Business - Page 7

Sunak: What He Doesn’t Want You to Know


Prime minister Rishi Sunak – reportedly the richest MP in Parliament – would be a boon for the financial lobby, tax justice campaigners have warned.

As talk turns to the next Conservative leader, the man trounced by Liz Truss just weeks ago is now the favourite to replace her. But experts say Sunak has not been transparent with his finances and that his hedge fund background raises questions about his commitment to fighting tax avoidance.

His profile has risen sharply since he became chancellor in early 2020, just weeks before the first lockdown began. But critics say a slick public marketing campaign has disguised a man with an ultra-privileged background, who is a committed Thatcherite ideologue.

Here’s the openDemocracy guide to the man who might just end up as the UK’s next prime minister, originally published in January 2022.

He went to private school

Sunak marked his first year in the Exchequer by tweeting two photos of himself: one as a child in school uniform, and one as the chancellor, standing outside Number 11.

He wrote: “Growing up I never thought I would be in this job (mainly because I wanted to be a Jedi) […] It’s been incredibly tough but thank you to everyone who has supported me along the way.”

The message carefully tip-toed around his privileged upbringing. Until the age of 11, Sunak attended Oakmount Preparatory School and then the Stroud Independent Prep School,  the latter of which now charges fees of up to £18,500 a year.

From there, he studied at King Edward VI School in Southampton (now £17,000 a year) before moving to Winchester College (now £43,335 a year).

Five chancellors and one prime minister have attended Winchester, one of England’s oldest public boarding schools and a long-standing rival of Eton, before Sunak.

“[Sunak’s] tweet made me smile,” said Richard Beard, an author whose latest book ‘Sad Little Men: Private Schools and the Ruin of England’ assesses the private education system and the many politicians that have been through it.

“The idea that, while studying in Winchester College, he would have never thought he would be at the top of government is very unlikely to me. Leadership qualities are one of the things that they teach you and you’re bound to think of your future in those terms.

“So he would definitely have thought that that is the kind of job that he’d be in, even if he didn’t explicitly think of chancellor of the exchequer.”

In media profiles, Sunak’s allies describe him as “immaculate”, “calm” and “organised”, qualities befitting of a former Winchester head of college. None volunteer that he is empathetic or compassionate. When given examples of people who are experiencing hardship in Parliament or press interviews, as he was on ‘Good Morning Britain’ last year, Sunak listed policies in response, but offered no consolations.

Beard, whose book is partly based on his own experiences, believes all-male boarding schools emotionally harden their students. To survive, he says, boys cannot show any vulnerability among their peers.

“If you repress emotion for yourself then ultimately it becomes very easy to repress feelings for other people,” he argues.

And while boarding schools like Winchester may prepare students well to advance in politics, Beard says they instil a worldview that is far from ordinary.

“Money is at the centre of it all because everyone knows it costs a lot of money, including the boys, but the actual money is abstract. The needs of everyday life are simply taken care of for you,” said Beard.

“How can you actually then think in terms of people struggling for five pounds and ten pounds?”

He cut benefits

Last year, Sunak was heavily criticised for axing a £20-a-week increase to Universal Credit that had helped some of the poorest families through the pandemic. More than 200,000 would have been pushed into poverty as a result of the cut, according to research by the Joseph Rowntree Foundation.

Just weeks before the cut was confirmed in July, the chancellor requested planning permission to build a private swimming pool, gym and tennis court at the Grade II-listed Yorkshire manor that Sunak and his wife, Akshata Murty, purchased for £1.5m in 2015.

After several MPs from his own party spoke out against the Universal Credit cut, Sunak increased in-work benefits in his Autumn Budget – but not by enough to offset the cut.

He has a lot of money

The Sunaks’ Georgian mansion, where locals described attending parties with liveried staff pouring champagne from magnums, is not the only property they own. There is also the £7m, five-bedroom house in Kensington, west London; a flat, also in Kensington, that the couple reportedly keep “just for visiting relatives”; and an apartment in Santa Monica, California.

The chancellor’s extensive property portfolio is just one source of his wealth. After studying at Oxford University, Sunak went on to work for US investment bank Goldman Sachs for four years. He left to pursue a business degree at Stanford University in California, where he said meeting influential figures in the multi-billion US tech industry “left a mark” on him.

From there, Sunak had a stint working at hedge funds back in London. He was a partner at the Children’s Investment Fund (TCI) where he is believed to have made millions of pounds from a campaign that helped trigger the 2008 financial crisis.

Sir Chris Hohn, the fund’s founder paid himself a record £343m in the first year of the pandemic. TCI is ultimately owned by a company registered in the Cayman Islands, according to its accounts. Its philanthropic arm, the Children’s Investment Fund Foundation (CIFF), donated £255m to charitable causes last year (full disclosure: openDemocracy has received funding from CIFF since 2019).

Sunak then left to co-found his own firm Theleme, which had an initial fund of £536m – and is also registered in the Cayman Islands.

His financial interests aren’t very transparent

The Cayman Islands are one of the world’s top offshore tax and secrecy havens. When an investment is made through a hedge fund in the Caymans, “nobody can possibly know where the money has come from”, said Alex Cobham, the chief executive of the Tax Justice Network.

Not all the money that goes through the Caymans is dirty, and hedge funds argue that they need to keep their investment strategies secret to be competitive.

Nevertheless, “it is probably the best, certainly the most reputable, way of allowing fairly questionable money in large volume to go into mainstream financial markets,” said Cobham.

An estimated $483bn (£357.62bn) a year is lost in cross-border tax abuse by multinational companies and by individuals hiding assets in havens like the Cayman Islands, according to the Tax Justice Network.

“Somehow, in the financial sector, we still have this idea that it’s basically smart to game the system. If these are the people, and the culture, that is coming into public life then we’ve got a real problem,” said Cobham.

When Sunak became a minister in 2019, he placed the investments he held from his years of working in finance into a ‘blind trust’. Such agreements are intended to avoid conflicts of interest by handing over control of assets to a third party, but whether that works in practice is questionable.

“These trusts don’t necessarily come with any legal mechanism to prevent the owner of the assets actually dictating what happens, or indeed seeing through any claimed blindness,” said Cobham.

“If politicians were willing to make the arrangement transparent, including the legal documents, we might have some confidence in them,” he adds.

Sunak has declared the trust in his entry on the Register of Ministers’ Financial Interests, but not the contents of it. The rest of his disclosures are remarkably minimal for a man with an estimated net worth of £200m.

Aside from the trust, he has listed his London flat and the fact his wife, Akshata Murty, owns a venture capital investment company, Catamaran Ventures, which the couple founded together in 2013.

Murty, who Sunak met at Stanford, is the daughter of Indian billionaire NR Narayana Murthy, who co-founded the IT company Infosys. Her shares in that firm are worth £430m alone, a fortune larger than the Queen’s and enough to make her one of the richest women in Britain.

The Murthy/Murty family (Narayana’s children have dropped the ‘h’ from their name) is reported to have invested part of their wealth through Catamaran Ventures, though how much is unclear. Sunak resigned his directorship of the company in 2015.

Ministers must declare the financial interests of their close family – including in-laws – which might give rise to a conflict, but Sunak has declared only one of the companies that his wife owns. A host of other family assets – including a £900m-a-year joint venture with Amazon in India, owned by his father-in-law – are not mentioned, according to the Guardian.

Sunak is said to have met with the government’s then head of propriety and ethics, Helen MacNamara, before becoming chancellor, to review what interests should be declared. MacNamara said she was satisfied with what had been registered at the time.

He has strong links to right-wing think tanks

Sunak reportedly led the hawks within the cabinet who opposed taking action when scientists recommended a circuit-breaker lockdown in September 2020, arguing that restrictions would be too economically damaging. Johnson delayed the decision and infections spiralled leading to a more punitive and lengthier lockdown in November.

