Connect with us


There is no such person as ‘one- armed economist’



by Jayampathy Molligoda

The Sri Lankan government adopted a relaxed monetary policy coupled with lower taxes to stimulate economic growth since 2020 (beginning) till end of 2021. The objective was to provide relief to people and businesses in order to overcome negative effects due to COVID 19 and Easter Sunday attack in April 2019. However, whether the economy really produced goods and services to the extent that is required is questionable. It is true that during the year 2021 they have been able to convert the negative growth rate of 3.6% in 2020 into a positive growth rate of 3.7% in 2021. Commencing 2022, Central Bank (CBSL) has adopted a policy of tightening the monetary policy by increasing the interest rates and increase income tax and indirect taxes such as VAT and social security contribution levy in order to reduce inflation and inflationary expectations. One can argue that all these contrasting policy measures are in accordance with the accepted macro- economic theories put forward by eminent economists.

This year Nobel Price goes to Economist, Bernanke, Ex-Chief of Central bank, US:

Eminent economist, Ex-Fed reserve, Chief, US, Ben Bernanke, together with two other eminent economists, won the Economics Nobel price this October on the role of banks, particularly during financial crises and how to regulate financial markets. “In his role as Chief of the Central Bank, US, Bernanke was able to put knowledge from research into policy during the financial crisis of 2008-2009” the Nobel Committee said.

Bernanke has been previously credited and hailed for the Fed’s unorthodox response of slashing interest rates and flooding the financial system with liquidity and thus successfully handling the recovery after the 2008 recession, but at the same time, criticised for doing little to avert it, allowing investment bank Lehman Brothers to collapse. The award winners also showed how the financial institutions were vulnerable to so called bank runs. “If a large number of customers (savers) simultaneously run to the bank to withdraw their money, the rumour may become a self-fulfilling prophecy – a bank run occurs and the bank collapses” the Nobel Committee said. The Committee added this dangerous dynamic can be avoided by governments providing credit and giving banks a life-line by becoming a lender of last resort. “In a nutshell, the theory says that banks can be tremendously useful but they are only guaranteed to be stable if they are properly regulated,” Nobel committee chairman added.

Solutions to great depression in the 1930s:

This reminds me ‘Keynesian’ economics, which involves government expenditures while economics believe that government spending causes inflation and therefore need to control the supply of money that flows into the economy. In contrast, Keynesian economists believe that a troubled economy continues in a downward spiral unless a government intervention drives consumers to buy more goods and services. They believe in consumption, government expenditure and to change the state of the economy. In short, governments should balance out the cyclical movement of the economy by spending more in downturns and less in prosperous times (thereby preventing inflation). In fact, Keynes begins his general theory by attacking Say’s law, the view that ‘supply creates its own demand’. Keynes proceeded to turn Say’s law on his head, arguing that aggregate demand determines the supply of output and level of employment. (Post-Keynesian Economics (PKE) is a school of economic thought which builds upon John Maynard Keynes’s argument that effective demand is the key determinant of economic performance.) In the field of monetary theory, ‘post-Keynesian’ economists were among the first to emphasise that money supply responds to the demand for bank credit, so that Central Banks cannot control the quantity of money, but only manage the interest rate by managing the quantity of monetary reserves.

By the way, Bernanke previously received awards for his analysis, conducted in the early 1980s, of the ‘Great Depression’ in the 1930s, the worst economic crisis. For Keynesian economists, the experience of Great Depression provided impressive confirmation of Keynes’s idea which is consistent with Keynes’s argument. A sharp reduction in aggregate demand had gotten the trouble started. A reduction in aggregate demand took the economy from above its potential output to below its potential output, and, as we see in below the recessionary gap created by the change in aggregate demand had persisted for more than a decade, but expansionary fiscal policy had put an end to the worst macroeconomic nightmare.

The dark-shaded area shows real GDP from 1929 to 1942, the upper line shows potential output, and the light-shaded area shows the difference between the two—the recessionary gap. The gap nearly closed in 1941 The chart suggests that the recessionary gap remained very large throughout the 1930s.

