Title : New Economy model for Sri Lanka (Lakshan)
Author: Lakshan Bandara
Created Date: 2020-07-26
Last Modified Date: 2020-07-26
Article Code: 91
Keywords: Sharing Economy, Entrepreneurs, Capitalism, Communism
Sri Lanka is failing (near to bankrupt), because we believe that good leaders will take care of everything. But, designing good systems is the key success factor for Sri Lanka, irrespective of leaders.
I see that the economists don’t have the correct vision to uplift the Sri Lankan economy, though they are highly educated and highly paid. Ad-hoc changes without an optimum master plan (economic model) is planning for disaster.
We need to focus on following key factors:
1. Priority of do’s and don’ts
2. Increase income
3. Decrease expenses
4. Improve production
5. Reduce unemployment
If you have a good plan addressing the above key factors for an economic leap, I would like to discuss it.
My presumption is, we must have the need for ideological inventions to uplift our country.
Therefore, let me present my Economy Theory and Entrepreneurship Theory to design a new Economic Model for Sri Lanka.
Current main Economic Theories:
The German philosopher and economist Karl Marx and his intellectual partner Friedrich Engels identified following economic stages of human history (Historical materialism, where history is the result of material conditions rather than ideals).
They are roughly as follows with detail:
1. Traditional Economy (classless primitive community)
Early man gathered food by hunting and searching grain, edible plants, etc. In order to survive, they used sticks and stones as tools. They worked together. Common labor entitled common ownership of production. They shared food and other necessities among their community. There was no currency. They also shared/exchanged necessities with other communities. There was no surplus production and no exploitation of man by man. Backward psychology was ruled by local religions, superstitions and customs.
Decline of primitive communism caused by social division of labor, such as tribes based on domesticated livestock, agriculture, handicrafts such as metal tools, cloths and footwear, etc. With advanced productive forces, surpluses were possible in production. People who owned production exploited those who had none.
This is a brutal system with human exploitation. It also gave rise to new advanced productive forces like canals, irrigation devices, grain milling, mining and smelting (extract), weaving, tanning (leather) and carpentry, ship building, written languages, growth of commerce and new towns . War became the main source of slaves.
The main force behind feudalism is security. Lords රදළ took care of business. They made agreements with peasants (hard working villagers). The peasants transferred their land ownership to lords by registering and paying taxes, in return of protecting them from predator greedy officials and usurers (money lenders at unreasonably high rates of interest) as well as from tribal physical attacks. That degraded the social status of peasants to the state of serfs ප්රවේණිදාසීන් (Lords owned the serfs who lived on their lands). Though they leased the land from Loads and payed taxes, they were motivated for production by a false assumption of land ownership. For security and exploitation sake, the peasants and serfs had to join the Lord’s army and protected his castle by risking their lives. Surfs had the opportunity to increase their social status as artisans and craftsmen.
With greater production, trade increased leading to new towns, trading centers and new industries. This paved the way to Capitalism.
Growth of commerce and accumulation of capital while increased debt by aristocracy (highest class in society) led to revolution. It opened the way to a society structured around commodities and profits. We call it capitalism, the economic practice in current day.
In this system, proletariat (working class) believe that they are free, because they get paid for their labor. But, bourgeoisie (capitalist class) continue to exploit them when labor is bought and sold in the market. The small percentage of society who control the capital own the production. Therefore, they enjoy majority of profits. The working class experience alienation (left out) from the driving forces of economy and is punished for smart thinking.
Capitalists have 2 main intentions when increasing wage/salary of working class.
a. Workers need food to be healthy and strong to increase production
b. When workers make children, the future generations will continue to work for capitalists
This is predatory behavior, like a tiger thinking of managing the deer population of the jungle for his selfish well being. A disgrace to humanity.
We need to be clear that Capital is not a thing, but a social relation between persons.
Sometimes we see rich people like Bill Gates (Microsoft is a monopoly in capitalism) donate money to the poor. But there’s no general system to convert poor to be rich.
