This Article is written by Shubham Awasthi (a law student from Lloyd Law College)
Why do dictatorships tend to mess up the economy?
Table of Contents
During the debates of the Constituent Assembly, the makers of the Indian Constitution envisioned not just a political democracy but also a social and economic democracy! They believed that political developments take place quickly but social and economic changes take time, even more so in a democracy. Dictatorships might be able to move certain things quickly but they do that the cost of collective wisdom of the people and rely only upon their whims and fancies and when they do that, it doesn’t matter how strong their position or how noble their ideas be, they will end up doing something which will create a crisis which could simply have been avoided.
Take Sri Lanka for example, Sri Lanka is one of the richest countries in the Indian Subcontinent, with a per capita GDP twice that of India. However, Sri Lanka’s resources have been depleting with Forex reserves dropping down to just $2.6 billion compared to $7 billion in August 2020. Furthermore, Sri Lankan Rupee has seen a drop by 8% against US Dollar, and so on the Forward Currency Contracts have gone as high as $200. In short, this is a crisis somewhat similar to the Indian BOP crisis of 1991, when India did not have enough dollars to pay for its imports. Since Sri Lanka depends on imports for its food supplies, the crisis seems even more grave for them. President Gotabaya Rajapaksha declared an Economic Emergency to tackle the crisis. In this article, we are talking about the genesis of this problem.
Current Covid Situation in Sri Lanka
Sri Lanka has just been hit by the fourth wave of Covid 19, for a country of 21 million population, Sri Lanka has been seeing 3000-4000 daily cases with 150- 200 deaths per day.
Sri Lanka is an island nation and heavily relies on tourism and imports for essential goods, Sri Lanka’s tourism which contributes around 10% of its total GDP( the largest contributor ) has suffered due to Covid induced travel restrictions.
Food Crisis in Sri Lanka
With Foreign Exchange Reserve depleting, there is no incentive for businesses to import goods to add more to the ongoing crisis, President Gotabaya Rajapaksha prohibited the import of non-essential goods. In the process, Sri Lankans lost faith in their own government and started hoarding essential products such as rice, oil, kerosene, which resulted in inflation. The already high inflation rate increased to 6% in the month of August 2021
But what has caused this sudden shortage of food grain and how is it related to the economy? The answer might surprise you. When President Gotabaya Rajapaksha banned chemical fertilizers, pesticides and insecticides and announced overnight that Sri Lanka will be going organic. Countries around the world praised Sri Lanka for leading the way towards organic farming as it was seen as a sustainable and environmentally friendly alternative to chemical fertilizers, but the fact is that there are serious questions about the productivity of organic farming. There is still no scientific evidence to prove if organic farming could provide better productivity or even the same level of productivity as compared to chemical fertilizer. The after-effects of the ludicrous ban can be seen in the economy as the crops failed, production was low and hence a crisis was staring in the face of the Sri Lankan government and Sri Lankan people which could have been avoided.
Agro-economic studies reveal that several organic crops are yielding less as opposed to using chemical fertilizers. With no chemicals, crops such as coconut, tea, cardamom, cinnamon and paddy yields have dropped by 20-35% which in turn affects the economy by 3.5 % of the total GDP.
Military Involvement in Sri Lanka’s Economic Emergency
Now, that wasn’t enough to open the eyes of the ruling dispensation. Dictators have the political necessity to look tough and in control of things even when they are not. They can’t share this insecurity as a leader in democracy could do, so they tend to do even more foolish things.
Amid the sorry state of the economy of the country with recession worsening, shortage and hoarding of supplies, President Gotabaya Rajapaksha has involved the military in civilian affairs. After declaring an Economic Emergency in the state, President Gotabaya Rajpaksha has appointed Former Major General M.D.S.P Niwunhella as commissioner of essential services and it is now the responsibility of this army man to ensure there is no hoarding of supplies.
The Military will have powers to assist the officials to ensure that the essentials commodities such as rice, paddy and sugar are being sold at government pre-decided prices and that no trader hoards the items to increase the prices by cutting off the supply chain.
But this alone cannot prove to be sufficient to get Sri Lanka out of the crisis because the production has taken a hit.
How Sri Lanka manages its crisis is something we will see but the lesson here is this: Collective wisdom is always better than the predispositions of one man. The second lesson is that we must listen to experts and scientists on issues like climate change and sustainability. It’s disastrous to make changes without scientific evaluation in the present system in order to adapt to and mitigate the effects of Climate Change, as it is to deny it. Sri Lanka is a democracy but there is nobody to raise questions about the ruling dispensation. From an overnight ban on chemical agricultural products, shortage of food to military involvement in civilian functions.
With no opposition to question the authority of an Emperor and the overwhelming power to take unanimous decisions gives rise to militarization and lack of accountability has a corrosive impact on democratic space and fundamental rights which leads to destabilisation in social cohesion and sustainable development.
The President of Sri Lanka is such an example of an elected dictatorship where they can have a negative effect on the economy, as opposed to trying to focus on important matters, the focus shifts to unnecessary matters!