Inflation, money printing and unemployment:

Under the Monetary Law Act 1949 as amended, the economic and price stability and financial system stability were made the core objectives of the CBSL. Therefore, it should focus on maintaining stable price levels, means containing inflation and inflationary expectations. In order to attain ‘price stability’, CBSL is required to keep liquidity and money supply of the country at appropriate levels so that the total demand for goods and services known as the ‘aggregate demand’ is more or less equal to the total supply of goods and services called ‘aggregate supply’.

In 1958, economist A W Phillips published an article in the British journal of economica that would make him famous covering a relationship between unemployment and inflation. Phillips curve showed negative correlation between rate of unemployment and the inflation. When inflation is high, the rate of unemployment is low and vice versa. Practically policy makers use this by altering monetary & fiscal policies in influencing ’aggregate demand’ in the short run and achieve trade -off between employment and rate of inflation. The ‘Nobel Price’ winner in 2001, Economist George Akerlof once said “probably the single most important macroeconomic relationship is the Phillips curve.

New Keynesian approach has emerged as the preferred approach:

Steeply rising prices is a bigger threat to businesses than high interest rates which will have to be maintained for a time until inflation start to ease, Central Bank Governor Dr. Nandalal Weerasinghe said recently. He was quoted by the local media as saying. “Sri Lanka was now experiencing the result of past money printing and if rates are cut now, runaway inflation could be the result. Higher interest rates are cost to business, but inflation drives up all costs,” Governor Weerasinghe explained addressing concerns of businesses on high interest rates and raising taxes. However, the Columbia University professor, author of “The Price of Inequality” and “Globalisation and Its Discontents,” Joseph Stiglitz argued that the overwhelming source of inflation is supply-side disruptions leading to higher prices in oil and food. “Will raising interest rates lead to more oil, lower prices of oil, more food, lower prices of food? Answer is clearly not”.

This is in response to recent announcements by Federal Reserve officials in the US indicating that interest rate hikes will continue in order to bring down rising prices — but this may intensify inflationary pressures, according to the Nobel Prize-winning economist. “The real worry in my mind is, will they increase interest rates too high, too fast, too far?” Joseph Stiglitz told CNBC recently at a Forum in Italy. In fact, the real risk is it will make it worse; Why? Because what we need to do is to make investments to relieve some of these supply-side bottlenecks that are causing such havoc on our economy. It’s going to make it more difficult.” Unquote. According to Joseph Stiglitz, raising interest rates in non-competitive markets may lead to even more inflation.

While there is less consensus on macroeconomic policy issues than on issues in the microeconomic and international areas, surveys of economists generally show that the new Keynesian approach has emerged as the preferred approach to macroeconomic analysis. The finding that about 80% of economists agree that governments’ expansionary fiscal measures can deal with recessionary gaps certainly suggests that most economists can be counted in the new Keynesian camp. Neither monetarist nor new classical analysis would support such measures. At the same time, there is considerable discomfort about actually using discretionary fiscal policy, as the same survey shows that about 70% of economists feel that discretionary fiscal policy should be avoided and that the business cycle should be managed by the Fed (Fuller & Geide-Stevenson, 2003). Just as the new Keynesian approach appears to have won support among most economists, it has become dominant in terms of macroeconomic policy.

Conflicting theories on macro-economic policies put in to practice:

As can be seen, Sri Lankan policy makers tend to adopt economic policies going into two extreme ends, namely; relaxed monetary policy, coupled with government expenditure through excessive money printing and lower taxes on the one hand, and tight monetary policies coupled with high Income Tax and indirect taxes on the other hand. When interest rates are raised, availability of bank credit reduces and consequently overall economic activities tend to slow down. If they continue to adopt tight monetary policy framework and fiscal (high taxation) policies, it’s likely the aggregate supply will contract and may lead to lower production, which in turn end up in ‘stagflation’ or it could even end up in a recession. The economy is expected to contract this year around 8-9 percent of gross domestic product (GDP) as investment and consumption falls. Nevertheless, at the IMF and World bank annual sessions in Washington this October, the State Finance Minister Shehan Semasinghe was quoted as saying; “Sri Lanka’s ongoing IMF-prescribed reforms to come out of an unprecedented economic crisis will not be reversed in future unlike in the past as there is somewhat consensus among the current lawmakers for such reforms”; Unquote. Already the micro and small and medium enterprises have serious issues, where they cannot afford to borrow any more or repay the debts already taken. As a result, household indebtedness may gradually increase to unprecedented levels. This may intern, increase the instability of the financial and banking system. How the present government is going to address those serious socio/ economic issues is yet to be seen.

