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Power & Money: Economics and Conflict in Burma

General Ne Win overthrew Burma's short-lived democratic government in 1962's military coup, and, in an effort to move toward a socialist economy, instituted a new economic plan dubbed the "Burmese Way to Socialism." As part of this plan, Ne Win nationalized business and created government monopolies on staple goods such as rice and salt. More notably, in order to keep food prices low for urban workers and to procure cheap rice for export, Ne Win instituted a policy forcing farmers to sell their rice to the state at fixed prices. This policy decreased incentives for farmers to grow rice, thereby lowering production and creating nationwide shortages. The resultant scarcity drove prices up, generating inflation, and a foreign exchange crisis developed, due in large part to decreased production and diminished trade. Rural farmers, a group composed in large part of ethnic minorities, were hardest hit by Ne Win's approach to the economy. Farmers' incomes were reduced by forced sale at low prices to the state, and inflation cut into their already diminished buying power, making it difficult for them to purchase needed agricultural inputs. By 1976, average expenditure on food as a percentage of family income had leapt to more than 72 percent, indicating a rapid increase in food prices, and by 1982, 86 percent of rural families were living below the poverty line. (Steinberg, 1991) As the rural economy collapsed and traditional livelihoods were destroyed, hungry farmers began to turn to the black market to survive.

In 1985, in order to stymie the growing black market trade and curb inflation, Ne Win declared all large kyat notes valueless. 5,000 kyat was returned to each family; the remaining sum was reimbursed only if it could be proven to have been legally earned. A similar plan was implemented in 1987, when all kyat notes greater than or equal to US $2.50 were declared illegal, this time without compensation. Rendering 70 percent of the circulating currency invalid, this act increased inflation and shortages as people stockpiled commodities, afraid that their money would become useless. By 1988, the price of rice had skyrocketed and there was none available for export. The demonetarization plan thus exacerbated existing problems, making it even more difficult for rural producers to Survive and increasing general poverty.

Growing discontent culminated in the 1988 demonstrations in Rangoon, which led to the seizure of power by the SLORC under General Saw Maung. In an attempt to restore prosperity, the SLORC instituted the "Burmese Way to Capitalism," based on the East Asian model of an open market controlled by a hard state. SLORC's successor regime, the State Peace and Development Council (SPDC), has continued these policies. In opening the country to foreign investment, the government has granted concessions to Thailand allowing unlimited fishing as well as the clear-cutting of teak along the Thai-Burmese border. Overfishing by Thai companies has destroyed the livelihood of those peoples who traditionally have based their economies on fishing, and the destruction of teak forests has harmed the environment and displaced many ethnic villages. At the same time, despite the change in nomenclature, many of Ne Win's socialist policies have continued unchanged. The state has retained control of business and of the products with the greatest foreign exchange power such as rice, teak, petroleum and gems. Further, farmers are forced to obtain cash or credit advances from the state in order to buy seeds and other needed inputs at the beginning of the growing season, and in exchange must sell back a quota of rice in relation to the amount of the loan. According to Mya Maung, this system imposes an implicit tax rate of 1,081.4 percent. (Maung, 1998) Farmers are caught in a virtually inescapable debt cycle. Inflation, debt, and foreign exchange shortages have continued to plague Burma, and all residents have experienced a severe decrease in purchasing power. The ethnic peoples, with few alternatives available in the village and a dramatically restricted ability to generate income through agriculture, have been particularly affected by the general economic crisis.

The regime's persistent military targeting of ethnic peoples has significantly compounded the negative effects of economic mismanagement. Although the ethnic conflict in Burma is widely considered a human rights problem, many of the regime's tactics are economic; in an attempt to starve them into submission, ethnic groups are routinely denied the ability to secure an income sufficient for survival. The Four Cuts and village relocation policies (see Kevin Heppner's report in this issue) have destroyed the traditional agricultural economy of ethnic minority peoples and made it nearly impossible for them to make a sufficient living, putting the cost of education and health care well out of their reach. 15.8 percent of children in Burma are severely malnourished, and the infant mortality rate increased from 67 per 1000 in 1988 to 105 per 1000 in 1995. (Maung, 1998) Rural health care and available medicines are virtually nonexistent. Only 1 in 25 villages in the ethnic states have primary schools and education is completely unaffordable for most ethnic families. (Maung, 1998) Lack of education ensures that even after the conflict ends, those of working age will have limited opportunities outside of agriculture. Illiteracy also makes it more difficult for ethnic groups to preserve their culture and to assert their right to fair treatment.

