Sri Lanka in dilemma between free market economy and welfare state

• Academic says Sri Lanka’s welfare state has failed to develop people who can generate dollar incomes 

Sri Lanka has been a welfare state since its independence but it has now come to a breaking point with the people increasingly realising that the government cannot continue to provide things for free or even at subsidised prices. 
However, Mahinda Pathirana, a Senior Lecturer at the Sabaragamuwa University, recently queried if the people are truly ready to make the shift from a decades-long welfare state to a one completely determined by the market forces, where the prices of everything is decided based on the demand and supply. 

He said he doubts if that is what the people, who are engaged in the struggle and others in society, are really asking for, despite they call for a complete reset in the economic and political system in the country, calling the divergence as ‘the great dilemma’, in the Sri Lankan society and polity. 

“Our system is in a great dilemma. Neither the strugglers nor society ask for the prices determined based on the market forces. At one point, we ask for a subsidised price. We ask for free education; we ask for free healthcare, etc.,” Pathirana told a television discussion. 

Left-wing politics in Sri Lanka wants the government to play an outsize role in the economy, including the state-sponsored free education, jobs and state-run enterprises. 

However, under a potential International Monetary Fund (IMF)-backed rescue package, the country will have to do the opposite while privatising even the existing state-owned enterprises, shrinking the government and its role in the system. 

Market-based pricing of fuel, gas and other utilities in response to the sharp depreciation in the rupee has already inflicted an enormous pain on household balance sheets, as they were forced to cut down on their consumption to a bare minimum, without a corresponding increase in their incomes.  

Pathirana said while the people are asking for free and subsided goods, they also ask for other things to maintain their lifestyles, which they have gotten used to—most of which are imported.   

“The problem we have is the man we make healthy through the free healthcare system doesn’t earn dollars. Instead, what he does around the clock is spending dollars. For instance, from the point he wakes up to the moment he goes to bed, he consumes things we have to bring in spending dollars,” he said. 

“On the other hand, the academia and intelligentsia like us, who got benefitted from the free education, also do not earn dollars. The universities do not earn dollars. The only dollars we get are from those who migrate and repatriate part of their money just enough to sustain their parents back home,” he quipped.

Therefore, he said the current crisis offers a great inflection point for everyone to assess the path we took and decide which path we must tread going forward to achieve durable economic well-being for everyone. 

“In my opinion, I think society must now at least engage in a self-reflection and self-criticism of the path we have so far taken and debate and decide if we want to have a complete liberal market system or the welfare system or a restricted liberal system.”