Monday, April 7, 2008

the core problem of the economy of Sri Lanka

The core problem of the economy of Sri Lanka

Unproductivity and Inefficiency are the fundamental problems that have not been identified and hence not addressed. These core problems, have caused inflation, under employment, low growth in GDP and a general lowering of our capacity to compete with the rest of the world.

We have therefore identified the wrong problems and while trying to solve them, have not been nor ever will be successful. When a mistake as basic as believing unemployment is a problem in Sri Lanka is made by even the most eminent policymakers, then the solutions they recommend create more problems. Tackling the fundamental problems will then automatically solve the unemployment issue, the bloated government bureaucracy and terms of trade issues as well as exchange rate and lagging development.

The concentration of energies in misdirected spheres has lead to the current malaise, and once the core issues are identified and tackled it will be surprising how the market forces will take over the mantle of growth and development.

Sri Lanka is no longer a developing country, where special action is needed to correct things like mass starvation or malnutrition as well as the absence of the rule of law. The GNP per head though unequally distributed exceeds US$1,500, which in purchasing power terms is about US$5,000. This is quite adequate to give all the people a modicum of the basics and therefore the efficient allocation of the resources and the emphasis placed in the correct areas will lead to an overall improvement in living standards and market driven solutions to some intractable problems.

Some of the problems that will solve themselves by this approach, partially or satisfactorily, will be the bloated bureaucracy, food production, reduction in the skill shortage, terrorism, corruption, environmental degradation, education and unemployment.

In conclusion therefore if measures are taken to combat the twin if not related issues of unproductivity and inefficiency by taking steps to minimize these aspects in all areas of the economy, first by identifying the worst offenders and then taking action to correct them, we can go a long way to solve some of the pressing problems of today.

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