Features
Deconstructing the Budget
By Uditha Devapriya
In the course of his Budget speech last week, President Ranil Wickremesinghe quoted three figures: Sugathapala de Silva, Gamini Viyangoda, and Chintana Dharmadasa. All three quotes served to reinforce his belief that the country has as yet not broken out of its past. He then went on to outline his policies, all of which are aimed at spurring private sector led growth and industrialisation. Lauding the
The Budget speech has attracted its share of praise and censure. Groups like the Feminist Collective for Economic Justice and political parties like the Tamil Progressive Alliance have criticised it. The FCEJ has gone as far as to describe it as “callous and heartless.” The TPA’s Mano Ganesan has argued that it has “shattered the hopes” of up-country Tamils. To be sure, neither women nor deprived minority groups stand to gain from the Budget, which in the name of growth in the future has legitimised austerity in the present.
This is perhaps the most neoliberal Budget from the last five or six years. To its credit, the Gotabaya Rajapaksa government, ensnared as it was by Keynesian visions of quantitative easing, low interest rates, and pegged exchange rates, formulated its policies on the backs of proponents of South East Asian industrialisation, such as Howard Nicholas. The marriage of the SLPP and the UNP, on the other hand, has led to a synthesis of Sinhala nationalism – in itself not a negative ideology – and neoliberal authoritarianism: what Andre Gunder Frank once referred to as the fusion of Jihadism and McWorldism.
Not surprisingly, then, the rhetoric has shifted to austerity, taxes, and welfare cuts. Again, to its credit, the Rajapaksa government never inserted anti-welfarist rhetoric in the two Budget speeches it presented. By contrast, anti-welfarism adorns this Budget through and through. Quoting the Samachchapala Sutra, for instance, President Ranil Wickremesinghe notes that we have borrowed from other countries and “got lazy day by day.” The first point is correct: we have been borrowing, not merely from bilateral creditors but also from private capital markets. But the second point misses the first: the issue isn’t that we have got lazy, but that we have never shifted from commodity exports to manufacturing.
Now there is a difference, a crucial one, between sourcing these problems to our welfare state and sourcing them to our inability to industrialise. Intriguingly however, mainstream economists – the liberals and the neoliberals – seem content in attributing the economic crisis we are in to an inflated, bloated government sector and welfare state. Their preferred solution is higher taxation, a prospect which the corporate sector and more so the middle-classes passionately oppose. Indeed, many of these economists have been criticising, not the taxation, but those vowing not to pay taxes. Their reasoning goes something like this: if the public sector is to be sustained, we need to tax ourselves more.
There is certainly some hypocrisy in the opposition to greater taxation. The government has effectively subsidised capital over the last few decades: this is how the economic reforms of 1977 generated so much inequality and inequity across the island. It was these inequalities that paved the way for, if not facilitated, civil unrest: to give one example, the destruction of agriculture in districts like Jaffna, unleashed by the wholesale liberalisation of imports, went on to fuel the separatist conflict and later the youth insurrection.
The opposition to taxation comes mainly from the middle-classes and the corporate sectors: in my view the most consumerist and least productive or production-oriented groups in the country. Ironically enough, these are the same groups that went to the streets in March and April demanding that the government go to the IMF. The IMF has more or less prescribed these reforms; the government is merely acting as their instrument. Dr Ravi Rannan-Eliya’s tweets on the need for taxation, and Umesh Moramudali’s criticism of those questioning or belittling that need, are in that sense instructive. Their argument is simple: if we do not tax those who can afford to pay, we cannot carry on the way we used to.
Not only SJB and dissenting SLPP MPs, but also the JVP-NPP has jumped on the anti-taxation bandwagons. Anura Kumara Dissanayake’s criticism of the Budget is perhaps the most strident yet from an Opposition MP. He calls it a Budget of “taxes, debt and sales.” This is true. The Budget focuses almost exclusively on what can be taxed, borrowed, and sold. However, even Dissanayake’s critique seems, for me, rather inadequate. Criticism of Ranil Wickremesinghe’s proposals are mainly centred on political corruption and the inability or unwillingness of the government to address corruption. For the likes of Dissanayake, tax revenues do not compensate for the permeation of bribery and graft in the State: for tax-and-revenue reforms to work, he suggests, political reforms have to be in place.
Why do I call this critique inadequate? Because left and left-liberal circles in this country, in their denunciation of the Budget, paradoxically reinforce the Budget’s tax-and-revenue framework. There is very little effort at assessing what its proposals lack: a proper, vibrant discourse on and discussion of production, manufacturing, and industrialisation. President Ranil Wickremesinghe does talk about Vietnam, but he does not dwell on the relevance of what Vietnam did to develop its economy. Mr Dissanayake condemns the tax, debt, and sale thrust of the Budget. Yet he would have been much more effective had he addressed its shortfalls, rather than just its limitations. The lesson here is simple. When evaluating the Budget, we need to assess its shortfalls. But no one has addressed them in their critiques, which all seem as tax-and-revenue centred as the object of their critiques.
The writer is an international relations analyst, researcher, and columnist who can be reached at udakdev1@gmail.com