The following was a keynote address presented at the annual meetings of the Planter’s Association in Sri Lanka—one of the oldest trade associations in Sri Lanka. In order to talk to them I had to learn about and visit the plantations of Sri Lanka. I think there is a worthwhile point to be made on economic policy and our attitudes to entrepreneurship. That is why I share this with you.
Plantations fascinate me because they are the product of visions of daring adventurers. I cannot help but imagine the boldness, initiative and organizational capacity that it took to cut down dense forest, ward off wild animals, build roads, plant coffee and when that failed to switch to an alternative - tea. It is mindboggling to drive through the hills on those narrow winding lanes which in themselves are engineering marvels even today.
They cleared the forest, planted first coffee, waited 6-7 years to harvest it. After a few successful years, disease killed their coffee plantations. They did not run to the government for help. Instead they imported tea from China and started it cultivation to wait another 5-7 years for a harvest. Around this new crop they developed a whole series of innovations that still dot the Sri Lankan landscape in the form of lovely tea factories, plantations and bungalows. a whole tea culture which still pervades Sri Lanka still lives on in the country.
The Early Planters
Hats off to those early planters from Scotland who incurred all this hardship and permanently changed Sri Lankan landscape, economy, and society. I will not bore you with historical details for I am sure you know more than I do about the history of this wonderful episode in your history. Let me tell you what I, as an economist, admire them deeply for;
1. Their boldness of vision. It was not doing the usual. They were not handicapped by conventional wisdom. They did it their way.
2. They were very Darwinian in their outlook. It was survival of the fittest for only the fit could take this enormously challenging task. These pioneers took their own risks, did not seek any government help even when the coffee plant was devastated. They invested their own money and waited for 8-9 years before they saw their first returns.
3. They were true entrepreneurs who took risks, but also were ready to change their plans and strategies. I remember one writer paying tribute to these men: “The first generation of planters in Ceylon were adaptable men who were not resentful of change.”
4. They did not wait for any consultants or advisors to tell them what to do. The functional, intuitively simple and yet ingenious design of the old tea factories that rely on natural forces to help in the maturation of tea, speaks of the self-sufficiency and quiet confidence of the pioneer planter.
5. The plantation was a great training ground for modern industry. It was perhaps the first effort at integrated industrial form of organization in Sri Lanka. Not only is the planting systematic, it is plucked in a well worked out rotational manner too, so that the bush does not grow beyond a certain height. It is graded and processed to a certain taster’s perfection. At all levels, organization and professionalism is required. Timing and management is important. This meant a higher order of discipline and training than would have been found in more traditional agricultural activities.
The more I learn of plantations, the more I begin to wonder: “Would such a visionary adventure be possible today in Sri Lanka?” Please do give me your answer whenever you like.
The Fountains of Paradise
Let me ask a few questions to sharpen the original thought. Let us say you discovered, as Sir Arthur Clarke fictionalized in the fountains of Paradise, that there could be an elevator from Sri Lanka to a satellite in space from which interstellar transportation would take place. Except, let us say that you could build not one but several such elevators. This venture would require a lot of land, energy, and other inputs. Imagine all of us are at a meeting to plan this great new venture. I have prepared my list of basic questions that any investor would ask. Let me run it by you!
· Question 1: To open this whole new sector, would you be able to obtain the land that is necessary for such a venture?
· Question 2: What sort of permissions would be needed to build?
· Question 3: Would the government and various external agencies have to first conduct a sector analysis and spend years planning and preparing a project for such an effort?
· Question 4: Would you then get all manner of credit and advice to set it up, which will also shackle you to bureaucracy that is unproductive?
· Question 5: How much of your time would you spend on your project and how much in meetings and paperwork to please the government?
· Question 6: How much freedom will you be given to experiment with your own approach to the problem rather than externally driven ideas?
· Question 7: Would you have the human capital to manage such a technological enterprise? Like the plantation sector of the 19th century, would you be able to import human capital? Or put it differently, would you allow the John Taylor of this sector to strike roots here and do the pioneer work?
· Question 8: Finally, how long would it be before you were able to hoist one of these elevators? How long would it be before you were able to develop this sector?
· Question 9: Would other countries, like Singapore and Mauritius beat you to it?
· Question 10: Would you rather make an elevator here or in one of those countries?
This may sound strange and funny. But truly, economic growth occurs as bizarre ideas like plantations (and it could be space elevators in the future!) come to fruition through the efforts of pioneers like Taylor.