“Sunak’s been the voice most consistently pushing for watering down of COVID restrictions in the cabinet. So, if you like, he is a kind of a logical continuation of that Thatcherite impulse within the Tories,” said Phil Burton-Cartledge, the author of ‘Falling Down: The Conservative Party and the Decline of Tory Britain’.

Soon after becoming an MP in 2015, Sunak wrote a report calling for the creation of ‘freeports’ around the UK for the right-wing think tank, Centre for Policy Studies (CPS), which was co-founded by Margaret Thatcher.

The policy idea – that tax-free, deregulated outposts will revitalise post-industrial coastal cities – was fittingly tried by the former PM in the 1980s, before being dropped by David Cameron in 2012 after proving unsuccessful.

Sunak also worked for another right-wing think tank, Policy Exchange – which, like CPS does not declare its donors – before becoming an MP, and has spoken at the Institute of Economic Affairs since becoming chancellor. All three think tanks have been consistently ranked among the least transparent in the UK.

He has a slick PR operation

During the pandemic, billionaires such as NR Narayana Murthy saw their wealth increase – Murthy’s fortune was up 35% to £2.3bn in 2021– while inequality between the richest and poorest grew. What, then, explains the seeming popularity of a former hedge fund manager like Sunak at a time in midst of a cost of living crisis?

Part of the answer might be the way Sunak has presented himself. Unusually for a chancellor, he hired the co-founder of a social media agency to manage his public image after he was appointed.

Since then, the content on his social media channels – from casual ‘ask me anything’-style YouTube videos to puppy pictures on Instagram – have more closely resembled a celebrity influencer than a frontrunner for Tory leader.

Jonathan Dean, an associate professor of politics at Leeds University, says this reflects broader political trends: “Forms of celebrity are increasingly prominent within politics, and that can either take the form of people who were conventional celebrities entering electoral politics, or it can also take the form of politicians trying to ape the publicity and performance traditionally associated with celebrity culture.”

Politicians draw on tactics from the world of celebrity influencers, Dean suggests, partly because they can mask their political views.

“A lot of politicians don’t have a particularly coherent or well-thought-through set of ideological commitments or kind of policy ideas. And I think certain forms of celebritisation allow them to circumvent that,” he said.

In Sunak’s case, it seems he has been even more successful in influencing journalists than the public. A picture of him working from home in a hoodie became a media frenzy after columnists from Vogue and GQ complimented his looks, which, in turn, spawned mockery on social media. It wasn’t long after that Sunak was being asked how he felt about being described as ‘Dishy Rishi’ in an interview with LadBible.

While Sunak may be the most popular Tory politician among the public, among party members he is second to the foreign secretary Liz Truss, his main rival for Tory leader if Johnson goes.

Burton-Cartledge suggests that this might be because he has not demonstrated the same zeal as Truss for pursuing a ‘war on woke’.

“He is of the same mould as Cameron: economically Thatcherite, but socially liberal,” said Burton-Cartledge. “That said, I can’t see him rowing back on the tough rhetoric about migrants in the Channel.”

Views expressed are personal

Why is Saudi Arabia Defying the US?


Why is Saudi Arabia suddenly defying the United States, after five decades of a strong alliance? It’s a question I’ve been asked frequently in recent days.

Here’s the answer.

I describe in my books the deal that I helped forge in the early 1970s that created this alliance. Known as the Saudi Arabian Money Laundering Affair (SAMA), it can be summarized as consisting of the following five agreements:

  1. Saudi Arabia will invest most of the petrodollars made from selling oil to the world in US treasury securities;
  2. The US Treasury Department will use the interest from these securities to hire US corporations to modernize (“westernize”) Saudi Arabia, building petrochemical plants, ports, highways, and entire cities;
  3. Saudi Arabia will maintain oil prices at levels acceptable to Washington and American oil companies;
  4. Oil will be traded on international markets only in US dollars (the power of the dollar had been jeopardized when President Nixon took it off the gold standard in 1971 because the US was unable to pay foreign debts in gold – this fourth agreement essentially established a new standard for the dollar, the Petro-standard); and
  5. The US will guarantee to defend and protect the royal family of Saudi Arabia and keep it in power as long as the above four agreements are honoured.

For 50 years Saudi Arabia honored the first four agreements.

As is well known — the US honored the fifth. It flew members of the Saudi royal family out of the United States after 9/11 when all flights had officially been prohibited. It turned a blind eye to evidence that the royal family had sanctioned the assassination of Jamal Khashoggi, a Washington Post columnist and critic of the Saudis.  It launched Operation Desert Storm against Iraq when Saddam Hussein threatened Kuwait and, by implication, Saudi Arabia. And it took many other less known, behind-the-scenes actions to maintain the alliance forged by SAMA.

So what happened? Why is Saudi Arabia no longer responding to Washington’s wishes and instead cutting back on petroleum production and thereby helping Russia earn income vital to its war in Ukraine? The answer is more complicated than the obvious one – that Saudi Arabia simply wants to increase the price of oil.

First of all, it’s important to recognize that SAMA was established in the early 1970s when the United States was the world’s most powerful economic and military power. As I write in my new book, Confessions of an Economic Hit Man, 3rd Edition: China’s EHM Strategy; Ways to Stop the Global Takeover:

For us in those days (the 1970s), the threat to America’s global dominance was Communism and the Soviet Union. Most of the Middle East (including Saudi Arabia) opposed both. Kings and dictators were not about to accept Marxism. Muslims were against atheism. The Soviet invasion of Islamic Afghanistan further encouraged Middle Eastern Muslim leaders to partner with the US.

Today, US hegemony is seriously threatened by China’s skyrocketing economic and military power, the Communist Soviet Union has been replaced by a monarch-like regime in Russia, and US wars in Islamic Afghanistan and Iraq have angered traditional Muslim leaders in Saudi Arabia and elsewhere. The US is no longer trusted to keep its previous agreements because many were discarded during the Trump administration. Furthermore, the ability of the US Congress to reach compromise is seen by the Saudis, as well as much of the rest of the world, as proof of America’s inability to perform as a functioning democracy.

Adding insult to injury, the Petro-standard is being threatened for the first time in fifty years. China is already buying oil from Russia with yuen. And, according to the Wall Street Journal:

Saudi Arabia is in active talks with Beijing to price some of its oil sales to China in yuan, people familiar with the matter said, a move that would dent the U.S. dollar’s dominance of the global petroleum market and mark another shift by the world’s top crude exporter toward Asia.

Another important factor: Although the alliance between China and Russia is somewhat fragile, this alliance impacts many other countries. Five nations that are major economic drivers on their continents are united under the very powerful BRICS bank (Brazil, Russia, India, China, and South Africa). Saudi Arabia is dependent on these five countries and their neighbours through a complex network of oil and other trade agreements. Riyad is not likely to jeopardize these agreements by continuing to bend to Washington’s wishes.

Why is Saudi Arabia defying the US?

A cartoon shows a Saudi prince holding an old-fashioned balancing scale in one hand. Hanging from one arm is the US flag; from the other, China’s flag. China’s clearly outweighs the US’s.

Unfortunately, the Saudi prince could be replaced by leaders in many Asian, African, Latin American, and Middle Eastern nations.

From Saudi Arabia’s standpoint, its decision to abandon SAMA is pragmatic. It is also a symbol of the shifting sands of global power.

Sri Lanka: Outline of a Redistributive State

A clear line against political repression is beginning to emerge within democratic opposition forces in Sri Lanka, or broadly speaking, those who oppose the current government of Ranil Wickremesinghe. But the crisis of the old order requires thinking more about the relationship between politics and economics that is materialised in the State. The people’s movement has been a multi-class phenomenon with antecedents in earlier forms of working people’s politics. But a hegemony with a progressive, class-based perspective will likely continue to develop within it. We can anticipate this trend because price hikes and other increases in the cost of living are already revealing the extreme inequality of austerity measures.

