ECONOMYNEXT – Sri Lanka’s toiling workers in the private sector who stand on their own feet are an unfortunate lot, caught between a neo-feudal ‘Hamu’ elected ruling class who want to block their entry to the services sector and Samurai un-employed graduates who have created an entitlement culture and are skimming off the fat of the land.

The shameless attempt to block less-affluent youth into the three wheeler taxi business shows a deep problem in Sri Lanka’s society and a tendency toward authoritarianism and general disregard for liberty and freedom that will hold back progress in this country for decades.

When Japan started its modernisation and industrialisation during the Meiji restoration, one of the most important steps was to break the feudal entitlement system of the Samurai that had sucked the blood off the people during the period of the Tokugawa Shogunate.

Neo-Samurai

There were an estimated 1.9 million Samurai, in a general population of 34 million people in Japan in late 19th century.

In Sri Lanka today, there are 1.9 million state workers getting lifetime pensions, though many are in fact doing useful jobs.

The real ‘Samurai’ who do not do any useful job are the unemployed graduates, for whose benefit tens of thousands of non-existent state jobs are created. Prime Minister Ranil Wickremesinghe is spearheading the latest drive.

Another group of prominent neo-Samurai are the development officers of the Samurdhi Department, who together with Basil Rajapaksa, a member of the hereditary elected ruling class, converted an Authority with EPF to a department with lifetime pensions.

The Samurdhi development officers, who came to alleviate the poverty of the poor, has certainty alleviated their own at the expense of the rest of the society. Like the Samurai, they have not the slightest qualm about fleecing tax-payers. They take as is their due.

Rajapaksa’s late father, his three brothers, and nephew are members of the elected ruling class, at the same time.

But this family is hardly unique, though it is an emblematic case at this time.

It goes without saying that in all major parties, the elected ruling class is now hereditary with brothers, cousins, wives, becoming members of the elected ruling class, like their fathers and uncles before them.

False Evidence-based Policy

It is in this context that the attempt by the elected ruling class and policy-makers’ attempts to stop the youth from buying and operating a three wheeler, come into play.

Their excuse is that factory owners are complaining that there are no workers and jobs are going to waste. There are also complaints that there are not enough construction workers and manual laborers.

First of all, blaming three wheelers for the reluctance of people to work in so-called 3-D jobs (menial jobs) is ridiculous and makes no sense. It is a claim made without evidence.

According to the Census Department, unemployment within the 20-29 age category is 15.7 percent. Of this, within the 20-24 category, it is 21.2 percent. Within the 25-29 year category, it is 10.7 percent.

The fact of the matter is these individuals have no job even after counting three wheelers.

Unemployment above 30 years is 0.8 percent. So people will have to leave some other employment and become a three wheeler driver, while younger people remain unemployed, creating further distortions in the economy.

The so-called ‘experts’ implemented three wheeler regulations with all this evidence in plain sight. They do it because it is in the nature of bureaucrats to regulate, under the assumption that they alone know what society needs.

This type of ‘unthinking interventions’ is typical of all state interventions.

However, from the point of view of three-wheeler associations who originally came up with the suggestion, it makes perfect sense. Stifle competition and maintain their customer base.

This is exactly what the Government Medical Officers Association is doing.

Interventions going against the wishes and needs of society to fulfill the vicious vicarious desires of an authoritative ruling class are bound to produce negative effects.

Bus Regulations drive Trishaw Expansion

At the moment, three wheelers are filling a valuable gap in the economy created by a regulated bus service that has been put in a straight jacket by a route licensing system and regulatory framework that is allegedly corrupt.

Three wheelers are exporting services by taking tourists around. Because of three wheelers, many out-of-the-way tourist spots are opening up.

Hotels and home stays located farther inland and off the main roads have become accessible and viable due to three wheelers.

Three wheelers comprise one of the most dynamic sectors of the economy. There is a lot of innovation because there are no regulations to stifle it. Call centres have come up, which offer anything from three wheelers to goods transport trucks.

Ride sharing apps have been set up. Pick Me is giving Uber a good run for its money.

Unfortunately, a lot of bureaucrats and ‘experts’ who do not use evidence are implementing these regulations.

Regulatory Premium

Uber was highly successful in regulated markets in the West, where taxi driver unions and the state had set up a licensing system that made it difficult for new taxis to enter. Uber was essentially arbitraging this regulatory premium.

That is why in Asia, they had a harder time penetrating the market. In East Asian countries like Vietnam, local company Grab Taxi had already bought Uber.

The ruling class in Sri Lanka is prepared to halt all this because they do not have manual workers to serve them. Similar complaints were made when apparel factories came up in the 1980s and women workers found EPF-paying jobs.

Suddenly, for the ‘Hamu Mahaththayas and Nonas’, it was difficult to find a ‘servant’.

Hamu Mahaththaya or Soviet Commissar

Why, then, are the Transport Minister and other ruling class members behaving like ‘Hamu Mahaththayas’ blocking the entry of less affluent workers to the service sector.

Minister Mangala Samaraweera hit the nail on the head when he said all complaints are against poor people. If similar acts are done by the upper society, there is no blame.

The current administration is giving tax payer-funded jobs to unemployed graduates.

These graduates will go on to become coercive bureaucrats who may well put more and more regulations on the people.

