An alternative to the alternative

An alternative to the alternative

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by Uditha Devapriya

Advocata Institute’s “A Framework for Economic Recovery” is both comprehensive and succinct. A response to the spiralling crisis in Sri Lanka, its publication has been well timed. Striking a realistic and pragmatic note, it foretells the worst for the country, unless certain urgent reforms are implemented. What it admits at the beginning is that the pandemic only highlighted the need for such reforms; the problems they seek to resolve have been in the offing since independence. If the present government is to address them, it should address two concerns: its fiscal and external current account deficits.

The Framework is in two parts. In the first, titled “Macroeconomic Stabilisation”, its authors propose six reforms based on the six pillars of the IMF’s Extended Fund Facility programme: fiscal consolidation, revenue mobilisation, public sector reforms, reforms of State Owned Enterprises (SOEs), monetary policy effectiveness and exchange rate flexibility, and trade and investment. These reform proposals reflect Advocata’s abiding belief that trade, not manufacturing and production, is what will reverse Sri Lanka’s diminishing economic fortunes. Outlining six options for the Sri Lankan government, the authors recommend a debt restructuring strategy, which requires going to the IMF. For Advocata, all other cards on the table, including sovereign default and debt monetisation, remain untenable and inadvisable.

Yet going to the IMF means enacting certain important, far-reaching changes. These the Framework delves into in the second section, titled “Structural Reforms for Sustainable and Inclusive Growth.” The authors propose five reforms: improving Sri Lanka’s Doing Business Environment and global competitiveness, increasing access to land, making labour markets more open and flexible, building human capital through health and education reforms, and developing infrastructure through, inter alia, public-private partnerships. If these proposals are not fast-tracked, we are told, Sri Lanka will keep on consuming more than what it earns and produces. The authors mention 16 IMF programmes we have gone through over 50 years, even though they don’t clarify whether these resolved problems so well that we do not have to go for a 17th. But their message is clear: to the IMF we must go.

Among elite political circles, going to the IMF has become a mantra of the hour. To quote Devaka Gunawardena, there is in general an “unshakeable belief” that doing so will provide “a pathway for Sri Lanka out of crisis.” Undergirding this sentiment, obviously, has been the economic woes of the country. The statistics tell us perhaps half the story, but they do paint a dire picture: on nearly every front, from unemployment to inflation to foreign reserves, Sri Lanka faces a reckoning in the not-so distant future. While the Governor of the Central Bank has repeatedly assured both locals and foreign investors, most recently via an interview with Bloomberg, that the country faces no imminent risk of default and hence will not resort to a debt restructuring programme, this has done little to reassure his critics. In the face of what many consider a deeply unpopular administration, such optimistic predictions continue to be met with scepticism. In short, people are angry, and want a way out.

Opinion regarding the IMF option remains divided, though economists tend to favour it. While Devaka Gunawardena’s intervention (published by the Social Scientists’ Association) does show that civil society views this option critically, elite MPs and policymakers continue to promote it. Their rationale is that we don’t have a choice: to handle economic woes, we need to go for the kill by way of fiscal consolidation. Partly because these policymakers are in a majority, until recently next to no debates regarding this cropped up. Gunawardena’s critique was crucial, in that sense, because it enabled such debates: where once arid winds blew, now a thriving dialogue ensues. Although these remain limited to the English media, there are signs that the Sinhala media is picking them up. What used to be a monologue has thus turned into a conversation, with various stakeholders pitching in.

These debates have entered the political field as well. To say the lines are drawn between the Opposition and the government, with the former for and the latter against the IMF line, though, would be to simplify a complex political issue: the most crucial lines of debate have crept up, not between the SJB and the SLPP, but within the SJB itself.

Hence while the likes of Harsha de Silva advocate Advocata’s proposals, other SJB MPs have stopped short of endorsing those proposals, suggesting in their place welfarist measures like controlling food prices and clamping down on private mafias. In fact the latter MPs seem to resemble their counterparts from the NPP and the FSP, who have highlighted the inexorable contrasts of poverty and affluence that the pandemic has thrown up. Such divisions have in turn opened up rifts within the SJB, between its right and left wings.

