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Fri, 14 December 2018 04:38:15
Sri Lanka's road to serfdom: fuss-budget
23 Nov, 2009 08:49:43
By Fuss-Budget
Nov 23, 2009 (LBO) - "A political regime, having totalitarian aspirations, ideologically based on centralized government, government control of business, repression of criticism or opposition, a leader cult and exalting the state and/or religion above individual rights."
That is a definition found in

"A philosophy or system of government that is marked by stringent social and economic control, a strong, centralized government usually headed by a dictator, and often a policy of belligerent nationalism."

That is a definition in the American Heritage Dictionary.

And all these sound terribly, horribly, familiar. These are definitions and descriptions of different forms of fascism.


How does a peaceful nation, where people went about their business without bothering anyone else, turn into a fascist state?

In to a country where there is no equality before law, where there is no rule of law even, where impunity reigns, where the state controls business, where the state is exalted above the individual and religious freedoms are curtailed?

Where an oligarchy rules? Where the state instead of being a tool put in place by the people to govern the nation and ensure their freedoms, becomes a self-serving entity that preys on the people themselves and takes away their freedoms?

Where economic freedoms, the freedom to trade with their fellows beyond the borders, to take their savings where they want is deemed a crime?

Where individual freedom, the freedom of speech, the right to bear different political ideas or political action, is likened to treachery or a conspiracy?

Where the state has a 'sovereignty' above the individual freedoms and sovereignty of ordinary citizens? Where the ego of the rulers is passed off as sovereignty?

Fascism has long been associated with the likes of Benito Mussolini and Adolf Hitler.

But it can exist in different forms, and may not be as extreme as that practised by Hitler.

The road to serfdom

One of the clearest explanations of how nations and peoples get stampeded into totalitarian rule - indeed where they actively demand it - where the citizen is reduced to a slave before the ruler, is found in the works of a Nobel prize winning economist.

Friedrich August von Hayek together with one of his mentors, Ludwig von Misses, are now very much in the limelight after US Federal Reserve's economic bubble burst.

They are among the foremost exponents of the school of Austrian economics, which tells the danger of state control of interest rates and the bubbles created by central banking, which has a monopoly in a medium of a country's exchange - money.

Hayek had headed the Austrian Institute for Business Cycle Research before joining the London School of Economics from where he was a lone voice challenging the inflationary state interventionism of John Maynard Keynes.

But what concerns Sri Lankans today is one his later works, written towards the tail end of the Second World War, called The Road to Serfdom.

Being an Austrian he saw what happened in Germany. He describes how socialism came to the fore in Germany during the late 19th century and early 20th century and how the state intervention failed to deliver, and how society, even intellectuals, basically cried out for a dictator.

Totalitarianism, fascism and the breakdown of the rule of law, he found, was an inevitable consequence of the failure of socialist state intervention.

But while recognizing that socialism failed, the leaders of fascist countries do not believe that restoring the economic freedoms and unleashing the power of the people or true democracy that comes from rule of law will bring prosperity back to the country.

Look at this description found in Wikipedia.

"In the economic sphere, many fascist leaders have claimed to support a "Third Way" in economic policy, which they believed superior to both the rampant individualism of unrestrained capitalism and the severe control of state socialism."

This change obviously comes from the decline of tax revenues, when the nationalized and once profitable enterprises start eating into general tax revenues under state mis-management, and the rulers suddenly realized it is a part of the problem.

First Steps

Hayek wrote The Road to Serfdom when people in England were under a process based on money printing, of rationing, with gold convertibility suspended, but a system which was nevertheless winning a war against perhaps one of the worst fascist movements of our time, Nazism.

By this time the roots of the 'welfare state' were already laid in the US with President Roosevelt's exchange rate depreciation and money printing even before the war, when like in Sri Lanka now, a burst economic bubble and a broken banking system allowed the government to borrow and deficit spend seemingly without generating inflation or higher interest rates.

What Hayek saw was a British tendency to apply wartime processes to fight peace time economic problems, like the older 'planning boards' of pre-Nazi Germany. Some of these concepts have been immortalized in a remarkable set of cartoons in Look magazine called the 'Road to Serfdom in Cartoons'.

It would be a mistake to look myopically at recent developments in Sri Lanka and draw parallels. The parallels date back decades, not years or months, both in Sri Lanka and elsewhere.

Against the articulate Keynes, the Cambridge University and the allure of central bank powered government, neither Hayek, nor the London School of Economics was proof against. Britain, and other nations, nationalized and printed their way to currency depreciation and high inflation.

Ironically, Hayek only won a Nobel Prize in 1974 after the failure of Bretton Woods and paper money became entrenched in the world.

Sri Lanka created a central bank to print money in 1950 and progressively nationalized business. The 1970s saw the worst type of economic repression imaginable under a heavily planned state.

After 1977, some economic freedoms were restored, and there was a certain amount of economic progress. But political freedoms were systematically taken away, through a draconian constitution and a general willingness and a call for a 'strong leadership' that could implement 'better' economic policies.

Deficit spending and state interventionism increased. The state built hotels and airlines. Unlike in Singapore though, the rule of law collapsed.

Television was made a state monopoly, on top of newspapers that were nationalized during the previous administration, giving a systematic tool for the state to dish out propaganda.

To this day many people talk of a 'lost opportunity' the post-77 administration had of ramming through practical economic policies with a five-sixths majority.

Of course there was no such chance. Sri Lanka was just going through the motions of socialist disillusionment and was well on the way to even more arbitrary government, where even the constitution could be changed at will.

Hayek says a sign of extreme fascism is also to target a scapegoat minority to build support and unity for the national party in power.

A second definition of fascism also found in the Wiktionary says this:

"By vague analogy, any system of strong autocracy or oligarchy usually to the extent of bending and breaking the law, race-baiting and violence against largely unarmed populations."

In Germany the scapegoat minority were the Jews. Sri Lanka's rulers started making discriminatory laws against the Tamils a few years after independence, long before they took up arms against the state.

The Burghers also left the country soon after.

