The paper examines the evidence for Sri Lanka's economic growth in many sectors, over the past two decades, notwithstanding the setbacks witnessed during the period. This economic growth is, by and large confined to the urban sector, and within it, the western province. In the rural sector, poverty, accompanied by the alienation of the educated rural youth from the economic mainstream, the expanding private sector, presents the "flip side" of the economy. These trends are reflected socially in the emergence of a new urban middle class, which champions a consumerist ideology and a western ethos. The rest of the country, though influenced by the ideology, is unable to embrace it, given the lack of resources and access to the domain of the NUMC. The paper also argues that the formal private sector has, in the main, failed to go beyond its narrow urban focus and bias which has alienated the educated rural youth from the economic mainstream. Their social alienation or exclusion is likely to have far-reaching implications.
Sri Lanka's relatively early liberalization of its economy in the late 1970s and its sustained attempts to empower the private sector to spearhead the country's economic growth, have, inter alia resulted in the increasing polarization of the socially and economically advantaged, and the disadvantaged groups, accompanied by far-reaching social implications.
The economic disparity between urban and rural segments of society has been exacerbated as a result of the enlargement of the private sector at the expense of the public/state sector. The formal private sector is largely located in urban areas. The urban-rural disparity spells deep-rooted social implications. The need for the establishment of social safety nets and social policy frameworks, in order to prop up the alienated rural poor in particular, is of growing importance to the country's social policy developers.
2. INCOME DISPARITY AND SOCIAL EXCLUSION
The concept of inequality reflected in the distribution of income, finds expression among others, in cross-country inequality which refers to the inequality of average incomes. Average incomes of the advanced nations have continued to rise, while average income at the other end of the income distribution, particularly in many countries in sub-Saharan Africa, have stagnated or fallen (Loungani, P, 2003). This, however, does not mean that inequality of incomes within countries has necessarily increased. Gini Coefficients in Japan, many European countries, and Canada have been stable over the past couple of decades, ranging between 0.25 and 0.3. In the continent, in other developed countries, the United States being the most notable example, the Gini Coefficient has increased to about 0.4 over the past 20 years. Importantly, emerging markets and developing countries defy easy characterization. Some like Korea, which has Gini Coefficient of 0.3, has experienced impressive growth without improvements to their already low inequality. Others like Brazil, which has a Gini of 0.6 have experienced slow growth and have not made a dent in the already high level of income inequality (Loungani P, 2003).
The nexus between average income and equality of income distribution is viewed by Saunders, (1990) and Hedey et al; (1999) in terms of the mechanisms that produce inequalities. They argue that inequality per se is not necessarily unjust or unfair. Some people work harder; educate themselves and take better use of their resources etc. Therefore, it is justifiable that some people deserve more than others do. Rawls. J (1972, 1995) in his seminal work on distributive justice is nowhere near enthusiastic a proponent of greater equality as Scandinavian public opinion is. Graubard (1986) reports the Scandinavian's passion for equality. According to Rawls's concepts of justice, inequality under certain conditions is acceptable if inequality is based on factors that do not differentiate between people. …