Contradictions of Capitalism

by Sunil Bastian, Himal, October 2010

Even as Sri Lanka’s smallholder agriculture dies a slow death, schemes to save the rural economy are only coming from urban intellectuals.

Since the end of the war in May 2009, there has been a lot of talk about ‘reconciliation and development’ in Sri Lanka. Though this is a slogan promoted primarily by the government, many, including the business sector and civil society, have welcomed such rhetoric. This has been buttressed by the support of some donor agencies, whose main agenda has been the promotion of a capitalist economy. There is no doubt that the defeat of the LTTE has created an environment more conducive for positive expectations in the country, nor should one underestimate the importance of this development. After all, it is far better to be in an environment in which politics, rather than the clash of arms, dominates. However, the question remains as to whether Sri Lanka will make use of this opportunity to develop a more just society, or merely to move in a direction that consolidates the structures of social exclusion.

As history has shown, capitalism can indeed lead to development in societies that ensure economic growth, equity and personal freedom. But this comes about through interventions of human agency, and there are no ‘laws’ of the market, or inevitable historical processes, that can ensure such an evolution. Far from the suggestions of some, capitalism is not a model of development promoted through a Western ‘conspiracy’, but rather is the product of a historical process characterised by social struggle. In some parts of the world, these social struggles have been more successful in developing a capitalism that ensures basic rights and entitlements for the masses. In other places, these struggles have been less successful. These differences are seen even developed capitalist countries. Despite the fact that the US is still the largest economy in the world and is the only superpower, it remains unable to ensure health-care facilities for all of its citizens. In Europe, on the other hand, the right to universal health care has been taken for granted for generations.

Given this contradictory character of capitalism, one of the major tasks that face progressive political forces in Sri Lanka today is to identify and tackle the major social contradictions generated by more than three decades of liberal economic policies. These interventions have to be at the local as well as global level. It now appears certain that the stability created by the end of the war is bound to intensify the capitalist relations in the country’s economy, and unless specific targeted policies are put in place, the social contradictions are bound to intensify.

Independence ideals
There is enough data available today to show that inequality has increased in Sri Lanka since the liberalisation of the country’s economy in the late 1970s. Absence of equity is seen in terms of both social and geographic distinctions, yet an analysis of inequality through macro-level statistics does not tell the whole story. In fact, this inequality has repercussions in all aspects of Sri Lankan society, allowing the elite classes to largely control society. Lack of egalitarianism also goes against a set of ideas that has defined post-colonial Sri Lanka; fighting against various forms of inequality has been the hallmark of national politics from the time of Independence, and has been a critical aspect of the country’s national discourse. For example, breaking the power of the Westernised English-educated colonial bourgeoisie who inherited power from the colonial masters has been a main characteristic of Sri Lankan post-colonial politics. Of course, a Sinhala-speaking indigenous elite has replaced them. But there is an ethos of struggling against inequality in Sri Lankan politics. Therefore, if the trends against this social ethos become accentuated, there can be a political backlash.

In many societies, capitalism can break the power of classes that dominate in a feudal set-up. It can undermine the advantages some groups have due to factors such as caste, ethnicity, gender, schooling or access to political patronage. But this will not happen effortlessly, and thus there is a need for conscious social action in the context of developing capitalism. Mainstream discourse believes that inequality can be tackled by ensuring access to markets, but this alone is insufficient. People need assets to benefit in a market economy, while they must also build the ability to influence the political processes and ensure security.

For instance, in Sri Lanka the spread of education has been a main channel of social mobility in the past. It has been a factor in equalising opportunities, and the means through which the power of the English-educated colonial bourgeoisie was broken during the post-colonial period. Since liberalisation of the economy this mechanism is not working in the same way as in the past. The state education system, in which the bulk of the Sri Lankan population is educated, is unable to train young people to benefit from the opportunities of a market economy. This does not affect the better-off, who depend on markets to provide education for their children. These sections are no longer confined to the old English-educated elite. The post-1977 economic liberalisation has widened the social composition of the elite, meaning that a large percentage today come from Sinhala-speaking background, who are also today able to offer a better education to their children by making use of the market. Thus, while the situation was more egalitarian in the past, since liberalisation it has become far less so.
The policy debate on education does not tackle these fundamental issues. It is pre-occupied with problems faced by the elite. One can compare the recent public discussion on entry to the small number of elite schools – problems that concerns the middle-class elite – with that of the failure rate at the ‘O’-level examination, which is a question that concerns the entire state education system. The former has been given far more energy than the latter, including the time of the Supreme Court. In this way, much of the mainstream education debate focuses on the interests of the growing middle class.