We need to reiterate the fact that the Sri Lankan economy can only be re-built in the medium term by successfully addressing the structural weaknesses, increase exports as a % of GDP and thus eliminating the twin deficits, namely government budget deficit and balance of payments with rest of the world. Simultaneously, the above stated vulnerabilities; household indebtedness, banking system stability etc. must be arrested in order to make a sustainable economic recovery possible. However, the challenge is the time it can take for the economy to adjust to these changes and how to manage the cash flows and social unrest during the interim period. USA President Harry S. Truman (33rd President serving from 1945 to 1953) hated what he termed two-armed economists, those who would advise him first “on the one hand” and then “on the other hand.” Give me a one-armed economist, he demanded, an adviser who wouldn’t waffle.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


Teaching feminism at SL universities



A women’s right protest. (File Photo)

“Feminism is not a synonym for man hater though we need a new man now”:

By Aruni Samarakoon

Recently, I was in a discussion on Feminism with the members of the Post-Graduate Research (PGR) community at the University of Hull, in the United Kingdom. They were my colleagues, from the Middle-East, Asia and Europe, representing the natural and social sciences, but, apparently, did not possess any prior knowledge on feminism. I say this because most in the natural sciences seemed to characterise feminism as a political ideology against man (man in this context represents male). This discussion provoked me to recollect why feminism was stereotyped by these scholars, who were researching for their doctoral degrees at the time.

The objective of this article is to extend my argument of teaching feminism at the Sri Lankan universities in my last Kuppi column (25/10/2022), which drew attention to the gaps in teaching and learning feminism in the classroom and practicing it in everyday life.

I introduced the basic notion of feminism in my last Kuppi column, but would like to extend the conceptual understanding of feminism in a new direction, that is the notion that feminism is not an anti-man discourse. bell hooks—lowercase letters symbolise, for hooks, resistance to injustice and prejudice in the capitalist system or a “new language” of equality and justice for all—in Feminism for Everybody: Passionate Politics (2000) states, “Feminism is a movement to end sexism, sexist exploitation, and oppression… and it was my hope at the time that it would become a common definition everyone would use. I liked this definition because it did not imply that men were the enemy ” (p.01). hooks’ proposition was further reinforced by socialist feminist Sheila Rowbotham in her book, Women, Resistance and Revolution (1972). Rowbotham suggests that feminism is a new political project to empower both men and women and create a new man and woman. Notably, hooks and Rowbotham did not agree with ‘binary politics’ that constructs man as “enemy” and woman as “victim”.

Who is the “New Man”?

The political notion of the “New Man” was developed by Rowbotham. She critically examined women’s representation in post-French revolution politics and asked how the latter “represents the voice of women in the French Revolution”? She suggested that women moved once again into the second sex (subordinate role) paradigm at the end of the French Revolution as revolutionary politics turned into patriarchal politics. Therefore, she suggested the concept of “New Man,” a man who recognizes class and sex oppression as the primary determinants of exploitation. The “New Man” understands the equal significance of ending classism and sexism at once. I draw on hooks and Rowbotham to propose that a “new man” is a necessary condition for teaching and learning feminism at Sri Lankan universities.

