Image courtesy AlJazeera
The petition from 182 economists and development experts calling for the cancellation of Sri Lanka’s sovereign debt has provoked rather interesting discussions in Sri Lanka and elsewhere. W. A. Wijewardena calls these petitioners “academics” in a recent article, but the latter constitute a diverse crowd: they include, as Dayan Jayatilleka points out, “prize-winning celebrity economists and a public intellectual ‘rock star’ former finance minister.” That ex-minister, Yanis Varoufakis, is an expert on and critic of IMF reforms, having taken part in negotiations with the organisation during the Greek debt crisis.
What is Sri Lanka to make of this petition, and more importantly, what are we to do with it? That it has divided academic opinion is a no-brainer. To start with, the country’s economic establishment have been dismissive, if not condescending. In an article in Al-Jazeera, for instance, Wijewardena, one of the leading faces of Colombo’s economic circles, observes that debt cancellation for Sri Lanka “might lead to the collapse of the current global financial system.” He also argues that many of the petitioners “are not economists”, and suggests that they must instead call for more accountability, since “when debt is cancelled, (corrupt political elites) don’t have to repay and can continue to borrow more.”
Wijewardena’s observation that “many of the academics are not economists” belittles the fact that the economists from among the petitioners are highly respected figures who have had a hand in influencing policy in their countries. I am not talking of Varoufakis only. Take Thomas Piketty. An expert on public economics, Piketty has penned a number of acclaimed books on wealth and income inequality. A critic of the global financial system, Piketty holds some important academic posts at the Paris School of Economists and the London School of Economics. He also served as an advisor to Ségolène Royal in 2007 and was appointed to the British Labour Party’s Economic Advisory Committee in 2015.
Jayati Ghosh is another case in point. Having held important posts at Cambridge University, Ghosh has been lauded by institutions like the United Nations Development Programme (UNDP) for her work on economic development. Ghosh’s mentor at Cambridge, Terence Byres, was an important peasant studies scholar and founding editor of no fewer than three leading journals on the subject, including the Journal of Agrarian Change. Her more recent work has focused on sovereign debt; not surprisingly, she has featured Sri Lanka in many of her essays and interventions, including at seminars. In contrast to the Sri Lankan economic establishment’s view of her and the other petitioners, Ghosh is not an “academic” confined to university circles; she is also a contributor to the popular press.
A not inconsiderable number of the petitioners are scholars from diverse fields who have contributed to research on Sri Lanka. These include not just Sri Lankan scholars like Kalinga Tudor Silva, Kanishka Goonewardena, and Devaka Gunawardena, but also Ann Blackburn of Cornell University. Wijewardena’s contention that the petitioners represent a “galaxy of academics” is in that sense correct, but it undermines the fact that many of these academics have focused on Sri Lanka in their work. It also ignores the fact that many other scholars, policymakers, and institutions have been calling for debt cancellation too: conspicuous by her absence in the petition, for example, is Asoka Bandarage, who has frequently pointed out the geopolitical implications of the debt crisis for Sri Lanka.
Since Wijewardena’s take on the petition is by far the most comprehensive authored by a Sri Lankan academic and economist, it would do well to focus on what he personally thinks of it. In an article to DailyFT – where, in stark contrast to the Al-Jazeera article that quotes him, he admits that “several” of the petitioners are economists – Wijewardena observes that, if seen through, the petition will herald “a new world economic order.” Wijewardena exudes a rather oblique attitude to this order; he does not explicitly say whether he’s for or against it, instead conceding that it is a “fine critique” of the current system. Whereas he is against the petition and its call for debt cancellation in Al-Jazeera, in his essay he is much more nuanced about and open to what the document is saying.
For instance he observes, very correctly, that the post-Cold War economic order, which crowned the free market and the neoliberal mantra of privatisation, deregulation, and welfare cuts, promised prosperity for everyone but delivered nothing. Such goals, he admits, were “elusive”, and their very elusiveness provoked anger and resentment when “the gap between those who are prosperous and those who are not” began to widen. Wijewardena also points out that the main targets of attack have become the IMF and the World Bank: in other words, the most consistent, articulate institutional advocates of the “interdependent and interconnected” financial system that the 182 petitioners criticise.
These are valid points, and they make sense. They also reveal the geopolitical and foreign policy implications of the current debt crisis. The origins of this crisis, in that sense, can be traced back to the early 1990s. The immediate post-Cold War period seemed to herald the beginning of a new era. From the end of history and the clash of civilisations to the unipolar moment, the narratives that foreshadowed this era all centred on a specific political and economic system, namely, capitalist liberal democracy. While political scientists like Francis Fukuyama, Samuel Huntington and Charles Krauthammer felt differently about what this system should evolve into, they all believed in its inherent superiority. European thinkers from the post-Marxist Left and the anti-authoritarian “radical” centre, prominently Anthony Giddens and Bernard-Henri Lévy, soon became its advocates as well.
Wijewardena implies that the petition on Sri Lanka targets the old Washington Consensus that preceded and undergirded these trends. He finds it surprising that a former advocate of this Consensus, Dani Rodrik, should himself be among the signatories.
But this is hardly surprising. A number of academics and economists, even policymakers, who worked for or were supportive of these paradigms, have now turned their backs on the orthodoxies that undergirded them. These include not only Joseph Stiglitz, who came to Sri Lanka seven years ago and cautioned the then government to move away from orthodox development theory but also Robert Wade and Robert Reich, two among many academics whose views on development have not been promoted enough in Sri Lanka. Enthusiastic at first about the post-1991 order, they have since become fervent critics.
We need to put their critiques in perspective. The triumph of the Washington Consensus, and subsequently of capitalist liberal democracy, was accompanied by three trends that were to prove antithetical to these paradigms. The first was the financialization of the world economy, begun by the Reaganist and Thatcherite revolutions, hastened by the Clinton and Blair governments, taken to its logical conclusion by the George W. Bush administration, and culminating in the 2008 mortgage crisis and Great Recession. The second was the rise of the state capitalist model, not just in China, but also in Russia, approximately at the time of the decline of the neoliberal free market model in 2008. The third was the deindustrialisation of the economies of the United States and Western Europe.
These developments provoked a backlash, a backlash which found its most articulate expression in the rise of the extreme right, or the “alt-right”, across the Global South and Global North. Not surprisingly, the dynamics of the one fed the other: thus, while the alt-right in the Global South used fears of Westernisation and foreignization, its counterpart in the Global North exploited resentment against “brown immigrants.” The epitomes of these processes can be found, in the South and the North, in the election of Narendra Modi (India) and Donald Trump (the US). They were, then as now, the grand culmination of an ideal but flawed economic and political project, which matured and peaked in the Clinton-Blair years, and eventually went on to produce its very demise.
The petition on Sri Lanka does not, to be sure, allude to these developments. And yet it has much to do with widespread feelings of frustration, anger, and fury at a system that has clearly run its course. The economic and even foreign policy establishment in Sri Lanka may or may not heed, still less amplify, the petitioners’ call. But the latter is indicative of some important geopolitical developments which have been decades in the making and of which the debt crisis is the most recent symptom. The US, and to an extent Western Europe, have realised the pitfalls of a system that has crippled their economies, beyond repair. Whether Sri Lanka can benefit any longer such a system, which these countries are slowly rejecting, is questionable. In the very least, it is highly debatable.