But it was not just the Tamils who took up arms against the state. The Sinhalese majority did it twice. The problem is therefore more complex.

The long slide

In 1977 after the United National Party's landslide victory, there was systematic violence against Sri Lanka Freedom Party officials. But the roots are not necessarily there as well, though the year was a definite turning point to the worse.

Political violence of all types stem from a basic intolerance and an inability to tolerate the idea that someone else has a right to a different political opinion and the right to support a political party of their choice.

The dangerous idea that it is 'wrong' to support a particular party of choice as opposed to disagreeing about policies, do not come from the bottom. Neither are these processes sudden.

Says Hayek of Germany: "…the process of the decline in Rule of Law has been going on steadily in Germany for sometime before Hitler came into power and that the policy, well advanced towards totalitarian planning had done a great deal of work which Hitler completed."

So it was not just the 1970s planned economy, or the nationalizations, but it all goes further back.

It dates back to the Sinhala only law at least but perhaps beyond. Because the same forces that were at work in Britain and the same economic thinking was at work here. Except that the problem here was made worse by communal aspects.

The Rule of Law is a concept and a belief in the population, especially the decision making elites in society, the media and intelligentsia as well as the common people about the fundamental right to equality of a human being.

It is not about constitutions per se but a conviction among the people and among those of the people who become leaders, about freedom, about liberty and about brotherhood which are then incorporated in a constitution.

For example the Soulbury constitution, which was externally imposed, had a section 29, which said that any law passed by the legislature (parliament) that restricted religious freedom or discriminated against any community, would be void.

Section 29 barred any laws from making persons of any community or religion subject to "disabilities or restrictions to which persons of other communities or religions are not made liable" or "confer on persons of any community or religion any privilege or advantage which is not conferred on persons of other communities or religions."

The Sinhala only law was passed despite this provision.

Constitutional Government

The basic principle behind a constitutional government is that it limits the powers of government, not increase it.

In Western Europe, constitutions evolved to limit the powers of the executive in particular (the monarch) and not to increase it so that the coercive powers of the state could be used to interfere in the economic and other freedoms of the people.

A constitutional government will give certain absolute guarantees to the people, subject to which only parliamentary majorities can be used to pass laws.

In the absence of such safeguards the parliament merely becomes a tool for the 'tyranny of the majority', whether in terms of political thought of a particular party, a religion, a community or race.

Parliamentary majorities can always be used to direct the coercive power of the state against a particular people or a group of peoples, in the absence of absolute guarantees of freedoms and equality or the absence of the broader concept called the Rule of Law.

The principle of the Rule of Law, and the sovereignty of the individual can be written down in the constitution (and reinforced through measures like the US bills of rights), or just accepted as a given by the people, like in Britain.

If the people do not understand the importance of it however, or do not feel a sense of outrage when it is violated, writing it down or changing the existing constitution will not help, as past experience has shown.

The fate of the 17th amendment to the constitution is an example.

Such countries therefore are not really democracies at all, but belong to a class of 'arbitrary government', where 'laws' are made at the whims and fancies of small interest groups, or a ruling oligarchy, almost overnight without white papers, or any discussion.

In Sri Lanka almost any action of the state, fair or foul, can now be legitimized by 'cabinet approval' or 'parliamentary approval.'

The Rule of Law

Hayek explains the Rule of Law in this way.

"Nothing distinguishes more clearly conditions in a free country from those in a country under arbitrary government than the observance in the former of the great principle known as the Rule of Law."

The most obvious sign of the Rule of Law is that laws apply to everybody equally, whether it is a politician or common man, the rich or poor.

"It may even be said that for the Rule of Law to be effective it is more important that there should be a rule applied always without exceptions, than what this rule is," says Hayek.

For example it does not matter whether people drive on the left or right, except that everyone should follow the rule.

The rule of law therefore applies without any economic distinction.

Though rules restrict freedoms to some extent, the laws are known before hand and are not changed in an ad hoc manner. In economic terms this allows people to act with some certainty.

Some laws which are intended to bring economic 'equality' can be seriously discriminatory and confer 'privileges' to certain peoples.

Hayek points out that the Rule of Law can produce economic inequality, but socialists and fascists have objected to laws that had no views on how well off particular people ought to be.

"The Rule of Law thus implies limits to the scope of legislation: it restricts it to the kind of general rules known as formal law and excludes legislation either directly aimed at particular people or at enabling anybody to use the coercive power of the state for the purposes of such discrimination.

"It means, not that everything is regulated by law, but, on the contrary that the coercive power of the state can be used only in cases defined in advance by the law and in such a way that it can be foreseen how it will be used."

Privilege and economic apartheid

In a planned state, whether fascist or socialist (some socialists may be well-intentioned and do not usually discriminate on religious or communal grounds), ad hoc laws that give legal privileges to certain sections of citizens can become common.

Laws that try to re-distribute incomes in particular can confer privileges on some sections of the population.

"There can be do doubt that planning necessarily involves deliberate discrimination between particular needs of different people, and allowing one man to do what another must be prevented from doing," says Hayek.

"It is the Rule of Law, in the sense of the rule of formal law, the absence of legal privileges of particular people designated by authority, which safeguards the equality before the law which is the opposite of arbitrary government."

In Sri Lanka, many laws that have made people slaves of the state and its agents have been passed, especially in economics, creating conditions of virtual apartheid.

One of the major discriminatory laws is the taxation of ordinary people and freeing politicians, agents of the state including officers of revenue departments themselves, from income tax on their salaries.

People in the state have been given various privileges. State agencies have been given various privileges including monopolies.

A recent bill said loss making state enterprises will be freed from paying past due taxes - a privilege not available to enterprises run and owned by ordinary citizens.

Now the people of Sri Lanka have been reduced to tax generating slaves living under high inflation for the benefit of the state and its agents, who also get salaries higher than inflation from taxes or yet more printed money.

It is no wonder that three times people have taken up arms against the government. The official practice, in every case, has been to call them terrorists.

While even the Rule of Law, which is the minimum expected from the government - any government - has not been given to the people, they have been fed a steady diet of inflation, exchange rate depreciation and arbitrary government.

