Repeating the debt cycle when the solution is to exit it

President Wickremesinghe is now piggy-backing on the crisis and the IMF recommendations to drive through a dogmatic, free-market fundamentalist, obsolete economic strategy

The very logic of the (bi-partisan) economic solution of the (bi-partisan) establishment tends to repeat the cycle, when the problem is how to exit it. Their solution is intended to use an IMF agreement to unlock access to the world’s private money markets, which is exactly how we got into the debt trap in the first place. The establishment is the creator of the crisis, not its solver

The UN Human Rights High Commissioner’s Report gives international recognition and legitimacy to ‘the protest movement’ of Sri Lanka’s youth.

Meanwhile, Sri Lanka’s magnificent victories at the Asia Cup cricket and Asian netball contain a key lesson. Never count Sri Lanka out. Sri Lanka and Sri Lankans are always capable of a comeback, whatever the odds. This was proved by the victory in a 30-year war and again in the Aragalaya this year which threw out a powerful President. In short, ‘Sri Lanka Can!’ especially when the energies of the island’s youth are fully engaged. 

How can we apply this to the current crisis? One obvious lesson is that young people who showed tremendous initiative, civic consciousness, energy, dedication and creativity, by participating in the Aragalaya, should not be victimised, arrested, jailed, persecuted. It is these youth, not a clutch of old male politicians, who constitute the engine of our recovery as a country.  

A second, perhaps deeper lesson is to do with paradigm. The victorious Sri Lankan cricket and netball teams were confident and determined that they could win, with external inputs and support to be sure, but primarily through its own human resources, talents, energies and capacities. It is patriotism – ‘Lankanism’—in the best sense. 

Paradigm problem 

The very logic of the (bi-partisan) economic solution of the (bi-partisan) establishment tends to repeat the cycle, when the problem is how to exit it. Their solution is intended to use an IMF agreement to unlock access to the world’s private money markets, which is exactly how we got into the debt trap in the first place. The establishment is the creator of the crisis, not its solver.  

Only the non/anti-establishment movement and political parties are thinking and talking of how to exit the cycle; how to engage in deep domestic restructuring – changes in the system or change of the system—that enables Sri Lanka to exit the debt cycle rather than be doomed to repeat it.

The establishment’s solutions are all outward-oriented. The loop of its thinking begins and ends with the external, the outside, the international. The solutions do not start from within and go outside, but start from outside and are sought to be imposed or applied within. The solutions are not based on the national and reach out to the international, but do the opposite. This is true of economic policy. 

While it is necessary to rupture with narrow nationalism which has blighted Sri Lanka’s development, the establishment has turned its back on ‘the national’. Our sports teams and of course the Aragalaya showed what the healthy love of ‘the national’, i.e., the (inclusive, pluralist) Sri Lankan, looks and feels like. It is that recognition of the strength of the national as foundational, that must be reflected in our survival and recovery strategy and economic model. 

Whether it is the Rajapaksas’ dependence on China and the assumption that the island’s location makes it so desirable that China’s support will be open-ended (assumptions that aren’t China’s fault), or President Wickremesinghe, the UNP and others’ invocation of the IMF, rating agencies, renewed access to foreign private borrowing, export-led growth, and one-size-fits-all economic ‘orthodoxies’, the dominant paradigm is external-centric or what Samir Amin called ‘extraverted’. 

Latin American literary giant Eduardo Galeano authored a famous book titled ‘Open Veins of Latin America’. As the FSP’s Pubudu Jayagoda and Duminda Nagamuwa followed by the JVP’s Wasantha Samarasinghe have conclusively demonstrated, the abolition in 2017 by Prime Minister Ranil Wickremesinghe of the 1953 Exchange Control Act led to an enormous outflow of export earnings from Sri Lanka. The 1953 Exchange Control Act was not abolished by J.R. Jayewardene and Ronnie de Mel or President Premadasa, because it did not impede the opening-up of the economy or attracting foreign capital inflows. During his 2015-2019 stint as PM, Ranil just went ahead and did it anyway. The ‘open veins’ of Sri Lanka contributed mightily to our contemporary crisis of hard currency. 

This is not an argument for an inward-looking economic strategy such as that adopted by the United Front government of 1970-1977. Still less is it an argument for a National Economy or Jathika Arthikaya. 

It is however, an argument for an economic model which is based on what Samir Amin called an ‘autocentric’ –not autarchic—as distinct from an ‘extraverted’ strategy. 

More broadly, it is also an argument for the kind of intellectual self-confidence which characterised Sri Lanka when it was internationally considered a model; a self-confidence manifested in what Godfrey Gunatilleke has called ‘A Sri Lankan Model of Development’. 

Gamani Corea and Godfrey Gunatilleke were hardly nationalists; they were Ceylonese patriots with cosmopolitan minds, who were critical of economic orthodoxies while able to select that which was valuable in all these schools of thought and blend them in an eclectic mix which was most appropriate to each sector, stage and problem of Sri Lanka’s economic development. 

