Wednesday 30 November 2011

Sri Lankan government imposes austerity budget

Sri Lankan President Mahinda Rajapakse, who is also the country’s finance minister, presented the budget for next year to parliament on November 21. Following the dictates of the International Monetary Fund (IMF), he has maintained the current wage freeze and imposed new burdens on workers and the rural poor, while making further tax concessions to big business.

The government plans to lift revenue by nearly 20 percent over the next year to 1.1 trillion rupees ($US10 billion) through a series of new taxes on essential items that will contribute to higher inflation. There will still be a budget deficit of 469 billion rupees, to be funded by increased borrowing from foreign and local banks.

The new taxes have been imposed on a range of imports, including dried fish, wheat flour, coriander, onions and saffron, in the name of protecting local industries. These imposts come on top of pre-budget price increases of about 10 percent for petrol, diesel and cooking gas.

Rajapakse also proposed to increase local and international phone charges by 25 percent and annual licensing fees for vehicles, including motor bikes and three-wheelers, by 25 to 50 percent.

The budget announced a 3 percent devaluation of the rupee against the US dollar—a move that will contribute to higher prices on a range of goods and services.

The government is maintaining an effective wage freeze that has been in place since 2006. Rajapakse announced a 10 percent rise in monthly allowances for public sector employees, which will increase to between 1,000 and 1,500 rupees next year. Retirees will get even less and no mention was made of private sector workers. The increased allowances will not compensate workers for projected price rises.
Rajapakse did not cut the small welfare payments of 250 to 750 rupees for poor families nor reduce the limited fertiliser subsidy for farmers. He is well aware that such steps would provoke greater disenchantment and opposition in rural areas.

The budget handed out generous tax cuts to the corporate elite. It reduced taxes on profits in the banking and finance sector by 7 or 8 percentage points and in export industries and tourism by between 12 and 15 percentage points. Foreign and local investors will enjoy tax holidays of 4 to 12 years for investments ranging between 50 and 2,500 million rupees.

Speaking to Bloomberg.com, IMF residential representative, Koshy Mathai cautiously praised the budget, saying “the exchange-rate adjustment was a step in the right direction.” He said the IMF’s “initial impression of the budget” was that it was “broadly consistent with the authorities’ earlier articulated plans” and thus in line with IMF demands.

An IMF team will visit Colombo in January to review the economic situation. The government received a $2.6 billion loan from the IMF in July 2009 in order to avert a balance of payments crisis produced by the global financial breakdown and the huge military expenditure on the war against the Liberation Tigers of Tamil Eelam (LTTE).
The IMF halted its last two loan instalments, citing the government’s reluctance to devalue the rupee and failure to meet fiscal deficit targets. According to Rajapakse’s budget speech, the deficit for this year will be 7 percent of GDP and 6.2 percent next year—well above the IMF’s targets.

The government’s decision to devalue the currency provoked criticism from the Central Bank, which has spent at least $1 billion in recent months on the foreign exchange markets to maintain the rupee’s value. The Central Bank has been selling rupee-denominated sovereign bonds and is concerned that a falling rupee will result in investors attempting to withdraw their money.

However, Treasury Secretary P.B. Jayasundera, who prepared the budget, told the media that value of the rupee should be “driven by market forces except in calamity.” His comments reflect the view of sections of big business that the rupee is overvalued by about 20 percent and must be devalued to boost exports.

By far the largest portions of government expenditure went to maintaining the country’s military machine and to pay off debt. Defence spending of 230 billion rupees and debt repayments of 914 billion rupees amount to more than 50 percent of budget expenditure.

Speaking at the Defence University after the budget, President Rajapakse justified the military spending by claiming that there was “no end to the challenges confronted by Sri Lanka despite the obliteration of LTTE terrorism two years ago.”

The military maintains a permanent occupation of the island’s North and East to suppress any opposition from the country’s Tamil minority and is also being prepared to crush any resistance from working people to the attacks on their living standards. The defence ministry has taken over what were previously civilian powers such as urban development and is in charge of evicting 75,000 families from shanty areas in central Colombo.

Big business has indicated its approval for the budget. The Ceylon Chamber of Commerce (CCC) declared that it was “pleased to note that the tax reforms announced in the last budget have been upheld in this budget with additional incentives to promote investments and a few further simplifications to the tax structure.”

At the same time, the CCC called for “further steps to improve the investment climate”. Its concern is falling foreign direct investments, which reached just $500 million last year—well short of the government’s target of $1 billion. The shortfall is another indicator of the impact of the worsening global economic turmoil, particularly the debt crisis in Europe.

