Experimentation

There's a crisis in Sri Lanka—I interview Pitasanna Shanmugathas.

Image source here.

“There have been quite a few experiments in economic development in the modern era, and though it is doubtless wise to be wary of sweeping generalizations, still they do exhibit some regularities that are hard to ignore. One is that the designers seem to come out quite well, though the experimental subjects, who rarely sign consent forms, quite often take a beating.”

“So maybe Sri Lankans have taken a standard neoliberal ‘beating’—journalists should definitely investigate whether this is what happened.”

“So this is basically what the overwhelming majority of the Western media won’t cover—the neoliberal roots of the present crisis in Sri Lanka.”

“It’s unclear which direction the country will go, but experts have pointed out that the crisis won’t end until things genuinely change.”

Sri Lanka is in crisis right now—is the media covering the crisis properly? You could argue that Sri Lankans are the latest victims of economic experimentation—Noam Chomsky put the issue of economic experimentation the following way back in 1996:

There have been quite a few experiments in economic development in the modern era, and though it is doubtless wise to be wary of sweeping generalizations, still they do exhibit some regularities that are hard to ignore. One is that the designers seem to come out quite well, though the experimental subjects, who rarely sign consent forms, quite often take a beating.

So maybe Sri Lankans have taken a standard neoliberal “beating”—journalists should definitely investigate whether this is what happened.

Pitasanna Shanmugathas has a master’s degree in global affairs from the Munk School of Global Affairs—he manages Stop Human Rights Violations in Sri Lanka!, which is a Facebook group with 2,900 members. I was honored and thrilled to interview Shanmugathas—see below my interview with him that I edited for flow. He supplied the bulk of the hyperlinks—I added some myself.

1) What should people know about the current situation in Sri Lanka? Which articles about Sri Lanka would you recommend that people read? 

This is Sri Lanka’s worst economic crisis since it gained independence from the British in 1948—the immediate cause is the political corruption and economic management on the part of the Rajapaksa family, which has dominated Sri Lankan politics for nearly two decades. 

The government has run out of foreign currency—the government can’t import basic materials like medicine and food and gas. Inflation has skyrocketed to over 50%—basic foods have become astronomically expensive.

There are power cuts throughout the day. And regarding petrol pumps, there are long lines that last for days on end—a few people have even reportedly died while waiting in line.

Mick Moore is a political economist—he’s been a specialist on Sri Lanka for nearly 50 years. There was a 25 May 2022 interview where Moore says the following about the ongoing crisis: “This is the most man-made and voluntary economic crisis of which I know.”

President Mahinda Rajapaksa used high-interest commercial loans in order to finance massive infrastructure projects that he began in 2009 after Sri Lanka’s three-decade civil war—the projects were supposed to help modernize Sri Lanka and generate tax revenue, but the projects failed.

And President Gotabaya Rajapaska instituted corporate tax cuts in 2019—Sri Lanka already had a problem with declining tax revenue at that point, so these tax cuts just made the problem worse. The government’s tax-policy changes caused Sri Lanka’s tax revenue to decline from 11.8% of GDP in 2019 to 8.1% of GDP in 2020. 

In that 25 May 2022 interview, Moore comments as follows: 

Instead of just reducing its investment and borrowing less, the government insisted on continuing to borrow heavily and repaying at higher and higher rates of interest.

And as follows: 

When the situation became so dire about a year ago, the government should have just gone to its creditors and said ‘Sorry, we can’t repay; let us reschedule the debts.’ Instead, they insisted in a macho fashion that they could repay in full. They went along this way until about six weeks ago when they had basically given away virtually all the foreign exchange they had.

Gotabaya also banned the import of chemical fertilizer into Sri Lanka despite warnings that a sudden transition on that front would have economic consequences. So Gotabaya imposed a rapid single-year transition to organic farming, which contributed to food scarcity and to the current economic situation. 

Sri Lankans began to protest against Gotabaya in March 2022—there were calls for Gotabaya to resign due to his corruption and economic mismanagement. The protestors’ goal was for all members of the Rajapaksa family to resign and for the family’s political acolytes to resign as well. 

Sri Lanka defaulted on its debt in May 2022—in that same month, Gotabaya’s brother Mahinda resigned from the position of prime minister in response to escalating protests.