In response to the SPDC's destruction of economic opportunity, many ethnic groups have turned to the black market as both a source of income and as a way to fund opposition armies. Drugs have played a pivotal role in black market trade, most notably in Shan State. The government has been complicit in expanding the drug trade, pocketing some of the profits and exchanging drug rights for ceasefires. Although some druglords have made immense profits by trading opium and heroin and have cooperated with the military junta, most involved are poor farmers with no way to make an income other than through growing poppy. According to Martin Smith, "for most hill farmers in the Shan and Kachin states, beset by a non-existent economic infrastructure and the dislocation caused by the war, there was absolutely no alternative cash crop." (Smith, 1991) Opium production doubled between 1988 and 1992 (B.U.R.M.A., 1992) and heroin production has increased by 400 percent since the coup (The Burma Project, 1998), demonstrating the regime's continuous destruction of legal avenues for securing income. Half of the world's heroin now comes from Burma. ( This situation has created severe health problems. 90 percent of heroin users in Burma are infected with HIV (The Burma Project, 1998), and over 500,000 are addicts (Maung, 1998). Minority populations are disproportionately affected by these problems, which, without access to health care, are particularly devastating.

Continued conflict and human rights abuses have severely weakened the economy, to the detriment of both ethnic peoples and the general population, and made economic reform a practical impossibility in Burma. Although gross human rights violations and cultural destruction seem not to bother Burma's government, perhaps the impossibility of sustaining the country on a continually deteriorating economic base will eventually force the ruling power to make concessions and respect the rights of Burma's ethnic nationalities.

References & further reading

Boucaud, Andre and Louis (1988). Burma's Golden Triangle: On the Trail of the Opium Warlords. Thailand: Asia Books Co.

Burma Debate IV(1) January/February 1997.

Burma Rights Movement for Action (B.U.R.M.A.) Dec. 1992 Annual Report. Burma's Will to Survive. Bangkok: Thailand.

Fredholm, Michael (1993). Burma: Ethnicity and Insurgency. Westport: Praeger.

Lintner, Bertil (1994). Burma in Revolt: Opium and Insurgency Since 1948. Boulder: Westview Press.

Maung, Mya (1998). The Burma Road to Capitalism: Economic Growth Versus Democracy. Westport: Praeger.

Renard, Ronald D. (1996). The Burmese Connection: Illegal Drugs and the Making of the Golden Triangle. Boulder: Lynne Rienner Publishers. Vol. 6 of Studies on the Impact of the Illegal Drug Trade. Lamond Tullis, series editor. Project of the UNRISD and UNU.

Silverstein, Josef (1980). Burmese Politics: The Dilemma of National Unity. New Brunswick: Rutgers University Press.

Smith, Martin (1991). Burma: Insurgency and the Politics of Ethnicity. London: Zed Books Ltd.

Steinberg, David (1981). Burma's Road Toward Development: Growth and Ideology under Military Rule. Boulder: Westview Press.

Steinberg, David (1990). The Future of Burma: Crisis and Choice in Myanmar. Lanham: University Press of America.

The Burma Project (1998). Burma; Country in Crisis. New York: Open Society Institute.

U.S. Committee for Refugees (April 2000). No Way In, No Way Out: Internal Displacement in Burma. Washington, DC: Immigration and Refugee Services of America.

World Peace Foundation (1997). Burma: Prospects for Political and Economic Reconstruction. Cambridge: The World Peace Foundation and Harvard Institute for International Development.

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