Takeaways from the crisis

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The protests in Sri Lanka, especially in Galle Face, have been going on for more than three months now. International, particularly Western and Indian, Media ascribes the crisis in the country to the convulsions of domestic policies and the mismanagement of the economy. This implies that the economic model which Sri Lanka had in place, dependent as it was on imports and sovereign debt, was somehow doing alright until recently. Such a narrative attributes the country’s problems to the ruling Government and the ruling family, the Rajapaksas and their ilk. Yet, while the latter must share much of the blame for the crisis, they are by no means its sole cause. It would be more correct, I think, to see them as symptoms, rather than causes, of our economic malaise.

Sri Lanka’s problems have to do with its dependence on exports of commodities, which neoliberal economists have pointed out as constituting the island nation’s “comparative advantage.” This belies a basic structural flaw: its inability to shift to industry and alternative development, and thereby to escape debt bondage.Sri Lanka’s economy has been paraded, even by radical economists like Jayati Ghosh, as export-dependent. Yet, it has been running trade deficits for the last 50 years. Its exports include primary commodities like tea, textiles, as well as tourism. It also earns remittances from migrant workers, many of whom work in West Asia.

These sectors took a hit from the Covid-19 pandemic. While tourism was on its way up in February, most arrivals were from countries like Russia and Ukraine. Russia’s invasion of Ukraine thus dealt a blow to hopes of a long-term revival. Neoliberal economists, especially those linked to Colombo’s well-funded think-tanks; attribute the country’s problems to excessive money printing and Government spending. Basically, they see the public sector as bloated, if not heavily politicised.

Rentier capitalism

To an extent, the latter view is correct. Sri Lanka’s bureaucracy has long been a preferred destination for unemployed graduates and the politically connected. While Gotabaya Rajapaksa came to power implying he would end such a culture, he reversed course two years later and hired 65,000 graduates to the State sector. Ironically enough, it is their peers who are occupying the frontlines of anti-Government protests today. Neoliberal commentators argue that the private sector should take the lead. But the private sector is dominated by rentiers. Moreover, the country’s exports are limited to commodities and tourism, along with sectors such as IT. These themselves are dependent on imported raw material and intermediate capital goods.

According to Harvard University’s Atlas of Economic Complexity, Sri Lanka’s largest exports are in moderate and low complexity products, like textiles. This contrasts with Vietnam, where textiles are more highly complex. Sri Lanka is also seeing a static pattern of export growth. In other words, while in 1990 it could boast of much potential in garments, by the early 2000s the sector’s prospects had considerably reduced. To resolve the economic crisis, heterodox economists and analysts thus contend that the Government must oversee a radical, socialist strategy, centring on import-substitution and local production: a dreary, dismal prospect for Colombo’s neoliberal coterie.

Unfortunately for Sri Lanka, there are not many commentators, certainly not in the country, capable of looking beyond neoliberal prescriptions or popular demands for resignations. One can attribute this to various factors, including the country’s flirtation with neoliberal globalisation, which has deprived most people of class consciousness. Neoliberal narratives depict the Government as an autarkic entity opposed to the private sector and gravitating to home-grown solutions. Yet, what distinguishes it has not been its rigid authoritarianism, but rather its willingness to change course.

While liberals portray Gotabaya Rajapaksa as an oriental despot, a Hitler in the tropics, it has been his inability to take swift decisions that has led to the crisis. The shift to organic fertiliser, a move advocated by environmentalists, many of whom oppose him, is a case in point: while he reiterated his commitment to organic agriculture as late as last February, as early as last November he had reversed a ban on chemical fertilisers.

IMF negotiations

The same goes for his refusal to engage with the IMF. The middle-classes that were out on the streets calling for Gotabaya Rajapaksa’s resignation castigate him for not going to the IMF earlier. Yet, they also criticise the Government’s decision to hike fuel prices and utility tariffs, failing to realise that these two are interlinked.Negotiations with the IMF are now presented as a mantra to woo investors and creditors. Yet, the Central Bank Governor himself has admitted that whatever bailout it receives from the Fund will not be enough. In that sense, it is ironic that while protesters castigate the Government for not restructuring debt earlier, they are also opposed to the regime’s caving into IMF policy prescriptions, including the floating of the rupee.

To say all this is not to absolve the regime. Its politics fits in, at one level, with South Asia’s legacy of dynastic politics. From India to Bangladesh, the subcontinent is hardly a stranger to family rule. The Rajapaksas are no exception: despite the recent spurt in anti-Government protests, the family continues to hold important positions in the country.

However, at another level, the Rajapaksa family has gone well beyond the regional model. Dr Dayan Jayatilleka has observed, “[t]his is not the Asian phenomenon of familial succession in politics, which is serial and sequential. The contemporary Sri Lankan phenomenon and process is both sequential and simultaneous, vertical and horizontal.” In other words, while family rule in the rest of Asia has served to sustain the political system, in Sri Lanka it has led to its very dismantlement.

Nevertheless, despite all this, it goes without saying that what protesters consider as the Government’s failures have been symptoms, rather than causes, of the structural faults underpinning the economy. The Government must share the blame for this: in particular, the Rajapaksas’ tendency to surround themselves with yes-men.

Yet, beyond such narratives, there is a more compelling problem: a failure to resolve pressing issues like the island’s dependence on imports and sovereign debt. That in itself is linked to the sprawling global debt crisis, which has extended to other countries. But while not all protesters are oblivious to these imperatives, many of them are yet to address them. So long as debates over the crisis remain dominated by narratives of corruption and political personalities, hence, such issues will go unnoticed and unresolved.

By Uditha Devapriya

The writer is an international relations analyst who can be reached at [email protected]