ECONOMYNEXT – An outspoken Sri Lanka opposition legislator has graphically warned against the inevitable results of protectionist oppression of helpless consumers trapped by import taxes and the excessive profiteering of import substation rent seekers.
Following the worst import controls since 1970s in 2021 Sri Lanka has achieved self-sufficiency in turmeric, a traditional South Asian spice used in cooking, where import competition from India had earlier kept prices at affordable levels.
Autarky or self sufficiency is a European nationalist strategy widely championed by Nazi Germany in the run up to the Second World War and after which was partly prompted by the Allied blockade of the Central Powers during World War I on top of money printing, which created food and raw material shortages.
In Sri Lanka sanitaryware, long subjected to high duties by rent seeking lobbyists, was completely banned for a time in 2020 in a sudden descent into a command economy and money printing.
Money printing had created forex shortages and price controls further created black markets until they were lifted. Price controls have since been lifted, improving supplies, subject to the availability of foreign exchange.
An opposition legislator said the self-sufficiency in turmeric was nothing to crow about.
“People do not have food to eat,” firebrand opposition legislator Harin Fernando told reporters in November as shortages of many goods emerged from money printing and price controls.
“There are no commodes to go to toilet (Lat ekerter yun-ner lat porch-chiya nae). There is no place to send what you have eaten. (Karpu dhey arin-ner tha-nuck nae).
“There is no cement. Some medicines are not there.”
Prices of toilet fittings shot up to record highs, and domestic import substitutors reaped record profits the expense of helpless home builders trapped by protectionist taxes.
Farmers who used to feed the people are now earning record profits from sky high turmeric.
Prices of many foods in Sri Lanka have soared like the stock market amid low interest rates and relentless money printing since February 2020 in the pursuit of what economic advisors called the ‘production’ economy.
Sri Lanka has generally been following import substitution strategies as a Latin America style central bank set up by a US money doctor created forex shortages.
The central bank was styled on one created by Raul Prebisch in Argentina and replicated by then Federal Reserve Latin America unit chief Robert Triffin through multiple missions to the eponymous region and later by other money doctors in Asia including Korea.
In Korea money printing forced people to eat army camp stew (Budae Jjigae) made from discarded left-over from US military kitchens and messes and smuggled Spam among other ingredients as the currency collapsed and there were severe forex shortages long after the war ended.
Sri Lanka has also controlled chemical fertilizer imports as part of the descent into a command economy leading to farmer protests.
Ironically the process to mass produce chemical nitrogen fertilizer (ammonia) was put into use by the German chemical firm BASF when the Allied naval blockade blocked nitrate supplies from Chile.
The process was conceived by Fritz Haber and developed by Carl Bosch of BASF.
The Harber-Bosch process was also used to produce chemical weapons during World War I, and Zyklon-B the insecticide that German nationalists under Hitler used in gas chambers to exterminate Jews in World War II. (Colombo/Nov21/2021)