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
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
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
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
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
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.