21 May, 2024


‘Make The Economy Scream’: Whither The Asian 21st Century?

By Darini Rajasingham-Senanayake

Dr. Darini Rajasingham-Senanayake

‘History repeats itself, first as tragedy, second as farce” ~ Karl Marx, The Eighteenth Brumaire of Louis Bonaparte

‘Make the Economy Scream’ were President Nixon’s instructions to the Central Intelligence Agency, September 1970, as the first Socialist President of Chile, Salvador Allende’s Popular Unity Party swept to power amid Cold War headwinds[1]. 

According to then US ambassador, Edward Korry a JFK-style liberal, this meant “to do all within our power to condemn Chile and the Chileans to utmost deprivation and poverty.” There was also a massive destabilization and disinformation campaign Noam Chomsky wrote in Secrets, Lies, and Democracy “our government intervened massively to prevent Allende from winning the preceding election, in 1964. In fact, when the Church Committee investigated years later, they discovered that the US spent more money per capita to get the candidate it favored elected in Chile in 1964 than was spent by both candidates (Johnson and Goldwater) in the 1964 election in the US[2].  

The CIA planted stories in El Mercurio, Chile’s most prominent paper, and fomented labor unrest, protests and strikes. This was the soft line, but there was also a hard line. 

Three years later, President Allende, a physician by profession was dead; killed, in a CIA-backed Coup that saw the establishment of one of the most repressive right-wing military regimes in South America. General Augusto Pinochet ruled Chile for 17 years and his rule was characterized by massive human rights violations, disappearances, and Dirty War operations, including “Operation Colombo”, of which more later. But economic ‘aid’ immediately began to flow again from Washington. 

The assassination of Chile’s democratically elected President Allende changed the course of history in a country described as “a long petal of sea, wine and snow’ by poet Laureate, Pablo Neruda. Twelve days after the coup Neruda, a member of the Chilean Communist party and close advisor of Allende also died mysteriously. After an independent investigation and declassification of State Department documents in 2015, the Chilean government said that it was likely that Neruda too was murdered as part of the Coup of September 1973.

Three years later, in 1976 the CIA backed yet another coup in South America: Chile’s neighbour Argentina saw the overthrow of Isabel Peron, who was replaced by a military junta, which triggered a Dirty War that saw thousands disappeared between 1976-83 as the Argentine economy screamed. 

Argentina like Sri Lanka has had numerous Washington Consensus (International Monetary Fund (IMF), and World Bank (WB)), bail outs! Protests against the IMF are ongoing in Buenos Aires at this time again, as Argentina continues to Scream under Washington’s Monroe Doctrine Redux jackboot –negotiating its 21st bailout![3]

History Repeats as Farce: Another Continent

Today, economy and society are ‘screaming’ in Colombo, Sri Lanka, which knows not of Chile’s infamous ‘Operation Colombo’ for which General Pinochet was stripped of his Presidential impunity and tried in Spain. This despite a recent film Albaorada purportedly base on Pablo Neruda’s brief sojourn in Sri Lanka as a young diplomat and a poem he never wrote!

Neruda, whose voice would have been powerful in condemning the CIA-backed Coup in Chile had to be silenced.  In death, he was subject to character assassination and disinformation campaigns which seem to continue to this day (viz. Alborada which suggests that he behaved like a colonial rapist in Ceylon).

As Cold War escalated in the Indian Ocean Region this year, Sri Lanka hastily Staged a Default in April for the first time in its history– enabling the Washington Consensus to make deep inroads into the strategic island’s policy process.

As the cost of living soared in June with real and staged fuel and food shortages, amid Aragalaya ‘protests’ a partial regime change operation was effected with US-backed Ranil Wickramasinghe becoming President after the country defaulted on $26 billion of Dollar denominated debt in April this year. 

At this time IMF austerity measures are being rolled out ex-ante an actual ‘bailout’ agreement with US and EU-based private creditors who caused the strategic Indian Ocean Island’s debt trap and Default.  New York based, BlackRock, Sri Lanka’s biggest private creditor which got huge Covid-19 bailouts from the US government is prominent among them. An outfit called the Hamilton Reserve Bank a shadowy off-shore tax haven based in St. Kitts and Nevis has sued the Government of Sri Lanka for defaulting on bond payments of $ 250!

