanding reproduction (growth in production), second a surplus injected in some form (goods, services or money) into local consumption and third employment creation. Employment is another way of saying injecting consumption into the domestic economy. Production has to expand and expand uninterruptedly to meet increasing and diversifying local consumption expectations.

This is where champions of shaving imports down to the bone, eliminating all “luxury” imports, introducing cooperative distribution of necessities and such like frugality, are careless. There is a large element of social justice motivating them; that’s ok but it’s not going to do much good for modernising and expanding production. It also calls for a licence regime; licence-raj as they call it in India.

Allow me to tell you a story about licence-raj. My late uncle Vernon Peries was Director of Family Planning in the 1970s. At one stage there was panic in all the clinics; the essential wherewithal had disappeared from pharmacy shelves. Vernon maama investigated, visited the Treasury and dug out files. Now this was the era when the import of sports goods was prohibited as a luxury. He found that an enterprising official had classified condoms as Sports Equipment and the Customs Department had withheld import licences. That’s a true story, and that’s licence-raj for you.

To get back; does encouragement of foreign investment spell the death of state engagement in the economy? No, in my scheme which envisages a different State from now, there will be directive principles about what investments are welcome bearing in mind the three criteria in the para before my sporting story. I envisage three categories; all-foreign, joint ventures where local and overseas capitalists participate, and in the case of the largest enterprises, joint ventures between the state and big investors.

Sure, investors have to take something away, but it has to be a win for the nation too; Deng Xiao Ping played it well. They left behind the capability of production facilities to survive on their own when it was time to say goodbye. This assumes a government with clear objectives and the ability to implement policy. Observe that I have not touched on technology and productivity enhancement – crucial, but too much for one essay.

What are the benefits? One is rent extraction. Taxes and duties will accrue to the state, that’s a sine qua non apart from the previously mentioned three points. This helps finance populist demands without recourse to deficit budgets. And export earnings will help buy motorbikes, cell-phones, refrigerators, books and blue jeans without falling off the debt cliff. It assumes intelligent political leadership and clear policy; well, if you don’t have that forget the whole discourse anyway.

My mind is on a future progressive regime, so in relation to state-foreign joint ventures what should the role of the state in enterprise management be? Managers of the best international companies are professionals whose loyalty is to the excellence of the company itself; they are rarely the big investor or representatives of share-holders. Similarly, our government and ministerial mutts should keep their grubby fingers out and let able managers get on with it. Younger readers will not know BD Rampala, Vere de Mel and ANS Kulasinghe. The role of the state is only laying out directive principles.

You might object that this is not socialism. Well which idiot said that socialism was possible in one country, and how bizarre to expect it in a tiny island or to expect it even in mighty China in this day and age? But I am not talking about bare-faced capitalism and extraction of surplus value by that class by simple exploitation either. What is the state form in Vietnam, or in China or such indeterminate cases? Not capitalism, but I don’t have a name for it either – a rose by any other name is good enough. As for party programmes everybody says the same thing; raising production and productivity, pruning handouts, cutting expenditure, export orientation and attracting foreign investment of the correct type. Aye there’s the rub; the dichotomy between inordinate market orientation and the directive function of the state. But that’s for another time.

END

(FDI Graphic below)



Features

Ranking public services with AI — A roadmap to reviving institutions like SriLankan Airlines

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Efficacy measures an organisation’s capacity to achieve its mission and intended outcomes under planned or optimal conditions. It differs from efficiency, which focuses on achieving objectives with minimal resources, and effectiveness, which evaluates results in real-world conditions. Today, modern AI tools, using publicly available data, enable objective assessment of the efficacy of Sri Lanka’s government institutions.

Among key public bodies, the Supreme Court of Sri Lanka emerges as the most efficacious, outperforming the Department of Inland Revenue, Sri Lanka Customs, the Election Commission, and Parliament. In the financial and regulatory sector, the Central Bank of Sri Lanka (CBSL) ranks highest, ahead of the Securities and Exchange Commission, the Public Utilities Commission, the Telecommunications Regulatory Commission, the Insurance Regulatory Commission, and the Sri Lanka Standards Institution.

Among state-owned enterprises, the Sri Lanka Ports Authority (SLPA) leads in efficacy, followed by Bank of Ceylon and People’s Bank. Other institutions assessed included the State Pharmaceuticals Corporation, the National Water Supply and Drainage Board, the Ceylon Electricity Board, the Ceylon Petroleum Corporation, and the Sri Lanka Transport Board. At the lower end of the spectrum were Lanka Sathosa and Sri Lankan Airlines, highlighting a critical challenge for the national economy.

Sri Lankan Airlines, consistently ranked at the bottom, has long been a financial drain. Despite successive governments’ reform attempts, sustainable solutions remain elusive.

Globally, the most profitable airlines operate as highly integrated, technology-enabled ecosystems rather than as fragmented departments. Operations, finance, fleet management, route planning, engineering, marketing, and customer service are closely coordinated, sharing real-time data to maximise efficiency, safety, and profitability.