Ranil Wickremesinghe replaced Mahinda as prime minister—Ranil is a neoliberal darling of the West. 

Gotabaya deployed the military to attack peaceful protestors on 11 May.

In June, Sri Lanka tried to negotiate another structural adjustment program with the IMF—it would’ve been Sri Lanka’s 17th IMF bailout, but the talks weren’t fruitful. And in July, Ranil publicly said that Sri Lanka was bankrupt. 

Sri Lanka owes over $50 billion in foreign debt—Western financial institutions are actually owed an overwhelming majority of that. 

The protests reached a fever pitch on 9 July—protestors occupied government buildings, broke into the president’s residence, and called on the president to resign once and for all. The Sri Lankan police assaulted protestors and journalists—a number of protestors were hospitalized. While in hiding, Gotabaya finally gave a statement—on that same day—where he said that he would resign on 13 July.

On 13 July, Gotabaya fled the country on a Sri Lankan Air Force plane—he had to flee in order to avoid facing trial for human rights abuses like ordering attacks against peaceful protestors. 

Gotabaya went to the Maldives—it’s ironic that a Muslim nation allowed him temporary refuge, since his family repeatedly oppressed Sri Lanka’s Muslim minority while in power. 

And Gotabaya went from the Maldives to Singapore, where he apparently remains—Singapore’s government insists that Gotabaya is just a visitor and denies that Gotabaya has received asylum status. 

Ranil took over as president. The Sri Lankan public is very angry about this—Ranil was Gotabaya’s ally and represents to the public a continuation of Rajapaksa-style politics. To give you a sense of how unpopular Ranil is, he wasn’t even elected to parliament in the 2020 elections—he actually lost his seat in 2020, but he was able to appoint himself to parliament through the national list.

As Acting President, Ranil labeled the protestors “fascists” and called protestors a threat to democracy—this was an ironic statement from Ranil, since he insisted on remaining Acting President in sharp contrast to what the majority of Sri Lankans wanted.

On 20 July 2022, the Members of Parliament willfully ignored the demands of the people and voted to make Ranil president for the remainder of Gotabaya’s term, which lasts until 2024. 

It’s evident that this crisis will remain unresolved as long as Colombo politicians continue to undermine the democratic will of Sri Lanka’s population in order to maintain or consolidate political power in service to the interests of the wealthy. 

In terms of material to read, I’d recommend a 10 June 2022 piece where Nimanthi Rajasingam provides some excellent and poignant insight about this whole matter. Her analysis has been largely excluded from the Western mainstream media’s discussion—her analysis of the present crisis’s neoliberal roots has especially been excluded. 

2) What are the roots of the current crisis in Sri Lanka? To what extent have the roots of the current crisis been obscured in the media? 

It’s important to recognize that Sri Lanka’s decades-long implementation of neoliberal policies is the root cause of the current economic crisis, although the immediate causes are the political corruption and economic management on the part of the Rajapaksa family. And Covid exacerbated those immediate causes. 

But the Western media won’t cover the neoliberal background of the present crisis.

Moore notes that Sri Lanka was actually fairly committed to large-scale spending on social welfare during the period from the 1940s to the 1970s. Sri Lanka did various things for the people during this period—Sri Lanka provided free education, provided free preventative and curative health care, and had a rice ration program that gave the people rice or flour for free or at a very low cost.

What compelled the government to provide these things for the Sri Lankan people? There was high voter turnout, since citizens were quite politically conscientious due in part to the nation’s early introduction of universal franchise—other factors included pressure from trade unions and from Marxist-leaning parties. And note that the leftist and Marxist-allied movements obtained 25% of all votes cast in the 1947 election—I think that Sri Lankan governments instituted these progressive programs in part based on the fear that there would be a revolution if you didn’t meet the demands of the politically conscious citizenry. 

Ronald Herring is a political economist who’s written extensively on South Asia for decades—he notes that Sri Lanka was designating around 20%–25% of its budget to welfare and social security in the mid-1970s and that India and Pakistan were designating around 2%–3% of their budgets to these things during that same period. 

So you can see why Sri Lanka had—in the mid-1970s—a life expectancy far greater than any of her neighbors on the subcontinent. Sri Lanka’s life expectancy during this period was actually near that of some European nations—that’s a really striking fact to think about. 

