Some things of the ‘early’ Corea stand out
of course — like the antiexport bias, preference
for import-substitution and preoccupations with exchange
rates and declining terms-of-trade for exports. But remember
that Corea is also the one who coined the phrase “infrastructure
plus skills equals development”. He said that of
Sri Lanka, but it applies to all developing economies.
He is also the one who kicked-off an export-led development
strategy when he was the key economic advisor to Sri Lanka’s
government.
The studies highlight six major issues:
development and ideology, macroeconomic policy, agriculture,
industry and technology, employment, matters relating
to institutions and social welfare. The 22 chapters and
the pithy introduction have been written by economists,
social scientists who are Corea’s ex-colleagues
and also by economists a generation or two younger. Four
papers are by expatriate economists and social scientists
of Corea’s persuasion.
And although Sri Lanka is a small economy,
this book also holds up a mirror to India’s planning
process. It does that by spanning the island’s planning
exercise, one in which Gamani Corea was heavily involved.
It is thus enthralling to read just how much in tune with
import-substitution was Sri Lanka, and how mistrusted
was the ‘invisible hand’. But the (big) difference
was that Sri Lanka did not go the whole hog by gifting
the economy’s ‘commanding heights’ to
a public sector specifically created for that purpose.
It was that saving grace which propelled it towards globalisation
despite all other impediments. So Sri Lanka now is mainly
an exporter of manufactures (up, from 0.9% of all exports
in 1965, to 76% in 2001) even as its primary exports have
declined (from 99% to 16.5%, over the same interval).
And, as 52% of all Sri Lankan manufactured exports fall
in the textiles and garments category, India must watch
it carefully as a major competitor after the MFA phase-out.
Finally, the book covers all the professional
areas of Corea’s interest like central banking,
the role of the public sector, exchange rates, and export
pessimism. The lattermost was fashionable amongst most
large developing countries of the time, and it got added
impetus thanks to the decline in the terms of trade of
commodities against (imported) manufactures. A passage
from a 1985 speech by Corea reprinted partially in the
introduction says the terms of trade for Sri Lanka’s
exports had declined from 187 in 1948, to just 50. But
the truth about terms-of-trade lies somewhere in-between.
Or, as Saman Kelegama, the executive director of Sri Lanka’s
Institute of Policy Studies, says in his introduction
to the volume, nothing about development is pre-destined.
It all depends on initial conditions, product differentiation
amongst exporting economies and the speed (and quality)
of reforms.
Soumya Kanti Mitra
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