International dimension of Sri Lankan state formation

The international dimension of Sri Lankan state formation

Sunil Bastian

This month the Sri Lankan state celebrates 75 years of independence from British colonialism. This is a good to opportunity to remind ourselves about the link between Sri Lankan state formation and the global context. This is because Sri Lanka gained independence not only because of what happened within the country, but also because the British empire became weaker from the time of the First World War. It was in this larger international context that negotiations between the British and the colonial elite in Sri Lanka led to Sri Lankan independence.

The other important development was that regional security structures became more autonomous and prominent in international politics. The post-colonial Sri Lankan state came to be located within the South Asian regional security structure, where India was the hegemonic power. In the post-colonial period this has had an impact on the state formation of Sri Lanka. 

In the first three decades of the post-colonial period, the Sri Lankan state existed in a global context characterised by the Cold War and the presence of the regional power, India. There is no space here to analyse how this international context influenced post-colonial state formation from 1948 to 1977. I refer to it as necessary when analysing the post-1977 period.

The post-1977 period is a qualitatively new period in the state formation of Sri Lanka due to three factors. First, the UNP regime elected in 1977 inaugurated a new period of capitalist transition. This emphasised markets, the private sector, and a greater degree of openness to global capitalism. Second, relations between the centralised Sinhala nationalist state and the Tamil minority deteriorated, leading to the latter contesting the 1977 general election on a separatist platform. Third, with the collapse of the Soviet Union, the global context began to be dominated by what I call a global neoliberal political project led by the United States. The new period of capitalist transition integrated the Sri Lankan state into this project to a greater degree.

The economic dimensions of the global neoliberal political project were based on an economic theory that believes free markets will bring prosperity to all, and the role of the state was to create an institutional framework for this purpose.  The market imperative was extended to areas such as education, health and social welfare. If there were no markets operating in these areas, they would be created through state intervention if necessary. This ideology projected global capitalism as a benevolent system that incorporates more and more people into a market economy, brings about an interconnected world, and spreads prosperity and freedom to all corners of the world. The political agenda was to establish liberal democracies and to reform states based on liberal principles. Liberal democratic states became an ideal to be promoted globally. It also believed that liberalism in economics and politics would lead to a more peaceful world. This is the security dimension of this project, often propagated as liberal peace. 

Liberal principles in economics, politics and security added up to a vision of the total transformation of the world based on liberal principles. It amounted to a liberal utopia in the post-cold war period. Some ideologues of this project even boasted about an ‘End of History’, meaning that the collapse of the state socialist system ended ideological debates about social systems. Capitalism and liberal democracy were seen as the final answer in this quest, and the entire world was supposed to move towards this ideal. A key assumption of this liberal utopia was the continuation of Western hegemony in a world led by the United States. 

The liberal ideology that was promoted by the developed capitalist countries of the West during the post-Cold War period was nothing new. These ideas have a long history stretching back to the likes of James Mill and John Stuart Mill. The same ideas of trying to bring peace and prosperity through free trade, and transplanting liberal democratic institutions from the West, were prevalent in the classical period of imperialism that focused on territorial domination. They remerged in the twenty-first century. 

The integration of the Sri Lankan state with the global neoliberal political project had a significant impact on the post-1977 state formation process. It increased the volume of foreign assistance from Western developed capitalist countries, Japan and multilateral aid agencies, which strengthened the economic security of the state. The Sri Lankan state also acquired a greater degree of legitimacy within the structures of global governance. 

Within Sri Lanka, the availability of foreign aid helped the state to manage its relations with the Sinhala majority while liberalising the economy. For example, foreign aid supported Mahaweli and several regional- and district-level projects, which catered to the needs of rural Sinhalese. Foreign aid also freed up resources of the Sri Lankan state, making it easier to continue with an expensive military strategy to deal with the Tamil separatist challenge. When all efforts to deal with the armed challenge to the state failed, the international actors who had begun to play a more prominent role after 1977 made an effort to promote a negotiated settlement to the conflict, and push neoliberal economic reforms to a qualitatively new stage. The collapse of this effort resulted in a regime led by a more Sinhala nationalist political leadership coming to power. This regime succeeded in consolidating the territory of the centralised Sinhala nationalist state through military means. 

