Historical transformation from Feudalism to Capitalism by 1824

by Jayampathy Molligoda

As we know, on March 2, 1815 the Kandyan Kingdom was formally ceded to the British by signing the Kandyan convention by the chiefs and the Governor, Brownrigg on behalf of the British. Thereafter, the year 1818 marks a real turning point with the defeat of the great rebellion of Uva- Wellassa, where the resistance of the people was broken and the British had laid claim to an all -island control.

According to eminent Historian, Professor K.M de Silva, British could not set up a unified administrative system for the whole island until the Colebrooke -Cameron reforms of 1829-1832, thus providing the administrative and legislative framework for a more liberal form of government for Sri Lanka. The establishment of plantation agriculture consolidated the unification by providing an economic basis for it. In the 1820’s, Governor Barnes’s network of roads built with the help of the traditional ‘rajakariya’ system (a feature of feudalist society) placed the control of Sri Lanka firmly under British hands.

As for the Island’s trade, the European agency houses were established in 1824 and then Governor Barnes decided to stop importing goods on account of the government, thus halting the monopolistic structure of the government’s economic activities through East India Company. Based on Colebrooke recommendations, the ‘Savings Bank of Ceylon’ was established in 1832 and money became freely available. Several historians and scholars including Ralph Peiris, Senaka Bandaranaike, Professor W.I Siriweera are of the view that pre-modern Sri Lankan society was feudal.

From the middle of the first millennium up to 1830, ‘feudal’ characteristics were predominant in the Sri Lankan society. The colonial powers including the British continued to maintain the state trade monopoly until the period up to 1825. Thereafter, the road and railway network developed and thus facilitated easy communication and opportunities for social mobility.

Internal and foreign trade expanded along with banking and money circulation. Governor Barnes (1824) is credited with the construction of the first major road under the British where he constructed a better and shorter road from Colombo to Kandy. Feudalism withered away with Colebrooke reforms and commercial capitalism in Sri Lanka started with the plantation crop culture.

The foundation of a class society was laid only with the implementation of Colebrooke reforms. As a result of the capitalist transformation, there emerged a class society based on the production; bourgeoisie (rich), middle class and a labour force. Tea and coffee plantation workers were brought in from South India and their living conditions were poor.

In contrast to the plantation workers, urban workforce experienced some salutary effects of transformation from feudalism to capitalism as the rigidity of the caste system was reduced because birth status was not a condition of employment. The majority of the labour force outside the plantation sector were Sri Lankans but labour employment was open to all ethnic groups and both sexes, although most of the laborers were male. Those labourers who settled down in Colombo (and few other main cities) lived in slums where sanitary conditions were unsatisfactory. ( Prof W.I Siriweera,2023)

Socio/ economic transformation by 1924; after 100 years under capitalism:

The growth of the plantation sector and means of communications and associated infrastructure development in road and rail transportation greatly contributed to commercialization. Cities such as Colombo, Galle, Matara, Kandy, Jaffna, Anuradhapura, Nuwara Eliya and many other cities developed considerably. Shops were established near railway stations and even some imported commodities were freely available in village boutiques and products of the villages began to be circulated in other villages, although the local hand-loom industry was affected.

According to published literature by eminent historians, only the plantation and merchandize capital had contributed to capitalist growth and hardly any industrial manufacturing growth, except small scale coir and coconut oil industries. The production of arrack and toddy became popular and the government granted permission to open taverns to earn revenue to the general treasury and as a result, crimes too increased and many other social issues cropped up.

By the 1920’s, we have seen a contraction of world trade due to World War 1914-1920 followed by the Great Depression of the late 1920’s. The British Government imposed restrictions on shipping and controls on tea and coconut imports from Sri Lanka.  With the disruption of food imports and stagnation of the plantation sector, there had been a revival of interest in peasant agriculture and development of the dry zone.

Further, the government wanted to liberalize the system of alienating the crown lands in order to accommodate the peasants. In the 1920’s under a new system, leasehold tenure system was granted to the peasants. It was also decided to appoint a Land Commission and there was a close link between the reappraisal of the land policy and the increase in population (22.5 million according to 2021 census from 1.5 million 100 years ago.)

Further improvements to the Capitalist system through Constitutional bases during the last 100 years-1924 -2023 To date:

With the formation of the Ceylon National Congress (CNC) under P. Arunachalam, the educated Sri Lankans agitated for greater share in the administration. As a result, more reforms were introduced during the 1920’s. One reform was popularly known as Manning reforms and the colonial office in 1927 appointed the ‘Donoughmore’ commission to make a new constitution.

One of the major reasons for the reforms was the Anti-Imperialist movements originating in Sri Lanka with the ‘Suriyamal’ movement in 1926 and formation of Youth leagues by Marxists (LSSP, CPSL). During this period, immigrant workers joined the indigenous working class under A.E. Gunasinha’s leadership. Urban workforce resorted to strike action due to poor working conditions.

Exactly 100 years under the capitalist system, there was a general strike in 1923 and in Lake House in 1929 and the Galle Face Hotel in 1934. After the formation of the State Council in 1931, the CNC continuously agitated for complete independence. As the Indian nationalist movement gained ground, the British government outlined a set of proposals in 1943, but Marxists opposed the transitional status, although moderates agreed to the proposals.