Just as in the case of the Sri Lankan cricket teams that won the World Cup and the Asia Cup, the Corea-Gunatilleke generation was one that enabled Ceylon/Sri Lanka to punch considerably above its weight in the world. I am not suggesting a return to the specific policies they applied, but a return to that perspective and a resumption of their quest for a ‘Sri Lankan model of development’ based on an encyclopaedic knowledge of the history of economic ideas and the state of the contemporary debate.

I can do no better than to recall Sri Lanka’s economic policy-makers, current and aspirant, to Godfrey Gunatilleke’s most recent reflections on policy paradigms and their relevant application in the pages of the Daily FT, October 8, 2021. (A-Note-on-Krugman-and-Economic-Policy-2.pdf (gamanicoreafoundation.lk))

That the Sri Lankan establishment – including the economic establishment—of today is not the agency of any such quest, is a major component and causative factor of our current crisis. However, outside of the establishment, there are those who start from the inside out and from bottom up. President Ranasinghe Premadasa’s spectacular development success was fired precisely by such a paradigm and project. 

A National Plan, a ‘Jathika Salasma’ is a term which kept cropping up in the Aragalaya and in the queues, but is absent from the discourse of the bi-partisan economic establishment. The real dividing line in Sri Lankan discourse—cutting across Government and Opposition, Parliament and outside it—pertaining to the crisis, is that between these two ‘sets’:

A. Those whose thinking is independent, critical-rational, creative and citizen-centric; those who are not for total self-sufficiency or absolute self-reliance as a goal, but prioritise the building-up of Sri Lankan economic self-sufficiency to its optimum capacity; those see the lack of and need for a National Plan as the key link, while determined to clean up our own act ourselves and stand on our own two feet while engaging in selective de-linking and selective re-linking; those who see and wish to tap our own potentials as an island by engaging in a national restructuring which primarily benefits the 99%. 

B. Those whose thinking is dependent, dogmatic, formulaic and corporate-centric; those who are determined to impose externally derived models and ‘solutions’ and look primarily to external agencies, patrons and rescuers. Their agenda of domestic reordering gives priority to the economic elites and places the burden of the crisis as well as recovery upon the shoulders of the citizens who are the least responsible for it and who contribute most through their sweat, toil and brainpower to produce the wealth of this country.  

Broadly speaking the Aragalaya, the various social movements especially of the working people, the Left and the progressive Centrists, are oriented towards Category A. 

The Right and Centre-Right are oriented towards Category B.  

President Ranil Wickremesinghe shares at least two qualities with his predecessor Gotabaya Rajapaksa. Firstly, they are both equally inexperienced in the post of the executive presidency. Secondly, they both share the quality of insouciant arrogance. It didn’t help Gotabaya because in relying on only intelligence briefings he lost touch with public opinion on the ground. In Ranil’s case, his political track record shows that political success has been the greasiest of greasy poles

Legitimacy vacuum and Ranil’s revolution

Mangala Samaraweera once said that Ranil Wickremesinghe was the best President that Sri Lanka never had. He also said that Sir John Kotelawala was the best post-Independence leader Ceylon/Sri Lanka had. If Ranil was the best President Sri Lanka never had that was because the Sri Lankan people never elected him their leader—or even to Parliament the last time around. Now we have him as President, thanks entirely to the 134 votes of the ruling SLPP MPs, and we shall see if Mangala was correct. 

President Ranil Wickremesinghe shares at least two qualities with his predecessor Gotabaya Rajapaksa. Firstly, they are both equally inexperienced in the post of the executive presidency. Secondly, they both share the quality of insouciant arrogance. It didn’t help Gotabaya because in relying on only intelligence briefings he lost touch with public opinion on the ground. In Ranil’s case, his political track record shows that political success has been the greasiest of greasy poles. 

President Wickremesinghe blithely told USAID head Samantha Power that he’s giving the political parties in Parliament six months to agree on electoral reforms and if they don’t, he’s going for a referendum. 

The problem is not so much the Parliament but the fact of an utterly unelected President – unelected both to the presidency and even to Parliament—which leaves a huge problem of a zero-mandate and legitimacy vacuum at the top of the system in a time of acute economic crisis and excruciatingly difficult reform. The primary problem is not the Parliament, it is the President. 

Electoral reforms are no prerequisite for an early election at any level which would provide a mandate. The requirement of a mandate has been noted by the head of the visiting IMF delegation and just now, by the outgoing UN Human Rights High Commissioner in her Report to the Human Rights Council.  

In the early-mid 1970s, even after the crushing of the JVP’s April 1971 insurrection, young radicals were enthralled by the possibility that a revolution was possible due to a coincidence of two facts. 

Firstly, there was unprecedented economic privation and mounting discontent at the mass level. Secondly, there was much chatter about a National Government, a grand coalition of the SLFP and the UNP, because J.R. Jayewardene had mooted the idea from the Opposition (quite contrary to R. Premadasa who had launched a new populist oppositional project called the Citizens’ Front) and it was being endorsed and echoed by Anura Bandaranaike, the Prime Minister’s son (much to the disgust of his more radical sisters). 

