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Lankan economy will stay flat for now

The Mafia-State must be rooted prior to economic


by Kumar David-January 24, 2015, 4:43 pm

For both domestic and international reasons the economic prospects for
Lanka remain flat for the short and medium term periods ahead; shortterm is the 100-Day duration of President Sirisenas Action Plan and I use
medium-term to denote the two-year transitional national government
envisaged for the subsequent phase. It needs no great political acumen to
make these two forecasts, the first is self-evident but some light may be
shed by probing why this will be the case in the medium-term.
De facto, the January 8 Presidential Election was a Single-Issue contest
between the incumbent and a Common Candidate challenger; no
significant economic or social changes can be implemented in the few
months before the dissolution of parliament earmarked for 23 April. The
immediate task was the defeat the incumbent and now the obvious postRajapaksa imperative is to emasculate the Executive Presidency, put a new
a constitutional system in place and revamp the electoral system how
many first-past-the-post, how many proportional etc. In general, success
will depend on the degree of mass mobilisation achieved in the next few
weeks to take crooks, power abusers and drug lords to the cleaners. The
blackguards who ruled the roost for the last nine years have created a
Mafia-State and nothing akin to normality can re-emerge until the slow

and difficult task of cleansing this root and branch is done. Pity capital
punishment for mega-corruption is no longer in vogue!
The mopping up and locking up of brigands will of course have salutary
long-term benefits but it is not going to turn the economy round, pronto,
or in the medium-term. The benefits of good governance filter into the
economy only gradually and the repair work of mending the damage that
has been done is a challenging intermediate task. The unpredictable
outcome of the pending general election will be a severe a complicating
factor. For example, will Ranil or an SLFP leader be the next Prime
The Mafia-State
The concept of the mafia-State was developed to
denote a phenomenon creeping across ex-Soviet
Bloc Eastern Europe (especially Bulgaria, Kosovo
and others), Africa (Guinea-Bissau and
Zimbabwe), Asia (Burma and Seychelles) and
Latin America. Moises Naim, a scholar at the
Carnegie Endowment in the US, describes the
Mafia-State as follows.
"In recent years, a new threat has emerged: the
Mafia-State. Across the globe, criminals have
penetrated governments to an unprecedented
degree. The reverse has also happened; rather
than stamping out criminal gangs, some
governments have instead taken over their illegal operations. In MafiaStates, government officials enrich themselves and their families and
friends while exploiting the money, muscle, political influence, and global
connections of criminal syndicates to cement and expand their own power.
This fusing of governments and criminal groups is distinct from the more
limited ways in which the two have collaborated in the past. In a MafiaState, high government officials actually become integral players in, if not
the leaders of, criminal enterprises, and the defence and promotion of
those enterprises businesses become official priorities. Mafia-States
integrate the speed and flexibility of transnational criminal networks with
the legal protections and diplomatic privileges enjoyed only by states".

The state that evolved in the Rajapaksa period fits this description well as
evidence now coming to light confirms. A chaotic situation in which, post
election, government and law enforcement agencies are struggling to gain
control is evident. Crooks and crookedness has become ubiquitous and it is
tough to get on top of the situation. Up to this time of writing although the
newspapers are filled with horror stories of container loads of loot and
arms, fleets of hidden and lost vehicles, millions stashed away and the like,
not a single arrest has been made. The offices of the bribery commission
and the CID are flooded with names and details of robbery by the family,
political hangers-on and big-time corporate rogues. Some government
offices have been sealed but no arrests have been made; some siblings
and family have been allowed to abscond; millions of dollars are moved
around each day. The Sirisena-Ranil government seems to be paralysed
but should be given another month to complete inquiries, make arrests
and file action.
This is because we are not up against a few dozen criminals but confronted
by institutionalised and semi-institutionalised criminals who claw their way
back into the replacement structures. For example Dumindas tentacles
reach into the UNP via the financing he offers some of its politicos. Newly
appointed Ministry Secretaries are Janus faced and an open door for old
power-brokers to return. Crooks are fighting their way back.
The JVP, TNA, and to the best of my knowledge the JHU, are the only
political parties that are not compromised and can confront the still
powerful Mafia that infests and infects the state. But even their efforts will
not achieve much without heightened public vigilance, mobilisation and
involvement. Sri Lanka is far from out of the woods; January 8 is a small
clearing that the nation fought its way into; completely rooting out the
Mafia-State is still a long journey into the future.
The general election
One reason why the SLFP jettisoned Mahinda Rajapaksa in haste was to
present a united SLFP to the voters at the elections. If there are two SLFPs
(CBK-Sirisena and a Mahinda-rump) both will be crushed by the UNP and
lose seats to the JVP. Now that the SLFP is reunified it is too early to say
how the electoral calculus will pan out, but there is reason to believe that it
will win a number of seats. Rajapaksa won two Provinces (Southern and
Sabaragamuwa) and five Districts (Kurunegala, Uva, Kalutara, Matale and
Anuradhapura) and a majority of the Sinhala electorates. Though defeat at