The question is whether you see the “New Man” in any context in Sri Lanka? Let’s start with the recent peaceful uprising of “Gota- Go-Home-2022”. Revolutionary political agents of both male and female sex were visible at the beginning of the uprising. For example, the image of a woman carrying a child in one hand and a placard in the other went viral on social media. The female undergraduates were on the front lines of the protests, holding the banners and shouting the slogans. The activities of women in this scenario took me back to the French Revolution;

“The idea of a march of women to Versailles to stop the bloodshed spread in April 1871. Beatrice Excoffon, the daughter of a watchmaker who lived with a compositor, told her mother she was leaving, kissed her children and joined the procession at the Place de la Concorde. Nobody was clear about the aims of the march or knew definitely what they should do, but there were political rather than strictly economic motives” (Rowbotham, 1972, p.104).

The women who came to the streets in the Sri Lankan uprising had both political and economic motives. They were not certain about the plan, though their voice was to end the “dictatorship” and restore “democracy”. The fundamental question is where are these women now? How many of these women were in the political party negotiation table at the end of the uprising? How many were able to voice their political motives? I argue that these revolutionary women were thrown to their private spaces by the “Old-Man”- the agent of patriarchal politics. The irony is that the “Old-Man” was preoccupied in ending the dictatorship in parliament, while maintaining sexist dictatorship in their revolutionary political bodies. Thus the “New Man” is a necessary condition to practice feminism as political ideology for everybody.

“New Woman”

The aims of feminist academic discourse and activism were/are to raise women’s political consciousness and empower them to be the “New Woman”. The scholarship of hooks and Rowbotham interpret the “New Woman” as one who opposes patriarchal politics. The “New Woman” can be found today in every sector; these women are in a hard struggle to establish the “Woman’s identity” in those settings. For example, the underlying impetus driving the ongoing Iranian protest is to recognize Women’s identity as a human being. Tearing off their hair cover was a symbolic representation of their voice to get identified as human, in my interpretation. However, creating the “New Woman” is a contested and difficult political process. What is the role of teaching and learning feminism at universities in creating the “New Man” and “New Woman”?

“Learning outcomes” of Feminism

A key “learning outcome” of Feminist pedagogy would be to critically examine a given social reality. The given social reality contains the stereotypes, power hierarchies and objectification of the human body. Feminism then, will throw light on this social reality and raise the critical mindset of both woman and man to question that given social reality.

Feminism, in that case, plays the role of activism for social transformation. The focus of old school pedagogy was examining theory; activism was not a part of older pedagogical approaches. It was feminism that introduced activism as a new method of teaching and learning Amy K Levin states in Questions for a New Century: Women’s Studies and Integrative Learning (2007) that, “feminist studies programmes work to meet knowledge and skills goals and activism is the requirement of the course” (p.18). Connecting knowledge and personal experience is a part of feminist activism.

However, in the context of Sri Lankan universities, activism is yet to be recognized as a legitimate pedagogical activity. In my experience, the most university academics in Sri Lanka maintain a hierarchy of academia and activism. They tend to present the theoretical arguments of other prominent scholars in academic language, rarely understood by the public. In activism, the theoretical explanations are discussed in simple language and examples of everyday life are connected to theory, to engage the public.

In conclusion, the point of feminism is not an anti-man thesis, but to create the “New Man and Woman” . The “New Man ” concept in Sri Lanka can and must be improved and expanded by teaching feminism at higher education institutions. Training undergraduates in activism is necessary for social transformation, which should be the ultimate objective of education. It is worth noting that the Kuppi collective has taken the lead in discussing new approaches to education; feminism is part of that discussion.

(Aruni Samarakoon teaches at the Department of Public Policy, University of Ruhuna)

Kuppi is a politics and pedagogy happening on the margins of the lecture hall that parodies, subverts, and simultaneously reaffirms social hierarchies

Continue Reading


Indian model as wayforward



President Wickremesinghe

By Jehan Perera

President Ranil Wickremesinghe’s statement that district committees can be considered as part of the solution to the vexed problem of power sharing between the ethnic communities has caused a considerable furore in the Tamil community.  It came as both a shock and a disappointment as the president has also been speaking about fast-tracking the national reconciliation process. The president said he is ready to reintroduce District Development Councils when former president Maithripala Sirisena proposed setting up of district councils under the provincial councils as a cost cutting measure.  “Former President, I listened to your comments on District Development Councils and I am ready to do it,” the President is quoted as having said. Subsequently, the president’s media unit clarified that the President meant that the District Development Committees (DDCs) will be established within the Provincial Councils.

