The Annual Meeting of the World Economic Forum for the year 2024 is held from January 15-19 in Davos, Switzerland, under the theme 'Rebuilding Trust.' It aims to restore collective agency and reinforce the fundamental principles of transparency, consistency, and accountability among leaders.
by Raj Gonsalkorale
Judging from events unfolding in various parts of the world, including the annihilation of the Palestinians in Gaza, the ever-widening income and wealth disparity between the rich and the poor, the hunger and malnutrition that millions of very ordinary people experience, the millions of forcibly displaced persons and refugees without a home or any hope, the value of international events such as the World Economic Forum is questionable. Rebuilding trust, restoration of collective agency, and reinforcement of the fundamental principle of transparency, consistency, and accountability among leaders assume all these principles were there at some stage or the other, and have since been lost, and now, they need to be restored. There is, however, a big question mark whether these noble ideals were ever there in the first place.
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| Garment workers protest to demand an increase in minimum wages in Dhaka, Bangladesh on 31 October 2023. [Photo by Kazi Salahuddin Razu/NurPhoto via Getty Images/ Oxfam] |
In this context, it is pertinent to consider two factors that are relevant for leaders at this Forum, viz, the increase in income disparity and the status of forcibly displaced persons and refugees.
Rich getting richer and poorer getting poorer.
On the eve of the World Economic Forum in Davos, the anti-poverty charity organization Oxfam has said that the ‘world’s richest five men have more than doubled their fortunes since 2020, sounding the alarm about unchecked corporate power as business elites hold their high-profile annual gathering in Davos, Switzerland. The five men are said to be worth a combined $869bn after growing their fortunes at a rate of $14m per hour during the past four years, Oxfam said in its report ‘Inequality Inc.,’ released on Monday. Oxfam goes on to say that despite the growth in the fortunes of the five, 5 billion people have gotten poorer over the same period and that billionaires are today $3.3 trillion richer than they were in 2020, while a billionaire leads 7 out of 10 of the world’s biggest companies. If current trends continue, the world will have its first trillionaire within a decade, but poverty will not be eradicated for another 229 years.
Forcibly displaced people and refugees
The 110 million people are listed as forcibly displaced people. So displaced on account of unrest in countries, war situations often precipitated by external elements that are after the natural resources of affected countries. Drug trafficking also causes civil unrest and displacement of people as rival gang clashes often impact on the populations in such countries. The UNODC says that the illicit drug trade is a USD 32 billion industry ‘global illicit trade involving the cultivation, manufacture, distribution, and sale of substances which are subject to drug prohibition laws is estimated to be a $32 billion industry. The recently launched UNODC campaign on transnational organized crime highlights that drug trafficking continues to be the most lucrative form of business for criminals worldwide. Drug trafficking flows have global dimensions linking regions and continents, sometimes with dramatic consequences for the countries they affect.
While critiquing this forum or any other international forum is probably a waste of time considering the futility of such an effort, a discussion may be of some benefit for Sri Lankans if the status of these principles is examined from a local, Sri Lankan context. It will be interesting to make an assessment of what Sri Lankan leaders have been demonstrating vis-a-vis the ideals and objectives of the World Economic Forum, namely, rebuilding trust, restoration of collective agency, whatever that means, reinforcing the fundamental principles of transparency, consistency, and accountability. The overriding litmus test for Sri Lankan political leaders would be whether they considered the country more important than their political fortunes when the worst economic crisis hit Sri Lanka and how they reacted to that perilous situation. At a time when collective agency (working together) would have been the objective, political parties and their leaders chose the opposite and rattled their individual sabers. Readers and voters could and should make the judgment on the worth and value of the political leaders if even at such a disastrous situation for the country, they chose themselves rather than the country.