Moreover, even with the recently announced preliminary agreement with the International Monetary Fund (IMF), Sri Lanka’s economy will continue to experience depression. The economy could contract by as much as a tenth this year alone. We would have to go back to the Great Depression of the 1930s to encounter a similar crisis. The solutions, which the Wickremesinghe government is promoting in the guise of the IMF agreement, are designed to further implement a failed neoliberal agenda that was in fact responsible for the economic breakdown.

Accordingly, the outline of the agreement and the broader economic programme it represents do not inspire hope. Through a dramatic combination of regressive “reforms” and shock therapy, including by hiking interest rates and raising prices for essentials such as energy, the current proposed path to recovery offers the minimal promise of an eventual return to ‘normal’. The ‘old normal’ was already extremely inadequate for many people before the current crisis. It is now an even worse proposition given the extent to which the ongoing economic collapse has immiserated many more. More than a quarter of Sri Lankans are food insecure according to the United Nations’ own estimates, and the poverty rate has risen dramatically.

In this context, there is a clear gap between the naïve rhetoric of policy makers about returning to international capital markets, and the wide-ranging aspirations that were stimulated in such an intense way by the people’s movement, especially the uprising on 9th July to oust President Gotabaya Rajapaksa. What can now be done, given the desperate need to formulate a programme despite uncertainty about whether political forces are organised and invested in pushing it? Would such a programme be a mere recipe for the cook-shops of the future, as Marx might put it? Or could it help initiate the delayed yet necessary dialogue about transforming the relationship between State and society on which democratic opposition forces could continue to build?

To broach this subject, it seems, at first sight, that we must be cautious. We recognise that the people’s movement has been wide and disparate, containing at-times contradictory views on the political, no less than the economic, changes required. But it is also true that there is an advantage in clarity when a self-aware faction within a movement emerges with a clear direction. Our focus should be to help consolidate that perspective.

Whatever diffuse support is lost, especially among ambivalent sections of the middle class and among the elites, more is gained by properly evaluating the stakes of the struggle. The amorphous mass of popular opposition becomes solidified around the section of it that has the necessary force to break through walls of repression and political decay. Meaning, if a progressive, class-based perspective emerges within the people’s movement, it can better persuade the base of working people on whom it implicitly – if not explicitly – relies on, that it has the will to offer a real solution.

For those looking to debate the economic features especially of this programme, the challenge is to maintain a historical perspective, to avoid becoming wrapped up in arbitrary details of policy and losing sight of the underlying paradoxes that must be weighed. This is not to say that stylised facts, as economists call them, are not useful. Nor does it mean that we should not get into the “‘boring and routine world’ of administrative rule-making,” as Urs Geiser, quoting Jacob Babu and Suraj Jacob, points out. The point is one of emphasis, that there is a great need for more work in parallel on the conceptual side. In addition, when we move from the realm of empirical debate to principles, the dangers of political sectarianism also become strong. Nevertheless, there needs to be a clear push, and a risk taken, in presenting an outline for such a programme, even if it may appear utopian on first sight.

The stakes are especially high given the context of ongoing repression, including the jailing of activists under the Prevention of Terrorism Act (PTA) and other moves to try and suppress dissent during an extraordinarily critical period for Sri Lanka. This makes it even more imperative to draft a programme that enables broader masses of people to identify why such repression is not only morally but also politically wrong, insofar as it blocks a progressive solution to the economic crisis.

How the Left Thinks about the State

There is a clear historical precedent for linking the battle between democratic and authoritarian forces to a broad horizon of change. On the eve of the European Revolutions of 1848, Marx and Engels launched The Communist Manifesto by distinguishing utopian socialism from communism. It was not for the sake of arguing, however, that their analysis was the final word on what communist society would look like. Rather, they outlined the historical framework within which the transformation of social relationships could be grasped, and the conditions that would have to be met for a radical programme to be effective. When, over the course of their writings, they shifted to the register of active political debate, they recognised that it had the logic of polemic.

Marx and Engels did not assume that the specific contours of communist society were guaranteed. Instead, their politics drew from an intuitive sense of the alignment of forces, thereby revealing tasks before the movement. Lenin and Luxemburg took this debate to the next level. They participated in twin, pivotal moments of revolutionary ambition of the 20th century, the Bolshevik Revolution of 1917, and the failed German Revolution of 1919. These revealed many of the strategic paradoxes with which the left around the world has continued to grapple. Or as Perry Anderson (1976) put it, “The classical debates, therefore, still remain in many respects the most advanced limit of reference we possess today. It is thus not mere archaism to recall the strategic confrontations which occurred four or five decades ago” (78).

We are separated from this revolutionary experience by the tremendous gap between 19th and 20th century Europe and the 21st century global South. In addition, there has been much deeper historical interrogation and uncovering of revolutions outside the European core that also yield important lessons. Regardless, there is a universal truth that must be rekindled if the current people’s movement in Sri Lanka is to push further, namely by thinking about the role of the State in social transformation. Among the many differences between the ascendant proletarian movements then and diverse oppositional movements today, the fact is that the current global moment is not conducive to radical change. There is no singular example of a programme that can be enacted to reconstruct society on more egalitarian foundations in the aftermath of what, in Sri Lanka’s case, has become an existential crisis. But there are tendencies, which, if thought carefully in terms of the existing political divide between progressive and reactionary forces in the country, may offer the basis for the triumph of the former over the latter.

Right now, given the neoliberal assault on State institutions and the imposition of austerity measures, the most critical part is theorising a more productive role for the State, specifically its mode of intervention into the economy. Up to now, neoliberals have attacked the welfarist dimension of the State. Those who oppose them may feel the need to defend it. But the latter position need not imply that the State itself is neutral. The State remains embedded in the capitalist system, with all the distributional consequences that entails. Instead, our point is to argue that forcing a debate over the class character of State intervention means explicitly raising the question, who benefits from its policies?

In this sense, when we talk about the retreat of the State in areas such as subsidies for essential goods, we are saying that this phenomenon is in fact a manifestation of the class power that the capitalist class has over the State. Talking about the retreat of the State or the need to expand it is often an inadequate shorthand for a much more complex theorisation that is required to understand the way in which the State reproduces the social order, but also the ways in which it can become a site of struggle. Marxist theorists such as Nicos Poulantzas have provided some of the most subtle analysis for thinking about these issues. Their theorisation, however, is distinct from the punchy rhetorical demands on the street for the State to provide solutions to working people’s problems.

If we now try to mediate between theory and political rhetoric, how can we propose a type of State that aligns with a progressive, class-based transformation of society? Moreover, how can we recognise the limits of what would inevitably be a challenging task, given the dominant social forces that would be arrayed against such a State? We can frame the paradox in two ways. First, for the opposition to neoliberalism that can consolidate within the people’s movement in Sri Lanka, the urgent need is to envision an alternative set of principles on which a redistributive State could act. Second, the reality is that until a revolutionary global conjuncture materialises, this State form will remain part of a taxonomy of capitalist States. It is critical to keep the latter in mind, to be able to push the debate in more intuitive ways. Specifically, avoiding over-extending by either moving faster than the base-building required or by inviting reaction and even external intervention that the movement is unprepared to confront.

Depending, however, on the way in which a redistributive State in Sri Lanka comes into being, it could provide the ground on which progressive forces could continue to advance during the decades ahead. It could even inspire movements in other smaller States in the periphery that are experiencing similar challenges during the multidimensional crisis of the global order, which has been marked by dramatic events such as the Covid-19 pandemic and the war in Ukraine. We can begin by grouping the core features of a redistributive State under three tentative headings: planning, investment, and welfare.