When the institution of permanent secretaries was destroyed, blurring the distinction between the political leadership and strong institutions that dispensed the Rule of Law equally to all citizens, the process of arbitrary government was strengthened.

Slaves by choice

As can be seen, the problem is not the executive presidency itself. It is a people who have no concept of what a free society is, and a people who are not only willing but are crying out to be led by totalitarian rulers.

People find it difficult to believe that instead of more arbitrary government, if there is more liberty and a restoration of rule of law they can work hard and better themselves.

People are still working hard, but poverty is higher than unemployment because the state is too greedy, and the fruits their labours are taken away and given as privileges to a few.

Some people now seem to have realized that there is a problem with the rule of law. But they are still expecting the next leader in the 'other party' to solve the problem.

Sri Lanka badly needs a constitution of liberty. But it is doubtful whether any politicians now in office or in the opposition has any idea what it is, or are indeed willing to give the freedom back to the people.

Especially when many people do not want liberty and have no idea what they are missing. Some migrate to other countries without knowing why they are doing so.

People who want strong interventionist governments are ignoring the obvious fact that every dictatorship has failed in a few years, while almost all liberal democracies have left the others behind long ago.

This include the entire Western Europe, the entire North America, Japan, Australia and New Zealand. And now increasingly Eastern Europe and East Asia.

Hundreds of thousands of Sri Lankans have migrated to those countries. Very few, if any are migrating to Venezuela, Burma, or China for that matter.

That people who are fed on a diet of socialism and failed interventionism for decades distrust liberty was understood not only by people like Hayek.

Read this.

"The psyche of the broad masses is accessible only to what is strong and uncompromising.

"…[T]he masses of the people prefer the ruler to the suppliant and are filled with a stronger sense of mental security by a teaching that brooks no rival than by a teaching which offers them a liberal choice.

"They have very little idea of how to make such a choice and thus they are prone to feel that they have been abandoned.

"They feel very little shame at being terrorized intellectually and they are scarcely conscious of the fact that their freedom as human beings is impudently abused; and thus they have not the slightest suspicion of the intrinsic fallacy of the whole doctrine.

"They see only the ruthless force and brutality of its determined utterances, to which they always submit."

That was from Mein Kampf.

And he said this not of himself but of the Social Democrats.

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24. aj Dec 05
I think Mr Dalpadatho's last comment says it all. We have finally come to the bottom on the matter.

Hitler also discriminated against the Jews on this Aryan myth.

23. Saman Nov 25
Mr Dalpathado,
I suppose that is one way of looking at it. This could mean that the destiny of SL is for eternal conflict between Tamils and Sinhalese.
22. lakshman Dalpadado Nov 25
The conflict in Sri lanka is the continuation of the conflicts between Dravidians( Tamils) and the Aryans( Indo aryans- Rajputs, Moguls & Sinhalese) that goes back several thousand years --almost as long as the conflict between the Palestinians and the Jews. , Moghuls and the Rajputs ruled 80% of the states( mini kingdoms) that existed in India at the time of unification of under the British.

I want to digress here a bit....In the process the English befriended one of the richest and most influential Rajput rulers in India- Ranjit Singh( Singhe or Sinha in Sinhala) ), who became very fond of scotch, cigars and the company of queen Victoria. And the queen somehow managed extract the biggest and the most valuable diamond in the world- the Kohinoor , which is the center piece of the British crown, ( also referred to as the crown jewel), from Ranjit Singh, for free!!

The Moghuls , with the aid of Rajputs- known for their courage and loyalty( Tall well built Punjabis and Sikhs are known as fearsome warriors and are much sought after by the Indian army) )- drove the Tamils into a small corner of South India known as Tamil Nadu, destroying the Tamil Kingdom that existed for nearly 100 years ( between 1400- 1500) . At it's peak, the Tamil Kingdom extended from Middle and south India to include Malaya, Cambodia, Indonesia ( Indo- asia) and Northern Sri lanka. To make matters worse, for much of it's history , Tamil Nadu has always been dominated by outsiders. So it comes as no surprise that they harbour the desire to be independent from the rest of India. In fact , two years before India got independence from Britain, Tamil Nadu tried to break free. The Tamils ( at least the likes of Karunanidhi) dream of their past glories and the lost empire.

Minorities usually do not cause trouble as long as they are not egged on and empowered by an outside force. Big brother to the north is solely responsible for our problems. ( there is ample evidence) .

Also consider the following...

It' s well known fact that Tamils in Sri Lanka, on the average, are far better educated and financially well off than Tamils in Tamil Nadu (or even Malaysia) This was the reason for mass illegal immigration to Sri Lanka from Tamil Nadu( across Palk Straight- to VVT- the first Free Trade Zone in SL) to take advantage of the excellent undergraduate and postgraduate facilities in Sri lanka. Good majority of the Tamils in the North- East have grand parents or great- grand parents in Tamil Nadu, indicating that they are 3rd/4th generation immigrants. And these new immigrants are the most vocal about a ' Tamil Home Land- much more than the the Tamils who have been living in other parts of Sri lanka for centuries. Tamils who came here in the Pre- British era embraced Buddhism and adopted Sinhala language as their mother tongue, along with the Royals from South India of that era.

Until the late 1980s,( When the LTTE was screaming of discrimination), 50%-60% of students who entered the Colombo medical school were Tamil. 50-60% of the Medical specialists were Tamil. 90% of the Pharmacists, 50 % of Lecturers etc-( all approx. figures- data can be verified at the SLMC). These facts goes against the claim that the Sinhala Only act and standardization of A/L results ( introduced to help students from less privileged schools and diverse back grounds to gain access to higher education) directly discriminated the Tamils. In fact the introduction of the latter, helped the students from the the north -east at the expense of the Colombo, Kandy and Galle Students.