The challenge for Sri Lankan Airlines is structural. Its operations are fragmented, overly hierarchical, and poorly aligned. Simply replacing the CEO or senior leadership will not address these deep-seated weaknesses. What the airline needs is a cohesive, integrated organisational ecosystem that leverages technology for cross-functional planning and real-time decision-making.

The government must urgently consider restructuring Sri Lankan Airlines to encourage:

=Joint planning across operational divisions

=Data-driven, evidence-based decision-making

=Continuous cross-functional consultation

=Collaborative strategic decisions on route rationalisation, fleet renewal, partnerships, and cost management, rather than exclusive top-down mandates

Sustainable reform requires systemic change. Without modernised organisational structures, stronger accountability, and aligned incentives across divisions, financial recovery will remain out of reach. An integrated, performance-oriented model offers the most realistic path to operational efficiency and long-term viability.

Reforming loss-making institutions like Sri Lankan Airlines is not merely a matter of leadership change — it is a structural overhaul essential to ensuring these entities contribute productively to the national economy rather than remain perpetual burdens.

By Chula Goonasekera – Citizen Analyst

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Why Pi Day?

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International Day of Mathematics falls tomorrow

The approximate value of Pi (π) is 3.14 in mathematics. Therefore, the day 14 March is celebrated as the Pi Day. In 2019, UNESCO proclaimed 14 March as the International Day of Mathematics.

Ancient Babylonians and Egyptians figured out that the circumference of a circle is slightly more than three times its diameter. But they could not come up with an exact value for this ratio although they knew that it is a constant. This constant was later named as π which is a letter in the Greek alphabet.

Archimedes

It was the Greek mathematician Archimedes (250 BC) who was able to find an upper bound and a lower bound for this constant. He drew a circle of diameter one unit and drew hexagons inside and outside the circle such that the sides of each hexagon touch the sides of the circle. In mathematics the circle passing through all vertices of a polygon is called a ‘circumcircle’ and the largest circle that fits inside a polygon tangent to all its sides is called an ‘incircle’. The total length of the smaller hexagon then becomes the lower bound of π and the length of the hexagon outside the circle is the upper bound. He realised that by increasing the number of sides of the polygon can make the bounds get closer to the value of Pi and increased the number of sides to 12,24,48 and 60. He argued that by increasing the number of sides will ultimately result in obtaining the original circle, thereby laying the foundation for the theory of limits. He ended up with the lower bound as 22/7 and the upper bound 223/71. He could not continue his research as his hometown Syracuse was invaded by Romans and was killed by one of the soldiers. His last words were ‘do not disturb my circles’, perhaps a reference to his continuing efforts to find the value of π to a greater accuracy.

Archimedes can be considered as the father of geometry. His contributions revolutionised geometry and his methods anticipated integral calculus. He invented the pulley and the hydraulic screw for drawing water from a well. He also discovered the law of hydrostatics. He formulated the law of levers which states that a smaller weight placed farther from a pivot can balance a much heavier weight closer to it. He famously said “Give me a lever long enough and a place to stand and I will move the earth”.

Mathematicians have found many expressions for π as a sum of infinite series that converge to its value. One such famous series is the Leibniz Series found in 1674 by the German mathematician Gottfried Leibniz, which is given below.

π = 4 ( 1 – 1/3 + 1/5 – 1/7 + 1/9 – ………….)

The Indian mathematical genius Ramanujan came up with a magnificent formula in 1910. The short form of the formula is as follows.

π = 9801/(1103 √8)

For practical applications an approximation is sufficient. Even NASA uses only the approximation 3.141592653589793 for its interplanetary navigation calculations.

It is not just an interesting and curious number. It is used for calculations in navigation, encryption, space exploration, video game development and even in medicine. As π is fundamental to spherical geometry, it is at the heart of positioning systems in GPS navigations. It also contributes significantly to cybersecurity. As it is an irrational number it is an excellent foundation for generating randomness required in encryption and securing communications. In the medical field, it helps to calculate blood flow rates and pressure differentials. In diagnostic tools such as CT scans and MRI, pi is an important component in mathematical algorithms and signal processing techniques.

This elegant, never-ending number demonstrates how mathematics transforms into practical applications that shape our world. The possibilities of what it can do are infinite as the number itself. It has become a symbol of beauty and complexity in mathematics. “It matters little who first arrives at an idea, rather what is significant is how far that idea can go.” said Sophie Germain.

Mathematics fans are intrigued by this irrational number and attempt to calculate it as far as they can. In March 2022, Emma Haruka Iwao of Japan calculated it to 100 trillion decimal places in Google Cloud. It had taken 157 days. The Guinness World Record for reciting the number from memory is held by Rajveer Meena of India for 70000 decimal places over 10 hours.

Happy Pi Day!

The author is a senior examiner of the International Baccalaureate in the UK and an educational consultant at the Overseas School of Colombo.

by R N A de Silva

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Sheer rise of Realpolitik making the world see the brink

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A combined US-Israel attack on Iran.(BBC)

The recent humanly costly torpedoing of an Iranian naval vessel in Sri Lanka’s Exclusive Economic Zone by a US submarine has raised a number of issues of great importance to international political discourse and law that call for elucidation. It is best that enlightened commentary is brought to bear in such discussions because at present misleading and uninformed speculation on questions arising from the incident are being aired by particularly jingoistic politicians of Sri Lanka’s South which could prove deleterious.