Rural transformation
A principal reason for growing inequality in Sri Lanka has been the impact of markets in rural areas since the liberalisation of the economy. In particular, this has made smallholder agriculture less viable. This reflects a failure of a set of ideas that began even before Independence. Supporting smallholder peasantry, by providing them with state-owned lands, subsidies and state support in prices, has a long history, which also had strong support from mythologies developed by Sinhalese nationalists. Sinhalese nationalism always refers to a glorious past in which the country was self-sufficient in terms of rice, which was produced by small farmers living in idyllic villages. Often, they would hope to replicate this in modern Sri Lanka. In the past, these ideas, together with dominant policy discourses, have kept up state support for the smallholder peasantry. Today, however, it is becoming increasingly difficult for the state to provide land for the small farmers. There is also demand for land from other interest groups, such as the business sector and other infrastructure projects that are needed for expansion of capitalism. State subsidies in the production process have been reduced, and the state is thus no longer able to purchase rice from farmers and ensure an adequate return.

Those with a fervent belief in the markets propose that the solution to such a situation is to ensure the more efficient operation of land markets. They believe that this will push those who cannot earn a living from land to other occupations, leaving the land to those who can profit from it. Yet such ‘rational choice’ arguments neglect the relationship between land and society in Sri Lanka, and it is absurd to trot out such dogmatic views in a country where land has been an underlying factor for social and political conflict.

The answer to these contradictions is also not to try to maintain smallholder agriculture through various types of support, which is the position of certain forms of rural populism. Sri Lanka has many schemes developed by urban intellectuals who continue to romanticise smallholder agriculture. For example, there are many projects trying to promote crops that have no markets or projects aimed at rehabilitating the small tanks scattered round the country, hoping to revive paddy agriculture on this basis. There is very little chance of any of these succeeding. In fact, even as policymakers and many populists are trying to do exactly this, the children of the peasantry are running away from land because agriculture cannot give an adequate income. What the population in this sector needs is support for agriculture that is viable in a market economy. There is no agency other than the state that can provide this support. At the same time, there is a need to recognise that a section of the population will move way from agriculture and the society has to focus on their problems in a different manner rather than assuming that they will remain in agriculture.

The other side of rural transformation in Sri Lanka is the growth of a working class living in rural areas. One of the major requirements of capitalism is a supply of labour. Capitalism ensures this by making it difficult for people to earn a living through means of production owned by them. This is exactly what has been described in the previous section. Many in rural areas cannot earn a living from the land that they own. Therefore the number of people depending on wages in Sri Lanka has expanded tremendously. But the peculiarity is Sri Lanka is there is no mass movement into the city. Often people live in villages and engage in a wage labour relations because the plots they own cannot give an adequate income. Therefore wage labour relations are spreading to areas that are for administrative purpose designated as rural.

In a globalised world people in rural areas are drawn into labour markets not only through internally but also internationally, such as labour markets in the Gulf states, Saudi Arabia, Jordan, etc. In this, it is important to make special note of female labour, which has grown significantly during the last three decades. For colonial capitalism of Sri Lanka female labour was important in plantations. Today in a period of globalised capitalism within the country female labour is important in the plantations and garment factories. Their participation in international labour markets contribute significantly to Sri Lanka’s foreign exchange.

This growing working class is found in multiple socio-economic formations (organised, informal, sub-contractors), and certain sectors have institutions to protect their rights while others do not. The institutional framework within which unskilled female workers are exploited in countries such as Saudi Arabia, Gulf states etc., reminds one of conditions under which plantation labour was originally brought to Sri Lanka, in the colonial era. These workers are hired through labour contractors; and typically the greater the number of intermediaries, the greater the level of exploitation. They work in culturally alien environments, and are employed in household conditions often not regulated by labour laws. If they opt out of these contracts they become criminals. In other words, they are trapped in labour contracts from which they cannot easily escape. Most often, they sign on to such contracts without knowing the exact details of the conditions of labour. This is the condition of the labour that brings in a huge amount of foreign exchange for Sri Lanka.

Although there has been an expansion of the working class, the bulk of the working class is unorganised. Sri Lanka had a tradition of trade unionism that produced strong unions, especially in the state sector and plantations. But this movement has been weakened for many reasons – they have not been able to capture new sections of the working class in their organisations. Even alongside the regular clamour by pro-business forces to remove some labour laws, there are many workplaces in which these laws are simply not enforced. Low wage rates for the working class are probably a greater reason for continuing poverty than any other factor. But in discussions on poverty, the problems of the working class do not receive the attention they deserve. The exception is the plantation sector.

