Is Sri Lankan recovery policy unconstitutional? Should we have a pro capitalist Constitution?

 


Article's Background

As we all are aware, Sri Lankan Constitution is for Democratic Socialist Republic of Sri Lanka. The term "Socialist" is comprehensively interpreted across the globe against "Capitalism" born on the free market philosophy of Adam Smith in 1776. Therefore, by Constitution, Sri Lankan economic policies should be pro socialist.

In addition, the Constitution contains a number of socialist-based directive principles of state policy and fundamental duties that guide the state in enactment of laws and governance of Sri Lanka for the establishment of a just and free society.

However, the state policy package pursued at present seems pro capitalist and tends to violate such directive principles. 

Therefore, this article is to highlight the said violation and to propose Constitutional amendments to promote pro capitalist policies in Sri Lanka.

Pro capitalist policy model pursued at present

It is no secret that the IMF-based policy model is geared for a small government allowing a dominant role to the private sector and markets in the economy in the medium to long-term. The restrictive fiscal and monetary policies without regard to the dire need to expand the capacity of productions and improve living standards at the present status of the economic contraction are clear evidence in that regard.

Increases in taxes, deceleration of public spending, restrictive limits on fiscal deficit and debt, disposal of state enterprises and interest rate and credit policy without regard to greater credit distribution needs of the economy are the fundamental concerns over deviations of pro socialist principles of the Constitution.

Socialist-based directive principles of
state policy and fundamental duties in the Constitution

Pro socialist principles on economic welfare of the public as contained in the Chapter IV of the Constitution are presented below. All these are the duties of the state policies towards greater distribution of economic activities and benefits among the public.



Although the state is not obliged to implement specific policies to deliver such duties, the state is responsible for any policies that are detrimental to those public duties.

Therefore, it is evident that the present economic policy stance of the state tends to violate the above pro socialist principles.

Recommendation

  • The Parliament these days is in full of noise on supreme powers of the public enforced by the state as empowered by the Constitution.

  • Therefore, it is worthwhile to review whether the Parliament itself violates constitutional economic policy principles as voiced concerns above by disregarding supreme powers of the public.

  • The world has been moving towards pro capitalist economic principles since early 1980s. The resulting improvement in living standards against the previous pro socialist economic models is not disputed. Sri Lanka also has been on this path since 1977.

  • However, the rising bureaucracy on economic regulation claimed for fair markets is a threat to pro capitalist principles. The Sri Lankan bankruptcy in 2022 is a bureaucratic outcome of unsound fiscal and foreign reserve policies.

  • Therefore, it is proposed that the Sri Lankan Constitution is amended suitably to facilitate more pro capitalist principles by recognizing the competitive roles of the state and private sector in a market-based production and distribution system in line with modern market economic principles. This will be more beneficial to the supreme powers of the public than frequently enforced constitutional amendments on qualifications, term of office and powers of the President that have led to immense political tensions and instabilities.

  • Otherwise, unconstitutional economic policy governance carried on individual beliefs will be a significant risk to socio-economic stability of the country.

This article is released in the interest of participating in the professional dialogue to find out solutions to present economic crisis confronted by the general public consequent to the global Corona pandemic, subsequent economic disruptions and shocks both local and global and policy failures. All are personal views of the author based on his research in the subject of Economics which have no intension to personally or maliciously discredit characters of any individuals.)

P Samarasiri

Former Deputy Governor, Central Bank of Sri Lanka

(Former Director of Bank Supervision, Assistant Governor, Secretary to the Monetary Board and Compliance Officer of the Central Bank, Former Chairman of the Sri Lanka Accounting and Auditing Standards Board and Credit Information Bureau, Former Chairman and Vice Chairman of the Institute of Bankers of Sri Lanka, Former Member of the Securities and Exchange Commission and Insurance Regulatory Commission and the Author of 12 Economics and Banking Books and a large number of articles published.


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