Relief and Welfare during Depression

If there were any doubts over the last year as to whether Sri Lanka was sliding into a crisis, the shortages of milk powder and cooking gas have awakened people to the deep economic depression. As cost of living rises, incomes from the informal sector grind to a halt and the salaries of workers decline in real terms, what kind of demands should working people make on the state?

It is budget season now, but this time around the promises of the Government that the economic problems facing the people will be addressed in the Budget for 2022 will provide little confidence. Similar promises were made a year ago, but that budget was a great disappointment. There was no relief for the people and there was little inves

"Thinking about our futures, we need to demand that the Government invests in and revamps free healthcare and education. Past experience shows that demands not met during a crisis are rarely addressed later"

Amidst this economic quagmire, where declining foreign exchange reserves curtail imports of essential items and falling tax revenues restrict state expenditure, the Government is finally accepting the severity of the economic problems. Indeed, the powerful teachers struggle demanding that the salary anomalies and long promised salary increases be addressed has made the Government reveal the real situation of state finances. In this context, I outline below some demands that the public should put forward in this time of crisis.

Revenue crunch and redistribution

In the lead up to the budget last year, some of us called for a broad wealth tax to redistribute resources and generate state investment in a free falling economy. The Government, having greatly reduced taxes in a populist move after the elections of November 2019, was in no position to increase taxes. In 2020, state revenues had fallen to the abysmal level of 9.1% of GDP, while debt servicing alone was 13% of GDP. (Finance Ministry Annual Report 2020) During an economic depression – when profits and incomes in most sectors fall, and consumers are tightening their belts – higher taxes on economic flows should be avoided. This is where the wealth tax targeting the stock of assets, as opposed to the flows of incomes, could transform idle wealth into much needed investment for production and redistribute resources to deprived constituencies.

An economic depression such the current one requires radical measures, and it is through the redistribution of resources that the country can provide relief to the people. Indeed, providing immediate relief to the people, including in the form of cash grants, is a priority when working people, the elderly and children are pushed into starvation and malnutrition.

Social welfare and land grants

While immediate relief during a crisis is necessary, sustainable solutions to the economic predicament require investment in social welfare and public institutions. The great strength of our country for decades was the three pillars of food subsidies, universal healthcare and free education. 

The open economy reforms attacked food subsidies and brought about various targeted measures of poverty alleviation that over the last few decades have proven to be a failure. With the current economic depression, we have to revive the policy of universal food subsidies. It is moments of great historical upheaval that awaken us to the importance of our basic needs, and it is time we again recognised the importance of food as a right of all our citizens.

"An economic depression such the current one requires radical measures, and it is through the redistribution of resources that the country can provide relief to the people. Indeed, providing immediate relief to the people, including in the form of cash grants, is a priority when working people, the elderly and children are pushed into starvation and malnutrition."

Where would we be during these times of pandemic induced suffering if it was not for our free healthcare and education systems? Despite decades of neglect in terms of state investment, and creeping commercialisation of the health and education sectors, it is the survival of these social welfare institutions that are holding our communities together. And no wonder, healthcare workers and teachers are the most vocal critics of the Government at the moment, and addressing the salary increases of these workers in the frontline of fighting the pandemic is a priority. 

Thinking about our futures, we need to demand that the Government invests in and revamps free healthcare and education. Past experience shows that demands not met during a crisis are rarely addressed later. All the more, as successive governments have only sought to make lucrative businesses out of healthcare and education. However, the Government has a point, where can it find the state resources for investment?

The wealth tax mentioned above is one possibility. Another model to consider is from the US, where governments in the middle of the nineteenth century began a programme of land grant universities. The large amounts of state land grants became the wealth on which the powerful American university system was built. 

Sri Lanka today is in a similar position, where the state still owns a majority of the land in the country. A programme of allocating large tracts of lands to our free healthcare and education institutions can ensure the flourishing of our cherished welfare system in the future. 

Political will and vigilance

Addressing the current crisis requires political will; to implement a wealth tax, to provide relief to the people and to rebuild our social welfare system. However, the priorities of the ruling regime over the last year – from the Port City to the KNDU Bill – provide little confidence. The regime is more akin to selling the family silver, by privatising state enterprises for example in electricity and water, regardless of the cost of essential services to the public in the future. 
These are times when the public must be vigilant and make powerful demands that have to be forced on the Government. Immediate relief for the working people and the welfare of future generations should be the rallying call in the months ahead.