The president’s media unit further elaborated that the DDCs would provide a platform for coordination between the government, the provincial councils and the local governments for all executive decisions. It also said this will ensure the process is not duplicated and will reduce financial wastage.  The concept of the district as the unit of devolution was tried before in 1981 by the president’s uncle, the late president J R Jayewardene during whose period the government established DDCs to be part of the solution to the ethnic conflict that was getting worse by the day.  The Sri Lankan security forces had been ordered to control the growing Tamil militancy.  The security forces were armed not only with guns but also with the Prevention of Terrorism Act which was abused then as it is abused today though to a much greater extent then, than it is now.

The memory of the brief period of the DDCs is an unhappy one to the Tamil community.  The elections to the DDC were contested by the ruling party, the UNP, to which the president belongs.  The government’s attempt to rig those elections and win them at any cost led to the catastrophic burning of the Jaffna Public Library in 1981.  This seat of learning was one of the most sacrosanct institutions of Tamil civilisation that symbolised the high quality of education in the north of the country that was the envy of other parts of the country.  It is therefore not surprising that the president’s media unit was quick to deny the very negative inferences made with regard to the president’s speech.


The president’s media unit can be relied upon to accurately portray the president’s cryptic remark with regard to his willingness to resuscitate the district council system.  However, the very idea of creating a complex platform for coordinating the central government, provincial councils and local government bodies for all executive decisions seems to be a difficult task.  It runs the real risk of killing any possibility of decision making through a multiplicity of committees.  Coordination within one level of the government is difficult enough.  Coordinating between multiple levels will be even more difficult.  There have been issues when two drivers sit at the wheel. Who does the Government Agent in a district report to as he also serves as the District Secretary? What is the protocol when a central deputy minister and provincial minister attend a formal meeting?

The questions noted above have been raised in the past and many remain unresolved and making further units of devolution will be confusion compounded. The irrelevance of the proposed district committees to the solution of the ethnic conflict can be seen by another problem.  The provincial councils, which were formulated to be the solution to the ethnic conflict, and to represent the wishes of the people of each province, do nothing of the sort at the present time, as they are non-functional where people’s representation is concerned.  For the past four years, the provincial councils have only been administrative bodies run by a presidentially appointed governor who can act, and does act arbitrarily, without consulting the people of the province.  During this period, elections to the provincial councils have not been held.  Far from being institutions of devolved power, the provincial councils now represent the centralised power of the state, both unfortunately and perniciously.

The ability of the government to neutralise the provincial councils by the undemocratic method of not permitting elections to be held for 4 years gives impetus to the Tamil community’s rejection of them.  The provincial councils were brought into existence in 1987 as the main democratic part of the solution to the ethnic conflict. They were meant to provide the people of each province with the power to decide on locally relevant matters.  But this right has been denied to them.  This would be the main reason why the demand for federalism is once again coming to the fore. In a landmark judgement the Supreme Court in August 2017 with Chief Justice Priyasath Dep presiding ruled that “Advocating for a Federal form of Government within the existing State could not be considered as advocating Separatism.” The court dismissed a petition that ITAK (or Federal Party) had, as one of its “aims” and “objects” the establishment of a Separate State.


The TNA which is the largest Tamil party (with ITAK as its major component) has responded positively to the president’s announcement that he intends to seek a solution to the ethnic conflict by the 75th anniversary of Independence.  They have said that they will seek a solution on the basis of federalism.  Their spokesperson M. A. Sumanthiran has pointed out that there are more than 25 countries in the world which have federal system and they are very much united, and contain over 40 percent of the world’s population.  The United States, India, Switzerland and Malaysia are examples of federal states.  The key feature in a federal state is that the government will not be able to change the way a provincial council is governed.  Certainly, the government will not be able to arbitrarily postpone elections to a provincial council for four years and then run it centrally through a governor of its own choice.