Karl Marx version of Communism:
Karl Marx vision was to build an advanced classless communist society with common ownership of the means of production. Therefore, he mainly focused on class struggle, resulting physical conflicts between workers and property owners.
Socialism is the transition period from capitalism to communism. It’s a period to educate the rights of working class for power struggle and to establish institutions with public ownership.
Karl Marx believed that different classes of society always oppose to each other, because they have different interests.
My solution to this tug-of-war problem is to give them a common interest, where we can develop our country and live happy. There should not be an oppressor and an oppressed in this solution. When rich take care of poor, there cannot be conflict between rich and poor.
Karl Marx and Friedrich Engels have done good research on economic, social, political, etc systems. But, the implementation of their futuristic communism goal failed, because of ideological design error.
They correctly found the problem.
1. Conflict between social classes, because the capitalist class exploit working class
2. Government and system justice bias towards powerful capitalist class
But, their solution to empower weak working class to fight and capture government power for a classless society was not correct.
Classless society is not stable. Let me explain.
There are two types of relationships in dynamic existence.
1. Master-slave relationship
2. Peer-to-peer relationship
Master-slave is the stable form of relationship. In any situation, dominance is inevitable. Therefore, peer-to-peer relationship is unstable. This is how love works.
Peer-to-peer relationship can be achieved as inter-dependent master-slave relationships. That’s why, mutual respect is necessary to avoid power struggle conflicts. This is perfect love.
Why did Communism fail?
Practically, communism has never been implemented anywhere in the world. We see socialism (the transition period) with labels of communist parties and communist governments. Don’t judge a book by the cover.
They practice Oligarchy, a form of Dictatorship. In oligarchy, a small group of people have control of a country or organization. This oligarchy control the budget (majority of money) to exercise power.
We experience this oligarchy situation in the Democratic Socialist form of government in Sri Lanka.
Also, it is not practical for the working class to defeat the capitalists, because of the capitalists' financial knowledge to accumulate wealth. Capitalism may loses some battles, but they win the ultimate war.
If wealth is equally shared among capitalist class and working class, in few years the capitalists will gain wealth over working class, because of their special knowledge.
Working class alone cannot share capital and profits, because there is no wealth to share.
Therefore, the expectations of Marxist Communism is not achievable.
Then, why did Capitalism fail?
The goal of capitalism is monopoly, where few capitalists champion and the majority become poor without basic needs.
There’s surplus production wastage in the capitalist system, because the poor majority cannot afford (people don’t have money) to buy what market offers. One one hand, it leads to future debts (take loans for today’s consumption). On the other hand, more and more money printing for loans to improve money circulation leads to long term recession (business cycle contraction when significant decline in economic activity). Both these strategies inflate an economic bubble. When it bursts, the economy collapse.
Monopoly is dictatorship and is also bad for the economy, because other economic contributions are discouraged in normal circumstances.
Oligopoly is a prisoner's dilemma and negatively affects economy.
Too much greed, unbalances the economy ecosystem.
Capitalism demonize the rich capitalists as thieves.
For example, when you build a mountain in a leveled field, you have to take soil from the surrounding. Likewise, the capitalists become rich by taking the wealth of others. It is systematic theft.
Another example, you may have heard ‘Jack and the beanstalk’ fictional children’s story. But, I’m sure that you’re not aware of the message of it.
When the poor boy Jack climbed beanstalk and steal the wealth of the giant, why is he not condemned as a thief? It is theft in prima facie (on first impression), isn’t it?
But, the story justice say, Jack is a brave boy to challenge the fearful giant and bring back the wealth, which the giant has stolen from his father. Steeling from thief and taking back your belongings is not theft.
Bad (-1) x Bad (-1) = Good (+1)
Bad (Bad) = Good
Steeling the capitalist who stole the poor people’s wealth is not theft. That is correct judgement, and is taught to children in their bed time story. This message changes children’s minds to fight for their rights.
We are stuck in this unresolved conflict.