So successive Sri Lankan governments invested in progressive programs. But it’s worth noting that most Indian plantation workers in Sri Lanka—who’d initially been brought to Sri Lanka as indentured laborers during British colonial rule—were rendered stateless in 1948 when Sri Lanka became independent. So these workers weren’t entitled to benefit from the progressive programs.

And successive Sinhalese Buddhist majoritarian governments implemented discriminatory policies against the minority Tamils—these discriminatory polices related to language, higher education, access to government employment, and so on. These discriminatory policies provided the basis for the three-decade civil war—I’ve written previously that the Sinhalese community’s rationale for implementing these discriminatory policies had a lot to do with the impact of Britain’s colonization. 

There was a drastic change in Sri Lanka when J. R. Jayewardene came to power in a landslide victory in 1977 and introduced neoliberalism—Sri Lanka had experienced a steep decline in trade from 1970 to 1977, so this context made the transition to neoliberalism easier for J. R. and for his political party. 

And things quickly took an authoritarian turn when J. R. and his government assumed power. A new constitution was ushered in—this new constitution gave J. R. unconstrained executive rule, which he used to implement policies that suppressed trade unions and weakened his political rivals. 

But J. R. was in the Western-led international financial institutions’ good graces, since he was increasingly engaging in export-oriented industrialization—foreign aid organizations began to support him.

Balasingham Skanthakumar has done extensive research on poverty in Sri Lanka—he notes that Sri Lanka’s “neo-liberal economic reforms” have been associated with “growing inequalities of income and wealth”, with “persistent poverty”, with “mass unemployment or underemployment”, and with “precarious employment where jobs are generated”. 

Jennifer Hyndman is a professor at York University—she points out the following about Sri Lanka’s neoliberal policies: 

Economic liberalization meant an end to many of the concessions and patronage relations that had kept the peace between otherwise disparate class and ethnic factions; the glue holding ethnic and class alliances together was effectively removed (Stokke 1998). While foreign dollars began to pour into Sri Lanka, specific Tamil and Sinhala areas remained largely excluded from investment (Sivanandan 1990:241).

With the assistance of the World Bank, J. R. severely weakened the nation’s popular rice ration program under the guise of improving the program—the rice ration program was replaced with an ineffective food stamp program. 

There was no economic rationale for reducing food subsidies—food subsidies were targeted for purely ideological reasons. And J. R. actually played a role in the failed 1953 attempt to eliminate the rice subsidy completely.

Indra Tudawe of the Institute of Policy Studies of Sri Lanka writes the following in her 2001 report on chronic poverty and development policy in Sri Lanka:

Applying 1995 nutritional assessment to present-day population estimates the number of pre school child population suffering from stunting is about 0.33 million; 0.21 million are wasted; and 0.54 million are underweight. Furthermore 0.66 million children suffer from Vitamin A deficiency whilst 0.72 million pre school children are anaemic. Nearly one third of adult population in Sri Lanka has been classified as undernourished.

J. R.’s rule saw a severe weakening of the groups that had historically rallied around Sri Lanka’s universalistic progressive programs. 

Export processing zones were created in Sri Lanka in 1978—these zones gave national and multinational corporations the opportunity to access cheap labor and to not pay taxes. 

There’s been—since 1977—a decline in government spending on education and health care.

And from 1977 to the present we’ve seen neoliberal policies from practically every Sri Lankan government elected to office. 

The result of the neoliberal experiment? The rich have continued to get richer and the poor have continued to get poorer—income inequality has widened in contrast to the pre-1977 period. There are 2012 statistics from the Central Bank of Sri Lanka indicating that the richest 20% of households “account for 54.1 percent of income share”, that the poorest 20% of households “have only 4.5 percent”, and that the middle 60% of households “have a lower combined income than the richest 20 percent”—that’s a remarkable situation. 

And Sri Lanka has reduced social spending as the rich have continued to get richer. For example, there are 2011 statistics from the World Bank showing that Sri Lanka was spending less on education than any other government in South Asia—a stark contrast to the situation decades prior. 

Sri Lanka right now allocates a greater percentage of its GDP to the military than do Germany, Japan, Sweden, Bangladesh, and China—Sri Lanka’s military budget continued to expand even after the civil war ended. 