Advocata’s point about the futility of denying the crisis is, all things considered, correct: in the absence of an alternative, we may run out of alternatives. But what of the solutions it prescribes? The Framework projects an almost Panglossian belief in the private sector: its whole focus is on tapping the potential of the market. This is a line that has been touted by previous administrations; to a certain extent, even by Mahinda Rajapaksa’s. Indeed, if faith in the efficiency of the market can be considered a good yardstick for the prospects of the economy, those prospects would have improved a long time ago. That they have not, so far, implies that such assumptions and paradigms are not beyond critique.

Perhaps the biggest critique to be made of the Framework is that it reduces the crisis we’re going through to orthodox theory. In saying this, I am not arguing that we should ignore or forego on economic imperatives. Far from it: any way out for the country must be framed with due regard to those imperatives, appealing to reason, not rhetoric.

However, in asserting that we need to liberate the market, it rationalises the crisis we’re in as a failure of the public sector, and neglects every other consideration. What are the social consequences of its proposals? What would, for instance, its suggestion that we “liberalise” the labour market by making it easier for employers to fire workers amount to in the face of unemployment and mass social discontent? Orthodox theory suggests that, in the absence of restraints, the market will adjust and unemployment will resolve itself. But has this been the experience of countries that have dabbled in structural reforms?

Orthodox theory also suggests, or implies, a separation between politics and economics. That is why free market advocates deplore this government’s authoritarianism, yet hail the J. R. Jayewardene administration’s economic reforms as having liberalised and rescued the country. Here, human rights NGOs and advocacy groups have been more prescient than the neoliberal right in pinpointing the link between those reforms and the political tensions they generated. It remains to be seen what advocates of free markets would have suggested when the Jayewardene government was trying to tackle working class discontent in the face of welfare cuts and rising costs of living. Perhaps they would have remained quiet over that administration’s crackdowns on trade unions and its proscription of the Left: actions which contributed to the escalation of the war. Yet to side-step these is to ignore the link between politics and economics. What purpose does that serve?

Consider another of the Framework’s proposals: SOE reforms. Neoclassical theory argues that, as Advocata notes, SOEs place “a significant burden on public finances and are a major source of inefficiency in the economy.” As far as neoliberal theory is concerned, the solution seems reasonable enough: restructure, deregulate, and divest. But the importance of SOEs goes beyond imperatives of costs and revenues: in certain regions in the country, they have not just become a source of employment, but also facilitated linkages with the fabric of their societies and the livelihoods of their people. Privatising these outfits without accounting for such linkages would generate far-reaching externalities for those regions.

In leaving the matter of managing these ruptures to the State, neoliberal policymakers give carte-blanche to authoritarian regimes to exercise impunity in the interests of capital. In the face of the worst health crisis we have seen in decades, this could in all likelihood facilitate authoritarianism of a sort surpassing even the Jayewardene regime. What is ironic is that in light of such paradoxes, no less than the logic of neoliberalism turns in on itself. Put in other words, these reforms tend to lead away, not towards, their intended outcomes.

Take a very simple proposition: that in order to boost exports, we should allow the value of the rupee to come down. On the face of it, this seems clear enough. But as Jeevan Kelum notes in an analysis of Sri Lanka’s tea sector, rupee depreciation has not boosted exports. Au contraire, while tea export volumes have increased, value added as a percentage of GDP has actually declined; plantation companies bemoaning the decision to mandate a rise in wages have, going by this, not delivered. Kelum’s argument that reforms are needed in the private sector, involving investments in technology, might be at odds with the neoliberal solution of retrenchment and divestment in the public sector, but it holds up.