Class struggle has led to human losses and destruction of property. We experienced this violence as JVP revolution era in Sri Lanka, which was a black-mark to humanity.
This is not how intelligent people should think and behave.
My advice to the radicals including university students, who are attracted to physical conflicts with authority:
"if you have good intentions, you must achieve it in a human and a lawful way by intelligently communicating your case with reasons, not shouting. People who benefit your proposal will agree and join with you in the revolution. So, make your case to attract a wider audience. Before implementing revolution, you must design a good plan based on concepts. Systems get destroyed in revolution. But, that must be done without anger and physical violence."
This struggle among classes of the society does not help for harmony and prosperity. It again negatively affects back to the economy.
The society system must be redesigned to restructure and redirect the struggle, where everyone work for a common goal. That’s the wise way to serve the nature including all people.
We experienced the failure of socialism (labeled as communism) all around the globe. Developed countries are now learning the obvious failure of popular capitalism. They are experimenting the concepts of communism to build a stable society.
As I demonstrated above, the communism concept of Karl Marx cannot be achieved because of the structural error of classless society.
There’s another Utopian concept of communism. It is called ‘Sharing Economy’. This economic theory has not being fully conceptualized and experimented in today world.
Therefore, I will do the need to explain this new concept, in order to design a new economic model for our country. Then, we can solve all current problems and leap to a developed economy state.
Don’t take my words blindly. First, learn from my explanation and do your own research to see it’s feasibility.
New Sharing Economy Theory:
Sharing Economy is to share both capital and profits. In other words, reinvesting in society.
The concept is “Communism based on Capitalism” – Build wealth and share it.
Money is not Wealth. Money is a measurement of Wealth.
First, build wealth using Capitalism. Then, share wealth back with the society using Communism.
We cannot share wealth unless we build it.
In a family, someone has to earn wealth for everyone to share food at the dinner table. Otherwise, everyone can share starvation.
The governance of society system must be designed to coordinate “Communism on top of Capitalism” mechanism.
Sharing economy has the "My company is yours" motto/tag line, because the capital and profits are shared.
In this theory, Capitalism positively contributes to the ultimate goal.
Capitalists are motivated by greed and sense of ownership to build wealth. That’s a good thing. They contribute their knowledge to build wealth. Other people don’t have that knowledge. So, let the experts do what’s best for our economy.
When the capital is shared, small businesses can network and work together to compete with global market giants.
This economic theory brings prosperity by:
1. Prioritising what to do and what not to do
2. Increase income
3. Decrease expences
4. Improve production
5. Reduce unemployment
Therefore, it eleminates poverty.
This economic ecosystem also brings harmony among social classes to work together for the development of our country.
Win-Win for all.
Consider this senario.
Uber taxi company based in capitalism (USA) is using sharing economy. Their only asset is a process with an online app. The capital investments of taxi vehicles are distributed and shared among many private owners. Though the Uber investment is so small as a company, it is the largest taxi company in the world. It has scaled to many countries and many subsidiary businesses.
They use an information system to directly communicate passenger and driver using GPS technology.
Information systems are very important for sharing economy.
Many jobs are created. Taxi drivers get full-time jobs without idle time. Daily income is around Rs. 5000 and monthly income is round Rs 175,000 in Sri Lanka.
Passengers benefit because they have no troubles in maintaining private vehicles and private drivers, parking issues, etc. They can focus on their main jobs.
Transparent transactions and professional driver service results in good business culture. That’s the power of sharing economy.
But, Uber as well as Pick Me in Sri Lanka are not applying the sharing economy concept in full to benefit the society. They don’t share their profits back with the society.
That’s the difference in my New Sharing Economy Theory.
Profits must be reinvested for income generating assets and not for expense generating liabilities.
The highest potential of Sharing Economy has not theorized and experimented so far, anywhere in the world.
We can do it in Sri Lanka and be a success model to the world.
New Entrepreneurship Theory:
Entrepreneurs take calculated risks to make profits. They have special skill sets and profit making attitudes. Majority of other people don’t have that knowledge.
