Eternal Economic Woes Of Sri Lanka: Wayward Vijaya To Imbecilic Gotabaya
By Ashan Nanayakkara – Colombo Telegraph
“Ceylon”, the word rolls off the tongue nicely. It is an island of mountains, blessed to have monsoon rains in the course of entire year, densely ornamented with deodars in thick rain forests. It’s riverine and lush forests have made shelter to brooks and pools that would surreptitiously, carry ambrosial water clustering fruits and grooves. Nippy wind that howls across manicured staircase of tea at the hill country could pacify the scorching sun rays of North, it is so soothing, as ode to a toddler at night. Gilt beaches and colonies of tiny coral reef at the sea, bordering around this islet, create a graceful embroider. It, is a beautiful country, wastes its prospects by impure men who ruled it.
Modern Civilization originated at Thambapanni:
Mahawansa – The Great Chronicle of Ceylon says: when those who were commanded by Vijaya landed from their ship, they sat down, wearied, while resting their hands upon the ground – and since their hands were reddened by touching the dust of the red earth, that region and also the island were named Thambapanni. Carl Muller, in his “Children of the Lion”, grippingly recounted in facts, how did progenitors of Sinhalese settled in Ceylon – “…Buddha said: “Vijaya, son of Sinhabahu, will be driven to the island of the Yakkas which is Lanka. He will come banished from the country of Lala which is Sinhapura. And he will come with seven hundred of his followers…” pp. 87-88 of Children of the Lion. The Indo-Aryan-Vijaya and the gang of outlaws who set foot on Ceylon, and colonized, possessed a knowledge of both paddy cultivation and of irrigation on which Sinhalese dynasty advanced from. During this era, there was no systematic economic set up in placed except everything revolved around the household; further, sociological ethos, such as the holiness of marriage, sanctity of being in nuptial life, monogamy were unheard of. Peasants did farming to bring home the bacon, and the prime duty of the king to supply the continuous water for the said cultivation and thwart any external invasion, if any. The population was multiplied, offspring were begot thick and fast as the agriculture needed more and more elbow grease at home. There was no concept of hired labour. The people acted as gregarious group.
Mostly, the territory of the whole island was not united (except the patronage of few Sinhalese kings, the country got unified), and time to time, Dravidians rule the Northern part of the island. The whole nuance of who has the power over Jaffna Peninsula and the North of Ceylon, has been the rallying point of Sinhalese kings in the South, since time immemorial, and this paved the way for both sides (Sinhalese and Dravidians/Tamils) to have their own interpretation on their fons et origo.
Except regular external attacks by Dravidians from North India, ever since Vijaya’s arrival, the first fleet of Europeans who came to Ceylon was the Portuguese. The explorer, Dom Lourenco de Almeida, boarded to this island in his quest to find Kingdom of Paradise, in 1506. Since then, until the last King of Kotte, king Dom Joa Dharmpala (1541 to 1597) also known as ‘Dharmapala’ who officially handed over the kingdom of Kotte to Portuguese in 1597, until then, the costal line of Ceylon faced drastic socio-economic changes by the influence of Portuguese. Portuguese and Spanish empires laid the foundation of age of discovery to the world, and Ceylon was captivated to their ruthless military prowess as well as an avalanche of their jovial culture, Roman Catholicism and economy based on external trade.
From Portuguese to Dutch (‘Silva’ to ‘De Silva’)
The prime purpose of the Westerners to travel far East was to find the lands of El Dorado which they found, eventually. Having about 80-years of struggle against the Portuguese rule, later ended, bringing the Dutch expanding their sea power over the Indian Ocean. By the time, the Dutch Republic was considered as an independent country san any influence of Holy Roman Empire by mid of 16th Century (which was also known as the Golden Age of Dutch), the King Vimaladharmasuriya who reigned in the Kandy Province in Ceylon instrumental in starting negotiations with Dutch Admiral Joris van Spilbergen for the first time to regain its lost territory in the sea belt. In 1640, the Dutch captured Baticaloa after fierce battle, and at the end of 18th century the Netherlanders completely evaded the Portuguese from this soil.
