Proven Sri Lankan solution - Part I:

Spiralling Cost of Living

Malady of UNP policies:

Garvin KARUNARATNE

Sky rocketing consumer goods is a concern for everybody. The Rajapaksa Government has declared that it will win this economic war too, now that the separatist terrorist outfit of Prabhakaran which was threatening the very existence of this country has been annihilated.

I would like to share my personal experience of the strategies used by the past Governments through the Marketing Department and the CWE mechanisms to control the spiralling costs of consumer goods, which worked extremely well until the system was disjointed and dismantled and sold to the private sector at the dictates of IMF/World Bank twins by the post 1977 UNP Governments.

I am of the opinion that restoring the Marketing Department mechanism is essential to bring about increases in production, the creation of employment and the alleviation of poverty.

It is true that the world market prices of certain essential commodities has increased in recent years, but if the infrastructure that Sri Lanka had before 1977 to combat high prices had been intact it would have been possible to ensure that the increases were low.

Private traders

In my own words: The Department for Development of Agricultural Marketing of the Fifties and Sixties ensured that prices of all essential commodities were indirectly controlled and the traders were compelled to offer fair prices to the producers and shop keepers were compelled to sell at fair prices to the consumers. (How the IMF Ruined Sri Lanka? (Godages) This was done in a very shrewd manner by the Government too buying from producers and selling the goods to consumers in the cities. When the Marketing Department competed with the traders and offered the commodities to consumers at very low rates, the Private Sector traders too had to offer goods to consumers at similar rates if they were to be in business.

The Marketing Department, as the Department for Development of Agricultural Marketing was generally called, was actually unofficially controlling the prices at which producers sold as well as the price that prevailed in the cities.

Marketing Department

The working of the Marketing Department was a thorn in the neck of the private traders because it effectively limited the profit they could make in trading.

The IMF believed in Free Market Economics and it was anathema for the Government to interfere with any economic activity. This was the Structural Adjustment Program of the IMF in action.

The IMF called for Liberalization and de-regulation? De-regulation has meant that the power of regulation has gone out of the sovereign country into the hands of Trans National Corporations, private investors and private importers. (Microenterprise Development, Sarasavi, pg.22).

In the Pre-1977 Period it was Assistant Commissioners under the guidance of the Ministers that made every decision- like what to import, prices etc. while after 1977 this role was taken over by the salesmen of private companies- their main attempt being to maximize profits. Thus the spiralling costs of consumer goods today is a malady created by post 1977 UNP policies. Fortunately, President Rajapaksa does not have to search far and wide, because the Marketing Department mechanism was practiced by the Governments of his own party up to 1977.

All that we had built, the systems, machinery, infrastructure, and price control systems were systematically dismantled by the UNP of the Jayewardene Era in the name of the open economy. The theory was that the Government should not handle trade and that it should be left to the Private Sector to handle it as they like.

The difference was that when the Government Departments handled trade - be it in vegetables - fruits-milk- fish, the motive was to serve the public.

UNP the architect of soaring consumer prices. File photo

In trading the motto was to keep the lowest possible margin that would cover handling and transport. In the case of the Private Sector the motive was to keep a profit and serving the people was of secondary concern.

UNP propaganda distorting facts

Thus, the UNP is the culprit and architect of the high Cost of Living and soaring prices of consumer goods of the country. It is ludicrous therefore now, that they themselves turn back and shout at the present Government for high cost of prices of consumer goods.

UNPers lead by Ranil Wickremesinghe should look up themselves in the mirror to find the real culprits. Instead, the current Government of President Rajapaksa is blamed for increases in prices of essential commodities by the so-called free media. It is the natural tendency to blame the party in power and all the anger of the people are generally let loose on the Government.

In this context it is necessary to understand that the Pre 1970 United National Party was a nationalist party that looked after the people while the Post 1977 UNP Governments were selling the country to the IMF, to Western Imperialists and to the rich of the country.

The Private Sector of the country was allowed to keep any profit in handling local produce or imports. The motto of the rich was to get rich fast and the people had to suffer in silence. The UNP of the Post 1977 Era ran Sri Lanka for the rich of the country - charged the least income tax from high earners - even less than what the UK charges, offered unrestricted foreign exchange for the rich, even borrowing foreign exchange at high interest for this purpose, built up a system of international schools for the children of the rich and allowed the rich to live in the lap of luxury, while the masses lingered within the realm of poverty.

Farmgate Vs Colombo price

It is true that prices of certain items are exorbitant today. I am told that a kilo of beans at Narahenpita Economic Centre was as high as Rs 90. I was in Sri Lanka in February and did travel to Kataragama and also to Mahiyangana via Randenigala.

The prices in the remote rural areas are very low while in the cities the prices are very high.

On the way to Mahiyangana I spotted a lorry being loaded with crates of tomatoes and the price was Rs 40 a kilo. If I offered spot cash, I could have purchased it for less. It was been dispatched to Colombo and payment would be weeks later.

Back in Colombo the price of a kilo was never below Rs 80 a massive 100 percent profit. This unfortunately is a global phenomenon.

In 2009 I toured Spain and bought a bag of satsumas at a farmgate for a single Euro. In the nearby Supermarkets the price was four Euros- a mark up of 400 percent. In California the trees are laden with lemons and oranges and there is no system of selling at the farmgate. However an orange is sold at around thirty cents in the Supermarkets.

If the Sri Lankan Marketing Department mechanism is functional in California, many people can earn a living by selling oranges and the Supermarkets will have to reduce their prices.

Marketing Dept with its non profit motive as the middleman

However there is a difference up to 1977 as far as Sri Lanka is concerned.

This is because Sri Lanka is the only country in the world that had the development infrastructure in place to ensure that the producer gets a fair price and simultaneously for the consumer to get the same goods at a reasonable price.

To get to basic facts that system enabled the producer near Mahiyangana to get paid at Rs 40 a kilo for tomatoes and also enabled the consumer in Colombo to get it at Rs 50 or Rs 55 a kilo. This was in a nutshell, the Department for Development of Agricultural Marketing at work.