That’s why we see few successful entrepreneurs in our society. Entrepreneurs are the brains to convert inventions into innovations. It’s a big process to boost our economy. We need to identify the real entrepreneurs and correctly position them to make maximum use.
This new theory has similarities, but not the same to Sharia banking and financing. The wise will always be humble to learn the good things from every.
Currently, the Colombo Stock Exchange is practically used for gambling and for providing loans to around 200 companies, though not officially announced so. It has no contribution by large, to improve the economy of Sri Lanka. An institutional waste.
We can make use of the stock market as a tool to bring investment, from both locally and internationally.
Shareholder feedback is important to our economy.
Stock market should not be a place for stock brokers and to use as a paper document post office. No brokerage costs. Online communication only is a must.
Then, the top-level entrepreneurs will be financed.
They will invest on lower level entrepreneurs.
The investments will flow from top to bottom in a viral way, down to the grass root level local businesses. It’s salable with minimum risk.
Investing for profits is different from giving loans for interest. Profits encourage businesses, where loan interests as expenses discourage businesses.
When investing, the top level entrepreneurs share their hard earned knowledge of profit making with the lower level entrepreneurs, because they all have common interests to be successful in business. Therefore, the probability of business to fail is very low.
In return, the profits are shared bottom up via entrepreneurs, and back to the share market.
Everyone must work hard to build wealth (not just loan, sit back and get interest). That’s the essence of capitalism.
Workers must share the profits (no salary/wage) in proportion to their contribution, and their basic needs must be fulfilled.
Majority of profits must be invested in new businesses. That’s the essence of Communism.
Small part of profits can be consumed. International investors can take back this share.
Good investments are long term. If the investments make profits and if the environment of Sri Lanka is good for living, the international good investors will consider to stay with us, because of benefits.
No taxes. No loans. Investments and Profits driven.
Private ownership of capital is encouraged. It motivates the entrepreneurs, because they have the sense of ownership.
Workers can invest in their company and as owners, and they can actively participate in decision making.
“Invest profits back to our society” and “freeze assets” are different. Investment is a dynamic process to generate more wealth.
Instead of current job policy (promise to give jobs) that increases unemployment exponentially, with this new theory, we can generate surplus employment opportunities, where people from other countries also can contribute to our economy. We have the luxury to brain hunt foreigners for our benefit.
The new system decides on how the surplus (profit) is used.
The government must be restructured to support the smooth implementation and maintenance of New Sharing Economy Theory and New Entrepreneurship Theory.
Prioritizing the to-do-list and not-to-do-list must be the top priority of government.
Wealth not only be made morally, it should be spent morally. Moral is to be concerned with the principles of right and wrong behavior. Export income must be higher than Import expenses.
Sri Lanka need more and more capitalists/entrepreneurs/rich people with knowledge to drive the economy.
Do not discourage entrepreneurs with bureaucracy (important decisions taken by state officials rather than by elected representatives) and too much standardization. Politics must be alert to make necessary changes to the system without damaging the goals of the master plan. Legal code must nourish and encourage real entrepreneurs and filter the fake ones. We need results, not just processes.
Then, we need the laws, guidance, reasonable education and encouragement for reinvestment.
Taxes are expenses for business. We don’t want entrepreneurs to hide and runaway. Instead we need to invest the profits back on businesses to support the efforts of entrepreneurs.
Eliminate structural forms of oppression and systematic poverty. Government must act for the best interest of people.
Market is a beautiful place, welcoming and friendly. “Do what you do best. Trade for the rest.” People make a living. We vote with our wallets. Every purchase sends a message. Therefore, TRUST is very important. It’s the duty of the government to facilitate and maintain a good environment for our economy to grow.
Free market based on supply and demand is necessary. Free market is not planned. It works with human actions. A bottom-up approach. When demand is high and supply is low, then the price increases. When demand is low and supply is high, then the price decreases. Free market reduces wastage, inefficiency and stagnation.