The white paper on constitutional reforms, which included Soulbury proposals, was placed before the State Council in 1945 by D.S Senanayake and was approved. Later, he informed the colonial office that he could not successfully challenge the Marxists if dominion status was not granted.

On August 15, 1947, the first election to the House of Representatives was held under the Soulbury constitution and the opening of parliament on February 4, 1948 marked the end of the status of crown colony. During the next 70 years. The Sri Lankan leaders continued to maintain the capitalist system of governance up-to- date (Although some attempts were made to change it during the period 1971-1974 by Marxists within the 1970 government of Mrs Bandaranaike and outside, but it was not successful).

The Constitution titled, The Democratic Socialist Republic of Sri Lanka- 1979 by President J.R Jayewardene (with 21 amendments so far) introduced the present ‘Executive Presidential system’ and is still continuing. These constitutional provisions provided a solid base for smooth functioning of the capitalist system although some cracks have emerged. The writer is of the view, that at present, the majority of people are dissatisfied with the prevailing governance system.

Present status of the political economy and living standards of the people:

Much has been written on the failure of successive governments since gaining independence to provide even some basic needs of the people let alone improving the quality of life and overall economic development in Sri Lanka; therefore, there is no need to repeat over and over again some facts and figures to justify this claim.

As this writer has explained in many articles published since 2014, the Sri Lankan economy   has been recording a persistently high ‘twin deficits’ meaning (1) government budget deficits since independence and (2) Balance of Payments (BOP) current account deficit with rest of the world due to deficit in exports minus imports. And CBSL has been compelled to resort to ‘money printing’ more than what is required/desired level while the successive governments continued to borrow to bridge the gap thus increasing foreign debt service beyond sustainable levels.

The real issue has been that our exports as a % of GDP has come down from 28% in four to five decades to 12% especially since 2014 to date. As explained earlier, since 1824 mainly the merchandise, capital had contributed to our economy’s capitalist growth and hardly any industrial manufacturing growth. Even in the case of agricultural and plantation crops, due to high cost of production and low yields compared to products from other countries, our exporters have not been able to compete in the global marketplace on ‘cost leadership strategy’.

Many have already expressed serious concerns about the deep economic crisis in the country and its impact on the people of Sri Lanka, especially the poor and the vulnerable, particularly women. The government of the day has not focussed enough to address those badly affected segments, including SMEs, construction industry etc. and address those vulnerabilities. Already, poor and some middle-class families became poorer.

According to a survey conducted by the Department of Census and statistics recently, some 60% of the household’s income has decreased. Income disparity between the rich, middle class and the poor has also increased. The Sri Lankan society’s poverty problems are closely related to this wider problem- namely, the growing gap in the share of income going to the rich, the middle class and the poor. The recent increases of VAT up to 18% in addition to price increases of fuel, electricity, water, transport, food items etc. have really aggravated the burden of the middle class and poor.

 The grand idea of capitalism is that those with capital will apply it to create more wealth that enables to create more employment and jobs for everyone. Not only the wealthy benefit but their wealth will trickle down to other classes as well. However, according to more comprehensive research studies done recently by eminent economics of the calibre of Prof. Joseph Stiglitz and Thomas Piketty, the inequality will worsen under free market capitalism.

Growing income disparity is not only a disaster for the poor, but also a threat to the rich. Poverty breeds crime, beggars, prostitution, massive social protest movements and inability to gain access to education and training, which will seriously affect developing our human resource requirements for improving businesses.

These economists urge the governments to embrace real solutions: Investing in education, science, technology and infrastructure, offering more help to the children of the poor, doing more to restore the economy to full employment, introducing more effective and proper tax policies etc. It is essential to ensure that adequate social protection is provided. They believe our choice is not between growth and fairness- with the right policies we can choose and achieve both. (For a more thorough discussion of the adverse economic consequences of inequality, please see Joseph Stiglitz, ‘The Price of Inequality’ and Thomas Piketty, ‘Capital in the twenty -First century’)

 Need to project immediate future scenario during the election year- 2024:

In the event, the Government is unable to provide these solutions, social unrest will further increase and the ruling party unpopularity will increase, thus paving way for political forces demanding a General or Presidential elections sooner or later. Once again, the government of the day would have to abandon the IMF policy prescription. It is interesting to note that even the IMF, an organisation not taking radical positions, has taken up the position that inequality is associated with instability. For details, please see ‘Inequality and unsustainable growth; two sides of the same coin? – IMF staff discussion note- 2011’.

 The writer is of the view that in the new year 2024 (exactly after 200 years of capitalist form of governance) there is a probability or a likely scenario that a major transformation of a ‘system change’ may take place including a complete abolition of the Executive Presidential system.  It is not impossible to obtain two thirds majority in Parliament to change the Constitution and adopt a new constitution approved by people in a referendum by early 2025 and thus ending the capitalist system that prevailed over 200 years in Sri Lanka. Whether it will provide tangible benefits to Sri Lanka and its people is yet to be ascertained.

(The author is a freelance writer who previously served as Executive Deputy Chairman/CEO at Bogawantalawa Tea Estates PLC and as Chairman, Sri Lanka Tea Board)