EPW reviews Lanka’s Economic Situation

Economic and Political Weekly as presented in Daily News, 23 January 2015

While the election victory for President Maithripala Sirisena was due to a unique political moment that united minorities and many in the Sinhala electorate to vote out an authoritarian regime, expectations of major change in economic policy need to be tempered. The momentum gained from overthrowing an authoritarian regime should now be channelled into a radical democratic agenda for social justice through mobilisation and struggle in which the leftist forces in Sri Lanka have to play an important role.

The Collective for Economic Democratisation (ahilan.kadirgamar@gmail.com) is an organisation in Sri Lanka that focuses on historically grounded analysis of political and economic issues.The people of Sri Lanka have stood their ground for democracy, defeating a well-entrenched regime and a seemingly invincible leader. One of the strongest messages emerging from Mahinda Rajapaksa’s defeat in the elections is that change is possible – change that is sparked by the common citizenry through democratic means.

During the run up to Sri Lanka’s January 8 Presidential polls, there was considerable opening up of space for dissent. Voices that had for long been silenced and suppressed during the last phase of the war, and remained so with the militarised and authoritarian politics into the post-war era, were beginning to be heard. The popular critique of the Rajapaksa regime was framed around corruption, nepotism and centralisation of power, even as rural Sri Lanka was increasingly feeling the pressure of rising costs and dispossession.

The powers of the executive presidency may be clipped soon, if President Maithripala Sirisena keeps his key election promise. Sri Lanka may also go for parliamentary elections in the near future, resulting in a further reconfiguration of political forces. In this context, issues like a political settlement, demilitarisation and a more equitable economic policy package are likely to enter the debate.

In this article, we focus on the politico-economic moment; the neoliberal policies shaping the economy leading to the current conjuncture, the possible economic trajectories with the reconfiguration of politics and the challenges before the Left.


Neoliberal trajectory: Under the Rajapaksa regime over the last decade, a neoliberal economic path was steadily consolidated. While Sri Lanka has been shaped by neoliberal policies by successive regimes since the “open economy” reforms after 1977, the civil war had its costs; it curtailed the inflow of capital and slowed economic growth. With the end of the war in 2009, global finance capital and investment by bilateral donors such as China contributed to a massive transformation of the economy with infrastructure and urban development.

The neoliberal trajectory of this post-war economy involved tremendous financialisation of the economy, with relatively high levels of economic growth between 6 per cent and 8 per cent dependent on construction with foreign borrowings. The structure of foreign debt also went through a transformation, with high-interest short-term loans for sovereign bonds and euro dollar bonds for commercial banks and bilateral aid from China at commercial rates. Sustaining such growth through international debt required rolling over previous loans with newer and larger loans. Even as the chances of debt-related economic crisis increased, the Rajapaksa regime found new avenues of financial flows including by encouraging further real estate related foreign investment, expansion of casinos and profit making private universities and hospitals.

The new government will be trapped within this neoliberal economic trajectory set over the last few years. It will be under considerable pressure to continue on the path of financialisation to avoid an immediate debt-related crisis but in the process it could prolong the onslaught of a deeper future crisis. While President Sirisena’s election manifesto claimed it would increase state spending in health and education, it is to be seen whether the new government has the political will to raise the necessary resources and revive the legacy of free education and health in Sri Lanka.

Parliamentary politics after the elections is very much still in flux. The forces which manoeuvred regime change come from the entire spectrum; from the hard neoliberal elite, populist forces and the Sinhala Buddhist right. Unlike the Rajapaksa regime which avoided overt neoliberal rhetoric any consolidated United National Party (UNP) regime is likely to be explicitly market friendly, going by past experience. Thus, if a UNP regime gains confidence, it may even take forward the agenda of labour reform and privatisation in the interest of capital. However, such moves are likely to be opposed by forces such as the Janata Vimukti Peramuna with a rural and working class base and even the Sinhala Buddhist Jathika Hela Urumaya.

These are the central questions facing the political economy of Sri Lanka. What will be the continuities of the neoliberal trajectory set by previous regime? What are the possibilities of an economic policy shift, either further to the neoliberal right or towards a social welfare direction? Much will depend on the kind of the regime that crystallises following the fall of the Rajapaksa regime, but also the kind of resistance and progressive mobilisations that utilise the recently-opened democratic space.

garment workers garment workers

Role of the Left: Given the complex, worrisome economic reality of the country, what will be the role of the long-declining Left in Sri Lanka? One of the central strategies of the Rajapaksa regime was to co-opt all opposition forces. The old Left parties became part of the Rajapaksa patronage network and most trade unions were co-opted or broken. Thus the leftist and labour forces became ineffective in opposing the regime.

In recent years, sections of the Left split and opposed the regime and trade union agitation has been on the rise, but the three ministers belonging to the Left parties shamefully supported Rajapaksa till the end. With the opposition campaign, many Left actors were reactivated and played their role in contributing to the defeat of the Rajapaksa regime. But it remains to be seen if a reconfiguration of the Left is possible, given the split down the middle of most Left parties and the now open democratic space. Much will depend on the younger generation of activists including students, teachers and workers politicised in recent years.

Labour in Sri Lanka is considerably dispersed and in a precarious state. The garment-producing labour in the Free Trade Zones, migrant labour to west Asia and the estate labour together bring much of the foreign exchange earnings for the country. And these three sectors also point to the changes in the relationship between the rural and the urban through migration, and have created new forms of social and economic life.

The agenda for the Left then has to begin by conceptualising the transformation in the conditions of labour underway over the last few decades, including the challenges of organising labour. The new regime that emerges out of the fall of the Rajapaksa regime may continue in the neoliberal path set in the late 1970s and the accelerating neoliberal polices in the post-war context. Will sections of the Left and organised labour that worked towards democratic change, rise up to the new challenge of finding alternatives?

The defeat of Rajapaksa did not come easy. In addition to a rather last-minute, strategic re-alignment of political forces, a host of other actors played their part consistently, by way of putting up strong resistance braving serious threats. In recent years, workers and fisher-folk protesting policy changes have been shot and killed, students have consistently braved tear gas and water cannons to oppose privatisation of education and residents of villages have been attacked by the security forces when they protested pollution and dispossession of their water and land.

While regime change signifies a democratic breathing space, it may not necessarily signify any radical shift. The democratic space that opened up with the various actors becoming vocal in the context of the elections could now give away to the pronouncements of new experts and the policies of politicians complicit in Sri Lanka’s downward deterioration. That will be a tragic squandering of the opportunity to address the crisis of state and society in Sri Lanka.

The momentum gained from overthrowing an authoritarian regime by the peoples’ struggle should now be channelled into a radical democratic agenda for social justice.

See more at: http://www.dailynews.lk/?q=features/will-lankas-neoliberal-economy-change#sthash.wclSfdQt.dpuf


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