There are things we can plan in the free market.
- Balance of supply demand to reduce over production waste and protect the supplier
- Set highest and lowest price margins to protect both customers and suppliers
- Restrict unethical transactions and encourage genuine transactions
- Restrict brokers, who earn unreasonable commissions in proportion to their value addition
- Government must ensure that there's no fears competition in the market, because it's a wastage. Controlled competition motivates to improve product quality.
We need safety nets to support who are economically and socially vulnerable.
Government must help the losers of market to find the winning spirit and get back on foot. Don't let anyone be poor and beg for basic needs. They need help in bad times, even when unemployed.
Government must monitor all the time and control when and where necessary for the benefit of people in Sri Lanka. Too much control is restricting. Be strict and flexible with good judgment.
Social institutions like hospitals must be run by investing the profits of businesses, not by taxes collected for leasing property and the use of money. All institutions must be profit centers in management terms using the knowledge of entrepreneurs, irrespective of free services given to people.
A new separate currency system is needed for the local economy to grow without being effected by global economic manipulations. It can be an eVollet with points to exchange in local transactions. The data of this system will reflect the correct picture of our economy.
Facilitate global commerce. We need to play in global markets without incurring a deficit in our budget. Be open but vigilant on foreign trade. Real entrepreneurs do have the knowledge and experience to convert challenges into opportunities. Make best use of them.
Our investment for infrastructure like roads must generate income to our economy. They should be income generating assets, not liabilities. Return-on-investment is a must.
Government must concentrate on it’s main duty, which is governance. Governing means having authority to conduct policy, actions and provide free services for the benefit of sovereign people. Government should not waste resources and should not be biased by doing business. Government should not make money.
Establish a separate court system, specializing economy.
Every individual matters and deserves respect. Individual is the best judge on their own interests. We don't need others to plan our lives. Others should not force them to do what they do not want to do. Therefore, there should be a balance in individual interest and collective interest.
New Tools for our economy:
We must use the correct tools to our economy, suitable for the new millennium. We are just a speck in the global economy, and we must compete using our strengths, which is intelligence.
In my articles, I emphasize the benefits of using Information Systems to develop our country. It's the best tool we can use in this information age. Read “Feasibility of Information Systems” article in Intellect Forum.
For example: We don’t have the Oil fuel resource in Sri Lanka. We import it. To reduce the budget deficit, we must minimize transportation. The alternative is to use information systems. (need to focus on Natural renewable Energy in the long run)
Other tools are new currency system,stock market, internet, smart phones, GPS, study historical patterns with big data analysis for forecasting, run time data collection for monitoring, business secret messaging, etc.
We can add more tools to this list through discussion.
New Economic Model for Sri Lanka:
It is necessary to design a smart economic model by integrating the proposed new Sharing Economy Theory and Entrepreneurship Theory.
The New Economic Model must be wisely designed as an eco system where the individual interests serve collective interests and visa versa.
The role of the government is to be the invisible hand on top as a big brother, who looks after our economy with care.
Use correct Tools suitable for the new millennium.
Our primary goal should be to maximize wealth to eliminate poverty and make our people happy.
We need limited resources to live happily. Anything more is a waste. People need education on satisfaction.
We Sri Lankans are genuinely hospitable and forgiving people. Our foreign policy is to be friendly and unbiased towards others.
Therefore, our secondary goal should be to sincerely help people in need of other countries, without expecting anything in return.
We can promote our new economic model to other developing countries, where they can follow our foot steps to prosper.
Sharing is not new to us. We have a culture of ‘Dansal’ giving free food to everyone.
In future, we can design “Transnational Collaboration Economic Models”.
As I said in the beginning, believing in good leaders to take care of everything for us is not the wise decision. Simple adjustment to our systems can bring big effects to our economy. Right people at the right place is management practice within the system.
“Rule of law” is not all about personal discipline. It's about the design of system structure to achieve goals for the benefit of sovereign people of our country.
Paradigm Shift in Economy
Sharing Economy Concept
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