Most Sri Lankan born Tamils are well educated are doing extremely well in Singapore, malaysia, UK, Canada and USA. 30% of registered doctors( SLMC) here are Tamil ( even now) and there is at least one Tamil Director in the LMD top 50. Now someone can argue that they all got there by hard work and merit- but thats the point- if anyone can ascend the ladder by virtue of hard work and merit , then that society has to be a reasonable society to some extent.

21. Aj Nov 25
If history is as you say don't you think all this is pretty silly?

AncientWisdom I really liked your last comment. I haven't laughed so hard in weeks.

20. lakshman Dalpadado Nov 25
Dear AncientWishdom
No offence- and none taken.

All I ( and no fuss) have done is to state historical, geographical,anthropological and linguistic facts--

The conclusions are entirely yours.

19. AncientWisdom Nov 25
To Lakshman and no-fuss, both of whom are intelligent commentators on this site:
No need to get angry and feel offended.

You win and I surrender.
I will also learn to believe that ours is the best race, country, language and the system and all our failures are due to the handiwork of some outsiders who have a personal interest in bringing us down. It indeed gives me immense pleasure and comfort.

18. Lakshman Dalpadado Nov 24
Ancient wisdom- There is no argument amongst scholars that Sinhala language is quite distinct derived from Indo- Aryan( Indo-European) group of languages. Sinhala comes from the word Sinha- le( blood of the Lion). The Lion emblem comes form the north-western Indo-aryan emblem also used by the Gujaratis, Rajputs( Singhes and Punjabis( Sikh - Singhes)-- hence the Royal names Raja Singhe, Narendra Singhe and Wickrema Singhe, etc. The emblem of Dravidians is the Tiger.

Every language borrows words from other languages. English words, or words we think are English- Jodhpurs,Dinghy, Pajamas, Chuuka, Pukka are all borrowed from Hindi. That does not make English -less English. Likewise, Sinhala has borrowed a lot of words from from Dutch and Portuguese( and a few Tamil). In fact, most words used in colloquial Sinhala are Portuguese- including the famous word - Paga( bribe) - The word comes from Paja- Portuguese for payment. Others are Sarampa( measles) , Kamese( shirt, Kalisama, Sappattuwa( shoes), Pistole, Eschole( school) , Thintha( Ink) , Pintura, Mesaya, Almiera, Cameraya, Soldaduwa-etc. ( the list is very long) , In fact we use Portuguese words on a daily basis including ' machan' Bailar( dancing) --and some commonly used swear words that I cannot mention here.

The Arabs, mostly from Oman, never invaded Sri Lanka. They were essentially traders( spice, fish and pearls) and arrived in Sri Lanka several centuries before the Portuguese , and settled along the the south western coast. They are physically and ethnically different from the East Coast Muslims who arrived from West Bengal and surrounding areas. Whether the English, and the Portuguese , did us a favour on not, is a moot point. One can be wiser, especially after an event, when gazing through the ' Retro-spectroscope'.

Nayakkars were probably Telugu speaking aristocracy from north-east India. They spoke fluent Tamil and were based in Madurai but not strictly tamils. King Keerthi SRi Rajasinghe( Circa 1767) , a Nayyakar prince, embraced Buddhism and did more to uplift Buddhism and the Sinhalese than most others . He was instrumental in building kandy into what it is today. Whether Ehelepola Maha Nilame is considered Patriot or a Traitor depends on ones point of view. Most consider him as a traitor who ended 2500 year old Sri Lankan Sovereign state.

Your statement that ' Most Sinhalese Aristocrats' signed the 1815 cessation treaty in Tamil is not true. Signatures are not meant to be legible but If you look at a copy of the treaty you will clearly see that almost all have signed in Sinhala. Only Dullewe Dissawa's and Pllima Talawwe Disawa's( the Senior) signatures look a little suspect. But one has to understand that the Sinhala script those days was quite different to what it is today.

17. No Fuss Nov 24
You're missing the point. No one is claiming that Sinhalese is unique or greater than any other language/culture. Like most languages/cultures, it would have borrowed from others. All the western European languages are even more closely related than ours for example. The fact that they all use the Latin script doesn't mean that Italians have a claim over all other European countries, or can expect preferred treatment, as some minorities and their politicians here would like.

Also the fact that there were Tamil royals in Sri Lankan history does not negate the existence/rights of Sinhalese. In fact, it is inevitable with royalty that it will be mixed (e.g. you can't elect a new royal if you dont have an heir, you have to import one from your neighbours). England for example has been ruled at various times by Roman, French, Dutch, German (the current line) royalty and vice versa. Some of them (i.e. George I) didn't speak a word of English either and signed all his documents in German. That does not mean that there is no such thing as English culture/identity, and likewise for the French, German, Dutch etc. Any minority living in any of those counties will have to accept/learn the majority language whether they like it or not, despite their pretences about being a liberal multi-cultural societies. That is a fact. Saying that, "oh, your language is partly derived from my language" or that "your country was once ruled by my ancestors", will not get you very far over there.

The reality is that there is an overwhelming majority of people in Sri Lanka who identify themselves as Sinhalese (it is irrelvant from where Sinhalese originates) and certain other minorities. If the majority wants this country to reflect their culture/language, that is an inevitable and democratic right. Lets face it, the Sinhalse are hardly the most oppressive people around.

Your claim that the Sinhalese would have been extinct if not for the Europeans is conjecture. Yes, the last king was Tamil and many of his court did sign in Tamil, but then again he wasn't exactly very popular for all that was he. Which is one of the reasons the chieftains plotted with the British to depose him (as has happened before with unpopular kings). It was also not the first time a foreign king had been imported to SL (like in other countries) and over time he might have accepted the local cultuire (as with past imports) or the culture would have incorporated some elements of the kings native culture (as they do at times).

16. Saman Nov 24
There is also one more point to make - the roots of this conflict lie with economic opportunity.

Give a man enough to eat and he will be relatively content, if he thinks his welfare is going to be hurt them he will rebel.

Discriminatory policies in Malaysia have not resulted in a violent insurrection because of the expansion in the economy - people grumble but will put up if they can see a future for themselves.

