Economic growth and vicissitudes of politics

Recent events in the political firmament have destabilised the government. A general election is due as the term of Parliament is due to expire in April next year. One of the advantages in the Presidential system is that when elections take place the Executive President is still in place. Although the incumbent President can serve for two more years, he was apparently considering the possibility of an early Presidential election to reap the popular support he garnered as a result of the victory over the LTTE.
But, the Opposition plans to field only a single opposition candidate for the Presidential election and the choice of General Sarath Fonseka has unsettled the plans for a Presidential election. Although there is no danger of an imminent collapse of the government yet, such political instability ties the hands of the government.
Economists agree that development requires a strong government not subject to the vicissitudes of politics. This was the argument put forward by President Jayewardane when he introduced the Executive Presidency. A government capable of taking prompt decisions to cope with the complex problems faced in the aftermath of the war is a necessity.
Economic development as well as meeting the challenges to the internal stability of the nation from terrorist threats requires that the state should be strong and have power to formulate and execute policy. Perhaps the government has gone too far in quelling dissent, which has its due place in a democracy.
Economic development requires the diverting of resources from consumption to investment, which is the factor that drives economic growth. The problem in a democracy is that people want instant economic benefits whereas such benefits can come only from economic growth and economic growth can come only from greater investment. Since resources are limited economists say investment involves the postponement of consumption.
But, governments in a democracy cannot do so since the entire political contest between parties is based on instant gratification of the desires and needs of the people. Political parties in a democracy also support distributive policies rather than policies that create greater wealth. So, the necessity to win elections will deter the government from imposing taxes or curbing spending. But, that is exactly what the IMF doctor has prescribed for the economy. We have to meet the targets agreed with the IMF, if we are to get the next tranche of the Standby Credit.
So, the demands of party politics have to be balanced with the policies agreed to with the IMF. This situation could lead to an economic stalemate. The climate for investment both for local investors and for foreign investors would be unsettling. This is unfortunate for there are many educated youth who need employment. Employment opportunities can be created only through greater investment, which means lower consumption.
In the tenure of the President, there has been much investment in infrastructure despite the financial burden of the war. The President always insisted that the war cannot deter him from carrying out a public sector investment programme. He raised public sector investment from the previous 4% to 6% of GDP. Much money is being spent on the coal power project, the super-highways, Upper Kotmale and the Hambantota Port. These projects, when completed and in operation, should promote higher growth.
But, the present political instability may delay the completion of these projects. The government budget will now be oriented towards consumption rather than investment. Political stability is also required for the nation to face the criticism and opposition of the West towards the country and its government. The government is embroiled in a contest with the West, which accuses the government and the armed forces of violating the laws of war and the humanitarian law.
The government must be strong to face these criticisms. And, it will be helpful if the people are behind the government. Up to now every one, local and abroad took for granted that the people were behind the government and appreciated the war victory. It is very necessary that some rapprochement with the Opposition be reached, if the President does not propose to hold a premature Presidential election.
The Opposition is promising to set up the Constitutional Council and the independent Commissions. Presently, these Commissions are operating in a legal vacuum, and justified only by the doctrine of necessity. These are matters that the government too should give serious consideration in the larger interests of the country for they constitute the case for the abolition of the Executive Presidency, a slogan of the Opposition.
The President is always committed to follow the will of the people. Attending to these matters will also help the government to tone down if not eliminate the hostility of the West, which is also in the larger interest of the country which otherwise stands to lose the GSP Plus. This is a decisive time for the country and it requires cool heads and the willingness to subordinate the party and parochial interests to the larger interests of the nation.