The Nature of Planning

In Sri Lanka, the current government of Ranil Wickremesinghe has slapped restrictions on imports. In this regard, it follows its disgraced predecessor in recognising, whether it wishes to or not, that the previous system of the free flow of goods and services has become unsustainable because of the balance of payments crisis. The latter was a long time coming. It was built up through the opening of the economy after the election of JR Jayewardene in 1977, and then the shift to foreign borrowings to cover the current account deficit. Now the neoliberals are blaming the State for unrestrained spending, especially the so-called loss-making State institutions, such as those that provide energy at subsidised prices to the public. But the reality, as demonstrated by the import restrictions, is that at its core, the current crisis represents the breakdown of the market. The desperate need is to revive planning to rebuild society.

If we specify the problem in terms of prioritising imports, this points to a deeper question about which sectors matter, and who should be able to acquire the goods necessary for Sri Lanka to gain self-sufficiency in critical areas. Or as Maria Mies (2014) put it, “Only societies which are to a large extent self-sufficient in the production of these basic necessities can maintain themselves free from political blackmail and hunger. In this, self-sufficiency in food is the first requirement” (219, emphasis in the original). Samir Amin (1983) clarified by noting that “Although a self-reliant development model is not in theory synonymous with autarchy (economic self-sufficiency), it may lead to it whether we like it or not, for obvious internal and external political reasons…So, although autarchy in itself is not synonymous with self-reliant development (think of Burma), it may be the condition for it under certain historical circumstances” (548-549; see also Amin 1987: 442-443).

Given the potential negative connotations of autarchy, it may be useful to further distinguish it from self-sufficiency. We could use the concept of self-sufficiency to identify the strategic necessity of being able to provision essentials within a national territory, as opposed to autarchy, which implies a more rigid notion of isolated monads within what remains an interconnected global order. Even if we manage to successfully decouple self-sufficiency from autarchy, however, difficulties still arise when operationalising the concept in practice. Specifically, when we talk about planning to achieve self-sufficiency, we recall visions of the vast bureaucratic operations of alienated States that claimed to practice ‘actually existing socialism’. The reality, however, is that there are different forms of planning, just like there are different market regimes.

The question is not so much whether Sri Lanka should plan, but the way in which it should be carried out. If we distinguish between capital, intermediate, and consumer goods, then planning would require an institutional space—for example, let’s call it a planning unit—in which different associations of producers, distributers, and consumers could openly debate the sectoral weights according to which items should be imported. The level of detail does not need to be overwhelming. Instead, it could be an opportunity to create new classificatory bands for goods, so that Sri Lanka’s economic trajectory can be managed with the appropriate perspective.

This would further require the State’s light yet steady hand in providing direction. It could create broad targets within a progressive macroeconomic framework that aims to reduce the disparity between rural and urban areas, for example, while leaving the finer points to be resolved by committee. The latter could include a representative mix of people who reflect diverse needs, including farmers, fisherfolk, migrant workers, manufacturing workers, and so on, in addition to the usual bureaucrats and businesspeople.

The main point is that planning by prioritising imports would necessarily entail much deeper questions about the structure of the economy. For that, the answer can only be discovered by further articulating a progressive vision. Moreover, we would also have to recognise that overcoming the deeper divisions of the global capitalist economy in the long run would require constructing an alternative geopolitical bloc with that explicit goal in mind. In this regard, an orientation toward self-sufficiency precedes the much bigger goal of collective self-reliance. The latter is a much more ambitious project that would require reviving or building international alliances rooted in democratic aspirations, along the lines of past examples such as the Non-Aligned Movement.

Realising Social Objectives through Investment

Given that planning by prioritising imports is only the start, the follow-up question is what type of investment would be required to transform the economy. The idea that deficit spending should be curtailed to meet fiscal surplus targets has become part of the common sense of a potential agreement with the IMF. But the reality is that Sri Lanka cannot recover from the economic crisis without severe, long-term scarring unless it engages in what economists refer to as countercyclical spending. What that means is that because the country is in a slump, and private investment is withdrawing, only active intervention by the State can sustain the key sectors that are necessary for people’s livelihoods. The novel critical dimension for Sri Lanka is the need for this investment to improve metrics of self-sufficiency, to reduce the import burden.

As for those who currently depend on imports for livelihoods, there will also have to be explicit steps taken to create opportunities within a more redistributive economic system. But that is a strategic question for the political forces that aim to bring together opposition to the failed market mechanism. Meanwhile, the notion that the vast gap between supply and demand can be resolved by drawing in foreign investors eager to do business is a pipe dream at best. It will provoke even greater catastrophe at worst. Sri Lanka cannot wager the risk. Many central banks in core countries are raising interest rates and financial conditions are tightening, which provoke outflows of capital from so-called emerging markets. In addition, longer term trends will continue to disrupt trade, including geopolitical polarisation and climate change. In this context, there can be no question about the need for public investment to reduce supply constraints that have become the justification for rising prices. But the way in which investment is channelled may matter even more than the headline amount.

So far, the debate about the supposed illegitimacy of State intervention has focused on the latter, insofar as it supposedly represents the lack of fiscal restraint. In this way, neoliberals have managed to confuse sections of the public about the State-led investment necessary to rebuild the economy thanks to cheap rhetoric about corruption and exclusive focus on the political class, to the neglect of structural issues. This is not to say that politicians who abuse public resources should not be held accountable. But the way in which we conceive this process hinges first on articulating a positive understanding of State capacity. The mechanism for disciplining politicians must be predicated on accepting the value of State intervention in line with a new, egalitarian direction for the economy.

The reality is that Sri Lanka never fully overcame its dependency on colonial-era institutions, especially the plantation system. Instead, its dependency was reconfigured but nevertheless sustained through new forms of subordination. That has included the narrow targeting of investment toward sectors in which wage repression is the norm, especially garments, and the resulting use of debt to cover the current account deficit when the terms of trade continued to move against Sri Lanka. The previous regimes since the late 2000s, including those led by the Rajapaksa family, exacerbated the problem through financialisation, especially the most visible issue of sovereign debt.

The structure of Sri Lanka’s production has never been oriented in its entirety toward the needs of its working people. Even the late, State-driven efforts after independence to try and industrialise were predicated on creating the conditions for private accumulation in light industries that were protected behind import barriers. This contrasted with an alternative project to transform the economy that would have required releasing the “suppressed creative energy of the entire rural community” (104), as GVS De Silva (1973) put it.

Because of the scale of the current crisis, the question of the alternative to dependency confronts Sri Lanka with renewed force. That includes the need to promote self-sufficiency to lower the cost of the wage goods, especially food, on which working people depend. This further requires redistribution to create appropriate levels of sectoral balance according to efforts to bring working people’s incomes in line with the highest possible standards, or what Amin (1987) called a national law of value (439-440).

Shifting the focus to agrarian relations, for example, requires simultaneous class-based interventions to facilitate production, transportation to market, and retail. That includes breaking cartels in the agricultural sector by providing public alternatives for wholesaling and retail, in addition to land reform, innovating with efforts to extend credit to producers—especially those who can work together through voluntary association—and scaling up the processing of agricultural goods by cooperatives. In the language of economics, this would primarily involve an agrarian demand-led transition (Adelman 1984). But it must be framed in terms of class (Bharadwaj 1988; Ghosh 2005).

The reason why class is an effective dimension not only in theoretical but also political terms is because it has the potential to create a deeper sense of solidarity among people. It could enable even those who benefit even in more minor ways from the current system to challenge the wider process of marginalisation of rural areas in which powerful local actors play a key part. Of course, whether initiatives to redistribute land, extend credit, support cooperatives, and generally weaken the strength of cartels, for example, are capable of being articulated in terms of a radical politics depends on the strategic capacity of activists and others to make these concrete issues for people. In the meantime, the rural will remain a key site of the politics behind a progressive solution to the economic crisis.

On a broader level, as Amin (1987) put it, to think about delinking from the global imperialist structure requires a political commitment to autocentric development in which public investment is channelled not according to the criteria of profitability as such, but rather the ability of industries to accommodate working people’s needs (436). This does not mean that there is no scope here for private accumulation. Again, given the extent to which the redistributive State remains a capitalist State, a key aspect of its legitimation in fact requires recreating stable conditions in which private capital can operate. But the underlying infrastructure of the economy must be established with a particular vision in mind; one that does not focus on importing or producing luxury goods but producing wage goods at home instead.