Conversely, when the Indonesian economy collapsed in the wake of the Asian financial crisis there were anti Chinese riots. The Chinese who were generally rich and controlled a lot of business were made scapegoats.

15. AncientWisdom Nov 24
FussBudget, Thanks for reminding Hanke's observations. One has to go through only the CBSL reports since 1950 to verify its truth, since the tone, substance and analysis of all these reports have changed along with the changes in the political cycle.
14. fuss-budget Nov 24
Dear Ancient Wisdom
Thank you for illuminating our history in this way.

Wasn't Bhuvenaka Bahu VI's father a Tamil Vanniar?

Also here is a quote from Professor Steve Hanke, from Johns Hopkins University that may be of interest.

"Recall that military history is written by victors. Economic history is written, to a degree, by central bankers. In both cases you have to take the official version with a large grain of salt."

13. Saman Nov 24
Mr Dalpathado seems to miss the point of the article - that liberal economics tends to go hand in hand with liberal government. On the whole liberal economics has brought prosperity to many more people than any other type of economic policy.

Liberal values - the freedom to think, the freedom to act and the freedom to transact business relatively unhindered are good and need to be supported for that reason.

The perceived faults or hypocrisy of others cannot be used to justify ones own failings either.

"They do it as well" or "they are far worse than us" does not necessarily mean that ones actions or inactions are good or worthwhile.

And while this argument may make some sense from a Rulers point of view - "hey that fellow is a lot worse than me, who is he to talk?" makes absolutely no sense to those under the rule, in either country!

12. lakshman Dalpadado Nov 24
First of all, I would like to thank LBO for publishing my posts - and giving a voice to the ' Silent majority'- and also to fuss budget for his insightful articles and comments.

My ranting here is to high light three major issues

1. Fallacy in democracy
2. Flagrantly double standards of western countries
3. Absurd aspirations of minorities.

Fuss budget- Your argument that bad economics and bad governance is the cause of all or most social ills does not explain why some minorities are far more rebellious than others. The fact is, even wealthy minority communities in well to do western countries, do rebel, and ask for separate states/countries on the grounds that are absurdly trivial to most outsiders. You have to agree, that, at least in countries with minorities- factors other than economic factors are at play. In fact I would go as far as to say that socioeconomic empowerment of the minorities maybe a factor for their rebellious behaviour.

Let us take Britain for example- the mother of all parliaments. Britain is a constitutional monarchy with a pseudo- democracy. It's not a true democracy because, out of three layers of government, only one, the parliament is elected by the people. It's more of a 'functional' democracy. The two layers- queen and the house of Lords- are not elected by the people. It's a well known fact that the Queen can veto all or any decisions made by the parliament. A not so well known fact is that the parliament does not present any motions that is not agreeable to the queen( so she doesn't have to veto!). During the privatisation wavw in the 1990 all utilities and transport were privatised except the The Royal Mail - which was left untouched. By all accounts The Royal mail is a dead loss - so why wasn't it privatised? Apparently the Queen likes to have her photo on all Royal mail stamps and she intends continue with her policy until she relinquishes her throne!!- a good example of democracy??

Now, there is another reason for picking UK as an example- as you mentioned, Scots dominate the UK political scene. Not only the PM is Scottish, even the opposition leader- David Cameron is Scottish! And by all parameters the Scots are a wealthy lot and are not discriminated by any stretch of imagination! But they do claim that they are discriminated and want to have a separate sovereign state from Britain-and they do already have a separate parliament!!

There are other examples of minorities, all wealthy and well to do- in this case white minorities in G7 countries- asking for separate sovereign countries on the grounds- wait a minute- because of sophistication and superiority of ones language and heritage!! Here are a few:

- Basque community in Spain

- French speaking Quebec form Canada

- French speaking( Walloons) from Flemish speaking Flanders in Belgium.

The crux of my argument is, as No Fuss pointed out, there are far more insidious factors are at play -much more to do with aspirations based on ethno-religious upbringing than economic.

Now a word on discrimination. If there is a minority that is discriminated like no other in this world -then they have to be the Australian aborigines. But no major western country or organisation has taken up their cause. Why? Because the perpetrators are white westerners. Similarly there are countries in South America where the majority natives are severely discriminated by the minority white europeans- Peru, Bolivia and Ecuador comes to mind. Why is that no western country taking up the issue of Natives? same again- the perpetrators are white or semi-white Europeans. Full stop.

Funny world isn't it?

11. AncientWisdom Nov 24
This is a good debate, everyone enjoying the freedom of speech enunciated in democratic norms.

It is true that everyone should learn history. But history is nothing but the present, because we interpret historical events in accordance with our own beliefs, ideals and values. That is why Mahathir Mohamed warned us when he addressed the CIMA world leaders' conference in Colombo that we should learn history in order not to make the same mistake again. So, history in the hands of an undisciplined person is a lethal weapon that would eventually destroy him. Hence, we should be careful when we go by history! Sri Lanka's history as recorded by Mahavansa and Culavansa tells us that it was a nation of mixed ethnicities.

King Dutugemunu had Tamil commanders in his army and King Elara had Sinhala commanders in his army. So was the army of the Sri Lanka's great king Parakramabahu the First. His army had a number of Tamil commanders and a large number of Tamil soldiers. Parakramabahu himself had a South Indian lineage: Pandyan blood from his father's side and Kalinga blood from his mother's side.

Sinhala language is not a uniquely Sinhala language. While it has the root of Sanskrit, it has been enriched by several other languages: Pali, Portugese,Dutch, English and even Tamil and Raksaka Language. It is better anyone interested in Sinhala language, read Ven Hisselle Dharmaratna's 'Sinhalaye Dravida Abhasaya' published as far back as 1949 where he says about 40% of the vocabulary in Sinhala has come from Tamil.

You can test this by comparing the words used for trading and merchant activities in the two languages. Similarly, according to the Gate Mudliyar W.F Goonewardene, more than 2000 words that we use today in Sinhala have come from Raksakas who ruled this country before the advent of the Sinhalese in the island.