Rajapakse boasted that despite “global uncertainties the country has been able to sustain 8 percent growth momentum.” The figure, reduced from an earlier forecast of 9 percent, is largely the product of high infrastructure spending and the provision of credit for services such as telecommunications, banking and retail. The economy is unlikely to keep growing at this rate as export markets in Europe and the US contract, and the EU financial crisis worsens.

During the first eight months of 2011, the country’s trade deficit rose to almost $US6 billion, 88 percent higher than the corresponding period last year, and is set to reach $US9 billion for the whole year. While the government is hoping that foreign remittances will bridge the gap, the IMF has expressed concern about a new balance of payments crisis.

The opposition parties have attempted to exploit widespread anger among working people over rising prices and declining living standards. United National Party (UNP) leader Ranil Wickremesinghe denounced the government for bringing down an “IMF budget,” but his remarks are entirely hypocritical. The conservative UNP insisted in 2009 that the government had to seek IMF assistance, knowing that austerity strings would be attached.

Janatha Vimukthi Peramuna (JVP) parliamentarian Vijitha Herath declared: “People in this country hoped that the government would provide some kind of relief through this budget to ease the sky-rocketing cost of living.” JVP union leader K. D. Lalkantha threatened to call a general strike.

The JVP has no fundamental opposition to the government’s pro-market agenda and was part of a coalition with Rajapakse’s Sri Lanka Freedom Party in 2004 that imposed austerity measures. Its trade unions have been instrumental in sabotaging any struggle by workers to defend their jobs and living standards.

The budget is a sharp warning that the whole political establishment in Sri Lanka will impose the burden of the deepening global crisis onto working people. Only by mobilising independently of all factions of the bourgeoisie on the basis of a socialist and internationalist program can the working class defend its class interests. (WSWS)

Tuesday 29 November 2011

A meeting on JVP crisis in Sri Lanka

The Socialist Equality Party (SEP) and the International Student for Social Equality (ISSE) held a public meeting in Colombo on November 17 on the political crisis of the Janatha Vimukthi Peramuna (JVP), and the SEP’s struggle for socialism. More than 100 people attended, including workers, intellectuals and students from several parts of the country.

The JVP was founded in the 1960s on the basis of a mixture of Maoism, Castroism and Sinhala populism. In the 1990s, it abandoned the “armed struggle” and has been thoroughly integrated into the Colombo political establishment. Amid plummetting electoral support, it is currently headed for another split.

K. Ratnayake, a member of the SEP Political Committee, chaired the meeting. He explained that both the JVP leaders and the new-emerged dissident faction declared that they had made “mistakes” over the past decade by entering into alliances with various bourgeois parties. These opportunist arrangements, however, were the product of the JVP’s politics from its inception.

“The emergence of a dissident faction is a response to the sharp erosion of the party’s social base of support and the radicalisation of the workers and youth in Sri Lanka and internationally. The dissidents are trying to pose as socialists to set up a new trap for workers and youth,” he said.

Ratnayake quoted a recent speech by JVP dissident Chameera Koswatte, who cited the late JVP leader Rohana Wijeweera as saying no political formula was supra-historical. “For the JVP, this truism is used to justify its pernicious role and lack of any principles. The dissidents are also making room for future alliances with bourgeois parties with such references.”

Ratnayake explained that the JVP had been opposed to scientific Marxism from the beginning. It had become increasingly mired in Sinhala communalism and supported the island’s 30-year civil war. The SEP and its forerunner, the Revolutionary Communist League (RCL), which was founded in 1968 on the basis of struggle for socialist internationalism, had analysed all the JVP’s twists and turns. He urged workers and youth to study the lessons of this political struggle for the independence of the working class from all factions of the bourgeoisie and petty bourgeoisie.

ISSE convenor Kapila Fernando told the meeting: “The JVP student leaders attacked us in the past for opposing the war in the north and east [against the Liberation Tigers of Tamil Eelam] which was to suppress the Tamil masses and the entire working class. They physically attacked their political opponents, including the ISSE, which advanced socialist policies to defend free education.”

Fernando pointed that these same student leaders now declared, “yes we made mistakes, we are correcting them,” but refused to take responsibility for the disasters they had helped create for the masses.

Fernando also noted that various ex-radicals had described the JVP dissident group as a “welcome progressive development.” This included university teachers association president Nirmal Ranjit Dewasiri, who had betrayed the recent pay struggle by university lecturers. “The ex-lefts are attempting to boost the JVP dissidents to prevent youth from turning to the SEP’s struggle for Marxism and taking a socialist road.”