This conclusion, especially the scope given for capitalists to continue to operate, may seem ambiguous. But after many failed revolutionary projects, the reality is there will always be an inherent tension in the process of social transformation. One must not overestimate popular support or underestimate the opposition of dominant social forces. The actual trajectory of a redistributive State in Sri Lanka would depend on many levels, including the international conjuncture, which right now inhibits an outright revolutionary overthrow of capitalism. But there is still value in thinking through a viable path to radical transformation, which can cultivate resistance in the periphery without opening itself to brutal counterattack by over-extending.

Meanwhile, concrete efforts to stimulate food production, for example, could be thought in terms of creating the backward linkages necessary to further reduce dependency in other areas. These could include, for example, eventual plans for domestic fertiliser production, based on both the scale of the market for such inputs and their strategic necessity. Enterprises could be further exposed to foreign competition on a clear timeline once they have developed sufficient capacity. It would also mean considering the wide-ranging possibilities for what Amin (1974) referred to as “autonomous scientific and technological research in the Third World” that inspired a vast and barely rediscovered range of heterodox thinkers (19). They focused on reconceiving the entire basis on which changes in productive technique could be applied through the corresponding transformation of social relations of production.

Whether the industries that are created could be repurposed for the realisation of new, creative needs would depend on the growing social consciousness of people engaged in a collective project to bend capital toward their own purposes. Furthermore, framing State intervention in this way would undermine the politics of patronage, or what economists call rent-seeking. The relevant communities—in which deeper organising could also be undertaken—could supervise public investment and where it is directed. They could do so through the creation or use of existing forms necessary for mobilisation to overcome the economic crisis, such as village committees, Provincial Councils, and even committees that could be established within parliament once it has obtained the people’s mandate through elections and a referendum to abolish the executive presidency.

These efforts would further strengthen more substantive aspirations to institutionalise new forms of popular representation and to convene a constitutional assembly in society at large. Or as Hasini Lecamwasam has suggested, “cooperatives, community level organisations, small-scale unions, and other such bodies already active at the community level could be mobilised to come together as a federation, representing the interests of their communities”. Already there are global examples of similar experiments, such as the participatory budgeting process devised in the Brazilian city of Porto Alegre. The point is not to fixate on layers of bureaucracy for their own sake, but to strengthen the democratic institutions that can interface between State and society, including those created for the purpose of resolving the national question. Moreover, these efforts dovetail with historical discussion within socialist circles as well about the concept of workers’ self-management. In this case, it could be extended well beyond its original industrial factory setting to cover diverse areas of social life.

The Need for Welfare

All these efforts, coordinated through public investment, to stabilise and eventually help grow the economy, run up against the question of the way in which people can survive in the context of the immediate economic crisis, in addition to the long-term, egalitarian foundations on which society can be rebuilt. One of the main problems with the neoliberals—and the wider social group of traditional economists for that matter—is that, through deception or self-deception, they ignore the deep challenges involved in restructuring the welfare State on narrowly targeted grounds in the middle of a severe economic collapse. Given the administrative efforts needed to design proper mechanisms alone, it is incomprehensible that such experts would expect the State to have the capacity to rapidly transform what they themselves consider to be complex systems, such as the Samurdhi welfare programme.

Talk of cash transfers to the poor in the context of mass immiseration and hyper-inflation, then, is ideological cover for a class project to try and undermine the basis for universal or otherwise subsidised goods and services, including energy. To confront this agenda, the people’s movement must deepen its efforts to envision an alternative that reinforces the democratic ethos of Sri Lanka’s welfare institutions and rectifies persistent inequalities that exist within them. The foundational principle is that basic goods and services should be available to all, meaning free or otherwise reduced in price at the point of access. They should be funded by redistributive taxation. That could include a mix of wealth taxes, land and property taxes, capital gains taxes, or even taxes on luxury goods. The overarching point is that the provision of such goods and services should reflect the goals of social levelling, to overcome extraordinary disparities that have been further exposed in the current crisis.

The positive aspect is that Sri Lanka does have a long history of helping provision basic needs for all. But entitlements have also been weakened by regional, ethnic, caste, and gender inequalities. The goal, however, should not be to throw these entitlements out, but to engage marginalised groups in the process of democratising State structures to better ensure that everyone has what they need to survive. In the current moment that includes the urgent need for a ration system to provide food. The same logic of popular participation applies to the claim that existing public institutions are “captured” by “mafias”.

The priority should be to democratise, not privatise, including increasing public oversight and reorganising the State sector along clear, mission-driven lines (Mazzucato 2013). Over-staffing the bureaucracy, for example, is an effect of the structural condition of under-employment, which is a symptom of Sri Lanka’s dependency. The underlying problem can only be resolved through public investment and disciplining capital for the purpose of establishing industries that satisfy working people’s needs, even if that goal can never fully be realised within capitalism itself. But it certainly cannot be resolved by mass firings and retrenchment in the middle of a depression.

For the neoliberals on the other hand, they may argue that such State institutions are loss-making and cannot be maintained during a severe economic crisis. But the reality is that there is plenty of wealth that exists outside the State, in society. The primary question is the way in which it can be reappropriated for the benefit of the public. This is the perennial demand for welfare. To speak to this challenge, we must begin by grasping the need for institutions that, although on the face of it may appear to be loss-making, in fact derive their revenue by taxing the broader accumulation of wealth. The goal is to secure people’s living standards across society.

To convince the elites to part with a chunk of their wealth, however, is far from an easy task. It depends more on the radical forms of struggle that may take place either through elections or, especially if that path is further blocked, on the streets. But political economic logic also justifies the redistributive State in general. Specifically, if elites wish to live in a functioning society, and to avoid a situation in which capital accumulation is destabilised by the threat of strikes or social unrest in general, then it is incumbent upon them to accept a new social contract. As Piven and Cloward (1979) pointed out, there is always a moment in which capital comes to accept and even internalise some aspects of the new arrangement, such as the creation of social security in the US in the aftermath of the Great Depression. In contrast, the current path is a potentially disastrous wager for the elite in Sri Lanka. While the current Wickremesinghe government believes it now has the initiative with tenuous promises of financial backing from abroad and repression at home, the reality is that its plan will create social and political blowback.

The critical need is to use the current moment to take stock of the demands that can be pushed to envision a fairer society for all, even while the elites stick to the line that there is no alternative. In the current case, to an IMF agreement that is being used to ram through unpopular provisions such as privatisation, a goal anticipated in the interim budget. But having moved from planning to investment to welfare, we can see in fact the way in which the circle of entitlements can be expanded to manage shocks at the centre of the economy.

If people can achieve a society in which they have not only free education and free healthcare, but free public transport and access to public housing, for example, is this not a vision of recovery that would enable them to overcome the breakdown of the current system by mobilising toward a better future? Only by asking this and other questions will the more active and self-aware elements within the people’s movement be able to rally their forces and achieve a far more durable victory.

OPEC Plus Decision to Oil Production: Wrong in Letter and Spirit

OPEC Plus, which is a group led by Saudi Arabia and include Russia and other oil exporters in the “Plus”  or expanded version, has now announced its decision to cut crude oil production to the extent of 2 billion barrel per day.OPEC Plus claims that such a cut in oil production is necessary, as the global crude oil price has dropped to about 90 USD per barrel from around 120 USD per barrel three months ago.

It is necessary to remind OPEC Plus countries that the price of 90 USD per barrel is not a low price and several buyers of crude oil in a number of developing countries already find it extremely difficult to pay the purchase price of 90 USD per barrel.   

The attitude of OPEC Plus countries clearly highlights their arrogance that their cartelization of crude oil production, will leave the world with no choice other than succumbing to their price pressure.

