Equity, Growth and Insurrection: Liberalization and the Welfare Debate in Contemporary Sri Lanka

Abstract

Protagonists in the 1980s' debate on equity and growth in Sri Lanka claimed to show that economic liberalization could deliver growth without jeopardizing equity, and the main lesson that they drew from the Sri Lankan experience - that welfarism should be abandoned - helped to reinforce neoliberal policy reforms of the Washington institutions. This paper shows that their conclusions were heavily dependent on the time frame employed and on the concept of welfare and inequality that was utilized, and that they seriously underestimated the importance of state welfare expenditure in buying social peace. Perceived relative inequality is seen to have increased remarkably, perceptions magnifying objective changes in distribution that coincided with the withdrawal of public support systems.

Rethinking Social Development: Towards an Equitable Future for Sri Lanka†

“…In fact, Dunham and Jayasuriya (2000) point out that the Gini coefficients which portray overall distributional equity have remained remarkably stable over the last four decades in Sri Lanka. Hence, they conclude that the Gini coefficient is an inappropriate measure of distributional changes in the economy primarily because it fails to capture changes in distribution due to policy or institutional reforms.…”

“…In other words, it is claimed that the economic costs of reducing inequality (for example, alleviating poverty) have had an undesirable effect on the economy. As Dunham and Jayasuriya (2000) rightly observe, this has boiled down to an ideological comparison of 'the relative virtues of a neo-liberal freemarket economy compared with interventionist welfarism' (Dunham and Jayasuriya 2000: 99).…”

“…As Dunham and Jayasuriya (2000) argue, what matters is the distribution of welfare rather than the distribution of income arrived at on measures such as the conventional Gini coefficients. In fact, Dunham and Jayasuriya (2000) point out that the Gini coefficients which portray overall distributional equity have remained remarkably stable over the last four decades in Sri Lanka.…”

“…SeeJayasuriya (2000) for a more detailed exposition of Sri Lanka's experience as a third world welfare state.II0According to Osmani, the Sri Lankan experience shows that: public interventions can enable a country to bring about significant improvement in the basic capabilities of its people relatively quickly, without waiting for growth of income to deliver the goods in the long haul of time (1994: 5).On the question of whether the commitment to welfare retarded growth, there are some divergent views. Some, such as the post-1977 conservative governments, along with international aid organizations, have sought to justify the dismantling of the welfare state largely on the grounds that welfare policies have retarded growth.…”

Development Strategies, Identities, and Conflict in Asia

“…2 . Other analysts argue that the civil war was mainly due to trade liberalization, sweeping away agriculture in the North, adversely affecting the Tamil farmers, and damaging ethnic relations (Gunasinghe 1984) and causing widened inequality among groups and regions (Dunham and Jayasuriya 2000 ). 3 .…”