For useful comments on aspects of this paper I am indebted to participants in seminars organized by the Institute of Development Studies; the Centre for South Asian Studies, University ofCambridge; the Department of Politics, University of Hull; the University of Sussex; the Institute of Commonwealth Studies, University of London; and the British Association of South Asian Studies. Where the present tense is used it refers to mid-1988. Later events, notably the election of a new President and Parliament in late 1988 and early 1989 respectively, do not directly impinge on the analysis.

¹ For contemporary expositions of this doctrine see Friedman, M. And Friedman, R., Free to Choose (New York, 1980);Google Scholar and Novak, M., The Spirit of Democratic Capitalism (New York, 1982).Google Scholar

² Lipset, S. M., Political Man (London, 1960), ch. 2;Google Scholar and Berger, P., The Capitalist Revolution (New York, 1986), ch. 4.Google Scholar

³ There appear to be three main variants of the general case that capitalism/the market economy generate systemic tendencies towards political unfreedom. Hirschman, A. O. (The Passions and the Interests: Political Arguments for Capitalism Before Its Triumph, Princeton, 1977) has traced an early dissident tradition which focused on the possibility that authoritarian political arrangements might be necessary to protect political authorities from societal pressures to interfere with the presumptively delicate and fragile mechanisms of the market. A second type of argument is based on the observed functional interdependencies between the capitalist economy and the modern state. Successful capitalism is associated with a strong state which has at least the potential to over-assert itself in relation to society and the individual (Berger, The Capitalist Revolution, ch. 4). A third type of argument is based on tendencies for monopoly to undermine competitive markets, and thus the possibility of conversion of monopolistic economic power into political power.Google Scholar

⁴ The power of central state institutions has been increased relative to the power of local institutions (elected local governments, local police forces) and the autonomy of some national institutions (trade unions, employers' organizations, professional associations, broadcasting authorities and higher education institutions). The executive has dominated over the legislative, providing unusually little scope for appraisal of a very large volume of new legislation. The authority of the Prime Minister and her personal advisers has increased in relation to both the Cabinet and the Civil Service. The possibilities of public disclosure of a wide range of state activities has been narrowed through administrative and legislative action. The range of interest groups represented in the state apparatus by co-option has been reduced.

⁵ The central idea behind the thesis is that the heavy investment requirements of the new stage of economic growth would become economically and politically feasible only by suppressing the living standards and political organizations of the mass of the population. There is no single authoritative text in which O'Donnell elaborates his thesis. The most accessible English-language presentation is his ‘Reflections on the Patterns of Change in the Bureaucratic–Authoritarian State’, Latin American Research Review 13, 1 (1978). The thesis is very conveniently summarized and analysed in Collier, D., ‘Overview of the Bureaucratic-Authoritarian Model’ in D., Collier (ed.), The New Authoritarianism in Latin America (Princeton, 1979). In his ‘Introduction’ to the same work Collier explains the broad intellectual context in which the O'Donnell thesis emerged: notably a widespread assumption of a causal connection between ‘dependent development’ and authoritarianism.Google Scholar

⁶ See the various contributions to Collier (ed.), The New Authoritarianism.Google Scholar

⁷ ‘The Turn to Authoritarianism in Latin America and the Search for its Economic Determinants’ in Ibid..

⁸ Sheahan, J., ‘Market-Oriented Economic Policies and Political Repression in Latin America’, Economic Development and Cultural Change 28, 2 (1980).CrossRefGoogle Scholar

⁹ The problem with this argument is that it is now widely recognized that the economic policies of the governments of Taiwan and South Korea have been highly statist in certain respects.

¹⁰ More detailed analysis of the context can be found in: Moore, M., The State and Peasant Politics in Sri Lanka (Cambridge, 1985);CrossRefGoogle Scholar and Moore, M., ‘Sri Lanka: The Contradictions of the Social Democratic State’ in Mitra, S. (ed.), The State in Asia (Brighton, forthcoming).Google Scholar

¹¹ The number of persons employed by the Sri Lankan state is, on any of several different definitions of the term ‘Public employment’, much larger than one would predict on the basis of statistical analysis of the factors which best explain cross-national differences in public employment (Heller, P. S. and Tait, A. A., ‘Government Employment and Pay: Some International Comparisons’, International Monetary Fund Occasional Paper 24, Washington, 1983).Google Scholar

¹² For example, in 1977 military expenditure amounted to only 0.6% of Gross National Product. By 1987 it exceeded 7%.

¹³ The transfer of public assets to private ownership has been a major feature of the Thatcher programme, whereas in Sri Lanka, as is explained in the text, there has been relatively little movement in this front.