So we’ve seen the expansion of military spending and—at the same time—a lack of government support for Sri Lanka’s war-impacted population. 

Regarding the present crisis, I mentioned that Gotabaya’s corporate tax cuts led to a decrease in government revenue that caused Sri Lanka to default on its loans to international creditors—the nation didn’t have enough foreign currency to pay off the loans. 

Moore has argued that the institutionalized pressure for tax exemptions contributed to the hollowing out of Sri Lanka’s revenue base and that this hollowing out contributed to the nation’s fiscal crisis—I think that it’s clear that this process contributed to Sri Lanka’s present economic crisis.

The Sri Lankan government has—since 1977—been very inept when it comes to effectively collecting direct taxes from its citizenry. 

The explanation is that this ineptitude serves the interests of Sri Lanka’s wealthy class. According to Moore, “governments have been willing to allow the revenue system” to “decay” because “this has been in the immediate material interest of the wealthier sections of the population”—these “wealthier sections” are those who (A) “pay little or no direct tax on their (fast-growing) incomes, property values and other wealth” and (B) “are not directly impacted by the degeneration of under-funded public education, health and social protection systems”. 

Ranil is actually J. R.’s nephew and is—like his uncle—a staunch proponent of neoliberalism. 

You can get a foreshadowing of the neoliberal policies that Ranil will likely pursue as president if you look at his record from the early 2000s when he was prime minister and his political party controlled the legislature—his record includes a 2002 strategy paper that fondly reminisces about the neoliberal reforms of the late 1970s and that advocates: 

• privatizing Ceylon Electricity Board and Ceylon Petroleum Corporation 

• privatizing or partly privatizing public services like health care and education

• provisions that would allow international companies to monopolize profits 

• labor market “flexibility” that would strip workers of protections

• creating additional export processing zones

• corporate tax cuts 

A critic of the 2002 strategy paper notes the following: 

the recommended policies appear to be designed to bring the country more into conformity with the IMF and World Bank’s traditional recipes, without offering evidence that this formula will produce better results than the current and past policies of the country.

These are the types of neoliberal policies that Sri Lankans will likely have to live with—and that Western-dominated international financial institutions will surely welcome—if Ranil remains president. 

So this is basically what the overwhelming majority of the Western media won’t cover—the neoliberal roots of the present crisis in Sri Lanka.

3) Where do you think that the media is doing a good job and a bad job? What do you think about Heather Chen’s 15 July 2022 piece about Sri Lanka? 

I read the article—it’s good to see that the article briefly mentions the relevance of some of the neoliberal policies of Gotabaya’s government.

The article mentions that Sri Lanka is currently in debt to China—there’s a myth that China has somehow engaged in debt-trap diplomacy in a way that’s relevant to the current economic crisis, but the article doesn’t address this myth. 

There’s a really useful article from Benjamin Norton that links to various mainstream sources—like The Atlantic and like the BBC—that convincingly debunk this myth. 

But there are some articles in the Western media that seem to scapegoat China—I think that the idea is to use this theme of debt-trap diplomacy in order to condemn China on a global scale and scare countries away from forging closer ties with China. 

4) What can Westerners do to help Sri Lankans? 

Westerners can donate money to various organizations that are working to help provide critical services to crisis-impacted Sri Lankans. 

Sarvodaya is one organization that I personally know does great work—it’s a community movement that has existed since the 1950s and that has historically provided programs to villages across Sri Lanka. So people should consider donating to that organization. 

And more abstractly, it would be useful to raise greater awareness in the West about the neoliberal roots of Sri Lanka’s present crisis—there needs to be opposition to the disastrous neoliberal policies of international financial organizations like the World Bank and the IMF. 

Politically speaking, Westerners can (1) express solidarity with the protest movement and (2) speak out against the root causes that are responsible for this crisis. 

But the protest movement is decentralized—there’s no centralized activist organizational force that Westerners can donate to or anything. And I think that it’s a beautiful thing that the protests emerged organically—these protests are happening mainly because government policies infuriated the people. 

Sri Lankans are fed up with corrupt politicians and with the fact that there’s no longer government investment in progressive programs that help workers and the vulnerable. 

It’s unclear which direction the country will go, but experts have pointed out that the crisis won’t end until things genuinely change.