 Obviously, such a decision to cut crude oil production by OPEC Plus countries should be condemned as a reflection of the exploitative mindset of these oil-producing countries, with the least concern for the problems of the buyers and importers of crude oil. Such an approach of OPEC Plus is nothing but a crude and exploitative trading outlook, with the least sense of responsibility towards the global cause and plight of the crude oil importers.

The world economy, particularly that of the developing countries, is just slowly recovering from the negative impact of the COVID-19 crisis and there is a  real threat of a global recession happening in the next few months due to the slowing down of the global economy.  Certainly, the oil cut move of OPEC Plus countries is not good for the global economy.

It is surprising that OPEC Plus countries do not realise that when the global economy suffers, they too cannot escape from the consequences.

It is astonishing that the OPEC Plus countries have not been able to visualize that there would be consumer resistance for their exploitative method of cutting crude oil production and forcing short supply in the global market.

In August 2022, OPEC Plus countries are said to have missed their production target by 3.58 billion barrels per day, as several countries were already buying well below the existing quotas. This has been largely due to their inability to pay high prices in the global crude oil market.  In such a situation, if the global crude oil market would shrink due to consumer resistance, it would upset the economy of the OPEC-plus countries, whose major share of income has been only due to the sale of crude oil.

Already, there is a huge global campaign against the use of fossil fuels produced from crude oil and natural gas, due to global warming impact. Many countries in the world including high crude oil-consuming countries like India and China have pledged that they would target zero emissions at a specified time in the coming years.

Already, huge global efforts are seen to develop alternate fuel and feedstock such as green hydrogen, apart from a high focus on boosting the production of renewable energy such as solar and wind power. Alternative eco-friendly fuels such as algae biofuel are also receiving considerable attention by the scientific community and technology initiatives to optimize the production of biofuel are now being carried out at a feverish pace. With the growth of biotechnology and fermentation technology, new process routes are being developed to produce biochemicals that would not involve the use of petroleum feedstock. The immediate example is the efforts to produce methanol from municipal solid waste in Canada and other countries.

While curtailing crude oil consumption in a big way is a pre-condition for achieving zero emission in the world, the OPEC Plus countries are unwittingly accelerating the process of curtailing consumption of crude oil in the world by cutting down the production of crude oil that would lead to high price in the global market.  After the announcement of oil production cuts by OPEC Plus countries, the price of crude oil in the global market has already started showing an upward trend.

It is necessary that OPEC Plus countries should read the writing on the wall and reverse their decision to cut their crude oil production. Otherwise, in the long run, it would be seen that OPEC Plus countries could be the real losers.

It appears that OPEC Plus oil countries have bitten off more than what they can chew.

Tech Billionaires Are Actually Dumber Than You Think

In mid-September, for just a few days, Indian industrialist Gautam Adani entered the ranks of the top three richest people on earth as per Bloomberg’s Billionaires Index. It was the first time an Indian, or, for that matter, an Asian, had enjoyed such a distinction. South Asians in my circle of family and friends felt excited at the prospect that a man who looked like us had entered such rarefied ranks.

Adani was deemed the second richest person, even richer than Amazon founder Jeff Bezos! A Times of India profile fawningly quoted him relaying his thought process in the early days of his rags-to-riches story. “‘Dreams were infinite but finances finite,’ he says with engaging frankness,” according to the profile. There was no mention of the serious accusations he faces of corruption and diverting money into offshore tax havens, or of the entire website, AdaniWatch, devoted to investigating his dirty deeds.

Adani made his money, in part, by investing in digital services, leading one economist to say, “Wherever there is a futuristic business in India, I think… [Adani] has a stronghold.”

The moment of pride that Indians felt in such an achievement by one of their own was short-lived. Quickly Adani slipped from second richest to third richest, and, as of this writing, is in the number four slot on a list dominated by people who have made money from the digital technology revolution.

In fact, ranking multibillionaires is a meaningless exercise that obscures the absurdity of their wealth. This year alone, a number of tech billionaires on Bloomberg’s list lost hundreds of billions of dollars as the gains they made during the early years of the pandemic were wiped out because of a volatile stock market. But, as Whizy Kim of Vox points out, whether or not they’re losing money or giving it away—as Bezos’ ex-wife MacKenzie Scott has been doing—their wealth remains insanely high, and most are worth more today than before the COVID-19 pandemic.

What are they doing with all this wealth?

It turns out that many are quietly plotting their own survival against our demise. Douglas Rushkoff, podcaster, founder of the Laboratory for Digital Humanism, and fellow at the Institute for the Future, has written a book about this bizarre phenomenon, Survival of the Richest: Escape Fantasies of the Tech Billionaires.

In an interview, Rushkoff explains that billionaires worry about the end of humanity just like the rest of us. They fear catastrophic climate change or the next pandemic. And, they know their money will likely be of little value when civilizations decline. “How do I maintain control over my Navy Seal security guards once my money is worthless?” is a question that Rushkoff says many of the world’s wealthiest people want to know the answer to.

He knows they ask such questions because he was invited to give private lectures by those who think his expertise in digital technology gives him unique insight into the future. But Rushkoff was quietly studying them instead and has few flattering things to say about these wielders of economic power.

“How is it that the wealthiest and most powerful people I’d ever been in the same room with see themselves as utterly powerless to affect the future?” he asks. It seems as though “the best they can do is prepare for the inevitable calamity and then just, you know, hang on for dear life.”

Rushkoff explores this tech billionaire “mindset” that he says has resulted in a generation of people who are “almost comedic monsters, who really mean to leave us all behind.” Adani is a perfect example of this, having invested in the very fossil fuels that are destroying our planet. He has large holdings in Australia’s coal mining industry and has sparked a massive grassroots movement intent on stopping him.

The admiration that some Indians feel for Adani’s ascension on Bloomberg’s list of billionaires is based on an assumption of cleverness. Surely, he must be one of the smartest people in the world in order to be one of the richest? Elon Musk, the world’s wealthiest man by far (with twice as much wealth as Bezos), has enjoyed such a reputation for years.

Those who are invested in the idea of merit-based capitalism can justify the unimaginable wealth of the world’s richest people only by assuming they are intelligent enough to deserve it.

This is a façade. Rather than smarts, the wealthiest people on the planet appear to be rather small-minded idiot savants who share a common disdain for the rest of us.

After being around tech billionaires in private, Rushkoff concludes that they are invested in “this notion that they really can, like puppeteers, kind of control society from one level above,” and that this approach is “different than the era of Alexander the Great, or Caesar.” If the question that vexes them most of all is how, in a disastrous future, will they control the guards they hire to protect their hoardings, then our economic system is a farce.

“Even if we call them genius technologists, most of them were plucked from college when they were freshmen,” says Rushkoff. “They came up with some idea in their dorm room before they’d taken history, or economics, or ethics, or philosophy” classes, and so they lack the wisdom needed to oversee their own perverse amounts of wealth.

Having spent time with many tech billionaires, Rushkoff worries that “their education about the future comes from zombie movies and science fiction shows.”

Billionaires are not simply drawing their wealth from a vacuum. According to data from the World Economic Forum, “the world’s richest have captured a disproportionate share of global wealth over recent decades.” This means that, if you were rich to begin with a decade or two ago, you are likely to have seen your wealth multiply by a greater amount than middle-class or lower-income people.

Not only are tech billionaires undeserving of their wealth, but they also are fleecing the rest of us—and fantasizing about hoarding that wealth in the worst-case scenarios while the rest of humanity struggles to survive.

The danger is that if society valorizes such (mostly) men, we are in danger of internalizing their childish, selfish mindset and giving up on solving the climate crisis or building resiliency on a mass scale.

Instead of relating to them, we ought to feel sorry for a group of people so cut off from humanity that their vision of the future is a very lonely one.