During the time of king Rajasinghe II, the Dutch entered into a treaty with the king and as per the said pact, the Dutch had the monopoly over doing businesses of commodities such as cinnamon, paper, gems, diamonds and what not except elephants. The power sharing which was expected to be in favour of Ceylon kings could not cater the results as they expected, and soon, the Ceylonese felt that Portuguese were far more better than the Dutch. Thus, the Sinhala saying came, that, “inguru dee miris gate wage” (buying hot-tasting chili, by bartering healthy ginger). This strategic failure of the Sinhalese rulers of Ceylon, made them inevitably had to invite more and more unknown devils, whereby, the British stepped on to Ceylon in 1797.
Looking back the economy of 16th Century, Robert Knox brings light to the following macro and micro economic indicators which will give soupçon of indication on how the trade had set up in the old Ceylon during Portuguese and Dutch epoch.
At pp. 274-275 of “An Historical Relation of the Island Ceylon by Robert Knox” edited by J. H. O. Paulusz [2nd ed. Vol 2] May, 1989, Knox states that, “There are no Markets on the Island. Some few Shops they have in the Cities, which sell Cloth, Rice, Salt, Tobacco, Limes, Druggs, Fruits, Swords, Steel, Brass, Copper, & c.
As to the Prices of Commodities, they are sold after six quarters for four pence half-penny English, or a small Tango, or half a Tango: six Hens as much; a fat Pig the same: a fat Hog, three shillings and six pence or four shillings: but there are none so big as ours. A fat Goat, two and six pence, Beatle nuts 4000 nine pence Current price, when a Trad.”
Also, at pp. 149, 151, 154 of “An Historical Relation of the Island Ceylon by Robert Knox” edited by J. H. O. Paulusz [2nd ed. Vol 2] May, 1989, Knox states that,
“The Dew accustimed Cottimals or rents, as they may propperly be Called, never alter as Ourida (Awrudu), Ilmaah (Ilmaha – November), Allesall (aluth sahal – fresh rice) which is the new year rent or guift, the fristfruits and the November sacrifice. But when the kings house wanteth anything, there is an extraordinary imposition…
…At this and the other times the things which the People carry as their Rents and Taxes, are Wine, Oyl, Corn, Honey, Wax, Cloth, Iron, Elephants Teeth, Tobacco, Money… The great Officers tell the King, the People have brought their Rents. The King saith. ‘Tis well’…
….The King hath several Treasure-houses, and in several places, in cities and Towns, where always are Guards of Soldiers to watch them both day and night. I cannot certainly declare all that is contained in them. (e.g.: Medamahanuwara is marked on Dutch maps as the King’s main treasure store)
…There are Precious Stones such as his Land affords, money, but not very much, Cloth, and what he hath got by Shipwreck, Presents, that have been sent him from other Nations, Elephants-teeth, Wax, good store of Arms, as Guns, Bows and Arrows, Pikes, Halberds, Swords, Ammunition, store of Knives, Iron, Tallipat-leaves, whereof one will cover a large Tent, Bedsteads, Tables, Boxes, Mats of all sorts…”
Hence, it is not hard to fathom that the whole economy was based on how wealthier the King had been and how lavishly he had been faring on. Treasury of the country was nothing but a personal vault of the sovereign.
This self-centered idea of hoarding and greediness towards the wealth of the peasants (including their alluring wives), to be accrued for the personal gain of the king, is reflected in modern day rulers of this country as well. And, as a result, this country got declared insolvent in year 2022 (on which the author will write on in detail at Part II). Impromptu, it comes to the mind of everyone that, how extravagantly nearly 360 Million USD was squandered, in year 2012, by the youngest son of former president Mahinda Rajapaksa to send a ‘Supreme Sat’ satellite to the oblivion to satiate his son’s longing desires, whilst total outstanding foreign debt as a percentage of GDP, by then, increased to 36.5 per cent at end 2012 from 35.6 per cent at end 2011, while increasing in nominal terms by 18.8 per cent to Rs. 2,767 billion Rupees at end 2012.
The author now realizes that such plundering of public money to meet the private needs is nothing new to the rulers of any country who follow the footsteps of Monarch/Kingship.
End of British Raj
The mission of British came to its pinnacle in year 1815 when the Sinhalese Kings and the ‘Radhalayas’ (aristocrats) officially handed over the ownership of the entire country without any encumbrance, on a gold plate, to the British empire, by virtue of the pact, called and known as ‘Kandiyan Convention’. As a result, then King, Sri Wickrama Rajasinghe, nobles and countrymen of this island came under the sovereign of British throne. To reverse, after so much of bloodshed and deliberation, it took exasperating 150-years to send these Englishmen back to where they came from. Hence, Sinhalese kings, in the past too, had made historic blunders, which reminds the author, the old adage, “For want of a nail the shoe was lost. For want of a shoe the horse was lost. For want of a horse the rider was lost. For want of a rider the message was lost. For want of a message the battle was lost. For want of a battle the kingdom was lost. And all for the want of a horseshoe nail”.