Wije DiasSEP General Secretary and WSWS International Editorial Board member Wije Dias delivered the main report. He began by emphasising the need for a scientific approach to the JVP break-up. “Two factions of the JVP are roaring subjective accusations against each other,” he said. “But as Marxists, our task is to make a serious historical examination of the political and economic conditions fuelling their crisis as part of our struggle to build a genuine revolutionary party.

“The SEP has always emphasised two fundamental points in educating the working class: First, what is the objective economic and political state of the world? Second, what are the strategic lessons of the historical struggles of the working class as the guide to the present-day revolutionary tasks?”

Dias explained that the origins of the JVP lay in the serious crisis of bourgeois rule in the 1960s. “In 1964, Prime Minister Sirima Bandaranaike publicly stated that she was facing an uncontrollable situation where a massive wave of workers’ strikes was paralysing the country’s economy. Out of fear of a backlash from the working class, she rejected advice to call out the military and turned to the ‘left’ leaders for help.

“The leaders of the Lanka Sama Samaja Party (LSSP) and the Stalinist Communist Party (CP) readily agreed with Bandaranaike, and the LSSP joined her capitalist government. This great betrayal of the working class created profound confusion among the workers and a deep crisis of leadership.

“Various groups of youth looked for an alternative. With the intervention of the International Committee of the Fourth International (ICFI), we realised that the only way to overcome this crisis was to undertake the struggle for Trotskyism, which was abandoned by the LSSP under the influence of Pabloite opportunism. We joined the ICFI and formed the RCL in 1968 to fight for international socialism.”

By contrast, Dias said, all the other groups, including the JVP, were bogged down in nationalism. The JVP had turned to the petty-bourgeois political currents of Castroism and Maoism. It had turned its back on the working class, the only consistently revolutionary social force on the planet.

Dias explained that the JVP had built a relatively big movement but only to lead it into the 1971 adventure that resulted in ferocious suppression by the Bandaranaike government. “That was no small price that the JVP paid for turning its back on Marxism,” he said.

Recalling the JVP’s fascistic attacks in the late 1980s against workers, political opponents and union activists, Dias said: “The JVP activities, particularly during that period, were a grave attack on the political culture of the working class. This was underscored by the cold-blooded murder of three members of the RCL by those JVP gangsters.”

Dias referred to a pamphlet written by the late JVP leader Wijeweera published in 1978. The JVP dissidents had written a preface for a new edition of the book. But, Dias explained, it repeated the same fundamental theoretic errors. “For them, workers and peasants represent the same class. This is Wijeweera’s trap to turn the youth away from the working class and bring them under the wing of the bourgeoisie via the petty-bourgeois peasant movement.”
Dias explained that the RCL’s founding general secretary, Keerthi Balasuriya, had analysed the reactionary positions of the JVP at the beginning of the 1970s in his work entitled The Politics and Class Nature of the Janatha Vimukthi Peramuna. Balasuriya had warned that the JVP’s communal politics, as evidenced by their hostility to Tamil plantation workers, could eventually take fascistic forms.

Dias pointed to the growing dangers of war, and the international offensive underway against the living standards of working people. He urged workers and youth to draw the necessary political lessons from the crisis of the JVP, and join the SEP and the ISSE to fight for international socialism based on the theory of Permanent Revolution.

After the meeting, WSWS correspondents spoke to a number of those who attended.

Ajith, an unemployed youth, said he had been to a meeting of the JVP dissidents and wanted to hear what the SEP had to say. “I had to drop out of the school halfway through because my parents couldn’t afford it any longer. But I believe you can’t win anything by collaborating with the government. It is attacking every right of the people.

“I agree with the SEP that there needs to be an international organisation of the working class against these attacks but this message should reach workers. I agree that there are lots of difficulties, as the media doesn’t provide any space for this perspective.”

Several youth from the JVP dissident group also attended. One of them commented: “It is Keerthi Balasuriya’s book that forced us to come to this meeting. But I still think that JVP has done a good job by introducing politics to people in remote villages like me.

“I wanted to clarify a number of political issues. One is the war [against the LTTE]. In that I agree with your position that the military should be withdrawn [from the North and East]. If you get an opportunity to go to war-torn Jaffna you can see that there is not much difference in the situation facing people even after the end of war.”

Some of the JVP dissidents were evaluating Trotsky “from a new angle” and he had wanted to know about the role of Trotsky in socialist politics. In fact, amid the continuing confusion about Trotskyism created by the LSSP’s betrayal, the JVP dissidents are seeking to distort Trotsky to justify their own opportunist politics. (WSWS)