¹⁴ The more significant components of the liberalization programme have been: a general reduction of the extent of state involvement in trade; the almost complete liberalization of access to foreign exchange for all current economic transactions; the abolition of the previous dual exchange rate system and an initial devaluation of the currency (in large part reversed in later years); imposition of tariffs on public sector imports; some (limited) measures to ‘rationalize’ the tariff structure and reduce overall tariff levels; abolition or raising of ownership ceilings on residential property and agricultural land; encouragement of private sector competition to public enterprises in such fields as passenger bus services, retail telecommunication and electricity services, supply of agricultural fertilizer, and marketing and milling of rice; (limited) closure or leasing/selling to the private sector of components of public sector enterprises; a major reduction in consumer subsidies, especially food subsidies; abolition of most retail price controls; incentive and support for foreign direct investment, including suspension of much labour legislation for enterprises operating under special export-processing-zone conditions; and encouragement for private sector provision of health and education services.

¹⁵ The scope for such reorganization was large because the main political parties in Sri Lanka have always been relatively poorly organized and institutionalized in comparison to the relative sophistication of the electorate and to the volume of patronage which is distributed through the political system.

¹⁶ The consequences of this reorganization for the composition of the UNP Parliamentary party are detailed in the current research of Tara Coomaraswamy. I am grateful to her for permission to use the results. Jayawardena's concern to establish a more organized and ‘popular’ party machine reflects three related factors: his very long history as the party's ‘organization man’; the previous dominance over the party of a Senanayake family clique which had for decades frustrated Jayawardena's claims to the leadership; and an accurate perception that the Bandaranaike family had squandered much of their SLFP's previous automatic claim to the bulk of low caste votes, and could, now that the Senanayakes were out of the UNP scene, be tarred with the brush of family elitism—‘family-bandyism’ in local terminology.

¹⁷ It is interesting that soon after the 1977 general elections one of Sri Lanka's leading businessmen, N. U. Jayawardena, circulated a long mimeographed memoir on economic policy (An Agenda, for a just Society, Colombo) which: conspicuously refrains from extolling the virtues of unrestricted free enterprise and indeed points to some potential costs (p. 9); focuses in large part on improved public action to achieve social, economic, and moral goals.Google Scholar

¹⁸ Due to space constraints I do not cite detail of economic trends. Evidence for all the major points may be found in Sorbo, G. et al. , Sri Lanka: Country Study and Norwegian Aid Review (Bergen, 1987), ch. 1.Google Scholar

¹⁹ There was a partial reversion to tradition in the mid-1980s when large numbers of people were recruited into the military and security agencies.

²⁰ One might argue that the UNP government has gone some way to remedying an historic ‘weakness’ of the Sri Lankan political system: the relatively indiscriminate and inefficient distribution of relatively large volumes of material patronage such that they purchase little lasting support for the party in power.

²¹ The doctrinal core of economic liberalization comprises the search for ‘natural’, automatic and market-oriented modes of economic coordination which hold out the prospect of avoiding the evident costs associated with the direct political management of economic life—distortion, inefficiency, corruption, the suppression of initiative and the concentration of power in the hands of the state. In practice such an objective normally involves some combination of the following categories of policy: (a) an increase in the proportion of economic activity organized within the private sector; (b) a reduction in the degree of administrative regulation of the terms of economic transactions; (c) an increasing degree of competition among economic agents; (d) the decentralization of economic decision making with in the public sector: (e) a more prominent role for the market, rather than the state, in directing the pattern of economic change. However, as is briefly explained in the text, in reality these may be substantive contradictions between different components of a liberalization programme.

²² For evidence on this and the succeeding paragraph see Jayawardena, L. et al. , Stabilization and Adjustment Policies and Programmes, Country Study 15, Sri Lanka (Helsinki, World Institute of Development Economics Research, 1987).Google Scholar

²³ The reasons are not unrelated to our main story. There was no substantive industrial policy in Sri Lanka over this period, in large part because the Minister of Industries and Scientific Affairs was principally engaged in defending the state industrial corporations against the liberalizing economic policies pursued by the Ministry of Finance and Planning and, indirectly, by the World Bank and the IMF.

²⁴ Current balance of payments deficits and public revenue deficits have rarely been below 10% of GDP, and have often approached twice that level. In 1985, gross aid disbursements equalled 56% of government capital expenditure, 32% of total gross domestic capital formulation, and 19% of total government expenditure.

²⁵ According to the official figures, which are almost certainly too optimistic, this averaged 6% per year. The growth rate has since fallen to around 1% per year.

²⁶ The World Bank has played a major role in part because of its role as chair of the Sri Lanka Aid Consortium, which includes a very large number of aid donors—at least 26 bilateral national donors in 1983, as well as 5 major multilateral donors. The large number of donors, and the fact that none of them were at that stage individually prominent (Japan has since become so), placed considerable authority in the hands of the coordinator, the World Bank. The IMF plays a lesser role, largely because Sri Lanka has been able to command a great deal of official aid in grant or concessional form, and thus has avoided major indebtedness or an impossibly heavy debt service burden.

