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Economic growth through the democratic process

On the occasion of the 25th Death Anniversary on May 4 of Chelliah Loganathan, the first Sri Lankan general manager and chief executive of the Bank of Ceylon, we publish, excerpts from the text of a series of broadcast talks over the National Service of the Ceylon Broadcasting Corporation during Sept-Nov, 1967. His views continue to have relevance to the present Government's economic ideology and strategy



Chelliah Loganathan

Series of talks: A close study of the declared broad and basic objectives of most governments would show that in the economic field the objective is an adequate increase in the national product with full employment, so as to secure a definite and marked improvement in the living standards, particularly of the low income groups.

In the field of social development, the objective is the building up of a socialistic pattern of society with a view to reducing inequality of opportunity and achieving an optimum measure of social justice.

Both these are sought to be achieved within a political framework of democracy involving inter alia the presence of adequate scope for the free and effective exercise of the vote and the existence of an effective political opposition.

In planning for economic development and the provision of social justice and in determining the scope of planning and the extent of State intervention, it will be necessary for any government committed to the basic objectives mentioned earlier to examine and understand in the first instance the implication of these objectives.

If the objectives conflict with one another in certain respects, then it is paramount that such conflicts should be reconciled. Any action taken to implement the objectives should also take these conflicts into consideration.

The question, therefore, is not whether planning is necessary but the determination of the scope of planning and the extent of State intervention in the matter of economic development and the provision of social justice. Such determination must be based on the economic, social and political objectives of the government in question.

Conflict between the objective of increasing national output and that of providing social justice In most countries of Asia, when they were colonies, the nationals, irrespective of differences in culture, language, race and social habits, began to develop within themselves a national consciousness against a common foe - the imperialist ruler. Their own differences were ignored. The national self-consciousness, in course of time, gave rise to a unity of purpose and action, which ultimately won for them collective freedom from imperialism.

Once this collective freedom was obtained, the differences among the people which hitherto lay submerged in the presence of a common foe, began to manifest themselves in the form of religious, communal, language and other similar strifes.

Most of them can be traced to the basic problem affecting Asian peoples generally - the very low living standards of a large and fast-growing population and lack of employment opportunities against the background of plentitude and prosperity in the West and in their own countries.

Against the background of these extremes of want and plenty, the vast mass of workers and under-privileged, despite their differences, began slowly but steadily to recognise the need for unity among themselves in striving towards the achievement of a better living standard. Conscious of the political power which adult suffrage gave them, the large masses of the under-privileged, and in particular the workers, began to give bold and loud expression to their pent-up feelings of frustration in regard to their living standards.

It is not surprising therefore that frequent demands for wage increases and for better conditions of employment by the working classes, supported by strikes and threats of strikes, are invariably successful, largely on account of support from government and most political groups. None will deny the fact that there has been a definite and wide diffusion of political power and a mass movement for a similar diffusion of economic power, which is still in the hands of a small capitalist class.

It is against the background of the conflict between those enjoying political power and those enjoying economic power that we should examine the problem of striking a healthy balance between savings and consumption and between development expenditure and non-development expenditure. This would involve the determination of the limits to the implementation of the slogans "freedom from want" and "social justice".

The three basic objectives and their reconciliation

One of our problems of development therefore involves the reconciliation of the three broad objectives of increasing national output speedily and substantially, of building a socialist pattern of society with a view to achieving an optimum measure of social justice, and of preserving a democratic political structure.

Is reconciliation possible? In answering this question, it must be noted that there is conflict between the large mass of workers and the under-privileged, who have come into political power, and the small capitalist class enjoying economic power.

This conflict takes the form of strikes and threats of strikes for increased wages and larger slices of their countries' national incomes, resulting in more consumption and less savings and investment. In other words, it will be necessary to resolve the conflict between the political power enjoyed by the mass of the population and the economic power enjoyed by a small capitalist class.

The problem is how to bring about a suitable climate that will preserve democracy and at the same time achieve increased output and social justice.

It can be said at once that a prerequisite of such a climate is the willing co-operation of the worker, the peasant and the common man in any national development plan which would involve inter alia a proper allocation of resources between consumption and savings and between development expenditure and non-development expenditure.

This can be brought about only by measures that will effectively give to the common man certain economic responsibilities and self-interest to induce him to view and use his political power and privileges with certain amount of balance and realism.

Hence, the type of democratic socialism contemplated is one in which cross-sections of the masses of the population, with interests identical with those of the masses and with adequate economic and political power, will compete with one another, without any central direction, for the means of production, thereby obtaining the advantage of a market mechanism, and at the same time utilise the means of production in the larger interest of society.

It is the responsibility of any government committed to the preservation of a democratic political structure to encourage the growth and development of a healthy and broad-based private sector, which will mean a wide diffusion of economic power in order to act as a bulwark against any type of dictatorship.

State ownership should be limited to those cases where such a policy is clearly expected to add to output, directly or indirectly, or to serve in a distinct and defined way national interests or the needs of social justice, and where the desired results cannot be achieved by means other than nationalisation.

The problem that arises from a policy angle, therefore, is not only the early determination of the spheres in which State monopoly is necessary or desirable, but also the determination of particular economic activities in which the State ought to engage in open and fair competition with the private sector, or in partnership with it.

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