For the radical left this was great good news, because the establishment would be unified, polarising politics drastically, and especially in the context of a screaming economy, would make a big, fat, easy target. Fortunately for the system, the bourgeoisie turned out to be much smarter than that, the JR-Anura convergence project was shot-down and a bi-polar balance continued. Whenever the crisis got really very intense, through civil wars and foreign interventions, elections always enabled the safety-valves to be opened up and the system attained equilibrium once again.

When ex-President Kumaratunga dusted off the JR-Anura formula and put the SLFP’s Maithripala Sirisena and the UNP’s Ranil Wickremesinghe together, polarisation and radicalisation followed but not along a Right-Left axis. The SLFP broke apart with the overwhelming bulk rallying around former President Mahinda Rajapaksa while things got dangerous with the Trumpian candidacy of Gotabaya Rajapaksa which swept into office on the menacing wings of the Islamophobic backlash after the as-yet-unexplained Easter Sunday massacre.

Three factors prevented a system-overthrowing revolution in Sri Lanka. 

I. The country always had a popularly elected leader (with the solitary exception of the low-key, stop-gap presidency of D.B. Wijetunga, following the suicide-bomb assassination of President Premadasa).    

II. The country always had a robust two-party system.

III. The country always had the buffers/shock-absorbers of a strong public sector, social welfare and upward social mobility. 

Today, we have none of these three factors. 

1.President Ranil Wickremesinghe isn’t popularly elected to anything, has no popular mandate for anything, and yet does not behave like anon-confrontational, consensus-building President. 

2. The two-party system of alternation has been wrecked by the bloc of the ruling SLPP and the unelected UNP of the unelected President Wickremesinghe. 

3. The country is in deep economic crisis and the majority is suffering in unprecedented privation, while the neoliberal economic model of President Wickremesinghe is to the right of the IMF, the Biden administration and any previous Sri Lankan government including that of J.R. Jayewardene. Massive global evidence shows that it cannot but trigger socioeconomic polarisation, radicalisation and upheaval (which repression can only accelerate). 

This model has been called into question throughout the world following the triple shocks of economic crisis (2008), popular upheaval and COVID-19, and been supplanted by a more balanced equation between the global and the national, the private and the public. 

Things may not have been quite this fraught had the two-party system remained intact. Instead, we have a significant but fragmented Opposition. There are many Oppositional currents or tendencies, parliamentary and extra-parliamentary, and all of them play a valuably positive role. However, what we do not see is at least a two-coalition model; an Opposition coalition to healthily counterbalance the unhealthy convergence of the SLPP and UNP. We do not even see any political coalitions built around the two main, competing Oppositional centres, the SJB and JVP. This absence makes for disorder rather than an alternative order in the political system. It makes for chronic instability, despite the current appearance of stability.  Taken together, this cluster of factors, political and economic, constitute a time-bomb ticking under the very foundations of Sri Lanka’s political, economic and social system

When Prof. Joe Stiglitz, winner of the Nobel Prize for Economics, shared a platform with then PM Wickremesinghe and stressed the need for an equity-driven economic strategy, he was studiedly ignored by Prime Minister Wickremesinghe and his economic policy team through his 2015-2019 stint. Instead, they tapped Prof. Ricardo Hausman, a far-right Venezuelan notorious in Latin America for his free-market fundamentalism.           

President Wickremesinghe is now piggy-backing on the crisis and the IMF recommendations to drive through a dogmatic, free-market fundamentalist, obsolete economic strategy.

As if all this wasn’t bad enough, Wickremesinghe has also lost the most valuable of real estate, the moral-ethical high-ground, by arresting over 3,500 participants in the unarmed popular uprising, the Aragalaya, and detaining the island’s most popular student leader without even producing him in a court of law, under the draconian Prevention of Terrorism Act (PTA). And Wickremesinghe has done so while locked in the enabling embrace of the reviled Rajapaksa clan.

Things may not have been quite this fraught had the two-party system remained intact. Instead, we have a significant but fragmented Opposition. There are many Oppositional currents or tendencies, parliamentary and extra-parliamentary, and all of them play a valuably positive role. However, what we do not see is at least a two-coalition model; an Opposition coalition to healthily counterbalance the unhealthy convergence of the SLPP and UNP. We do not even see any political coalitions built around the two main, competing Oppositional centres, the SJB and JVP. This absence makes for disorder rather than an alternative order in the political system. It makes for chronic instability, despite the current appearance of stability. 

Taken together, this cluster of factors, political and economic, constitute a time-bomb ticking under the very foundations of Sri Lanka’s political, economic and social system. 

Ideally, Sri Lanka needs a social democratic solution—not necessarily a Left solution—to its current crisis. It needs an economic formula of public ownership/control and private management. However, the two potentially social democratic entities, the SJB and the Freedom People’s Congress (the Dullas-GL group) have yet to settle accounts with their respective pasts (UNP and SLPP). If they do so and form a progressive coalition with each other, Sri Lanka has the safest way out. If not, the citizenry will, quite logically, be ready to give the Left(s) the chance to guide the destinies of the nation for the first time in 75 years.