²⁷ Escalating military expenditures and rapidly declining economic growth rates are beginning to provide a rationale for an orderly retreat from full commitment to the present Sri Lankan government by its foreign supporters. A retreat would be based on the argument that civil conflict had fatally undermined the economy. To date Sri Lanka's foreign friends have proved very loyal.

²⁸ Notably, components of the major Mahaweli power-cum-irrigation-cum-land settlement project.

²⁹ This paragraph has been informed by the current research of Tara Coomaraswamy. See also Oberst, R., ‘Democracy and the Persistence of Westernized Elite Dominance in Sri Lanka’, Asian Survey 25, 7 (1985).CrossRefGoogle Scholar

³⁰ At the 1977 general elections, 140 UNP candidates were returned. Only 15 (11%) had been sitting in the previous Parliament at the point when it was dissolved, and a further 32 (23%) had sat in Parliament at some previous point. Of these 47 UNP MPs with previous experience in Parliament, 23 immediately became Ministers, in fact accounting for almost all Ministers; and a further 21 became Deputy Ministers. Overall, two-thirds of UNP MPs had never sat in Parliament before.

³¹ Thirteen times at the point of writing.

³² This figure excludes the twenty-five district ministers, which were superseded in 1988 by Chief Ministers chosen by elected Provincial Councils.

³³ This phrase is used in a loose sense, and is probably, strictly speaking, false. Laws relating to alcohol distilling, cannabis cultivation, timber-felling, hunting of game, urban planning, traffic movements, taxation, land tenancy etc. have historically been widely disobeyed. But disobedience has been routine and socially-sanctioned, and has rarely involved or generated aggression or violence. It has certainly not constituted a significant obstacle to trade or private investment, and indeed many of these ‘crimes’ represent a triumph of market exchange over a political definition of the national interest.

³⁴ For an elaborated attempt to explain comparative national economic performance in this way see Olson, M., The Decline and Fall of Nations: Economic Growth, Stagflation and Social Rigidities (New Haven, 1982).Google Scholar

³⁵ For details of policy towards trades unions Fernando, L., ‘The Challenge of the Open Economy: Trades Unionism in Sri Lanka’ in R., Southall (ed.), Trades Unions and the New Industrialization of the Third World (London, 1988).Google Scholar

³⁶ This section is based mainly on Kearney, R., Trades Unions and Politics in Ceylon (Durham, North Carolina, 1971).Google Scholar See also Jupp, J., Sri Lanka—Third World Democracy (London, 1978), pp. 176–81. Note that the Indian Tamil plantation labour unions have a very different history. They are excluded from the account here.Google Scholar

³⁷ Fernando, ‘The Challenge of the Open Economy’, p. 171.Google Scholar

³⁸ Presidential Commission of Enquiry into the Affairs of Air Lanka Limited, Final Report, Sessional Paper IV–1987, Colombo.Google Scholar

³⁹ In the early 1980s the World Bank made a major effort to persuade the Government of Sri Lanka to privatize at least the management of some estates. They failed completely. The President has been the Minister in change of the two public sector plantation corporations, and has leaned heavily upon the resources and senior personnel of these corporations for direct political support.

⁴⁰ Through, for example, taking local capital contributions to pay for second-hand equipment which is grossly over-priced, and then disappearing.

⁴¹ See, for example, a speech by J. R. Jayawardena made in 1979 and quoted by S. Ponnambalam (Dependent Capitalism in Crisis, London, 1980, p. 164).Google ScholarJayawardena was explicitly defending the introduction of proportional representation and a constitutional amendment which prevented MPs from changing parties. Proportional representation was seen as a device for both ensuring that the UNP would continue to be the largest party in Parliament and preventing any other party from having enough votes in Parliament to amend the constitution. Foreign investment was given constitutional guarantees against expropriation in 1978.Google Scholar

⁴² Notably the Communist Party and Mrs Bandaranaike's son-in-law, the late Vijaya Kumaranatunga, who was soon to leave the SLFP to establish his own party.

⁴³ These include some combination of: general political disintegration; military or semi-military dictatorship; and the accession to (some, shared) power of the radical JVP Sinhalese left movement. ‘Rational capital’ would not have treated the JVP, formerly the party of the April 1971 Insurgency, in the same ‘generous’ way that the UNP did initially. The release of all remaining detainees and general encouragement given to the JVP in the late 1970s was clearly intended to undercut the SLFP. For the SLFP and the JVP shared a very similar support base, but a deep enmity due to the events of 1971.

⁴⁴ See footnote 26.

⁴⁵ The relative scale of the material rewards associated with the liberal economic regime is illustrated by the fact that most serious corruption charge which could be brought against one of the most senior (and unpopular) ministers of the previous regime was that he had diverted scarce milk powder to feed the chickens on his own poultry farm. Chicken feed in all senses!