Sri Lankans face a grim future of Dollar Debt Colonialism, as the rupee has plummeted against an increasingly weaponized US dollar, while the rising dollar has compounded the local currency cost of servicing foreign debts denominated in USD- the global reserve currency— increasingly of last resorts? 

Hence, some analysts have called for de-dollarization/ trading in a basket of currencies, and sourcing oil and gas from Russia whose sanctions-hit Ruble ironically remains the strongest currency against the US dollar. The global-local Debtocracy from Argentina to Sri Lanka and its failed policies seems set to continue if the readouts of the IMF and World Bank meetings last week are true[4].

Ironically too, while protests are set to continue, few among Colombo’s Human Rights activists and Aragalaya Stars had heard of ‘Operation Colombo’ in Santiago de Chile in 1974, which saw the disappearance of 119 dissidents. Amnesia amid propaganda operations and ‘dream films’ like Albadore with pretentions at post/colonial avant guard chic and vibes of the ‘me too’ movement seem almost Kafaesque – despite the best efforts of Director, Prasanna Handagama. The protestors who capitalized on genuine economic grievances of citizens had a limited agenda for Economic Rights and Debt Justice! Some groups of the Aragalaya held pro-IMF posters!

It is increasingly clear that the strategic Indian Ocean island has fallen victim to Full Spectrum Dominance (FSD), Digital Colonialism enabled cyber-operations with real and staged protests.  as much as, to the ‘lender of last resort’s debt trap neo-colonialism and the International Sovereign Bond (ISB) ‘bailout business’ after the Staged Default[5].  

However, given that this is Sri Lanka’s sixteenth IMF negotiation, and the fact that key bi-lateral creditors have not replied to the IMF and Paris Club of Euro-American private creditor nations’ (plus Japan), invitation to debt restructuring talks, it would be prudent for the island nation to consider alternatives to the Washington Consensus path. 

After all, the IMF promise of an insignificant loan of 2.9 billion over four years with massive “shock treatment” of economy and society, to enable the country to borrow from private markets again, is counterproductive to extricating itself from the current debt trap. Indeed, a moratorium and ban on borrowing from private markets which hold almost 50 percent of Sri Lanka’s dollar denominated debt would be logical.

Making the Global Economy Scream in the Asian 21st Century

The IMF wants China and India, Sri Lanka’s biggest bi-lateral donors (aside from Japan which is part of the Colonial Club de Paris), to join its “common framework” — for a debt reduction “haircut” with creditors on the pretext of “burden sharing”. Whether these Asian Giants would acquiesce and sit with Euro-American private market bond traders convened by Japan on behalf of the OECD’s informal Paris Club is an open question.  

India and China are sovereign states parties with their own geopolitical ambitions to match the Euro-American Paris Club and Washington Consensus as an Asian Century dawns again with the Indian Ocean Region a center for global growth.  

Hence, should not the Central Bank and Government of Sri Lanka engage directly with the Asian giants China and India on Debt restructuring and a sustainable development path– outside the Paris Club, IMF and Japan led donor meeting and Common framework which has been extensively critiqued by leading economists who recently called for debt cancellation in Zambia with Debt Justice, UK?

The dawn of what has been widely deemed the ‘Asian 21st Century’ (Kishore Mahabubani), again after about 200 years of Euro-American global hegemony and dominance of world history has placed Sri Lanka front and center of Cold War and colonialism 2.0.  The Asian Century is the projected 21st century dominance of Asian politics and culture, given demographic and economic patterns in Asia and the Indian Ocean region[6].

It is increasingly apparent that the US Empire with its 750 military bases all over the world, and global reserve currency weaponized by sanctions and rising interest rates would “not go quietly into the night”. Rather, increasing sanctions and interest rates by the Federal Reserve to curb seemingly self-inflected inflation in the US and EU as economic de-coupling from China gathers pace appear to be a ‘solution’ designed to make the global “economy scream”. 