Economic discussions in Sri Lanka has for so long been dominated by neoliberal theorists and utopian populists. The conventional view is that the latter appeal not to reason, but to rhetoric. This may fit in neatly with the distinction that an anthropologist drew between the “arthika” thrust of the UNP and the “jathika” thrust of the UPFA at the presidential election in 2005. Yet as the last 40 or so years have shown well enough, there has been a reluctance to engage with the logic of their reasoning by neoliberals as well.

In claiming the market as the epicentre of society, elite policymakers have both dislodged the State from its place in that society and granted it carte blanche to deploy untrammelled power in the interests of corporate bosses. Hence, their prescriptions, though undergirding an urgent need to chart a way out of the crisis, will only lead to tensions and ruptures. With its history of suppressing dissent, the Sri Lankan State, of whatever political persuasion, will likely wield its baton against workers protesting those ruptures. What we need, then, is not so much an alternative to what we have, as an alternative to what is proposed.

The writer can be reached at udakdev1@gmail.com

What makes brands allocate more budgets to digital: Brand World Virtual Summit 2021, Marketing & Advertising News, ET BrandEquity

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Brand marketing vs performance marketing - the age old debate The author revisits the marketers’ dilemma of choosing between brand and performance marketing at a time when businesses are increasingly bottom-line conscious, and want greater value for every penny spent… See More Details

Why are brands putting more money where the digital mouth is? Lloyd Mathias , angel investor and business strategist said, “Brands will allocate spends to media in which consumers are spending more time. Getting a consumer’s interest and attention is key for a brand’s success.Clearly, as more and more consumers are moving digital, brand spends in digital are spiraling.”According to Mehul Gupta , co-founder and chief executive officer, SoCheers, before allocating budgets to any medium, brands should answer the following questions. “What is our key objective? Where does our core target audience lie? What is the volume of the audience available to target through the medium? Where and how do we want to position our brand? How accurately will we be able to track our marketing ROI? Will we be able to gather effective data & be able to use it for doing a stronger campaign next time?“According to him, answering these will help get an understanding of where the brand wants to position itself, and budgets can then be allocated accordingly. For example, if a brand’s key objective is to inform masses across tiers about a new product launch that is affordable to their pockets, then it would make sense for them to tap into ATL (above the line) and spend more money there.Whereas, if the brand’s key objective is to inform teenagers about a new app that allows them to do all of their favorite things in one place, then it would make more sense for them to tap into digital and spend money accordingly.” Ipsita Chatterjee , head – innovation, development & brand strategy, Lotus Herbals added, “Going D2C through digital channels gives access to unexplored and previously unreachable markets without trying to invest colossal spends for ATL (above the line). In addition, brands often leverage real-world data through digital tools that help them better understand the desired performance of a product before it is launched.“Today, consumers appreciate brand transparency, honest efforts to attract customers and a ‘plain sailing’ shopping experience. In addition, consumers are keener to see product value based on authentic communication with the growing aversion to unrealistic advertising. So, the D2C digital approach helps brands fulfil such expectations and makes relationships stronger, wiser and full of empathy in real-time.“Furthermore, with brick and mortar retail taking a hit, brand discovery is made easier through digital as brands constantly gain detailed data rather than relying on limited information from vendors or associates.D2C, with a digital-first approach, is no longer limited to niche brand offerings but will emerge as a powerful sales medium due to its stability against disruptions because of digital infrastructure and internal supply chain value. Hence, brands are allocating more budgets to digital media,” he adds. Bidisha Nagraj , vice president – global marketing, Schneider Electric, explained saying, “The keywords that should pop out while looking at Digital spends are : Personalisation : How nuanced can you make your message; Optimisation : Keeping a sharp focus on ROI will help in making sure every rupee is put to work; Adding to the TOF (Top of Funnel) : At the end of the day business gains takes over - leads and the quality plays an important role.“Here, Tanuja Rai Pradhan , head – Consumer Insights Marketing, Vodafone Idea, added, “ Many factors decide it. Starting from the product category itself, the demography profile of your target audience, current stage of the brand and layered marketing objective are outlined accordingly. There is a need to manifest integration of online and offline mediums even during budgeting.”Chatterjee added that digital media also enhance speed, efficiency, data-driven learnings and help evaluate success or failure with a robust mechanism for, it instinctively answers the question of “whether this is working or not” faster. Sriraman Padmanabhan , vice president – marketing, Nissan Motor Corporation threw light saying, “The following is driving us to invest more in Digital than before: Ease of measuring advertising Rupee; Ability to measure Customer sentiments; Community Building; brand building with engaging stories.He added, “The ability for the digital medium to create a multiplier effect in unique - so the ROI is even better when this is co-aligned with ATL (TV or print) spends.”Pradhan said, “But the fact remains that world has moved on this ‘instant age’ of Internet and hence digital offers wider options to connect with consumers instantly, hence digital seems to be gaining share in overall marketing budgets. You need to be present, where you consumers are.”