The Sinhalese should be eternally grateful to Portugese and the English for two things. Sri Lanka was prevented from becoming a Muslim country by the Portugese who had a greater naval power than the Arab invaders in the 15th to 17th centuries. The English prevented, through their divide and rule tactic, Sri Lanka from becoming a Tamil State which was its natural evolution by the 18th century. Anyone who has a doubt can refer to the Kandynan Treaty of 1815 and count the number of the Sinhalese Chieftains who have either fully or partly signed in Tamil.

So, history is a lethal weapon in the hands of an undisciplined person and should be carefully used.

10. fuss Nov 24
Dear No Fuss,
Thank you for your thoughtful and detailed comments. There is no direct link between central banking and ethnic or religious bashing. Only link is bad governance. Central Banking allows bad governance to continue as monetary debasement did in previous centuries, even under specie money. Monetary debasement (minting smaller coins, mixing with cheaper metals like copper) has been a tool of bad leaders for centuries. It is a very damaging form of taxation. Central Banking is just a new phase.

The criticism against central banking is just as pathetic (in your words) as the age old struggle of the people against excessive taxation, which again is a cost-benefit issue of governance.

Putting the blame on foreign rule for a country after it gains independence is not going to help anyone. Most countries have been under foreign rule at one time or the other in their histories and they have the legacies to contend with.

That post-independence leaders have failed to build a nation where all people feel that they are a part of, is a fact not an opinion.

Blaming someone else and a refusing to knowledge your own responsibility and more importantly the ability to change the status quo will not help.

Regarding Sinhala only, however it is an example, but a powerful one, which illustrates the problem with democracy as practised here.

The principle of rule of law extends also to the Tamils. Demanding 50 percent is also wrong. Ambitious politicians of all kinds will try to whip of support from all fronts. But they will not build a following unless a fairly large mass of people also feel left out of. The same applies to the JVP uprisings.

Malaysia's Bumiputhra policy is hardly something to be held as a good example. Malaysia's actions against the Chinese was talked about during the 1983 riots here and held up as an example. The only saving grace there was that it had measures for positive discrimination. The Bumiputhra laws were essentially brought against the Chinese and even people of Portuguese descent were allowed to apply for benefits.

Giving opportunity to everyone should be a goal. A poor man is a poor man whatever his race or creed.

Your comment "Neither can the Sinhala Only act (for the brief period that it was in force) be classified as some racist/discriminatory legislation brough about by the evils of central banking. Given that the Sinhalese are 70+% of the population, they are entitled to have their language as the state language like in any other country. That is called democracy, which is about accepting the will of the majority, not only the parts that you, Hayek or the minorities like." is very important.

This is a fundamental misconception of what a democracy is. A democracy is not a tyranny of the majority. Such democracies will fail. Unless fundamental equalities are guaranteed or rather accepted, 'democracy' will simply turn into a tyranny.

You can argue that everyone is 'entitled' to a 'state' language. Indeed this has been recognized now. But again this is just confusion about people as human beings vs certain opinions about their status or the status of the language they speak.

That is not the issue. The concept of a 'state' language is political rather than practical. Is there a state above the people or a particular group of people?. People are born speaking a certain language in their country and they may not be bilingual. If that is a fact, it has to be accommodated for them to go on with their lives. Language is a tool to interact with others. It is not about 70 percent or 10 percent.

If people are willing to learn another language to work with (a single language for interaction is efficient in economic terms at least) then that is perfectly ok. If you try to force it on people, that it is tyranny.

The same applies to anything else. If people are willing to embrace another religion it is fine.

Unless you convert, religion is an accident of birth. So is race or mother tongue. To discriminate on those grounds either positively or negatively is senseless to say the least.

We have done certain wrong things in the past. As a result people of this country have paid for them in blood. We have changed in some ways after shedding blood.

The point of this column is to show that people in Western Europe have done a lot of wrong things. So has Genghis Khan for that matter. We do not have to re-invent the wheel.

We can learn from their mistakes and leap frog.

The point about central banking is the same.

9. No Fuss Nov 23
Your constant preaching about central banking being the root of all evil is tiring to say the least, but trying to blame even ethnic problems on monetary policy and/or lack of neo liberal politics is quite pathetic.

As Lakshman Dalpadado said in his comment, Tamil seperatism began long before independence or the creation of the central bank. It would be a good idea for you to read about the history of this country (especially the racist tamil politicians of the 1920's etc) before you make moronic statements. I'm also pretty sure that British colonisation, their divide & rule policy, theft of Sinhalese property for their plantations, importing of Tamils/coolies thus changing the ethno-demographic composition of this country etc. which contributed in no small way to the subsequent and inevitable ethnic problem, can't be blamed on our politicians and their monetary policy.

Neither can the Sinhala Only act (for the brief period that it was in force) be classified as some racist/discriminatory legislation brough about by the evils of central banking. Given that the Sinhalese are 70+% of the population, they are entitled to have their language as the state language like in any other country. That is called democracy, which is about accepting the will of the majority, not only the parts that you, Hayek or the minorities like. Most of the terrorists who used Sinhala Only as an excuse for their seperatist agenda did not speak a word of english anyway, it just gave them some extra propaganda to fool their western symapthisers.

Ethinic problems caused by the British were also present in almost all the other colonies. In Malaysia which has been relatively succesful, they have system of preference for the majority "bhoomiputras". In Singapore, ethnic problems were only avoided by the dicatorial rule of Lee Kuan Yew, not by stupid liberal democratic values imposed by the west which are rarely appropriate for developing countries.

Despite your assertion that only democratic countries have succeeded, the evidence is quite the contrary. In the post-independence era all the countries that have developed (NIC's), have been dictatorships or have been largely ruled by a single party (i.e. the LDP in Japan). Some have become democracies after they reached a certain level of development (i.e. South Korea, Taiwan), but were not democracies during the crucial stages of economic growth (and were also quite corrupt). None of the western countries were real democracies until well after their industrial revolution. Britain didn't allow females to vote until the 20th century, and the US was basically an apartheid state until the 1960's. The less said about how the Aussies/Kiwis treat the natives of the countries they robbed, the better.