To do the trade in Indian Ocean, in 1600, the British established a stock company called East India Company, which is also known as ‘the Company’. According to Farrington, “Trading Places: The East India Company and Asia 1600–1834 (2002)”, the East India Company had earned more than half of the world trade during 18th Century and until it was wound up in 1874 it kept its gargantuan status. The encouragement given by doing business in India and Spice Islands (Batavia – present day, Jakarta) was the strategic placement these islands were located. Overthrowing the Dutch Indian Company supremacy and due to short-term losses incurred by first and second Opium wars, paved the way to Whites to strike their chances in Ceylon.
As per, Christie, Nikki in “Britain: Losing and Gaining an Empire, 1763–1914 (2016) Pearson”, the capturing of Ceylon from Dutch gave an immediate sum of Pounds of 300,000 assets and great deal of cinnamon plantation and some lands of unsuccessful attempt of coffee. Making reference to cinnamon, it will be a great injustice, if the author does not quote, the words of Lord Mountbatten (Lord Louis Mountbatten of Burma, Viceroy of India and Ceylon, Supreme Allied Commander, the chosen representative of King George, Emperor of the British Empire) uttered to the former Planter and the renowned Author, Herman Gunaratne and to his friend Mervin when the Supreme Commander came to Dimbula Estate, Kothmale in year 1976, to wit, “Ceylon cinnamon is the best in the world. It is the most coveted spice. The history of it goes back to Biblical times. It was only Ceylon that produced this particular type of cinnamon. We protected its source so jealously that we sent the cinnamon stocks by boat to Madras and shipped it out to the world from there to conceal the true source.” – p 201 of “The Suicide Club” – 4th Ed., 2016.
To rule this outpost island, British appointed a Governor. First in its kin was Sir. Fedrick North (1798-1805). British introduced Coffee to Sri Lanka in the first place. British Army Officer George Bird and his brother, for the first time in history, commenced a commercial level Coffee estate in the valley of Gampola in 1824. Edward Barnes, in his tenure as the Governor in Ceylon, brought the coffee to Kandy as a commercial plant and the proposals like abolishing the service tenure (compulsory duty towards the King by providing labour or a pecuniary amount of coinage instead of labour) made in the Colebrooke–Cameron Commission encouraged the industry further. The result was, by 1870, Ceylon, Brazil and Indonesia were the largest suppliers of the world coffee consumption (vide: Illy, Andrea; Viani, Rinantonio (2005). Espresso Coffee: The Science of Quality. Academic Press. ISBN 978-0-12-370371-2). In the heydays of coffee, it covered about 111,000 hectares of coffee in the island. Nevertheless, by end of 19th Century, owing to a fungal disease called, hemileia vastatrix, also known as coffee leaf rust, the priority of coffee business dwindled and tea replaced the same.
Before move on to tea industry, which was, for the first time, initiated by James Taylor by operating a fully equipped tea factory at Loolekandura Estate (this Estates is located in hill capital – Kandy, and one layover of world fame ‘Pekoe Trail’ which traverses on the Central Highlands of Sri Lanka from Hanthana to Hortain Plains and therefrom to Ella and ends at Kandapola, Nuwaraeliya). The profits generated by coffee, the British were able to embark on lot of infra-structure facilities in Ceylon, which extended from railway to tramp cars in Colombo. Aftermath to coffee, since then, Ceylon became the cup of tea of the world.
This British era lasted from 1798 to 1948. For some, this was a civilization mission; in terms of plain and staggering facts before us, it is not wrong to say that this was a period of looting. An article written by David Pegg and Manisha Ganguly to The Guardian on April 6, 2023, titled, “India archive reveals extent of ‘colonial loot’ in royal jewellery collection” contained an insight to this despoiling committed by British. According to David Pegg and Manisha Ganguly, pillaging the well-known gem which was on the Mughal Peacock Throne of India is one of the most talked about precious gems that was extracted from an Indian Maharaja, by the British during their reign in India. It is estimated that, it costs between Euros 140 to 400 Million, today. Whereas, pilfering from Ceylon, by the British, was negligible compared to the treasures carried away from India. Yet, it is notable to say that the bronze statue of Tara (Circa. 800 A.D.) found near Trincomalee, Sri Lanka, is currently housed in the British Museum, London, is invaluable to this date and the colossal value of countless gems and diamonds shipped away from Ceylon, from 1798 to 1948, are yet to compute.