The widely and generally held view of most if not all Sri Lankans is likely to be that some are more equal than others in the country, the law of the land is not applied uniformly and equitably, law enforcement is selective and dependent on who one knows, there is rampant corruption at all levels, accountability is just a word in a dictionary, that there is a widespread view that large amounts of funds have been siphoned off the country and no attempt has ever been made to investigate such alleged siphoning by some at the highest levels in the country. Sri Lankans no doubt will also agree that the disparity between the haves and have nots has increased and more people are without at least two square meals a day and that malnutrition levels amongst children have increased dramatically. This is a sad indictment for a country that boasts of a history and culture of more than 2600 years.
Some may argue that this situation is not unique to Sri Lanka and it is a worldwide phenomenon brought about by the COVID pandemic and the international economic crisis that followed. Few probably are willing to admit that the moral and social degradation experienced is a consequence of bad governance and management by successive governments. Given this argument, one wonders what on earth and why on earth world leaders are meeting every year to restore some governance principles they do not respect, practice, or wish to practice in their own countries.
Besides blaming everyone else but themselves, Sri Lankans have also been quick to pin the entire blame on politicians for the situation the country is facing. They have not realized they have been equally complicit for this situation, as they have voted in politicians who have promised the most attractive short-term quick fixes, rather than giving any thought to the longer-term damage they could do to the country. The substance of promises has generally not been debated and has not been the criteria to vote in or vote out politicians and political parties.
The debt situation of the country
Sri Lanka’s debt to GDP ratio is said to be 119% in an economy (GDP) reported to be worth 89 billion (USD). This is the estimated wealth of the country. Foreign reserves reportedly are USD 4 billion but this includes some borrowings as well. The foreign debt component of the total debt is said to be approximately 55 billion (USD). As admitted by the President himself on several occasions, and by many economic experts, Sri Lanka is still not out of the trough of bankruptcy, and the future is still uncertain. Even if the country is sold for USD 89 Billion, it will still leave a debt more than USD 18 Billion. Who will then pay this debt?
The future depends on economic reforms and the sustainability of reforms, and economic growth. This requires an acceptance of some economic realities, and strategies that are needed to address such realities. These strategies are not only economic strategies but also key governance imperatives like transparency, accountability and critically, adherence to the law of the land, and enforcement of the law of the land without fear or favor. The cancer of corruption that pervades the entire society, and which is the tool used to prevent the very critical governance imperatives being achieved will ensure that the society’s decline of moral and ethical values and growth of inequities and injustices will continue and flourish. Such situations eventually lead to anti-democratic, violent uprisings.
In general, one could say that Sri Lankan politicians are very good critics, and some are able to articulate criticisms in language that finds ready empathy amongst the people. Solutions are generally not offered, but when they are, they are offered as motherhood statements and promises.
Specific solutions to address problems are rarely offered as such solutions could be bitter pills for audiences to swallow in times of economic pandemics although Sri Lanka is now in an economic and social pandemic, and hard to swallow solutions are needed to lift the country out of it.
Sri Lankans need to be told the truth by all political parties. Their credibility will hinge on this. Solutions to address this truth might be different, but they need to be based on the true situation the country is in. What is the true situation? It is that the country is in debt to the hilt, its current GDP growth would not allow it to repay the debts, and if they are not honored, the country will not be able to borrow any more even for development work, let alone for consumption.
The country needs income in foreign currency, and in rupees. Foreign loan repayments and funds for imports require foreign currency, and local loan repayments and domestic payments like salaries require Sri Lankan rupees.
So basically, Sri Lanka must export more and import less to build its foreign currency reserves. This is easily said than done, and what people need to know is how this is to be done and what specific measures will be taken by aspirants to high political office. Similarly, to generate more rupees, not by printing them, and building its rupee reserves, Sri Lanka will have to raise more revenue and reduce local expenditure. Again, specifics and not general statements are needed as some revenue measures and expenditure reduction measures will be unpopular, but necessary.