You also made some ridiculous statement about that China (and all developing countries) were older than the US and therefore should be more developed if they were democratic/had a currency board or whatever. Please read a history book.

The developing countries gave the world civilisation and achieved amazing feats, none of them democratically as far as I know. Genghis Khan for example almost single handedly changed the course of mankind (1 in 200 people in the world today are descended from him). He was illiterate and I'm pretty sure he didn't give a crap for Hayek's ideas.

We are not at the end of history as some people seem to think, it is just another cycle, where countries/civilisations will rise and fall (in relative terms) as they have always done.

The rise of the west (since around the 15th century), can be explained by a few factors. One of the key factors being that they were (since the fall of the Roman empire), pretty much always at war (I'm sure you would say due to bad monetary policy perhaps, maybe), which allowed them to take and perfect weaponry/technology by borrowing Chinese inventions (gunpowder, artillery etc). Necessity led them to be more aggressive and expansionist in every sense than the Chinese who were by far a more developed country at that stage, with more "rule of law", but insular.

No one is denying the effects of bad monetary policy, or bad leadership. However, the world/humans are far more complex than you seem to think, and cannot be explained through monetary policy (or the Austrian version of it) and some democratic jargon.

What is the use of these so called democratic countries with their written constitutions etc. which might safeguard their citizens but have no reservations about using nuclear weapons agaist other peoples civilians, invading other countries under false allegations and continuing to commit the worst atrocities (as they have always done) with complete impunity whilst preaching to others (I'm obviously talking about the US in particular and the West in general).

8. Senadheera Kuruppu Nov 23
This country urgently needs a public discussion to educate people on the tyranny of state- The monarchic and tribal mindset still lingers among us. The meaning of individual freedom is unfathomed.
7. Kawdaboy Nov 23
'Central planning' became a hot subject in liberal England after WWII. The Lib dems and the tories were alvie as a dead mans hearbeat when socialism was about sweep over the British Isles.

The argument was if the war was won on planning, the economy also can be won on planning. Free market economy? Bah Humbug!!

Think such as the Institute of Economic Affairs (IEA) founded in 1955 by Friedric V. Hayek, Antony Fisher, Ralph Harris and Arthur Seldon who chainged the midset of policy makers.

But unfortunately in Sri Lanka the so called think tanks seem to be guided by the state.

I hope authorities and think tanks alike take corrective economic action before Sri Lanka marches forward to 'Road to Fiefdom.'

6. fuss-budget Nov 23
Dear Lakshman,
As usual very thought provoking comments.

However I have to disagree with some of your comments.

Central Banking is not a free market system. It is a system where interest rates are controlled by a monopoly whether state or private.

Also funnily enough Bank of England which was completely private (where all the inflationary profits went to private hands) had a much better record, running into centuries. This is probably because people knew that stockholders made profits by lending to government and therefore they did not tolerate inflation. Also when the ruler is a monarch people are less willing to believe in the goodness of government.

The Fed devalued the dollar from 20 dollars to 35 dollars an ounce, 20 years after it started. That is a 60 percent devaluation. No joke. So you can bet that most of the decisions that the Fed takes are likely to be wrong, just as most of the decisions taken by Australian and New Zealand reserve banks these days are likely to be correct.

That the 'Austrian school of Economics seems to have run into a wall' I simply have to completely disagree.

The current type of collapse is exactly the outcome predicted by every single Austrian economist from Misses to Rothbard. Misses wrote about it even before the Great Depression and predicted the outcome. Unfortunately he wrote in German.

Even our first central bank governor John Exter predicted this. Not only did he predict a 'deflationary collapse' he also said that Fed will always try for an 'inflationary-blow off'. Gold is now 1160. Need more to be said?

However I think we can all agree that credit is dangerous and monopolies in money and credit are worse than competition. Even under free banking problems are corrected earlier but not eliminated. Political motives are just as dangerous as profit motives.

Autocratic China has not done so well. At any given time people in USA are better off than in China in general, even when the economy is at its worst.

China has 'caught up' in the last few years somewhat. China is a much older country than USA (so are most countries you can refer to as third world or developing) and really has no excuse to lag behind even two days. All these countries must be like Japan, or Australia or New Zealand. (The last two were British colonies like Canada and the US and Singapore and Hong Kong etc)

Having said that it is an interesting point in monetary history that China managed to escape the worst effects of the Great Depression as well, which was also created by the Fed. China was effectively under a silver standard. So it was not affected in the same way as countries with a gold standard were.

This time China ran counter-cyclical policy against the Fed in three ways. It had higher interest rates than the Fed (and collected foreign reserves) it pushed up the Yuan rate, and its state banks also ran excess reserves. It was these excess reserves for the most part that were loaned during the downturn. However they can still end up in bad loans. In that case people will pay for that later instead of biting the bullet now, even ignoring statistical issues.

But the same can be said for Australia, New Zealand central banks and also Japan. To a lesser extent the ECB perhaps. On top of all these they have freedom also. That counts for something.

Singapore's economic policies were effective. Very true. From Dr Goh downwards Sigapore's leaders studied in LSE (where Hayek taught, and therefore they instinctively distrusted Keynesianism.) Unfortunately liberal thinking in terms of LSE political thought they did not implement. But there is rule of law there.

Singapore is basically a British Colonial office type of administration. Build infrastrucure, have a legal system, make sure that the natives to do not get restless etc, provide opportunities for business, tax them, build infrastructure...etc. Singapore's leaders were mostly British educated civil servants. But you would not want to migrate there.

People in developing countries are just as intelligent and literate (perhaps more so) than the people some Americans who drive policy call 'rednecks'. (Remember it is some Americans who call others rednecks.)

The problem with us is that intelligent, educated, literate people do not believe in freedom, liberty and brotherhood and instead believe in dictators and state intervention. There is no one here to call others rednecks.

That the 'Sinhala' people are the salt of the earth I do not doubt. In the same way the German people were good. If Sinhala people were not tolerant this country would not have such a diversity of religions and races. These problems were of recent origin.

