16 - The Political Economy of the Rajapaksa Decade in 428 Sri Lanka, 2005–14: Policy Contradictions and Mal-governance

Summary

INTRODUCTION

The early to mid-2000s saw a shift from the Washington Consensus towards greater state intervention in the governance of market economies in developing countries. According to some economists, the structuralist features of many developing countries did not create the conditions necessary to generate adequate growth and address poverty through market liberalization (see for instance, Chang 2003). Nobel laureate Joseph Stiglitz's book, Globalization and its Discontents (2002), and his subsequent work, Making Globalization Work (2006), may have also had an impact on politicians and policymakers in developing countries and provided a further push away from the Washington Consensus.

This shift in thinking was seen in the emergence of centre-left leaders in many parts of the world, such as Eva Morales (Bolivia), Hugo Chaves (Venezuela), and Lula De Silva (Brazil) in Latin America, and Manmohan Singh (India) and Asif Zadari (Pakistan) and others in Asia. To this list, we can add Mahinda Rajapaksa, who was elected as President of Sri Lanka in 2005.

Rajapaksa is a seasoned politician identified with the centreleft of Sri Lankan politics; he is a populist politician who served as the Labour, Fisheries, and Highways Minister from 1994–2004 and Prime Minister from 2004–5. His development strategy, as articulated in his manifesto the “Mahinda Chintana”, was based on a mixed-economy model. It was designed to retain the open economy but strengthen the domestic economy for both export promotion and import substitution. For this purpose, infrastructure development was given priority status (MOFP 2005). Five hubs in the shipping, aviation, commercial, energy, and knowledge sectors were to be created to stimulate economic growth. The North/East Tamil separatist conflict was to be addressed through a devolution of power, as articulated in the 13th Amendment to the Sri Lankan Constitution (MOFP 2005).

However, the type of economic development strategy that eventually emerged over the 2006–14 period was quite different to what was articulated in the manifesto. Political coalition management, nationalism, authoritarianism, rent seeking, etc., determined Rajapaksa's economic strategy, which was essentially based on debt-financed economic development under a highly authoritarian political structure. His approach to the North/East Tamil conflict shifted to a military solution, and the peace dividend was based on generating rapid economic development in the two provinces rather that the devolution of political power.