Economic Innovations

Sri Lanka Table of Contents

The Colebrooke-Cameron reforms had an immediate impact on the economic development of the island. Many features of the economic structure the reforms helped put into place still exist. The commission advocated a laissez-faire economy. To encourage free trade, the government monopolies over cinnamon cultivation and trade were abolished. Traditional institutions, such as land tenure by accommodessan (the granting of land for cultivation, as opposed to its outright sale), was abolished, as was the rajakariya system. Rajakariya was opposed not only on moral grounds but also because it slowed the growth of private enterprise, impeded the creation of a land market, and interfered with the free movement of labor.

In the mid-1830s, the British began to experiment with a variety of plantation crops in Sri Lanka, using many of the technological innovations developed earlier from their experience in Jamaica. Within fifteen years, one of these crops, coffee, became so successful that it transformed the island's economy from reliance upon subsistence crops to plantation agriculture. The first coffee plantation was opened in the Kandyan hill region in 1827, but it was not until the mid-1830s that a number of favorable factors combined to make the widespread cultivation of the crop a highly profitable enterprise. Governor Edward Barnes (1824-31) foresaw the possibilities of coffee cultivation and introduced various incentives for its cultivation, particularly the lifting of coffee export duties and exemption from the land produce tax. When slavery was abolished in the West Indies and coffee production there declined, Sri Lankan coffee exports soared, filling the gap in the world market. The problem of limited availability of land for coffee estates was solved when the British government sold lands that it had acquired from the Kandyan kings.

The coffee plantation system faced a serious labor shortage. Among the Sinhalese, a peasant cultivator of paddy land held a much higher status than a landless laborer. In addition, the low wages paid to hired workers failed to attract the Kandyan peasant, and the peak season for harvesting plantation coffee usually coincided with the peasant's own harvest. Moreover, population pressure and underemployment were not acute until the twentieth century. To compensate for this scarcity of native workers, an inexpensive and almost inexhaustible supply of labor was found among the Tamils in southern India. They were recruited for the coffee-harvesting season and migrated to and from Sri Lanka, often amid great hardships. The immigration of these Indian Tamils began as a trickle in the 1830s and became a regular flow a decade later, when the government of India removed all restrictions on the migration of labor to Sri Lanka.

British civilian and military officials resident in Kandy provided initial capital for coffee cultivation, provoking contemporary observations in the 1840s that they behaved more like coffee planters than government employees. This private capitalization led to serious abuses, however, culminating in an 1840 ordinance that made it virtually impossible for a Kandyan peasant to prove that his land was not truly crown land and thus subject to expropriation and resale to coffee interests. In this period, more than 80,000 hectares of Kandyan land were appropriated and sold as crown lands.

Between 1830 and 1850, coffee held the preeminent place in the economy and became a catalyst for the island's modernization. The greater availability of capital and the increase in export trade brought the rudiments of capitalist organization to the country. The Ceylon Bank opened in 1841 to finance the rapid expansion of coffee plantations. Since the main center of coffee production was in the Kandyan provinces, the expansion of coffee and the network of roads and railroads ended the isolation of the old Kandyan kingdom. The coffee plantation system had served as the economic foundation for the unification of the island while reinforcing the administrative and judicial reforms of the Colebrooke-Cameron Commission.

The plantation system dominated the economy in Sri Lanka to such an extent that one observer described the government as an "appendage of the estates (plantations)." Worldwide depression in 1846 temporarily checked the rapid development of the plantation system. Falling coffee prices caused financial disruption, aggravating the friction that had been developing between the static traditional feudal economy and modernized commercial agriculture. In order to make up for lost revenue, the government imposed a series of new taxes on firearms, dogs, shops, boats, carriages, and bullock carts. All of these taxes affected Sinhalese farmers. Other measures that further alienated the Kandyans included a land tax and a road ordinance in 1848 that reintroduced a form of rajakariya by requiring six days' free labor on roads or the payment of a cash equivalent. But the measure that most antagonized the Kandyans (especially those associated with the Buddhist sangha) was the alienation of temple lands for coffee plantations.

