Thread by @ChayuDamsinghe

Let's go into the story about why focusing on "growing the economy", building factories, "industrialization" etc is just a story of corruption and theft - and won't help us out of this mess.

#SriLankaEconomicCrisis #SriLanka #ProtestLK #EconomicCrisisLK

(1/25)

The obvious reason is that we tried it over the last 2-3 years in different ways, and look where it got us. Yes, covid affects the whole world, but we're the only one this bad. This is the mistake of policy. No one can argue we're doing great.

(2/25)

But let's go beyond the costs and explore why it wouldn't work either.

What policies are proposed?

1. Give low interest loans and other support to "industries" and other "good businesses" (who decides? Lol)
3. Protect local businesses, prevent competition

(3/25)

First issue, is who gets these loans, protections, support? Remember, all tax payer paid.

You can say, no the government will be so smart and decide exactly what needs to be done but... Really? If we had smart governments, we wouldn't need this anyway.

(4/25)

Realistically, corrupt cronies, who are buddy buddy with politicians and have money to sway banks will get this support and protection

And because resources are limited, whatever we have goes to these ones = less for others. All taxpayer funded, so people lose out

(5/25)

Remember, the reason that someone would need this support, is because the business isn't viable without it. If it was, they would be doing great already.

That's what should happen, let people do good profitable business, not ones that only survive off support.

(6/25)

But if they grow and help the economy, that's fine right?

Not really. Remember, selling globally requires high quality and good prices. If this was automatically there, then no need support. Needing support suggests this isn't there. These aren't export businesses.

(7/25)

That means these are mostly import businesses. Yes, they import raw materials, so there's a savings there, but they also import machinery, equipment and all that. The saving is minimal.

But because these cronies get this support, actual loans etc for exports is harder.

(8/25)

This means that the net effect, even on dollars, is often negative from these "import substitution" businesses - because it still has massive imports AND reduces export ability of others. Also, because it forces high costs to people, they have less money to invest too.

(9/25)

Same story for jobs and growth. Since they make it harder for legitimate profitable businesses to exist AND force consumers to give them more money AND require tax revenue support, it makes sense why these dishonest firms grow, but at the expense of the country.

(10/25)

But that's okay if they grow to become export juggernauts later, right?

If.

Sri Lanka is a small country, and there's no real domestic market that forces innovation. Especially when you shut out competitors.

Eg - the tile industry has been protected for decades

(11/25)

The incentives in this government driven system is towards unethically keeping profit, rather than sustainably growing together.

Why innovate, when the government kills your competitors and gives you free money to do things with?

(12/25)

The economy grows, sure, but that's mostly big crony business. You've somehow gotten the worst economics of capitalism (big businesses exploiting the poor's taxes) AND communism (state protecting enterprise and giving bad expensive products)

(13/25)

What about the examples where this worked?

Two broad categories of these. Pre-WW2 Europe and authoritarian East Asia.

Both were terrible for the people, only good in long term.

(14/25)

In Europe, so many people were forced to work for terrible wages, in terrible conditions, and no one safeguarded them.

When the government let's you basically have forced labour, sure, any company can grow.

I stand against forced labour.

(15/25)

Japan after WW2, Korea in the 60s/70s, post-Mao China.

These had a repressive government that forced people to work in bad situations to "grow industry". Think sweatshops and child labour, forced savings, terrible conditions.

I think Sri Lanka deserves better.

(16/25)

So what should we do instead? Never grow? Never build?

Of course not. We grow and build, primarily with what we're good at and what isn't negative.

That's where more sustainable, equitable growth comes in.

(17/25)

By allowing genuinely profitable businesses to do well (and remove regulations that make business hard) AND have key protections for workers like wages and safety, you encourage growth that doesn't require taxpayer propping up.

(18/25)

You don't need to decide what these are. Just make conditions good. Humans have been a commerce oriented species since before we evolved into humans, we'll figure out the profitable options.

Worker safeguards mean there's no exploitation.

(19/25)

In addition to this, where the state can help is by encouraging competition, having well run public services, and investing in education/research.

Competition forces innovation and brings better solutions at cheaper costs, and grows the economy for more people.

(20/25)

Better services means that there's no corruption that builds up.

Eg - if CEB is better and more efficiently run, there wouldn't be opposition to setting up solar plants by people.
And there won't be shortages of power too.

(21/25)

Education helps upskill labour, improving earning potential, and combined with RnD, actually allows us to compete in areas that currently are hard. Better technology could mean cheap plentiful rice as opposed to tax payer funded rice mills.

(22/25)

In summary, "growing" should be by truly providing value, both domestically and internationally, that someone genuinely pays for

It shouldn't be through artificially low costs of forced labour, or artificially forced revenue of a captive consumer with no other choices.

(23/25)

Plenty of people will disagree, but then think why?

Are they academics/ideologues with no understanding of the real world? Then teach and show them

But are they benefitting from the current unfair system? Are they spinning lies to keep themselves and their bosses rich?

(24/25)

This is the story of how Sri Lankan "growth" is a lie pushed to make some cronies rich. This is what we must do to fix it, and truly bring growth to all people, not just a corrupt few.

The more we know, the more we learn, the more we can achieve it.

(25/25)