the January 8 elections will have a debilitating effect on its prospects and
continuing exposure of corruption will deliver crushing propaganda blows,
it is not possible to say how the SLFP will perform relative to the UNP in
the forthcoming general elections.
This is a pity. Though I am not a UNP supporter I do believe that unless
the SLFP is banished to the wilderness for a spell it will be an obstacle to
cleansing society of the Mafia-State. Flushing out scoundrels throughout
the country and state and corporate sectors - not just Paksa family and
cabal - and the denial of opportunities for graft for a long period is an
essential catharsis in rooting out the state mafia. This is not merely a call
for personal vengeance against the vermin who crawled around the
previous regime; what I have in mind is the imperative of cleansing
structures themselves. If the SLFP creeps back, if not into power even as a
major player in a future national government, it will be as if the robber
barons took a vacation and returned to thievery with renewed vigour.
Therefore it is imperative to minimise the number of SLFP MPs in the next
parliament and to replace them with JVP, TNA, JHU and UNP members. It
would also be useful to eliminate garbage, that is to exclude Tissa
Vitarana, DEW Gunasekara and Vasudeva. Likewise the Frontline Socialists,
Siritungas party and the Linus Jayatilleke led NSSP rump should decamp
to the Planet Mars where they may find a more productive role to play
than on this planet.
A directionless economy
This introduction is necessary background for meaningful comments about
prospects for the economy. Apart from my stress on the Mafia-Sate which
will subvert political will and policy, it seems that a hungish if not actually
hung parliament is impending. This does not bode well for the economy.
There will be no clarity, firmness or political will to pursue a well defined
economic strategy whether populist or capitalist-market oriented. Readers
who are inclined to a favour pro-capitalist or neo-liberal outlook will
appreciate the point if I put it like this: What if Ranil fails to get
parliamentary support after the election to secure the Prime Ministership?
What if Nimal Siripala is the next PM? I am not asking which is more likely,
thats a separate matter, I am drawing attention to uncertainty and its
implications. Were the SLFP to form the next government I will predict with
certainty that despite having thrown out the leading family of thieves and
brigands the dismantling of the Mafia-State will be blocked.

The pro-capitalist market driven approach that a Ranil led UNP government
will pursue can be summed up in a few key-words. It is not necessary to
spell them out because the discourse is well known. The key components
are: (i) An investment climate attractive to local and foreign capital, (ii)
legislating structural reforms, particularly curbs on working class activism,
welfare concessions, supporting the share market, banking policy to
support both big capital and small and medium enterprises, and of course
wholesale regulatory reform. I cannot see any of this pro-capitalist
strategy having a ghost of a chance if Ranil and the UNP, in coalition with
the TNA, SLMC, CWC and the JHU, fail to win a parliamentary majority.
This is leaving to one side fundamental concern of breaking up the MafiaState to which I devoted the first part of this piece.
A mixed international scene
China will be pleased to see the last of the Rajapaksas and the end of
projects inflated to two and three times real cost; ladling out graft on this
scale is an embarrassment for any foreign government. Economic relations
with India and the West will improve. The diaspora will create a better
international environment and will bring in a certain amount of investment.
In all these respects the economic environment will improve but cleaning
the mafia out of the state is a precondition.
The downside is that prospects for the global economy and global
capitalism in general are not good. Except the US the remainder of the
world economy is forecast to suffer a lousy year. The IMF and Christine
Lagarde are pessimistic about prospects for the EU in particular and the
rest of the world as well. Chinas decision to consolidate rather than grow
wildly is good news for the Chinese people but it will have depressing
consequences for the world economy. The collapse in oil prices is a
forerunner of a downturn in Russia, Brazil and Mexico and will result in
sharp lowering of global demand. This year (2015) is not going to be a
happy one for an export oriented growth strategy for Lanka which is just
what we should be aiming at. Year 2015 can be one of political
consolidation and cleansing and if we sort out these rudimentary tasks
there is hope for the economy after that.
Posted by Thavam