Is this an attempt to thwart the Asia Century and ensure that globalization which had benefited the emerging economies is reformatted to serve the imploding Euro-American, NATO, financial and military empire?

Be that as it may, Sri Lanka, located at the center of the Indian Ocean increasingly appears to be the canary in the coalmine of Global South countries facing dollar-debt Colonialism in the aftermath of Covid-19 bio-war lockdowns and Digital Colonialism to promote Euro-American Global Governance and the so-called ‘rules-based order’.

While the IMF and World Bank at their Fall Meetings this month in Washington DC focused on high interest rates and inflation, and War in Ukraine with grim predictions, no one mentioned copious money printing in the Euro Zone or the US government’s mammoth 31 trillion of debt! 

Covid-19 Déjà vu:  Dire Predictions and a Lockdown Culture of Fear

The IMF and WB were long on dire predictions of low growth and possible global recession and short on solutions for the impoverishment and inequality pandemic sweeping the Global South last week at the Annual Meeting in Washington DC this month. There was no Talk about Economic Rights or Debt Justice.

The same tired IMF recipes are on offer again for the dollar-debt trapped Global South and Sri Lanka, with IMF inspired austerity measures include huge tax increases on the working class which seem designed to shrink the economy– to fit the IMF’s dire predictions for 2023 while promoting brain-drain.

There was however, something déjà vu about the dire predictions, fear, Lockdowns and promises of fuel shortages and Famine to make economy and society scream: We had heard it all before during the past two years of economically-devastating Covid-19 bio-war Lockdowns psychological operations that enabled a pandemic of corruption. Meanwhile Big Pharmaceutical Corporations made massive profits with militarized, mass Covid-19 injection programs. 

Fear psychosis blocks critical thinking and reasoned analysis as psychologists have long known. Today Big Oil and energy corporations are making wind-fall profits while global governance institutions and powerful governments wring their hands rather than tax these corporations?!

But ‘reforms’ designed to shrink the Sri Lankan economy to fit the narrative, in addition to taxes, included higher energy, electricity, water prices, and soaring cost of living for hapless citizens caught in a debt trap not of their own making. Meanwhile, State Owed Enterprises are being un-bundeled and sold off to creditors and Vulture funds like BlackRock and their partners like Adani and Ambani as the rupee depreciates against an increasingly weaponized US dollar. 

US and EU based private market creditors who made big profits lending at predatory rates in places they deem “Frontier Markets”, now seek to profit from an IMF Firesale of Sri Lanka’s Strategic assets and State Owned enterprises. These include, land, energy, transport and telecom infrastructure as Cold War in the Indian Ocean Region ramps up. Rather than be compelled to bear the cost of their speculative investments in so-called “frontier markets” these OECD creditors now seek to benefit again–ex-ante the IMF-PC Debt Haircut. 

John Perkins’ famous book, Confessions of an Economic Hit Man, offers direct testimony highlighting how the creditor-debtor relationship built around the US dollar and the international institutions created to administer the ‘rules-based order’ has contributed to the deprivation of sovereignty of many struggling nations, especially those rich in exploitable resources. By design, not only governments but entire populations were meant to fall helplessly into the dollar debt trap and colonialism.  The parameters on which the IMF determined that the strategic Indian Ocean’s debt of 26 billion was unsustainable to trigger the Default are not available. Nor is the IMF Debt Sustainability Analysis! 

The on-going IMF inspired ‘Firesale’ of Sri Lanka’s strategic assets attests to the fact that the strategic island is now deep in Dollar debt trap colonialism in the wake of 4 years of hybrid economic war induced exogenous shocks –to make the economy scream. This has seen the Washington Consensus to move in to take control of economic, trade and energy policy autonomy and sovereignty, while stymying the possibility of de-dollarizing and buying oil and gas from sanctions-hit Russia at discount rates as Western Oil Companies make wind-fall profits at the expense of consumers while the EU and NATO blames their fuel crisis on their self-inflicted Ukraine war!