But, except the fact that the British seized the resources of this beautiful island during their stay, incongruously, Sri Lanka has not developed an inch forward since the latter left. From financial point of view, British Raj was the golden era of Ceylonese economy (though it was not really helpful to natives), where we as a country single handedly held world largest tea exporter in the world. By the independence in 1948, tea along with rubber and coconut contributed more than 92% of total export earnings of the country (Athukorala and Huynh, 1987). Records say that one million Ceylon tea packets sold at Chicago World’s Fair (1893), which showcases, the name, Ceylon tea, had earned during that time.
Promising Economy, At the Independence
Sri Lanka received its independence in year 1948. In 1948, 1949, 1950 according to the Central Bank Report, the Government had, respectively, an aggregate net Public Debt of 426.5-Million Rupees, 460.1-Million Rupees, 520.3-Million Rupees. Of which, net Sterling loans were only about, 82.3-Millions of Rupees in 1948, 80.1-Millions of Rupees in 1949 and 75.7-Millions of Rupees in 1950. Rest of the debts were covered by selling Treasury Bills and Rupee loans at domestic level.
By January 1949, the Money Supply of Ceylon was as meager as 476.1-Million Rupees. In 1950, 1-pound of rationed rice was about 30-cents (now about 300 Rupees, an increase of 900 fold) and flour was 23-cents whilst the landed cost of 1-pound of rice was in average about 56-cents.
At the time of independence, in 1948, Sri Lanka had a population about 7,244,000 with an average annual per capita income of about Rs. 400. A more reliable later estimate of 1950 placed the Gross Domestic Product (GDP) per capita at a sum of Rs. 550. In contrast, by year 1948, an average annual per capita income of USA was about 1,879 $ and the exchange rate was skimpy sum of 0.30. This means, 30-cent of USD Dollar could be bought by using 1-Rupee, in other words, 1-USD Dollar was about 3-Rupees, whereas, on present date, 1 USD Dollar is nearly 300-Rupees.
In 1945-1946, Government revenue was about 383.3-Million Rupees (for the year 2024, it was about 3,650 Billion Rupees, an increase of 9,538 fold) and the expenditure was 312.9-Million Rupees (for the year 2024, it was about 4,881 Billion Rupees, an increase of 15,594 fold). Fascinatingly, there was about 70-Million Rupees of surplus during 1946.
The total cash surplus of the Government after their recurrent expenses by year 1946 was 6.3-Million Rupees. Even in 1949, the Government revenue was about 576.1-Million Rupees and the expenditure without loan interests was less than the total revenue, viz, 547.9-Million Rupees. However, by 1950, total cash deficit of the Government went up to 154.3-Million Rupees, yet the Government revenue had a surplus.
It is notable that even as far back as 1950s that the Government was so generous to spend more and more money in subsidizing the food items, at the same time, despite the said charities, economy was still showing lot of encouraging future. This was succinctly explained by the year-1950 Central Bank as, “… 49. As argued earlier, it is regrettable from the economic point of view that such a large share of the budget deficit is the result of increasing food subsidies. The subsidies in the financial year 1950-51 are estimated to cost Rs. 133 million. Food subsidies, together with such payments as public assistance grants, are ordinarily classified in fiscal parlance as “transfer payments”, because, unlike payments rendered for goods or services, they are merely outright transfers of income from one section of the population to another. Such payments ought to diminish rather than enlarge during a boom…” p. 11, para 49 of the Central Bank Report of 1950.
Even in this backdrop, Ceylon’s exports in 1950, increased by nearly 50%, as compared with 1949, to a record level of Rs. 1,563-Million Rupees. During this time period, the terms of trade had increased to an average of 113. In simple terms, Ceylon could buy more quantity of imports from their export income. It is needless to say that, international trade has generated a surplus during year 1948, 1949 and 1950. In addition to the economic indicators during 1950s, the Government of the day had nearly completed the Lakshpana Hydro Electric scheme which generated about 75,000 kilowatts. Government Cement Factory had also been completed expecting 100,000 tons of cement for the local consumption during this period.
* To be continued..
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