Financial Crime that made 70% of Sri Lankans Poor

Approximately 70% of families in Sri Lanka experience poverty. While our daily discussions may revolve around specific topics, there are two major issues that require political solutions worldwide: inequality and environmental destruction linked to food and energy crises. Among these issues, poverty stands out as a complex and grave social crisis. Falling into poverty and escaping it are both influenced by political factors, as economic and social power is determined by individual or household financial strength, often resulting in the disenfranchisement of impoverished individuals.

In the capitalist world, poverty is typically measured in absolute terms—by the number of individuals or families earning less than the minimum amount required for basic survival. However, this approach is an unjust measure that obscures the true problem and fails to capture the actual living conditions or poverty levels. In Sri Lanka, poverty is defined as families with incomes below 25,744 rupees (according to the National Poverty Line) in 2019, which accounted for 14% of the population. This amount represents the minimum cost necessary to sustain life. However, by December 2022, this threshold had increased to 50,975 rupees, as calculated by the Department of Population and Statistics. Consequently, families earning less than 50,975 rupees were considered absolutely poor, accounting for only 30% of the population.

However, when living in a society, it is important to assess the quality of life relative to the prevailing economy. The global standard for this is relative poverty, which measures the number of people below 40%-60% of the middle point of the income distribution considered relatively poor in developed countries.?

As a developing country, we can use average family expenditure as a reference point. In 2019, an average family in Sri Lanka needed to spend 63,100 rupees per month to maintain a certain standard of living. This standard does not imply luxury but includes basic necessities, such as 31 kilograms of rice, electricity costs of 2,100 rupees, education expenses of 2,400 rupees, and clothing expenses of 1,688 rupees. The total expenditure for food amounted to 21,300 rupees, while non-food expenses reached 41,000 rupees, with an additional 8,744 rupees allocated for housing—representing an average standard of living.

Income distribution disparity is typically assessed by dividing total income into ten social segments and calculating the monthly income of the lowest 10% and highest 10% based on the Income and Expenditure Survey. According to the 2019 survey, it was evident that 50% of the population in Sri Lanka had incomes above the average living standard of 63,100 rupees, while the poorest 10% had a monthly income of less than 18,000 rupees.

Although no recent survey done, it is possible to estimate the changes. Assuming a 50% increase in income levels from 2019, even though this may not reflect the reality on the ground, reports from the Central Bank indicate a nominal salary increase of 50% in the private sector (Wage Index). Accordingly, the 2019 living standard adjusted to current prices and expenses would amount to 123,423 rupees per month. Based on these calculations, only 30% of families in our country can currently achieve a normal standard of living, underscoring the ongoing economic crisis. While income distribution disparity and declining living standards persist, those in power who fail to acknowledge their responsibility for this crisis place the burden squarely on professionals, workers, and the general public. According to neoliberal economic theory, poverty is considered a personal issue with no one to blame.

These calculations do not account for increased income taxes, which would further decrease disposable income, job losses in the private sector, as per the the central bank wage index public sector employees would only see a 33% salary increase. It is crucial to recognize that society's poverty runs deeper than the relative poverty described here due to undervaluing its significance.

A ruler devoid of compassion for society prioritizes criteria such as the stock market, exchange rates, and interest rates, while neglecting the fulfillment of people's basic needs. Such an economy naturally becomes a failure on a global scale.

Therefore, understanding this reality is vital, and making it a political objective becomes a social responsibility. It is impossible to overcome our current economic, social, and political crises with temporary fixes that neglect essential measures, such as continually reducing the prices of public goods and services and direct government contributions to industrial and economic growth.