Exogenous Economic Shocks as Hybrid Economic War

While the debt crisis in Sri Lanka is primarily the result of poor governance and political corruption, a series of hybrid war style exogenous economic shocks over the past 4 years have also contributed significantly to the Debt trap over the past four years: 

A series of Exogenous Economic Shocks including mysterious ISIS claimed attacks on hotels and the tourist dependent economy in 2019, followed by two years of economically devastating Covid-19 lockdowns and other hybrid war operations, such as the Lawfare program against Russia’s Aeroflot Airlines in June this year by external actors enabled the “Shock Doctrine and Disaster Capitalism” a la Naomi Klein and contributed to the debt trap and default.

The mysterious 2019 Easter Sunday attacks claimed by the Islamic State (ISIS), on seafront Tourist Hotels and fisheries livelihoods saw the economy into a tailspin with extended security lockdowns.  However, inexplicably, the World Bank in July 2019, ‘upgraded’ Sri Lanka to an ‘Upper Middle Income Country” (MIC) trap. MIC Status renders concessionary borrowing difficult and forces countries to borrow from US and EU private capital markets. These now hold the lion’s share, almost 47 percent of the strategic island’s debt.

The 2019 hybrid war attacks were then followed by two years of economically devastating Covid-19 lockdowns recommended by the World Health Organization. These caused knock on institutional debilitation, a corruption pandemic and digital colonialism in 2020 and 2021. Then in 2022 staged fuel shortages triggered by US sanctions on Russia brought the economy to a standstill. 

The hacking of production and food supply chains due to fuel shortages and lockdown were accompanied by a psychological operation of fear amid absurd promises of ‘Famine” in a fertile and lush tropical island– as protests mounted. 

As the economy screams, it is clear that Cold War headwinds are buffeting the strategic Indian Ocean island located among the busiest energy, trade and undersea data cable routes in the world, and hence perpetually in the cross hairs of big power rivalry as the Euro-American Cold War on China revs up. 

But as Nord Stream 1 and 2, gas pipelines connecting Russia to Germany in the North Sea come under attacked as part of hybrid energy wars in Europe, it is clear that Sri Lanka would need to seek alternatives to the IMF path and up its game in the field of Maritime Domain Awareness which may need stretching and recalibration. 

The strategic island’s Navy will be certainly called on to protect its ocean floors that contain submarine or Undersea Data Cables (UDC), that keep the internet and global financial system going.

TeleGeography’s Submarine Cables

Sri Lanka may need to strengthen its Navy and repurpose its military forces for a new generation of hybrid cyber wars. It would hence be logical for the cash strapped government to develop a plan to TAX the UDCs companies and their GAFAM clients. (Google, Apple, Facebook, Amazon and Microsoft). But it seems unlikely that the ‘lender of last resorts’ would assist or approve such an innovative income generation project is the debt-trapped strategic island, which may then render it solvent and independent!

Solutions and the good News: Alternatives to the IMF and Paris Club

It is increasingly clear, that in the event that the IMF and Paris Club process fails or drags on, contingency plans would be needed and it is imperative that Sri Lanka engage earnestly to meet unexpected exigencies that could arise, also given Cold War geopolitical rivalries.

The good news is that the Governor of the Central Bank of Sri Lanka (CBSL), noted in a press briefing recently that the country can on a monthly basis cover its import bill with its export earnings– if it can get rid of the debt and interest overhang. 

In the context, the simplest and most elegant solution to the dollar debt crisis would be outright cancelling of Private Market dollar-denominated debt which amount to almost 50 percent, with a ban on future borrowing from International Bond traders (ISB). Once this is done restructuring the bi-lateral and multilateral debt with creditors who are more flexible would be relatively straight forward — though extending time frames for repayment and further debt cancelation. 

There is a new Global South Development architecture emerging with new multilateral banks like the BRICS Bank, the New Development Bank (NDB), and the Asia Infrastructure Bank for development financing. Argentina has already applied for membership of the NDB, and Sri Lanka should do so too access credit.

This path forward is NOT Rocket Science in a world swirling in Odious and illegitimate US dollar-denominate debt with the US the most indebted country on the planet, but because of a huge amount of Disinformation, data manipulation, and exaggeration regarding both the Quantum of Debt, and the causes of the Default, relatively simple and elegant solutions to Sri Lanka’s debt crisis has been obscured and elided.

