11 June 2017

The Trade That Made A Nation (4)

Few people, even in the tea trade, now recall the report of the commission appointed by the United Front Government of 1970-77 to inquire into the workings of plantation agency houses and broking firms. The commission, led by LSSP stalwart Bernard Soysa and the leftist intellectual Kumari Jayawardena, had a strongly Marxist and nationalist orientation and was evidently prejudiced against the industry. Its report, published after much delay in May 1975, made numerous charges, both general and specific, of collusion among plantation-industry capitalists, the intent of which was to loot Sri Lanka of the proceeds of its key industries, for the benefit of a few, mainly English beneficiaries. The report caused a sensation when it came out and provided the State with the excuse it needed to nationalize the estates and remove them from agency-house control – though as it turned out, the state still needed the agency houses after all.
     The following excerpt from Ceylon Tea: The Trade That Made A Nation describes how the Agency House Commission Report was received by the government and the trade, and what happened next.

Brokers & buyers at a London tea auction


It was hard to deny the truth of some of the allegations made by the Agency House Commission, for which the report presented extensive if often circumstantial evidence. But the accusation of widespread and systematic wrongdoing was in fact based a few particular cases, and much of what looked, to minds weaned on Marx, Engels and Trotsky, like a capitalist conspiracy to elude exchange controls and loot Sri Lanka of its vital productive assets was often, in reality, nothing more than the dogged resolve of profit-making concerns to remain profitable in the face of increasing government interference and rapacity. As for the charge of collusion between brokers and buyers, it seemed thoroughly vaporous, based on little more than hearsay and the commissioners’ own suspicions.
       None of this prevented the commissioners from arguing that

The analysis made by your Commission does not reveal that the Agency Houses have rendered any expert assistance in the field of management to the plantation industry. Your Commission is, therefore, of the view that the present system of Agency House management is not indispensable.

The commission recommended that

the performance of Agency Houses should cease and that the business of planation management and the provision of ancillary services be entrusted to State-owned organizations.

All this was manna to the government and its supporters, who made much of the report in official as well as public forums: a glowing review in a Central Bank periodical even added a helpful diagram to help readers trace more easily the links between various actors involved in the tea industry in Sri Lanka and the United Kingdom. But the fate of the plantations had already been decided, and it would not be the one recommended by the Agency House Commission. In exposing the overlap of ownership between the houses and other firms involved in the industry, and detailing the ways and means in which these connections were used to evade exchange controls and squeeze large profits out of the plantation industries of Sri Lanka, the commissioners had supplied the government with ample justification for its planned takeover of the industry itself.
       The Ceylon tea trade reacted to the Agency House Commission Report with shock and indignation, but its rebellious mercantile spirit had been neatly curbed by the implicit threat of state prosecution arising from its findings. Thus was it made ready to play its scripted part in the second stage of the government’s plan. What this would be was made clear in October 1975, when the Land Reform (Amendment) Act was proudly signed into law by the Speaker of the National State Assembly (as the Parliament was now named). A total of 396 estates owned by 232 joint-stock companies, among which were included 292,126 acres planted in tea, were declared to have been vested with the government forthwith. Estate-company-owned fixed deposits and company dividends, amounting to more than Rs 50m in toto, were also acquired at the same time. The question of compensating sterling-company shareholders (inevitably in pounds sterling) for these acquisitions had already been satisfactorily settled earlier between Mrs Bandaranaike and the British prime minister, Harold Wilson.
       But it turned out that the agency houses were not to be liquidated after all. Instead,

Every estate land owned or possessed by a public company on the date on which this Part of this Law comes into operation shall, with effect from such date –

(a) be deemed to vest in and be possessed by the Commission; and

(b) be deemed to be managed under a statutory trust for and on behalf of the Commission by the agency house or organization which, or the person who, on the day immediately prior to the date of such vesting, was responsible for and in charge of, the management of such estate land... [who] shall, subject to the provisions of this Part of this Law, be deemed to be the statutory trustee of such estate land.

The agency houses, whom the state’s own commissioners had rubbished as incompetent, self-interested, prone to shady dealings and liable to filch any golden eggs placed in their trust, had been chosen by the government to be put in charge of the goose.

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