Lack of confidence in taxation and expenditure management
While tax hikes, both income tax and VAT, have had a devastating effect on some segments of the society, even such segments may have understood the inevitability of these revenue-raising measures, if they had the confidence that tax hikes were equitable and everyone in the country, especially those with high earnings were also paying their share of taxes. Lingering doubts exist whether some professionals, businessmen and women are doing this, and that they have the power and influence to ensure either they pay very little or do not pay at all.
Regarding expenditure management, politicians themselves do not set a good example as they appear to be enjoying degrees of lavishness at the expense of the State. Fleets of expensive motor vehicles are a giveaway sign that the State spends a considerable sum of funds for politicians who the people do not believe are doing a worthwhile service for the country. Continuing with loss-making State enterprises is another area that consumes a huge amount of State funds. While the current government has embarked on a process to address this issue, the SOEs continue to bleed the scarce resources of the country.
IMF and the reality of the power and influence of the Western nations
The reality is that Sri Lanka’s major trading partner countries for exports are the United States, United Kingdom, India, Germany, and Italy and for imports they were China, India, Malaysia, and Singapore, and of all these, the USA, Japan, China, Germany, France, UK, Italy, India, Russia and Brazil hold more than 50 % of the voting power in the IMF. Considering the influence these countries have in the IMF, Sri Lanka has to adopt appropriate strategies to grow its economy. While genuine reasons may exist to criticize IMF policies, the influence of the IMF cannot be discounted as a key requisite for the economic development of the country for the reasons given above and for the fact that the country would not have introduced some degree of the required financial discipline had it not been for the IMF. Criticism of the IMF without coming up with a viable alternative will not be a constructive approach.
Economic realities in major powers
With the exception of India, the economic outlook in the two big engines of the world, China and the USA does not look very promising. It is anticipated that the flow-on effects of a downturn in the USA and China will have far-reaching effects in many Western nations. Whether aspirants for the highest office in Sri Lanka have given this potential economic outlook due consideration and whether they have specific measures to address it is uncertain as the country has not heard from these aspirants as yet. Rather than leaving the task of economic predictions to individual political parties, it may be a task that should be assigned to the Central Bank of the country so that an independent opinion would be available for the public. It should provide an opportunity for the public to assess the substance of economic policies of individual political parties based on the long-term economic outlook predicted by the Central Bank.
Playing to the gallery without any specific solutions
As mentioned at the beginning, criticizing an incumbent government is an easy task, especially in circumstances of serious economic hardships. Symbolic, short-term solutions are not the answer as what is needed are long-term structural changes to put the economic house in order. As Einstein said, if the same thing is done again and again expecting different results, it is madness. Whether one likes it or not, and whoever is and has been responsible for the current situation, the reality is the country’s serious debt situation, low GDP growth rate, and unaffordable expenditure over the country’s income. A long-term plan, at least of 10 years duration is needed from all political leaders and political parties as to how they will address the current realities succinctly outlined above. Details and not motherhood statements and glib remarks are needed. The media is also to blame for giving headline space for reactive statements from political leaders but not pressurizing them to present specific solutions. The electorate should consider such plans and their practicality and workability before they decide to cast their vote. The test is how the country is going to live within its means, and if it wishes to spend more to have a better lifestyle for its citizens, it needs to increase its own means and not borrow more to do it.
Drawing crowds at political meetings is not a test of any party’s capability to govern seriously and in a responsible manner. Their capability will be assessed based on their telling the public the truth about the country’s economic situation, and what structural changes they will introduce to chart the country in a different and productive direction.
They also need to spell out how they will rebuild trust, restore collective agency, and reinforce the fundamental principles of transparency, consistency, and accountability. All these are at a low abyss and the public should make it known to political leaders that they will be considering substance and not politics when they vote in the future. If the public continues the same way and vote in politics and not substance, Einstein will be proven right.
Raj Gonsalkorale is an independent health supply chain management specialist with wide international experience. Writing is his passion.
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