It is ok for unemployed graduates to get non-existent state jobs at the expense of society, but it is not good for less educated young folks to buy a three wheeler with their own money, pay massive import and excise taxes, and use petrol paying taxes for every kilometer they run.

How is this vicious double standards of a feudal serfdom possible?

Serfdom (Wedasawam system), where people were placed in specific jobs based on land tenure, was ended by the British.

In Japan, the system was broken during the Meiji Restoration by giving freehold and ending service tenure with taxes.

The ending of a serfdom creates a free society where people can change the job from what their fathers did and move to another.

Authoritarianism

It is not only in traditional serfdoms that jobs were pre-decided by the ruling class. Authoritarian regimes tend to follow the same trend.

It was the same in communist and fascist state and Frederic von Hayek explained so eloquently in the ‘Road to Serfdom’.

Planning is a sign of authoritarianism, much worse than the relatively benign serfdoms during monarchies.

In fact, some of the people who are complaining against three wheelers say that it is ‘unplanned’ growth. But the fact is, no bureaucrat has ever been able to plan.

That is why planned societies across Russia and Eastern Europe collapsed. China and Vietnam prospered after they abandoned planning and allowed private initiative.

How then is Nimal Siripala de Silva and other members of the ruling class so willing to engage in such acts to maintain a privilege (cheap labour) for their business cronies and themselves?

Ruling Class Privileges

One explanations is that the elected ruling class considers these priviledges routine and takes them as their due, just as French and other aristocracies did, until the revolution.

In Sri Lanka, there has been no struggle for tax justice.

Both the elected ruling class and their servants enjoy a number of priviledges, many of which were in fact given to them by the United National Party and President Premadasa.

One privilege of having of having tax-free salaries was ended by President Mahinda Rajapaksa, which every second class citizen in the private sector must appreciate.

The practice of giving tax free cars started during the 1980s. President Premadasa gave not Japanese cars but BMWs to members of parliament. Provincial Councillers were given the so-called ‘Pala Baba’ Mitsubishi Pajeros, tax free.

They promptly sold the cars and pocketed the tax. Now getting a tax free car has become an institutionalised privilege of the ruling class, violating the fundamental principles of laws, that of being equal before the law.

State workers of all kinds get tax-slashed cars, while ordinary serfs pay massive taxes.

The elected ruling class receives pensions after 5 years. Many of their relations are in their personal staff, so they also get pensions.

All this shows that the elected ruling class behaves as a super class of privileged persons, for whose benefit ordinary people in the private sector must toil and pay taxes.

This could be the reason that they see no wrong in a despicable authoritarian proposal to ban young people from owning a three wheeler.

Not the first time

It is not the first time that the elected ruling class had tried to recreate a serfdom and succeeded to a great extent.

While in the West, capitalist societies emerged with the ownership of land by the sovereign (king) passing on to the people through free hold, Sri Lanka restricted freehold almost as soon as the British left.

Through the waste land ordinance, the British stole property as ‘crown land’ from people who could not prove ownership of it, which blocked the development of freehold. Land ownership had barely started to develop during the Dutch period and this was a low blow.

However, the British did release state land for many purposes giving crown title.

After independence, remaining freehold was expropriated from the people and given to the new monarch, the state.

This is why communist states failed and their agriculture collapsed.

Service tenure was re-introduced through the Paddy Lands Act, tying people to the land, medieval style. Farmers are not only prohibited from putting land to more productive activities, but even from growing anything other than rice on paddy land.

There are laws that also prevent coconut famers from putting their land to better use.

Plantations Industries Minister Navin Dissanayake (generally a pro-market person), whose father was also a member of the elected ruling class, has proposed a rule to stop the fragmentation of tea and rubber land.

Industrialism?

The reason? To preserve land for large industrial projects.

From another side, the Central Bank is depreciating the currency permanently and robbing real wages, in a bid to push people into the factory floor. But young people do not want to go.

The Central Bank has also placed credit restrictions on three-wheeler purchases. So it is also complicit in killing the aspirations of a society.

When industrialisation caught up in the West, nationalist reactionaries opposed it saying agriculture was better.

The argument that ‘agriculture is superior’ is part of agrarianism, which is a subset of nationalism.

Sri Lanka’s Paddy Land Act, restrictions against better use of coconut and other plantations, are all results of agrarianism.

The proponents of agrarianism did not see that industrialisation brought far more benefits.

In the same way today, moves are afoot today in Sri Lanka to block the less-affluent from moving to the service sector in a bid to provide labour to factory owners and construction companies.

Preventing people from moving to the service sector and the worship of industry is just as illogical today as agrarian-nationalists opposing industrialisation.

What all this shows is Sri Lanka’s society has a long way to go to gain freedom and prosperity.

The biggest price will be paid by the aspirational poor who are less educated, who find their advancement blocked at every turn by regulations by’Hamu-Samurai’ neo-feudals, who are intent on preserving their privileges and industrialism.

This column is based on ‘The Price Signal by Bellwether‘ published in the October 2018 issue of the Echelon Magazine.To read Bellwether columns as soon as they are published, subscribe to Echelon Magazine at this link. The i-tunes app can be downloaded from here.

To contact the author BellwetherECN@gmail.com

(Colombo/Feb19/2019 -SB)