Spillage of the Freebie Politics over the Democratic Economy.

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Thoughts And Ideas

9 min readJul 19, 2022

Sri Lanka was passing through one of its worst times. There is an economic turmoil that even causes a political crisis. Inflation has been skyrocketing, and the currency has almost lost its worth. There is an unprecedented economic meltdown. Sri Lanka’s annual inflation rate increased from 29.8 percent in May 2022 to an all-time high of 54.6 percent in June.[1] In recent weeks, the cost of vegetables has doubled, while the cost of basics like wheat and rice led to Rs. 220 per kg and Rs. 190 per kg, correspondingly. While a single kilogramme of sugar is priced at Rs 240, a litre of coconut oil costs an outrageous Rs 850. The cost of one egg is Rs 30. Even more astonishing, a kilogramme of milk powder costs Rs 1900.[2].So, one of the important questions that arouse in mind is

Was it a sudden Catastrophe or a Mischief digging from years?

Everybody knows how corrupt the Rajapaksa was.[3] Adding which their many casual behaviour and negligence in taking effective decisions makes the country as if it is in present.

The motive of this article is not to present the corruption but instead to present how coming to power in the early 20s, the government, on the one hand, they were satisfying their greed and, on the other, satisfying the people that the government was the best for them and the country.

This was due to the politics of the freebies to the people that on one place, plummet the reserves of the country and, on the other satisfied the people towards the Rajapaksa government.

Understanding Freebies.

For the purpose of winning the public’s vote and contesting the democratic election, political parties pledge to provide free power and water, monthly allowances to jobless people, wage employees, and household women, as well as technology such as laptops and cell phones. All this is in order to urge the vote and winning of the election.

And with time and continuance, these free gifts have become a tradition that even includes loan forgiveness, free power, bicycles, computers, televisions, and other items. It can be said that these freebies are nothing but a bribe which is presented legally to the people in exchange for their support and vote for the government.

This increase the expenditure of the country, and taking the debt it affects the GDP to DEBT ratio. So, one of the Interesting questions that arose is that

If it curtails democracy, then how hasn’t it been banned or constitutional exonerate? And what is its history that made it such offensive?

To Understand it, firstly, we need to understand the Trickle-Up and Trickle-Down economy.

Trickle Down Economic theory

According to “trickle-down economics,” theory tax advantages and perks for companies and the rich will eventually help everyone. In this theory, the government introduce objectives such as tax cuts on businesses and many other incomes and capital gains either in the forms of compensation or by way of development of the infrastructure for the big enterprises, investors, and business people in order to promote economic growth. The argument is predicated on two premises: Firstly, as the government spend on infrastructure, it leads to the development of the country. Secondly and more important, as the tax slabs and other benefits are provided, there is a reduction in the expenditure of the companies, which they use to expand their business, leading to more jobs and benefits to the members of society.

This theory was applied by the three different US presidents during their tenure, i.e. Ronald Reagan, George W Bush and then by Donald Trump. However, as much as it looks ripping, it was not actually. The companies used this extra income to pay the dividend and back up the shares. Thus, neither employment increases nor neither society develops. Instead, the top shareholders that possess the most shares got richer, creating more economic divide and inequality.

Trickle Up Economic theory

According to the “Trickle-up economics” theory, the government should provide incentives and subsidies, due to which the basic supplies and daily expenses such as of electricity and water would be saved. And the people use this money to invest in the industry and the businesses. And as the capital flow increase with also increase in the demands (as the other expenses such as electricity and water decremented), the profit of the businesses increases. And as the profit increases, the government could charge more taxes.

This was the same that Sri Lanka did in 1948 and Venezuela and many other countries. However, this would not be that effective again because savings did not actually convert into capital. And as much as the demand increase, the manufacturing and the corporate and industry do not increase. This leads to the need to increase export, and the debt increases.

Thus, the best measure is the balance between the two, to invest in the deficiency and at the same time expand on the corporate sector as well. The approach would also be a circumstantial determinant. For instance, at the time of 2009, the actions and the policies of the Obama administration were referred to be well analyzed and needed. They adopted the trickle-up approach. And signed the American Recovery and Reinvestment Act (ARRA), a $787 billion economic stimulus package designed to aid in the recovery of the economy from the worsening global crisis. The legislation expanded federal expenditure on infrastructure, education, health care, and a variety of tax benefits and incentives, as well as direct aid to individuals.

Thus there is a need for a balance and circumstantial implementation. And both expenditures in the form of freebies and investment are important for the successful running of the economy of the country.

Also, the same could be seen in the current times when the Biden government introduces subsidiaries.

Analyzing these freebies and Incentives from the legal perspective.