“Let’s look at these tech-bro billionaire lunatics. Let’s laugh at what they’re doing… so they look small rather than big,” says Rushkoff. He thinks it is critical to adopt the perspective that “the disaster they’re so afraid of looks entirely manageable by more reasonable people who are willing just to help each other out.”

This article was produced by Economy for All, a project of the Independent Media Institute.

The Central Bank as an Organization

Following excerpts adapted from Tumultuous Times: Central Banking in an Era of Crisis by Masaaki Shirakawa published by Yale University Press. This is a rare insider’s account of the inner workings of the Japanese economy, and the Bank of Japan’s monetary policy, by a career central banker. 

Independence and accountability are indispensable building blocks of the framework for governing central banks in democratic societies. This incentivizes the central bank to achieve the stability of the currency in the long term, but it does not necessarily guarantee the actual delivery of a good outcome. Ultimately, it depends on whether or not the central bank actually makes the right decisions. Of course, it is not realistic to expect the central bank to be an infallible institution; our goal should instead be to make it less susceptible to making wrong decisions. Like any other institution, the central bank is an organization composed of people and characterized by its own unique culture. There are many organizational issues that are worthy of serious consideration.


Alan Greenspan, the onetime chair of the Federal Reserve Board (FRB), was once described as a “maestro” . This metaphor, though quite famous, does not fit well with what I understand the central bank governor to be, because the word “maestro” unduly emphasizes the great talent and skill of a single individual. To state the obvious, the central bank is an organization, and it is not and should not be dominated by a single person, as the knowledge and ability of a single person is inherently limited. Furthermore, the economy is not something that can be orchestrated freely through monetary policy.

I have come across numerous metaphors describing the job of the central banker. One example is that of an airplane pilot.1 When confronted with sudden troubles in the sky, pilots in the cockpit quickly need to make the right decisions. The same applies to the central banker when private financial institutions become insolvent during a financial crisis or when the functioning of financial markets is disrupted by natural disasters or computer breakdowns.

But important differences exist between a pilot and the central bank governor. As for the decision by the pilot, the time allowed in the face of imminent danger is very short. There are usually no experts on the airplane other than the pilot and the copilot once it leaves the runway. As for decisions by central bankers, the time allowed is usually longer than seconds or minutes. Further, we can tap on the wisdom of experts outside the central bank. Many people—both experts and self-proclaimed experts—express their views, and some of them are quite vocal. In fact, I suspect differences of opinion among experts are much bigger as regards monetary policy. While passengers of an airplane do not have a choice other than to leave their destiny in the hand of the pilot, the general public does not give the central bank such carte blanche.

If I were pressed to give my favorite metaphor for describing the job of the central banker, without hesitation I would choose that of the central banker as medical doctor. As doctors take care of the health of people, central bankers take care of the health of the economy—both in terms of price stability and financial stability. The biggest similarity is that both jobs presuppose an enduring relationship of trust with the beneficiaries of the services in order to do the jobs properly. Patients go to their regular doctors, as they know that the doctors can be trusted through a long-standing relationship. When we need to have surgery, doctors explain the efficacies and possible side effects beforehand, and we give our consent as we are confident that they are making an accurate diagnosis and proposing the best treatment. The same is true for monetary policy. The public’s trust of the central bank is vitally important. What constitutes such trust is twofold: the central banker makes his or her best judgment as an expert and then implements the best policies based on this judgment. Another similarity between medical doctors and central bankers is that the level of knowledge when making recommendations is often limited; both the bodies of human beings and the working of the economy and financial system are that complex.

Though there are many similarities between central bankers and medical doctors, one important difference exists. While patients can choose a doctor from a group of doctors, the general public cannot choose its central banker. That is why the public governance mechanism of the central bank—independence and accountability—is put in place. Independence makes it possible for the central bank to take monetary policy measures that it judges to be the right ones. This is necessary but not sufficient. The central bank actually has to have the ability to make the right decisions. Otherwise, an independent central bank can cause a disaster.


In a democratic society, what is the legitimacy of a group of unelected officials at the central bank conducting monetary policy? Of course, the central bank is entitled to independence by law. But this legalistic answer is not complete. Central bank independence can be stripped if the country’s politicians and ultimately its citizens wish to do away with it. Furthermore, legal independence is not the same as de facto independence. In fact, the Japanese inflation rate was lower in the 1980s than that in West Germany with an independent Deutsche Bundesbank, despite the fact that the Bank of Japan did not have legal independence.

The legal independence of the central bank is a manifestation of the fact that people at large, recognizing the importance of price stability and financial stability, are prepared to delegate the task of achieving those goals to the central bank. Just stipulating independence in the central bank law is not enough; societal support for that independence is fundamentally necessary.

But the public at large understandably does not bestow such societal support for the central bank without actually enjoying good macroeconomic performance. This is a “chicken or the egg” problem. In any event, the legitimacy of the independent central bank depends on the public having a sense of trust that the central bank is competent and faithful in achieving its mission. The central bank is, like any other institution, formed by people, characterized by its unique culture, and influenced by subtle group dynamics. This means that, on top of public governance of the central bank, we have to pay sufficient attention to it from an organizational or administrative perspective.

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Sri Lanka: Trinco Port to Export Ilmenite after 30 years

For the first time after 30 years, Sri Lanka will start exporting ilmenite from Trincomalee port. This ilmenite export to China will start today. Sri Lankan Ports Authority has announced that a ship loaded with Ilmenite will leave for China shortly.

“For the first time after thirty years, Trincomalee Port has worked to directly contribute to the country’s exports. This is a historic moment,” Saman Perera, Regional Manager of Port of Trincomalee which comes under the preview of Sri Lanka Ports Authority told the local media.

The following images were taken during the loading;

Inhuman Electric Shock


The price of electricity has risen astronomically in Europe over the last two years: by four times over the previous year and 10 times over the last two years. The European Union (EU) has claimed that this rise in prices is due to the increase in the price of gas in the international market and Russia not supplying enough gas. This raises the critical question: Why should, for example, the German electricity price rise four times when natural gas contributes around one-seventh of its electricity production? Why does the UK, which generates 40 percent of its electricity from renewables and nuclear plants, and produces half the natural gas it consumes, also see a steep rise in the price of electricity? All this talk of blaming Russia for the recent increase in gas prices masks the reality that the electricity generators are actually making astronomical windfall profits. The poorer consumers, already pushed to the wall by the pandemic, face a cruel dilemma: With electricity bills likely to make up 20-30 percent of their household budget during winter, should they buy food or keep their houses warm?

This steep rise in electricity prices is the other side of the story of the so-called market reforms in the electricity sector that have taken place over the last 30 years. The cost of electricity is pegged to the costliest supply to the grid in the daily and hourly auctions. Currently, this is natural gas, and that is why electricity prices are rising sharply even if gas is not the main source of electricity supply to the grid. This is market fundamentalism, or what the neoclassical economists call marginal utility theory. This was part of Augusto Pinochet’s electricity sector reformsthat he introduced in Chile during his military dictatorship there from 1973 to 1990. The guru of these Pinochet reforms was Milton Friedman, who was assisted by his Chicago Boys. The principle that electricity price should be based on its “marginal price” even became a part of Pinochet’s 1980 constitution in Chile. The Chilean reforms led to the privatization of the country’s electricity sector, which was the objective of initiating these reforms.

It was the Chilean model that Margaret Thatcher copied in the UK, which then the EU copied. The UK dismantled its Central Electricity Generating Board (CEGB) that ran its entire electricity infrastructure: generation, transmission, and bulk distribution. This move also helped the UK shift away from domestic coal for its thermal power plants, breaking the powerful coal miners’ union. These were also the Enron market ‘reforms’ in California, leading to the summer meltdown of its grid in 2000-2001.