⁴⁶ It is worth mentioning that the pattern of voting in the 1982 referendum which validated the suspension of Parliamentary elections strongly suggests the existence of a principled opposition to constitutional manipulation in areas with a tradition of supporting left political parties. See Moore, M., ‘The 1982 Elections and the New Gaullist Bonapartist State in Sri Lanka’ in J., Manor (ed.), Sri Lanka in Change and Crisis (London, 1984).Google Scholar

⁴⁷ Gunasinghe, N., ‘The Open Economy and its Import on Ethnic Relations in Sri Lanka’, Lanka Guardian, Colombo, 16, 17–19 (1984).Google Scholar

⁴⁸ See Moore, The State and Peasant Politics, pp. 46–8, 110–13, and 117–19; andGoogle ScholarMoore, M., ‘The Ideological History of the Sri Lankan “Peasantry”’, Modern Asian Studies 22, 4 (1988).Google Scholar

⁴⁹ The leading figures within the government have in fact vied with one another at the ideological level. The President made much of his intention to create a dharmista (‘righteous’, in the Buddhist idiom) society during the early years of his rule. This project was eventually abandoned when it became patently absurd. The Minister of Lands and Land Development has used his own Kandyan background and his control of major irrigation and land development projects in the Dry Zone to play upon a wellestablished ideological theme: the representation of modern political leaders as the successors of the ancient Sinhalese kings of the Dry Zone (M. Moore, ‘The Ideological History’). The Prime Minister, capitalizing on his own humble and low-status background and on his position as Minister of Housing, has used new housing schemes for the poor as an opportunity to develop quasi-Gandhian themes of concern for the ‘upliftment’ of the poor. Lalith Athulathmudali, Minister of Trade in the period we are dealing with, has projected a ‘modernist’ image and promoted a major educational scholarship scheme, the Mahapola scholarships, to illustrate his commitment to modernity and opportunity. (I am in debt to the late Serena Tennekoon for having drawn attention to these issues in her research.)

⁵⁰ Berger, , The Capitalist Revolution, ch. 9.Google Scholar

⁵¹ Moore, ‘The 1982 Elections’.

⁵² The succeeding paragraphs are based on the evidence presented in Sorbo, Sri Lanka: Country Study, Annex 3.Google Scholar

⁵³ Some of the visible winners have been from among the poor, notably construction workers, especially skilled workers, during the construction boom of 1978–82; and families whose daughters have secured jobs as housemaids in West Asia. Overall, since 1977 there has been a shift in income-earning capacity away from educationally qualified holders of bureaucratic positions to labourers and entrepreneurs.

⁵⁴ I have elsewhere used the guesstimate of 5–15% of total population, purely to indicate likely orders of magnitude, i.e. not 1% and not 50%.

⁵⁵ The previous food subsidy entitlements were denominated in quantity terms, while food stamp entitlements are denominated in cash terms.

⁵⁶ Moore, , The State and Peasant Politics, p. 109; andGoogle ScholarWilson, A. J., The Break-Up of Sri Lanka. The Sinhalese–Tamil Conflict (London, 1988), pp. 160–1.Google Scholar

⁵⁷ Gunasinghe, ‘The Open Economy’.

⁵⁸ The source of that information cannot be made public.

⁵⁹ The population of the Jaffna peninsula, the heartland of Sri Lanka Tamil society and culture, had long specialized in higher education and in the types of bureaucratic posts to which educational qualifications gave access. The ‘standardization’ reforms firstly limited Tamils to a proportion of university places equal to the proportion of Tamil-speakers in the total population, and secondly gave quotas to students from ‘educationally-backward’ districts, to the disadvantage of Jaffna.

⁶⁰ Among Jayawardena's three or four most powerful ministers, one had defected from the SLFP because of Mrs Bandaranaike's refusal in 1970 to give him a cabinet position, despite his manifest ability. One was the son of a prominent SLFPer and himself relatively radical in outlook; it is widely believed that he had originally approached Mrs Bandaranaike to start his political career near the top of the SLFP, but had been rebuffed. Another had the kind of Kandyan background and Sinhalese Buddhist affiliations which made him a ‘natural’ member of Mrs Bandaranaike's SLFP—except that he was not related to her!

⁶¹ A great deal of evidence to support this paragraph can be found in Wilson, The Break-Up of Sri Lanka, chs 6 and 7. To my knowledge there are no additional published sources of information.

⁶² Until that time there was considerable scope for any government to turn the Tamil issue into an intra-Tamil conflict by making adequate concessions to the relatively conservative (and high caste) leadership of the Tamil United Liberation Front. It is an index of the political ineptitude of successive national (Sinhalese) leaders that this opportunity was not grasped.