One of the important principles of AV Dicey’s rule of law is the equality and equal protection of the law. It differentiates the principle of equality from that of equity and stresses on providing the people equal opportunity to grow and foster. This was also mentioned under article 7 of the Universal Declaration and Article 1(1) of ILO. And also seeks its presence in the 5 key human rights principles of the European Network of National Human Rights Institution. The basic motive of this government expenditure on freebies is to incur the development by providing the essentialities and services to that areas or sectors that are either deprived of or do not have that much money to procure. In order to include them in the development phase shouldering with the other people, and participating with the other people.

There are various ways in which these freebies are provided. But all these ways somehow link to the need and the essentiality to provide, besides the political motto.

In the commodity form — Many times, government procure initiatives to provide the people with free electricity or water or lots more.
Subsidiaries and Cash concessions– Subsidies are financial loans or grants provided by the government to companies.
Loans and the Revocation of the interest rate. This was a form of Capital pushing.
Pension and maturity funds and more. (After Investments and saving). — This is a kind of freebie in which government saves a part of the working people and emits them by adding their contribution at the time of their retirement.

Determination of the Freebies, to be good or bad?
Debt to GSDP ratio — The ratio of an area’s public debt to its gross domestic product is known as the debt-to-GDP ratio (GDP) or debt-to-GSDP ratio. The ratio of debt to GDP may alternatively be thought of as the duration of time it would take to pay off debt if GDP were the basis for repayment. This ratio helps to determine what amount of expenditure can be used to be paid as debt. Lower the ratio means that the government could provide freebies.

Politics entering into Freebies.

Evaluating the Case of Sri Lanka

The role of freebie changes, with the attraction and the appreciation the government receive due to these freebies making them to think of them as a political leader more than a country leader. Due to their concern less for the country and more for the power, they diluted the role and provided these with the motto of securing their seat.
Let’s understand how and how many times the Rajapaksa Government used it to establish their party as the best hegemony of Sri Lanka Country.

It was promised to raise the bottom income tax rate from 5 lakhs to 30 lakhs annually. As relatively few people made more than 30L, this meant that a significant portion of the population was no longer required to pay taxes.
For the following five years, all taxation on people and businesses involved in farming, including agricultural, fishing, and animal production, was exempted.
The government provide pensions to newly hired state bank personnel and current ineligible bank employees. Once more, these workers adored it.
The government pledged to keep fuel prices in check and avoid shifting the burden to the general population. They purchased the oil from India yet sell at a lower price than India. There would also be no tax revenue.
In 2019, the Rajapaksa government introduced several tax cuts (monetary freebie) that reduced the government tax revenue by 30%. (Even seeing how the Easter Sunday attacks and Covid 19 pandemic severely demolished the tourism sector).

Thus, for seeking support, the Rajapaksa government actually shouldered all their fallacy and greed over the shoulders of the country, which as becoming overburdened, collapsed. Even in 2022, the Debt to GDP ratio of Sri Lanka becomes 110% which means the country in the current scenario would not even be able to pay back the debt, siding all the possibilities of growth and normalcy.

In similar were the situation in Pakistan and many other countries where the government just for votes bank politics without caring for the economy, distributes the money procured as loans in the form of freebies, heavying the country with debt and moving nearer to an era of collapse.

Taking the Case of World’s Biggest Democracy (India).

India is one of the largest democracies in the world. Compared with the neighbouring states, the country holds much better position in both the economic and political stance. Manging the 2020 recession in the times of the grave COVID-19, it can be said that the government endeavours to be satisfactory. However, having the rule of politics over the democratic position. The country was not an exception to the usage of these freebies. And even this unethincal usage now starting to apprehend the possibility of many parts or the states of the country becoming just as the neighbouring country becomes.

In a report by RBI warned of the rising risks to fiscal consolidation of the states. Taking into account the dire situation caused by COVID as well as other military conflict inflation, the possibility of providing cash subsidies, the creation of the provision of free public utilities, the back of the old pension plan by some states, and the advancement of implicit and explicit assurances by various central and state Governments would be the transition of the bad into the worse with deepening the crises.

Delhi, the capital city and one of the major economic hubs of the country, was not any exception, with the Aam Aadmi Party (AAP) playing the politics of the freebies. Leader Bhagwant Mann of the state of Punjab has already come calling on Prime Minister Modi to ask for Rs 50,000 crore as the first tranche of a special Rs 100,000 crore package for the border state of Punjab. Thus, there has to be rational advancement needed to stave the country from crises.

CONCLUSION

Democracy is a form of government which is of the people, by the people and for the people. However in serving and alluring these people, if the leaders forget the long-term growth and economic prosperity. Then it was the duty of the people to resist to trap in this alluration and think rational to determine whether it was good for the future as well or not. So, as to preserve the country and their future from any such pathetic turmoil that today the Island nation of Sri Lanka and its people were facing. It is havoc for Sri Lanka County and an alarm for several developing nation such as India, Pakistan and more.