Poor-led progress.

OUR economy runs on an unfair status quo model where elites protect their big privileges while the poor get the crumbs. Now, hit by repeated economic crises after short booms, this decades-old elitist model is emitting signs of collapse.

The case of Sri Lanka shows that global turmoil that cuts our low remittances and exports bases may trigger a currency, and thus, economic collapse. That may be very chaotic for a nuclear-armed 200 million-plus state facing extremism, external threats and ethnic strife.

We need a new economic model that ends our perennial issues of low growth, twin deficits and inequity. The main state models are East Asian (export-led), Scandinavian (welfare), American (large domestic economy), Gulf states (natural resources), Caribbean (tax havens), North Korean (reclusive) and some criminal states. The last four are not possible or desirable. But linking parts of the first three, we may devise an innovative 'poor-led progress' (PLP) model.

Many economists now support pro-poor or inclusive growth as poverty harms not only the poor but also national progress via conflict and small economic size. But going beyond such models, PLP sees investing in the poor not just as an ethical or anti-conflict concern but actually as the main driver of national progress. Economists oppose policies that penalise the rich and cause capital flight. But PLP shows how reducing poverty ignites win-win growth that also benefits the rich.

We need a new economic model that ends our perennial issues.

Our internal market is small, despite a large population, given the low incomes of the majority. Increasing their incomes expands the market size and profits for producers. This in turn expands jobs and incomes for the poor and ignites a virtuous cycle of national progress. The poor spend more on local goods than the rich, benefiting local producers and the external account. So investing in the poor, largely seen as a moral aim, can actually be the main national growth engine under trickle-up economics that puts those at the bottom at the top.

A seven-step approach (COMPASS - credit, organisations, market power, protection, assets, skills and social services) that goes beyond giving only cash handouts serves as the compass for PLP.

One, we must expand the poor's ownership of assets. This includes land reforms, key to the East Asian progress. Two, we must expand easy credit for the poor. Three, we must expand the access of the poor to appropriate skills...