digital: Is digital, a performance oriented medium or a platform to build a brand?: Brand World Virtual Summit 2021, Marketing & Advertising News, ET BrandEquity

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Is digital as a medium more suited for performance oriented marketing or does it work equally well as a platform to build the brand?Angel investor and business strategist, Lloyd Mathias thinks that digital is capable of doing both though, most marketers use the platform to drive performance and build up the leads. Mehul Gupta , co-founder and chief executive officer, SoCheers pointed out a swift change visible in the marketing behavior. He stated that marketers have begun using the platform to build brands on an extensive scale. “Unicorn brands in India like Zomato, Nykaa, and Dunzo have been built on digital. While they have used ATL (above the line) from time to time to drive different objectives in their brand building exercise, their core efforts have been on digital mediums. Digital is clearly a combination of performance and brand building. Different brands customise and create their own combinations through trial & error to get the balance right,” said Gupta. Ipsita Chatterjee , head - Innovation, Development & Brand Strategy, Lotus Herbals, said, “It is a mix of both. For example, performance-based marketing is an additional personalised tool for brand-building. Though they are often discussed as two different activities, brand activation allocation is generally bucketed in brand versus performance distribution.““While digital branding focuses primarily on generating brand value and promoting loyalty and brand recognition, performance-based marketing is all about new customer acquisition and revenue generation. In short, digital can be used to break down the clutter of one message fits all. Brand conversations can be highly personalised, individualistic and not necessarily alienating to a particular audience,” she added.Chatterjee adds, “If it is done in a correct fashion, performance-based marketing can become a tool to encourage brand building.” Bidisha Nagaraj , vice president –Global Marketing, Schneider Electric thinks that it depends on two factors. Where a consumer is in their customer journey and, which stage of the buying funnel the consumer is in. Sriraman Padmanabhan , vice president – Marketing, Nissan Motor Corporation agrees that the customer journey has seen a significant change since Covid and it is involved in resetting its way of building the brand.According to Nagaraj, “Cohorts and studying behaviours plays a large role in determining what kind of nudge is required to push consumers to get into the buying conversations. In B2B this methodology reaps results.”For Padmanabhan, digital as an advertising medium can deliver results on both performance as well as brand building metrics for, it is much easier to measure performance to the last mile. And, more platforms can define a media plan based on the business objective as briefed to them.He explained, “The rise of platforms like Hoichoi- Bengali, to Aha- Telugu, Sun NXT, Koode- Malayalam, City Shor TV – Gujarati are just some of the regional OTT platforms that have gained popularity among Indian audiences who are keen to consume content in their native language.Regional OTT already holds nearly 40-45% share of the overall OTT pie in terms of consumption and is said to cross 50% by the year 2025, easing past Hindi at 45%. The depth of internet penetration coupled with increased adaptability among masses has surely positioned digital as a branding medium like TV.”According to Tanuja Rai Pradhan , head – Consumer Insights Marketing, Vodafone Idea said, “For leveraging digital marketing as a performance measure, the internal metrics should be chosen with care. Each case will depend upon your audience makeup and focus on each channel.”