It is just that small groups of extremist people make policy and feed it to the masses and the 'literate' people either stand by or cheer it on. They do not call them 'rednecks' or 'racial or religious bigots' etc.

England and Scotland etc have a bloody history. But they seem to have evolved a system. UK's prime minister is Scottish. The US also has a bloody history. But the US President is a black American whose middle name is Hussein. That complicates the issue.

When a Tamil or a Moslem or a Burgher or a Christian or person who worships their dead relatives or a Hindu or a Veddah ...becomes the president of this country we can take the argument forward a little more and talk about separate states. Look at the EU. They are weaving a massive, diverse 'state' together, held together only by some common ideals.

5. Lakshman Dalpadado Nov 23
Dear Fuss Budget- Very good article but the problem is autocratic countries are doing well when the ' free market' champions are falling by the wayside. Austrian school of Economics seems to have run into a wall. My conclusion are entirely different:

The main cause of the financial crises is the ' liberal' way the banks operate in USA.

The US Federal reserve is a PRIVATE BANK owned and operated by the other private banks. The interest rates are fixed by the private banks and not the US government. The main function of the Federal Reserve( private bank) is to protect the Bankers and thats why Hank Paulson from Goldman Sachs was appointed as Chairman. The bail out money was given to protect the bankers- not to help the people. On the other hand in countries where the Central banks are government controlled seems to have weathered the crisis better.

Autocratic China seems to have done in 30 years what the west took centuries to achieve. Singapore is another example of a autocratic country that is unique and doing well despite all Hayeks theories. Almost all banks are owned or controlled by the government- The venerable British Bank The Standard Chartered is 80% owned by the Singapore government.

Obviously, democratic, Free- market governments may not be the best form of government for third world countries where the vast majority are illiterate. Freedom of speech is fine for intelligent educated people. Fools will only waste their time with their heads buried in rubbishy news papers or spewing out gibberish in all directions- or watching silly games invented by the decadent British.

UK is an amalgam of ancient kingdoms- Wales, Scotland, Ireland( northern), and England. Since the majority are English the main official and working language is English. If the Welsh, Scottish, and the Irish doesn't ming speaking, writing and working in English why can't the minorities in Sri Lanka adopt the majority language? After all, the vast majority of (the minorities) who were protesting about the Sinhala Only( revised in 1956 anyway) did not speak, read, write or understand English anyway?

By the way- the plan for a separate state for the Tamils was floated( ?hatched) during the British administration- just as they did in India( Pakistan for Muslims and the division on India) and very little to do with what happened later. Sinhalese nationalism was born out of the demands by the Tamil politicians , perhaps dreaming of the glory days when South Indians Kings ruled Sri Lanka ( Kandyan Kingdom). Kandy was a cosmopolitan city with all races and religions working together until the last king decided to get rid of all the Sinhala aristocrats in Kandy ( beheaded more than 200) . Even now Kandy is the most cosmopolitan city in Sri lanka( 30% Buddhist, 30% Hindu and 30% Moslem . approx)

The Sinhalese were, and probably are even now, the most non- nationalistic of all people in Asia. Even during the administration of King Wimaladharmasuriya I(1591), there were Portugese, Dutch and South Indian advisors to the government and also Portugese and South Indian soldiers in the army. Sinhala Kings married princesses from Madurai and when King Narendrasinghe( was married to a Nayak princess) failed to produce an heir, and the kingdom passed on to Nayak prince Sri Vijaya Rajasinghe- (Narendrasinghes B-I-L,) in 1739.

It's the Portugese who killed the last Tamil king of Jaffna- 1500s
It's the British who removed the last king of Kandy.
It's the British who brought slaves and coolies from South India and housed them in' lines' in tea estates.
It's the British who practised' divide and rule'
It's the British who hatched the plan for a separate state( as they did in India)

" if you want to understand a problem read history"

4. I Bunkum Nov 23
It is said that Hayek wrote The Road to Serfdom (TRTS) after fearing that the post war Briton would move towards socialism. It is said that Eleanore Roosevelt herself,with the extensive dominance of government in post-depression era, thought favorably ofa Soviet Russia like collectivist socialist governance for US. Hayek felt the unprecedented support by masses (including pacifists) to the state to carryout war in both Europe and US would strengthen the state in post war era further which eventually could lead to fascist regime.

It is said that TRTS was so influential that it helped to define post war western economies.

Regrettably, as Fuss-B correctly observed, we live in a country where people themselves chosen to be slaves of not only the state but the ruling clan as well.

To make the matters worst, regretably, the opposition UNP, which is considered yesteryear's beacon of liberal thought in this country, are no different. Hon Wickramasinghe now openly tout supremacy of parliament and executive PM in his Anagatha Abhiyoga.

UNP's alternative to the present form of governance (which takes the country more closer to a proxy monarchy than to a true republic) does not guarantee supremacy of people either?

Either way we are kaput, unless we build institutions which will bring check and balances to whatever the form of executive we are going to have.

Chances are as good as finding intelligence in Mars-

3. Eagle Eyes Nov 23
"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety. " - Benjamin Franklin
2. fuss-budget Nov 23
That is so right. What people do not understand is that there is a parasite-host relationship between the government and the people.

If the government gets too big and too greedy it kills the people, who are no longer able to support it.

The reason ordinary people do not understand is because people who should know also have not said anything. Or they also believe the same thing.

So across political divides this has been happening.

1. EconoCautious Nov 23
Hayek was in fact so angry at central banks' misuse of the money printing powers, a power vested with them by the society for use with utmost care, diligence and foresight, that he suggested in his 'Denationalisation of Money' that central banks should be closed down and people should be empowered to print their own money.

In SL, as FussBudget has argued, people have become slaves by choice. Recently, a private TV channel interviewed some people in the street to find out their views on the government's recent salary increase of Rs 750 for public servants. All of them without reservation praised the move without thinking that it is from them the government would be collecting for payment to the inefficient bureaucracy. The reason was the general belief that the government is distinct from the people.

What can Hayek or FussBudget do for a nation of economically illiterate people?