It’s tempting to look at Sri Lanka and then look away. To think that it can’t happen to you. To say that we were just ruled by idiots, didn’t plan ahead, and made our own fate. This is true, but look at America, or the UK, or any supposedly safe country. Look at the trajectory you’re on. We were following you. Where do you think you’re headed to? How do you feel about your own government? Are you not floating on debt? Have you not also deindustrialized? Are your energy prices and inflation rates not rising too? Everybody’s gossiping at our funeral, but jokes on you.
Sri Lanka was the first country to neoliberalize after the 1970s. As former Central Bank Governor Indrajit Coomaraswamy said,
“We got away with this for years living beyond our means because from 1977 we liberalized the economy in 1977. We were the second country after Chile to liberalize our economy of those countries that went down the autarchical route. So the traditional donors were extremely keen to demonstrate good development outcomes in a country which had a liberal polity and a liberal economy so they gave us very generous amounts of foreign aid at that time when we were a low-income country so that’s how we managed because we lived beyond our means.”
Hence what’s collapsing here is the liberal order, that Francis Fukuyama said was supposed to mark the end of history. This was not how anyone actually developed (including the west) but was in fact a debt trap. Sri Lanka became ineligible for much foreign aid and then got passed onto vulture capitalists at credit card rates. It is that financing which has completely dried up, and taken the country with it. And we’re just the canary in the capitalist coal mine. Liberalism has just been a debt trap for poor countries, and that trap is clanging shut.