Economic Development versus Social Development - Case for Sri Lanka | Daily News
SLIIT Human Capital Management Research

Economic Development versus Social Development - Case for Sri Lanka

Development has become an increasingly important issue in recent years as problems of poverty, inequality and unemployment notably in less developed countries (LDCs).

This has been the case in Sri Lanka too as in other countries, where a variety of theoretical doctrines have articulated causes and reasons for the “development” from different perspectives. Traditional economics defines the term “development” by concerning Gross national product (GNP) and Gross Domestic Product (GDP). Modern notion of development concerns welfare of the community, which could enhance their living standards. Thus, the development should not only result from economic development but also from social development. So, how could Sri Lanka defines development? In fact, development is a multi-dimensional process of increasing economic growth while increasing living standards.

Welfare programs were the major agenda item of all successive government from the independence in 1948 in Sri Lanka. Social development in Sri Lanka started even before the independence. After the independence from the British in 1948, political power in Sri Lanka has basically shifted between two major political parties. Even though they have had different perspectives about the political vision, when in office, both have operated welfare programs as a development strategy.

SLIIT Human Capital Management Research Group conducted this study to examine the major food subsidy programs which function until today and investigate their effectiveness with regards to the two definitions of development; traditional and modern. This survey based research is on secondary data and presents the 70 years’ experience of welfare policies in Sri Lanka, from 1948 – 2018. The Food Ration Shop Scheme (FRSS) was introduced to the benefit of people throughout Sri Lanka by government in 1948. By the time the country began to feel the pressure of increase in population that directly affected the increasing cost of the FRSS, in September 1979, FRSS replaced with Food Stamp Program (FSP), which had the advantage of a fixed nominal value. In 1989, FSP was replaced by Janasaviya Program called as people’s strength program, not directly to provide free subsidy, instead it was considered as income transfer program. The Samurdhi Program that considered beneficiaries prosperity, was launched in 1996 and it is very similar to Janasviya program.

As shown in Figure 01, in 1955 GDP growth average about 5.8%. After introducing FSP in 1979, it showed 6.3% and in 1989, with the introduction of Janasaviya and then 1996 Samurdhi program, it showed similar fluctuations in GDP rates. In 1995 it was 5.5%, and up to 2010 showed gradual increased like in 2000, 6%, in 2005, 6.2%, in 2010, 8%.

Comparing GDP with welfare expenditure it showed that regardless of the amount spent for the welfare, economic growth has fluctuated in the same manner. The questions raised here are, has Sri Lanka achieved progressive results from these welfare programs and what is the reality after 70 years of independence?

However, Sri Lanka performs quite well in terms of most social indicators. Life expectancy ratios, showed favourable result, indicating that in 1960 it was 59.4 years but had improved up to 75.3 year in 2017. In 1973 adult literacy rate was 81%, in 1982, 86%, and in 1988, 85%. Almost all children of primary school age were enrolled in school. In fact, mortality was 82 per thousand in 1950 was reduced to 36 per thousand in 1985. Comparing other countries, which have similar income level (per capita income), the place of Sri Lanka could be easily determined. It could be inferred that the social welfare program is directly accounted to these progresses, as a human capital development strategy in Sri Lanka, as shown in Figure 02.

It is concluded that based on the economic growth, Sri Lanka clearly falls into the category of less developed countries. However, with decades of welfare policies in force fostering the development strategies from a modern point of view, Sri Lanka is always considered as a model country. Comparing with developed countries, Human Development Index (HDI) in Sri Lanka has a higher rank. Could this mean that Sri Lanka is a developed country? No, as mentioned earlier, development is not only economic growth but also human development. It is essentially a mixed notion.

Therefore, Sri Lanka’s experience confirms that neither purely welfare policies nor even growth oriented policies supported by welfare programs could be a substitute for institutional measures for overcoming poverty and inequality in view of the development of a country.

Issues involved in economic development are not strictly dependent on the government expenditure on social welfare programs. As shown in Figure 02, in 2018, GDI was 0.935 while world rank was 0.941 and HDI value was 0.770, higher than the world rank 0.72. Even though economists argue that huge welfare expenditure has a negative impact on economic growth, Figure 01 shows that even after the reduction of welfare expenditure afterward in 1980s, economic growth rate had fluctuated in the same manner.

The government was under pressure to comprehend rising inflation and civil war expenditure was negatively affected to economic growth rather than investment for the welfare. However, after seven decades, social indicators show that the welfare oriented policy made more socially developed citizens for the country. Thus, government intervention required for Sri Lanka to become a fast growing economy by taking advantage of this factor. High levels of expenditure on welfare are unsustainable without a growth. To achieve economic development, while improving standard of living of the citizen can do with a little effort, which requires a commitment of not only the government, but also the society?

This research was conducted by Dr. Wasantha Rajapaskhe, Senior Lecturer, SLIIT Business School and sponsored by the Faculty of Graduate and Research, Sri Lanka Institute of Information Technology, Sri Lanka.

The result of the research was published in the South Asian Journal of Social Studies and Economics, 3(1): 1-9, 2019.

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