Debt datafication amid Cyber hacks and pseudo-scientific analysis by Economic hitmen who profit from extended negotiations in Colonial Club de Paris and IMF debt treatments do not help the identification of solutions in the Real Economy, but benefit the likes of Lazard, Clifford and Chance that work the ‘Bailout Business” as the Transnational Institute termed it.

A concomitant lack of transparency on the IMF, Paris Club, Lazard process and the opaque nature of ISBs given that bond holders whose identities are not disclosed has rendered debt restructuring needlessly complex and a rabbit hole of infinite regress. Meanwhile, manipulation of Sri Lanka’s status as an MIC country to fit various Washington Consensus narratives are on-going with Government undecided whether it is a now Middle or Low Income Country or not! 

Shoring up an Asian Century: Provincializing Europe and America

While the IMF has judged Sri Lanka’s debt “Unsustainable” on unknown parameters, a simple solution to making Sri Lanka solvent and keeping its economy going is securing supply of oil and gas to keep industry and manufacturing going given the dollar debt trap. 

In the context, maintaining friendly relations with all counties while not succumbing to Western bullying and negotiating to buy oil at discount from India/Russia would significantly ease the economic situation. Fuel is the largest item for which foreign exchange is needed. This would also pre-empt the IMF inspired Firesale of energy infrastructure which will certainly negatively impact national Energy Security.

A second key aspect to sustainable recovery of the Economy is diversifying export markets, Eastward, as well as, products through transfer of technology and value adding, particularly in the Fisheries and Mineral Sectors which are low hanging fruit so to speak. Right now, Sri Lanka is dependent on export markets in the West that use threats of sanctions and tariffs while weaponizing human rights at the UNHRC. Periodic EU threats of GSP plus and minus removals seem to terrify large parts of the business community that has a colonial dependency complex, which have not spurred the so-called captains of industry to find alternative markets!

Another key point in sustaining economic activity amid IMF austerity measures designed to Shrink the economy is subsidizing and returning kerosene oil which is used by poor folks and fishermen to the previous price to enable Sri Lankans to harvest their protein from their extensive oceans. 

Sri Lankans do not need digitalized cash handouts from the IMF or UNDP to sweeten the sale of their collective National Assets. What is needed is enabling folks to earn a living wage– sans hybrid war masked Economic Shocks and disaster capitalism!

In the context it would be important that the Ministry of Foreign Affairs and CBSL implement the Russian MIR Card payment system in Sri Lanka’s banking system. Now that Russian Airlines is flying again to Colombo, it would be necessary and important to welcome Russian tourists to jump start the tourist economy in the island and enable MIR card transactions, while also buying Russian oil and gas at discount rates, perhaps with India’s help.

Finally, as Asia unites to withstand Divide and Rule agendas in order to claim the 21st century– a transformation predicted for a generation now–when power would shift from an increasingly provincialized Europe and America to Asia and other places—is demonstrably underway.  Small countries and civil society, from Chile to Sri Lanka, are now called upon to pull their weight in order to ensure that Colonial and Cold War History does not repeat– as tragedy or farce in the Global South

[1] https://history.state.gov/historicaldocuments/frus1969-76v21/d93

[2] Noam Chomsky. https://chomsky.info/secrets04/

[3] President Theodore Roosevelt officially invoked the Monroe Doctrine to justify sending troops to the Dominican Republic, Nicaragua and Haiti in the first decades of the 20th century. https://www.fairobserver.com/region/north_america/peter-isackson-aukus-monroe-doctrine-cold-war-us-news-joe-biden-china-usa-australia-uk-deal-43892/

[4] https://www.youtube.com/watch?v=qKpxPo-lInk

[5] Transnational Institute, 2017 The Bailout Business: Who profits from Bank Rescues? https://www.tni.org/files/publication-downloads/tni_bail_out_eng_online0317.pdf

[6] Kishore Mahhubhani 2021 The Asian 21st Century https://mahbubani.net/the-asian-21st-century/

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  • 3

    Very deep insights and analysis of a very complex game with too many players. A very difficult task to call who is playing who in this major powers’ money games with the poor SL govt (for example) caught with their pants down.

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