As they now go forward, people in the areas affected by the war in the Northern and Eastern Provinces will face the above issues in addition to the basic struggle to get back to some form of normality. It is important to remember that although these areas were affected by violence, they were not insulated from the dynamics of the market, even during the war itself. With the end of the war now intensifying the penetration of capitalist relations, if the resulting social contradictions are not handled carefully in the north and east, the political implications are much deeper than elsewhere. If the social outcome of the spread of capitalist relations is the entrenchment of the centralised state and hegemony of Sinhalese capital, development will undermine reconciliation.

Apolitical development
Sri Lanka faces a significant barrier in finding answers to the existing and emerging social contradictions due to the ineffectiveness of the state. Contrary to neo-liberal beliefs, effective states, rather than free markets, have been important for the relative success stories of capitalism in East Asia. These effective states in countries such as South Korea and Taiwan show several common characteristics. They have a degree of relative autonomy from society, meaning that the state has not been captured by sectional interests, such as specific ethnic groups; they have internal capacity; they manage state-society relations without leading to conflicts; and while open to the world, they are able to manage relations with the global economy for the benefit of the country as a whole.

In the past the Sri Lankan state played an important role in tackling social contradictions. This is no longer the case. Parts of the state machinery dealing with social issues have become more dysfunctional than those dealing with economic growth. In particular, these institutions have been the victim of patronage politics. Many social-policy issues are dealt through ad hoc projects that become the hobby-horse of certain politicians. Major poverty alleviation projects such as Janasaviya and Samurdhi are examples. In these projects, there is very little attention paid to the capitalist context within which poverty exists, and often they achieve very little for the poor. Rather, promoting the interests of politicians who control them is their intended outcome. The answer to this is not to turn towards the NGOs or civil society, however, neither of which can be a substitute for the state. In the end, civil society cannot be effective without an effective state. Therefore, state reforms have to be a part of the agenda for tackling these social contradictions.

If not handled sensitively, the social contradictions discussed earlier could lead to conflict. Not all will result in violence, and, sometimes, the tensions generated by these contradictions will be contained using the coercive apparatus of the state. The war has also created authoritarian structures within the state, which can be used for this purpose. In many parts of the world including Asia, capitalist economies are emerging in the context of authoritarian regimes and, in such conditions, capital and coercion are the dominant tendencies. This could happen in Sri Lanka, too, and the state might not be able contain these contradictions through coercive means all the time. Violence could erupt as a result.

A radical agenda to deal with these issues needs to confront several viewpoints, which have come to define policy debates on social issues during the past three decades. The dominant position comes from researchers linked to the establishment, which at its core does not analyse social relations generated by capitalism. This research is dominated by number-crunching exercises using macro-level data. In capitalism, every production process produces social relations. These relations are institutionalised and legitimised through hegemonic ideas; the sum total of these constitutes the politics of the capitalist production process. The mainstream discussion does not analyse capitalism in this manner, however, and hence is of little help to those who are searching for a better society in the context of capitalism.

During the last three decades concepts such as ‘people’s participation’, ‘local-level development’, ‘bottom-up planning’, etc, have come to dominate the social agenda. There is a significant body of literature which questions the usefulness of such ideas in dealing with social contradictions in a market economy. These ideas have taken us away from understanding how politics, power and structural factors operate amongst social issues; they signify an apolitical discourse of development. NGOs that employ these ideas have come to occupy the political space that is concerned with the conditions of the marginalised, but they do not provide an alternative. There is thus a need to question this discourse generally, including the politics of these organisations.

Finally, there are the issues that have not been debated enough Sri Lanka, by the state or otherwise. For example, there is the need to discuss self-organisation among the poor. Driven by donors, much of the focus of civil society has been on how to get the poor to participate in their projects, rather than to ask about the organisations and politics that they themselves already have. What has happened to the organisations (grassroots groups, unions, peasant groupings) that used to represent these groups? Does the electoral process represent even some of the needs of the poor and exploited – and if not, what new forms of organisation are possible? Ultimately, the post-war period has given rise to a fervent need for a new research-and-political agenda to tackle the social contradictions that the deepening of capitalist relations will generate. This is essential for the long-term peace and stability of Sri Lanka, even as the military conflict is now a thing of the past.

~ Sunil Bastian is an independent scholar and political economist, long associated
with the International Centre for Ethnic Studies in Colombo.