The European Union banked heavily on natural gas as its preferred fuel to bring down its greenhouse gas emissions; it also ramped up renewables—solar and wind power—and phased out lignite and coal. The EU has imposed a series of sanctions on Russia, made public its plans to impose further sanctions on the country, and seized about 300 billion euros of Russia’s reserves lying in EU banks. The EU has also said that it will cut down on Russia’s oil and gas supplies. Not surprisingly, Russia has sharply reduced its gas supplies to the EU. If the West thought it could weaponize its financial power, why did it think that Russia would not retaliate by doing the same with its gas supplies to the EU?

Due to the Russian supplies of natural gas to Western Europe falling, the price of LNG has risen sharply in the international market. Worse, there is simply not enough LNG available in the market to replace the gas that Russia supplied to the EU through its pipelines.

With the price of gas rising by four to six times in the last few months, the price of electricity has also risen sharply. But as only a fraction of the electricity is powered by gas, all other sources of energy—wind, solar, nuclear, hydro, and even dirty coal-fired plants—are making a killing. It is only now that the EU and the UK are discussing how to address the burden of high electricity prices on consumers and the windfall profits made by the electricity generators during this period.

It is not only the EU and UK consumers who are badly hit. It is also the European and British industries. Stainless steel, fertilizer, glass making, aluminum, cement, and engineering industries are all sensitive to input costs. As a result, all these industries are at risk of shutting down in the EU and the UK.

Former Greek Finance Minister Yanis Varoufakis in his article “Time to Blow Up Electricity Markets” writes, “The European Union’s power sector is a good example of what market fundamentalism has done to electricity networks the world over… It’s time to wind down the simulated electricity markets.” The rest of the world would do well not to follow the EU’s example.

Why then is Indian Prime Minister Narendra Modi’s central government rushing into this abyss? Did it not learn from last year’s experience when, after a coal shortage, the prices in the electricity spot market went up to Rs 20 ($0.25) per unit before public outcry saw it capped at Rs 12 ($0.15)? So why push again for these bankrupt policies of market fundamentalism in the guise of electricity reforms? Who will benefit from these market reforms? Certainly, neither the consumers nor the Indian state governments, which bear the major burden of subsidizing electricity prices for their consumers.

This article was produced in partnership by Newsclick and Globetrotter.

Sri Lanka’s Debt Crisis Cannot be Resolved by China Alone


Sri Lanka’s debt crisis, which led to political upheaval and change of government, is the result of debt accumulation, domestic policy dysfunction and external shocks.

Sri Lanka has long relied on external borrowing to bail itself out of financial crises. It has entered into 15 loan agreements with the International Monetary Fund in 52 years, with the ratio of its external debt to gross national income being above 50 percent for years.

Sri Lanka is a country with not only very high debts but also a very fragile debt structure. Short-term debt and private creditors, which are highly vulnerable to capital flight and interest rate volatility, account for 45 percent of its total external debt, while official creditors, which have low financing costs, long maturity periods and more stable financial flows, account for only 36 percent.

Besides, the COVID-19 pandemic and the Russia-Ukraine conflict have had a huge impact on Sri Lanka’s revenue, for they reduced, almost dried up, the flow of tourists to the country while affecting its tea exports, especially to Russia. That the tourism industry accounted for about 13 percent of Sri Lanka’s GDP and tea was a very big foreign exchange earner before the pandemic shows the importance of these industries. In 2020, for example, the number of tourists visiting Sri Lanka was only about 20 percent of that in 2018.

Wrong macroeconomic policies, too, accelerated Sri Lanka’s economic collapse. After coming to power in 2019, former president Gotabaya Rajapaksa implemented three major policies: tax cuts, printing more currency notes and introducing green agriculture.

While the tax cuts widened the fiscal deficit, with the fiscal revenue to GDP ratio falling from 12.6 percent to 9.1 percent in 2019-20, the government overissued currency notes to fill the funding gap, triggering hyperinflation. As for the green agriculture policy which took effect in 2021, it not only drastically increased farming costs but also halved production, creating an unprecedented food crisis.

As such, Sri Lanka is mired in a debt crisis, economic crisis, and food crisis. To overcome the economic crisis, Sri Lanka must first adopt prudent monetary and fiscal policies, and address the food shortage problem at the domestic level, and to resolve the debt crisis, it should cooperate with the international community.

In 2021, the share of sovereign bondholders in Sri Lanka’s external debt was as high as 47 percent, with China accounting for 10 percent, the Asian Development Bank 13 percent, Japan 10 percent, the World Bank 9 percent, and India 2 percent. Therefore, contrary to some Western politicians’ claim, China is not the largest creditor of Sri Lanka and Sri Lanka’s debt crisis cannot be resolved by China alone waiving its debt.

Over the years, China has been contributing to Sri Lanka’s economic construction and helping improve its people’s livelihoods. The infrastructure projects China has promoted and built overseas have not only reduced construction costs but also are suitable to the respective geographical and climate conditions of the host country, and therefore meet the realistic needs of developing countries.

Moreover, China’s overseas infrastructure projects are accompanied by long-term capital. Accordingly, China’s stable and preferential funds for Sri Lanka’s infrastructure projects were based on the policy of long-term infrastructure investment, high investments and long payback period, which have helped the country overcome many a financial woe and continue on the road to development.

Although China’s funding for Sri Lanka’s infrastructure projects has increased the latter’s liabilities, it has increased its public assets, too, while improving interconnectivity within the country and with the outside world, thereby reducing transportation costs and making the logistics sector more efficient.

China has always pursued an independent foreign policy and follows the Five Principles of Peaceful Co-existence, including non-interference in other country’s internal affairs.

Also, China helped finalize the G20 debt moratorium initiative for least-developed countries in 2020 and the common framework for follow-up after the G20 member states launched a debt service suspension initiative in early 2020 to offer debt referrals to 73 of the world’s poorest countries. In fact, China has suspended the highest number of debt repayments among all G20 members.

The year 2022 marks the 65th anniversary of the establishment of diplomatic relations between Sri Lanka and China. The two sides have always had close and friendly relations, and promoted the spirit of “independence and self-reliance, solidarity and mutual assistance”.

Since the Sri Lankan crisis broke out, China has sent emergency humanitarian aid worth 500 million yuan ($72.10 million) to Sri Lanka, including medicines, fuel, rice and other urgent necessities to help the country cope with the crisis. And China sincerely hopes Sri Lanka, under the new government, emerges from the crisis, revives its economy and restores peace, stability and prosperity in the country.

Views expressed are personal

This article is a part of the SLG Syndication project. Sun Jingying who is deputy chief of staff of the National Institute for Global Strategy in Beijing, authored this article for China Daily. Click Here to read the original

Sri Lanka: Top Shipping Line Re-routes to Protect Local Giants

The world’s largest container shipping company, the MSC, began in mid-2022 to re-route its vessels passing by Sri Lanka, on a new course that is approximately 15 nautical miles to the south of the current traffic separation scheme (TSS) for commercial shipping.

Specifically, MSC has followed guidance based on research surveys completed by the International Fund for Animal Welfare (IFAW), the World Trade Institute (WTI), Biosphere Foundation, University of Ruhuna (Sri Lanka), Raja and the Whales and University of St Andrews (UK), and additionally endorsed by the World Wide Fund for Nature (WWF), to change the routing for its boxships.

Westbound ship traffic is now limited to a latitude between 05 30N and 05 35N, and eastbound traffic is limited to a latitude between 05 24N and 05 29N in order to avoid designated cetacean habitats, according to an announcement.

An exception has been made for vessels embarking and disembarking for safety reasons in Galle, including in case of adverse weather. Additionally, smaller feeder ships sailing around the Bay of Bengal will reduce their speed to less than 10 knots in this area.

In the meantime, in January 2022, MSC decided to re-route its ships on the west coast of Greece to reduce the risk of collision with endangered sperm whales in the Mediterranean. According to NGOs such as IFAW, OceanCare, WWF Greece and the Pelagos Cetacean Research Institute, if all ship traffic using this area made a similar routing adjustment, the ship strike risk to sperm whales would be reduced by almost 75%.

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