The fall of the middle-class

By Uditha Devapriya

I distinctly remember one day in January 2020 when I felt I had everything I could want. I couldn’t explain the feeling; it just came up. I had resigned from work after three years, and was preparing for my higher studies, with hopes of going abroad.

That day three friends paid me a visit. We talked about the future. I pointed out we had nothing to lose. By “we”, I meant our generation: a generation which had come of age and left school around the time the war ended. We were now spending our way through life and saving very little of it. Our dreams remained the same: study hard, do a job, earn what you can, and spend what you will. This simple formula was what had pushed my generation on. My friends – younger than I – agreed that it would push them on as well.

We were supremely egotistical. We felt we could bend the world to our will. And to an extent, we did. We gorged on the latest consumables and luxuries, took cabs when earlier we took buses, and revelled in parties and outings. Education, for us, was a way of securing enough money to sustain this lifestyle. That is why we concentrated so hard on our A Levels and university exams: because it was our path out of poverty and misery.

Not surprisingly, we defined our status in terms of ownership: the latest phones, the fastest cars, the cleanest homes, the sexiest dresses. These remained our benchmarks.

We didn’t realise how fragile the ground beneath us was. We didn’t understand that our enjoyment of these luxuries depended on certain things. We called ourselves middle-class, even bragging about it to each other. Yet to remain middle-class, paradoxically, our lives had to be subsidised. Back then the minimum bus fare cost LKR 17. A litre of petrol cost LKR 117, and a kilometre in a metre taxi cost LKR 60. We failed to appreciate that to become who we were, these fares had to remain at those levels. And for them to remain at those levels, the government had to, in essence, absorb losses from lower prices.

We also failed to realise, I think, that the country’s economic model, which had sustained us for so long, could not sustain itself for too long. In the absence of an industrial base, or to be more specific an industrial ecosystem, the gap between what we wanted – which we had to pay for in dollars – and what we exported – which never brought in the dollars the country needed – could only widen. Successive governments made up for this deficit by borrowing. In other words, to subsidise the middle-class and their lifestyles, the country had to keep on running trade and budget deficits, and borrowing beyond its capacity.

It’s not that we didn’t understand this. Economists have been warning against Sri Lanka’s failure to industrialise for years. But we didn’t appreciate how steep borrowing, widening deficits, and diminishing export proceeds were financing our lifestyles. We didn’t realise, I think, that this couldn’t go on for much longer. A country aspiring for middle-class status, and had more or less achieved that status, had to extricate itself from what has been called the middle-income trap. To escape this trap, it had to start producing, and take the next step in manufacture. Yet the model we seemed content with was a rentier one: importing what we wanted, adding a profit mark-up, and reselling it to the local market.

This carnival of sorts began in 1977. It ended somewhere last April, when for the first time in its history and the first time in Asia in over a quarter-century, Sri Lanka announced that it would not service its foreign debts. It will now, for the 17th time or so, go to the IMF, only this time it will have to become debt sustainable. For a lot of Sri Lankans this seems like good news: we’ll be back on our feet and we can all go back to the way things were before COVID-19 and the wretched Rajapaksas. But some of us know better.

Sri Lanka’s middle-classes have always been vulnerable to external shocks. Yet until now, they were shielded from these shocks thanks to government intervention. The government kept the prices of essentials down, enabling the middle-classes to focus on other priorities. Since petrol and diesel were relatively affordable, they could prioritise buying vehicles and phones. So between 2011 and 2014 the country witnessed a tsunami of vehicle imports. The streets of Colombo flooded with SUVs and cabs. A JICA report, published during the second Mahinda Rajapaksa government, warned against rising vehicle numbers. But we didn’t care: since everything seemed within our reach, we wanted more.

We never thought of public infrastructure. We never thought of improving our public services. Yes, we built Expressways and Highways. But these, by themselves, were never enough. We never paid renewable energy the attention it deserved, for instance. Even at the height of the recent crisis several months ago, we witnessed CEB officials bemoaning the previous government’s decision to close a coal power plant. Now coal prices are on their way up and several countries, India included, are facing acute shortages, the worst in over 25 or so years. Meanwhile the sun keeps shining and the winds keep blowing. We’ve made use of neither. And officials who should be caring don’t seem to be.

Napoleon reportedly called Britain a nation of shopkeepers. He might as well have called Sri Lanka a nation of consumers. Joseph Stiglitz advised us to learn to produce and to learn to learn. This country has enough and more talent to take us forward there: it has the capacity, for instance, to produce electric vehicles. But such initiative should have been encouraged early on. Instead, pushed on by our faith in quick fixes, we ignored what was in plain sight. The IMF will sooner or later turn us towards debt sustainability, yes. But this will come at a tremendous cost, and not just for the country’s poor and vulnerable.

The middle-classes that once thought no end of their future will have to take the bite soon. The irony is that this was a long, long time coming. We just chose to turn the other way. That is our tragedy, though we have only ourselves to blame.

The writer is an international analyst who can be reached at udakdev1@gmail.com