Ideological impact of foreign aid on social policies of Sri Lanka

Foreign aid is always a part of the foreign policy of donor countries. This is irrespective of the source and purpose for which foreign aid is given. It is a part of economic statecraft, where economic means are used by donor countries to pursue foreign policy objectives. This is called ‘soft power’ in international relations literature. States play a role in managing multilateral aid agencies. In this process their foreign policy interests become important. In studying foreign aid, it is always necessary to keep the foreign policy objectives of donor countries in mind. Often the use of the term ‘aid’ masks this agenda.

In order to understand the politics of foreign aid it is necessary to focus on its ideological impact as well. In other words, along with the transfer of funds foreign aid also transfer ideas. The availability of donor funding makes it possible to spread these ideas. Pretty soon they become hegemonic. 

Finally, it is important to remember that foreign aid is not being imposed from outside. The political elite that control recipient states play a key role in making decisions about the flow of foreign aid to recipient countries. Their political and economic interests, and ideological orientation, play a crucial role in deciding what type of foreign aid is received. This means two key political forces – the foreign policy interests of donor countries, and the political, economic, and ideological orientation of the political elite who control the state, decide what foreign aid is received.

Ideological impact on social policies in Sri Lanka

Sri Lanka inaugurated a more liberal period of capitalist transition that emphasised markets, the private sector and openness to global capitalism after a new regime came to power in the July 1977 general election. This led to a significant increase in foreign aid from the developed capitalist countries of the West, Japan, and multilaterals. This resulted in a significant ideological impact on social policies. In order to understand this, we need to briefly look at the ideas that dominated before 1977.   

Social policies that characterised post-colonial Sri Lanka emerged in the late colonial period. They included:

·      A universal food subsidy - a policy that benefitted the entire population. This began during the Second World War and continued during the post-colonial period.

·      Policies to protect smallholder agriculture. The main planks of these were distribution of state land, developing infrastructure facilities for agriculture, providing irrigation facilities free of charge, subsiding fertiliser prices, and the state becoming the main buyer of rice in order to guarantee a purchasing price. 

·      The state taking responsibility for the education and health of the entire population.

·       Developing an institutional framework to ensure minimum rights for the working class, mainly as a result of political struggles.  

The main ideology underlying these policies was to promote distributive justice. In other words, these policies were an attempt to minimise the growth in inequality that is an inevitable outcome of capitalist transition. 

With the advent of a more liberal form of capitalism some of these policies were terminated and others weakened. Removing the universal food subsidy was the major example of terminating a welfare policy that had existed from the time of independence. Policies that guaranteed a minimum price for paddy farmers were dismantled. Keeping with the policy of giving primacy to markets in determining prices, some consumer subsidies were reduced. The expansion of the private sector in education and health benefitted the better-off sections in society. There were also attempts to expand market mechanisms on state-owned land, and to weaken or remove institutional mechanisms that protected the rights of the working class.

The other side of these changes was to establish the hegemony of the notion of poverty alleviation as the major plank in social policy. Due to the power of donor money, poverty alleviation relegated Sri Lanka’s rich tradition of ideas in social policy to a secondary position. The objective was to focus on households who were below the poverty line, and to direct state support towards them. At first the terminology used was a targeted safety net. The implication was that these policies were meant to safeguard the poor from the impact of economic reforms. This was supposed to be the main role that the state should play vis-à-vis the poor – in the long run economic growth would take place, and the benefits would trickle down to the poor. In other words, the foundation of poverty alleviation within capitalist transition is the idea of growth and trickle-down.

The analysis that underpins poverty alleviation always focuses on what are called poor households, in isolation from the structures of social and political power that keep them in this condition. Therefore, it takes us away from the need to tackle the institutional structures of socio-economic marginalisation.

These interventions also emphasised the notion of self-reliance. This emphasis is part of a long-standing ideology within capitalism that argues that the livelihoods of the socially marginalised can be improved through their own efforts, without any significant structural change in society. This agrees with the attempt to reduce the role of the state in the economy and society. Dependence on the self-reliant capacity of the poor meant less emphasis on state interventions to help the poor. 

It is clear now that a key outcome of more than four decades of the dominance of these ideas is the growth of a socio-economically unequal society. In addition, three decades of armed conflict had an impact in some parts of the country. On top of this, during the post-war period the debt crisis, impact of a cyclone, and now an energy crisis as a result of war are having a negative socio-economic impact in Sri Lanka. It is obvious that the poorer sections of the society are affected more by these developments.

Often the dominant idea in this kind of situation is the need to ensure capitalist growth first, before tackling anything else. This will be supported by the political and business elite and their ideologues. This is a new version of the conventional growth and trickle-down idea. Various arguments will be used to legitimise this. 

In contrast to this a time of crisis is an opportunity to generate new ideas, so that we tackle the concern of the poorer section of society while stabilising economic growth. For a society that has seen so much violence, this is actually an opportunity to build a social consensus. In doing this it is important to focus on inequality and the reasons for it. This is a better strategy than focusing on poverty. It does not mean we are trying to achieve a Utopia where there is no inequality. It also does not mean that there is ‘one big answer’ to deal with inequality. But the focus on inequality helps to identify various issues with varying degrees of importance to tackle inequality, and to continue our struggle towards a more just and better Sri Lanka. Ideological struggle emphasising inequality is a central part of this struggle. This is a process that needs continuous research and innovation. Recent research at global level can help us to begin this process. Thomas Piketty’s seminal work, the G20 report on inequality and the interest of the International Labor Organisation (ILO) on the concept of living wages, are examples that can be used.