As matters stand, there seems to be no credible evidence that the Indian state was aware of the impending torpedoing of the Iranian vessel but these acerbic-tongued politicians of Sri Lanka’s South would have the local public believe that the tragedy was triggered with India’s connivance. Likewise, India is accused of ‘embroiling’ Sri Lanka in the incident on account of seemingly having prior knowledge of it and not warning Sri Lanka about the impending disaster.

It is plain that a process is once again afoot to raise anti-India hysteria in Sri Lanka. An obligation is cast on the Sri Lankan government to ensure that incendiary speculation of the above kind is defeated and India-Sri Lanka relations are prevented from being in any way harmed. Proactive measures are needed by the Sri Lankan government and well meaning quarters to ensure that public discourse in such matters have a factual and rational basis. ‘Knowledge gaps’ could prove hazardous.

Meanwhile, there could be no doubt that Sri Lanka’s sovereignty was violated by the US because the sinking of the Iranian vessel took place in Sri Lanka’s Exclusive Economic Zone. While there is no international decrying of the incident, and this is to be regretted, Sri Lanka’s helplessness and small player status would enable the US to ‘get away with it’.

Could anything be done by the international community to hold the US to account over the act of lawlessness in question? None is the answer at present. This is because in the current ‘Global Disorder’ major powers could commit the gravest international irregularities with impunity. As the threadbare cliché declares, ‘Might is Right’….. or so it seems.

Unfortunately, the UN could only merely verbally denounce any violations of International Law by the world’s foremost powers. It cannot use countervailing force against violators of the law, for example, on account of the divided nature of the UN Security Council, whose permanent members have shown incapability of seeing eye-to-eye on grave matters relating to International Law and order over the decades.

The foregoing considerations could force the conclusion on uncritical sections that Political Realism or Realpolitik has won out in the end. A basic premise of the school of thought known as Political Realism is that power or force wielded by states and international actors determine the shape, direction and substance of international relations. This school stands in marked contrast to political idealists who essentially proclaim that moral norms and values determine the nature of local and international politics.

While, British political scientist Thomas Hobbes, for instance, was a proponent of Political Realism, political idealism has its roots in the teachings of Socrates, Plato and latterly Friedrich Hegel of Germany, to name just few such notables.

On the face of it, therefore, there is no getting way from the conclusion that coercive force is the deciding factor in international politics. If this were not so, US President Donald Trump in collaboration with Israeli Rightist Premier Benjamin Natanyahu could not have wielded the ‘big stick’, so to speak, on Iran, killed its Supreme Head of State, terrorized the Iranian public and gone ‘scot-free’. That is, currently, the US’ impunity seems to be limitless.

Moreover, the evidence is that the Western bloc is reuniting in the face of Iran’s threats to stymie the flow of oil from West Asia to the rest of the world. The recent G7 summit witnessed a coming together of the foremost powers of the global North to ensure that the West does not suffer grave negative consequences from any future blocking of western oil supplies.

Meanwhile, Israel is having a ‘free run’ of the Middle East, so to speak, picking out perceived adversarial powers, such as Lebanon, and militarily neutralizing them; once again with impunity. On the other hand, Iran has been bringing under assault, with no questions asked, Gulf states that are seen as allying with the US and Israel. West Asia is facing a compounded crisis and International Law seems to be helplessly silent.

Wittingly or unwittingly, matters at the heart of International Law and peace are being obfuscated by some pro-Trump administration commentators meanwhile. For example, retired US Navy Captain Brent Sadler has cited Article 51 of the UN Charter, which provides for the right to self or collective self-defence of UN member states in the face of armed attacks, as justifying the US sinking of the Iranian vessel (See page 2 of The Island of March 10, 2026). But the Article makes it clear that such measures could be resorted to by UN members only ‘ if an armed attack occurs’ against them and under no other circumstances. But no such thing happened in the incident in question and the US acted under a sheer threat perception.

Clearly, the US has violated the Article through its action and has once again demonstrated its tendency to arbitrarily use military might. The general drift of Sadler’s thinking is that in the face of pressing national priorities, obligations of a state under International Law could be side-stepped. This is a sure recipe for international anarchy because in such a policy environment states could pursue their national interests, irrespective of their merits, disregarding in the process their obligations towards the international community.

Moreover, Article 51 repeatedly reiterates the authority of the UN Security Council and the obligation of those states that act in self-defence to report to the Council and be guided by it. Sadler, therefore, could be said to have cited the Article very selectively, whereas, right along member states’ commitments to the UNSC are stressed.

However, it is beyond doubt that international anarchy has strengthened its grip over the world. While the US set destabilizing precedents after the crumbling of the Cold War that paved the way for the current anarchic situation, Russia further aggravated these degenerative trends through its invasion of Ukraine. Stepping back from anarchy has thus emerged as the prime challenge for the world community.

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