British troops so severely repressed a rebellion that broke out among the Kandyans in 1848 that the House of Commons in London commissioned an investigation to look into the matter. The governor and his chief secretary were subsequently dismissed, and all new taxes, except the road ordinance, were repealed. The government adopted a new policy toward Buddhism after the rebellion, recognizing the importance of Buddhist monks as leaders of Kandyan public opinion.

The plantation era transformed the island's economy. This was most evident in the growth of the export sector at the expense of the traditional agricultural sector. The colonial predilection for growing commercial instead of subsistence crops later was considered by Sri Lankan nationalists to be one of the unfortunate legacies of European domination. Late nineteenth- century official documents that recorded famines and chronic rural poverty support the nationalists' argument. Other issues, notably the British policy of selling state land to planters for conversion into plantations, are equally controversial, even though some members of the indigenous population participated in all stages of plantation agriculture. Sri Lankans, for example, controlled over one-third of the area under coffee cultivation and most of the land in coconut production. They also owned significant interests in rubber.

In 1869 a devastating leaf disease--hemleia vastratrix struck the coffee plantations and spread quickly throughout the plantation district, destroying the coffee industry within fifteen years. Planters desperately searched for a substitute crop. One crop that showed promise was chinchona (quinine). After an initial appearance of success, however, the market price of the crop fell and never fully recovered. Cinnamon, which had suffered a setback in the beginning of the century, was revived at this time, but only to become an important minor crop.

Among all of the crops experimented with during the decline of coffee, only tea showed any real promise of success. A decline in the demand for Chinese tea in Britain opened up possibilities for Indian tea, especially the fine variety indigenous to Assam. Climatic conditions for the cultivation of tea were excellent in Sri Lanka, especially in the hill country. By the end of the century, tea production on the island had risen enormously. Because of the inelasticity of the market, however, British outlets soon became saturated. Attempts to develop other markets, especially in the United States, were largely unsuccessful, and a glut emerged after World War II.

The tea estates needed a completely different type of labor force than had been required during the coffee era. Tea was harvested throughout the year and required a permanent labor force. Waves of Indian Tamil immigrants settled on the estates and eventually became a large and permanent underclass that endured abominable working conditions and squalid housing. The census of 1911 recorded the number of Indian laborers in Sri Lanka at about 500,000--about 12 percent of the island's total population. In the 1980s, the Indian Tamils made up almost 6 percent of the island's population.

The Tamil laborers emigrated to Sri Lanka from India not as individuals but as part of family units or groups of interrelated families. Thus, they tended to maintain their native cultural patterns on the estates where they settled. Although the Indian Tamils spoke the same language as the Sri Lankan Tamils, were Hindus, and traced their cultural origins to southern India, they considered themselves to be culturally distinct from the Sri Lankan Tamils. Their distinctiveness as a group and their cultural differences from the Sinhalese and the Sri Lankan Tamils were recognized in the constitutional reforms of 1924, when two members of the Indian Tamil community were nominated to the Legislative Council.

As the nineteenth century drew to a close, experimentation in crop diversification, on a moderate level in the years before the collapse of the coffee market, became of greater importance. Responding to international market trends, planters attempted to diversify the crops they produced to insulate their revenues from world price fluctuations. Not all their experiments were successful. The first sugar plantation was established in 1837, but sugar cultivation was not well-suited to the island and has never been very successful. Cocoa was also tried for a time and has continued as one of the lesser exports. Rubber, which was introduced in 1837, became a major export during the slump in the tea export market in the 1900s. The rubber export trade exceeded that of tea during World War I. But after suffering severe losses during the depression of the 1930s, rubber exports never again regained their preeminent position.

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Source: U.S. Library of Congress