Imagine yourself in the latter part of the nineteenth century. If someone had told you that some crazy fellow called Edison was developing a light bulb and a movie projector and that we would live with perpetual light as well as watch movies, what would you have said? Furthermore, what if there was a government regulator telling him what lighting should look like and what sort of movies could be made? The world would be very different to what we know today, if that had truly happened.
The need for investment space
Yes! Growing societies need to give individual entrepreneurial spirit a lot of room. There must be space - both physical and regulatory space - for making all manner of investments. Investment cannot be made on command. No one but the driven, like Bill Gates, knows what and how he or she will deliver in the market. New goods like cell phones and new ideas like FedEx and Starbucks generate growth. Do you believe that they happen mainly in the US because the US has some genetic advantage? Or is it because in the US there is space for such ideas to develop? I must answer this first question in the negative when I see Jeronis De Soysa as one of the pioneer planters with no foreign help. He started on 1835 and all his staff was Sri Lankan.
We must review our notion of private sector development and economics. But as my joke on South Asian policymaking goes; “how many economists in poor countries does it take to make economic policy?” The answer is “none, they have all migrated overseas or rigid bureaucracies will not allow them into policymaking!”
We continue to retain a very patronizing attitude towards the private sector in poor countries, where private sector development programs continue to rely on credit provision, some education of the private sector, as well as a considerable buildup of legislation and regulation for the private sector. We target investment through incentives and other fiscal inducements. The sector-picking mentality, where policymakers have in mind the industries that are to be developed, remains virtually intact. We justify our rather narrow approach to private sector development through poorly conceived ideas of stages of growth where a poor country must first produce agricultural goods, then move on to garments, graduating to leather and light machinery and finally climbing up the technology ladder to cars and machinery. It is this kind of reasoning that led all countries to attempt a car industry to a point where there is now a global excess supply.
It is this same reasoning that has so enslaved even the entrepreneur in poor countries that they now display herd behavior and operate under an expectation of a paternal government who will use poor taxpayers’ largesse in their favor. Garment and hotel trade is developed as a result of incentives offered by the government. Few produce branded, quality products that are more than mere commodities. Few have the differentiated product like Aman-resorts. As a result, I would conclude that these ventures are exposed to an excessive risk but they continue to be hopeful of government support. Not really a good way to run a business!
Nowadays, I am amused to hear everyone tell me that IT is the hope for poor countries where there is limited modern education! But those who argue for it want the government to take the lead.
Unfortunately, decades of Keynesianism, socialism, and generally poor thinking have resulted in the three communities - business, thinking, and government - developing a pathological co-dependency. This co-dependency must be exorcised if there is to be investment space and growth. The knee-jerk reaction that government must lead in every area and cover all risks has led to a situation that has stifled true entrepreneurship.
Government must be better defined!
Economics is a much-maligned profession. Even my old aunt thinks she knows all there is to know of development and lectures me on policy. Murphy’s law of economic policy states; “Economists have the least influence on policy where they know the most and are most agreed; they have the most influence on policy where they know the least and disagree most vehemently.” To this I would add development economists, who prescribe policy that is not based on modern economics. But then a development economist is one who wants the government to flush the toilet after he has created a mess.
Serious economists will not give you pat solutions based on government led growth. Growth is a multifaceted, messy business not amenable to fine-tuning and control of bureaucracies. No planner, no policymaker, no economist can tell you where the next investment opportunity lies. This is not to say there is not a role for government. There is! And it is not defining and directing investment and entrepreneurship!
I repeat, “Growth is a multifaceted, messy business not amenable to fine-tuning and control of bureaucracies.” Growth is fresh ideas! Growth is Taylor planting tea, Edison with his research lab and GE, Disney making cartoons, Graham Bell making a telephone and then AT&T dreaming of an across Atlantic cable, and then setting up National Geographic and so on and so forth.
This is what I find most fascinating about your plantations. Their history shows us how it is the self-willed men driven not only by the profit motive but the ambience and the adventure of plantations that delivered to us this industry that is now so critical to your economy. It is the pursuit of such dreams and visions that delivers to us, economic growth. The modern state needs to recede to allow such initiatives to be taken. It must provide the investment space that self-willed men like Bird, Taylor and Lipton need. And you and I independent analysts and stakeholders in the economy must argue for that space for investment.
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