On the other hand, from the time that the Tamil polity has asked for federalism, beginning in the 1950s, the Sinhalese polity has rejected it as being injurious to the country’s national sovereignty and security.  There is misapprehension that federalism might be the first step to secession. The examples of the former Soviet Union and Yugoslavia are given as examples of federal states that broke up on the lines of their federal units.  The Sinhalese position is that a unitary form of government would protect the country from being divided in this manner.  However, even unitary states have been divided if they did not manage their ethnic relations in a constructive manner as was the case in Sudan (which divided into South Sudan) and Serbia (Kosovo). The enlightened reasoning and decision of the Sri Lankan Supreme Court in 2017 needs to be explained to the political parties and to the general population.

The 18th century English poet Alexander Pope wrote “For Forms of Government let fools contest whatever is best administered is best.”  Just across the seas from Sri Lanka the world has a good example of a diverse and huge country that has held together as one and is now getting stronger and stronger, both in terms of its economic might, but also its international stature.  The Indian form of government is neither wholly federal nor wholly unitary, but can take on aspects of either as the situation demands.  In times of peace it is federal, in times of stress it can become unitary.  This was the solution that India and Sri Lanka agreed to in the Indo-Lanka Accord of 1987 and which was distorted in the 13th Amendment.  Recently in parliament, former president Mahinda Rajapaksa went one step forward to say he was for discussions on 13th Amendment plus. India has been Sri Lanka’s best saviour at the present time in terms of the economic crisis, giving Sri Lanka far more than other countries.  With India’s political support to a political solution based on its own learning and experience, a viable solution can be found and Sri Lanka can forge ahead as a truly united nation to economic development.

Continue Reading


Top acts heading overseas…for 31st night



Sohan & The X-Periments, and the new-look Mirage outfit, will not be around to usher in the New Year – 2023.

While The X-Periments will take a break, from 31st night activities, their leader Sohan will be away, in the UK, making sure that the folks, over there, have a ball, as the New Year approaches…and after!

He will be at the Honeymoon Banquet Hall, in Hounslow, London, together with the band Roots, and guest artiste Damin David – UK Lankan’s Voice Winner – to welcome 2023.

This dinner dance will commence at 7.00 pm and wind up at 1.00 am, and will be held in typical Sri Lankan style, with kiribath, tea, coffee, after the countdown.

Among the highlights will be the selection of the New Year Queen.

This will be Sohan’s third trip to the UK, for this year, and it did come as a surprise, he says, adding that he is glad that he is in demand in the UK, as well.

Sohan will also take wing for Australia, to perform at a very important event – a concert to honour the late Desmond de Silva.

It will be held on 11th, February, 2023, in New South Wales, and will also feature Mignonne and Suraj, Melantha Perera, Mariazelle, Corrine, and Sohan Pieris, among others.

Honouring the legend…Desmond de Silva

This concert will showcase the music from Desmond’s incredible musical journey…with the Spitfires, Jetliners, Foreign Affair (UK), Replay 6, Desmond and The Impressions, and the baila king himself, in ‘hologram.’

In the meanwhile, the new-look Mirage, who captivated a full house at the Peacock, Berjaya Hotel, Mount Lavinia, last Friday night – December 2nd – is scheduled to head for Oman for two important seasonal gigs – on 23rd December and 31st December.

On Friday, the 23rd, they will be at the Grand Hall, Al Falaj Hotel, in Muscat, for ‘Sri Lankan Musical Night’ – from 3.00 pm onwards.

In addition to their Christmas Eve and New Year’s Eve gigs, the General Manager of the Al Falaj Hotel, Praveen George, indicated to me that Mirage will also be seen in action at a few more events, in Oman.

Down Under, too, elaborate plans are being made to celebrate the dawning of another New Year.

Two popular bands, in Melbourne, Replay 6 and Ebony, will be at the Grand On Princess, to provide the right kind of music to make this New Year’s Dinner Dance nostalgic.

Continue Reading