The post-war Sinhala nationalist state exists in a global context that is quite different from the period dominated by the global neoliberal political project led by the West. One of the biggest conceptual flaws in the ideology of global neoliberalism was the zero-sum approach to the relation between the state and global capitalism. With the expansion of neo-liberal capitalism globally, the importance of states was expected to diminish. Some propagated this idea with the notion of the coming of a ‘flat earth’, where state boundaries become less important. Even the widely used notion of ‘international community’ masks the fact that the world still consists of competing states, with their own strategic interests. In contrast to what liberal internationalists believed, the growth of global capitalism has not made states less important - but they have become more differentiated. 

Capitalist development under neoliberalism has had diverse impacts on states. Due to the growth of capitalism some states have become stronger and are able to challenge the balance of power at regional and global level. The growth of capitalism can be presided over by states with different types of political systems. Nationalism and capitalism are not contradictory. In many areas the growth of capitalism is directed by states where nationalism dominates.

Looking at the world at present, the most important outcome of the period of neoliberal capitalism has been capitalist growth in China, and China becoming a strong state. With these developments China has begun to challenge the hegemony of the US, especially in the Asia-Pacific region. The US has constructed a new regional strategic space called Indo-Pacific to meet this challenge. This is an example of securitisation of geographic space. Once this is done security policies are developed on the basis of this spatial construction. For those who were not taken up with the liberal utopia in the first place, these are not unusual developments. The emergence of new centres of capitalist growth, and these states becoming stronger and challenging existing power relations, has happened in the past. We are seeing a new phase of this. More recent developments, like Russian efforts to assert political control over Ukraine and their fall-out, make it clear that it is better to understand the current global context within a framework of global capitalism and competing states. 

Improved relations with China, the new capitalist centre of accumulation, during military operations to consolidate the territory of the Sinhala nationalist state, continued in the post-war period. This revived an old relationship. According to some, post-colonial Sri Lanka was one of the first countries to recognise the One China policy. The Rubber-Rice agreement with China in 1953 was important for the Sri Lankan state to overcome economic difficulties in the 1950s. The relationship with China improved especially after the mid-1950s. In the post-war period China has become an important source of loans and investments to the Sri Lankan state. As is the case with any state, China has its own foreign and economic policy objectives when improving relations with the post-war Sri Lankan state. 

There has also been capitalist growth in India. India is asserting its power in the South Asian security structure, where it remains the hegemonic power. India has also become a source of finance to the post-war Sri Lankan state. There is further strengthening of India’s involvement with the strategically important Trincomalee harbour. The first major shift in this was the signing of the Indo-Lankan Accord. In an Annexure to the agreement the Sri Lankan state agreed that the oil tank farm in Trincomalee harbour will be developed in corporation with India. In a further development in January 2022, the Sri Lankan state signed three lease agreements with Lanka Indian Oil Company, Ceylon Petroleum Corporation and the Government of Sri Lanka to jointly develop the Trincomalee oil tank farm.

While the role of regional powers in contributing to the economic security of the post-war state has increased, the role of sources of finance that became dominant after 1977 has diminished. The Sri Lankan state became ineligible for concessions assistance from these sources due to its middle-income status. In this context the Sri Lankan state began to depend to a greater degree on global financial markets for loans. The inability of the Sri Lankan state to service loans from global financial capital has led to an economic crisis in a country that has a high level of economic inequality. The worst impact of the economic crisis has been on the social classes towards the bottom of the social structure. What I have called the new global context is already having an impact on Sri Lankan state formation. For example, it is difficult to understand the discussions on debt restructuring without taking into account the political interests of the diverse sources of loans to the post-war Sri Lankan state. But this is a part of a much larger picture. There is no space here to map out the different dimensions of this phenomenon. 

Today we need to understand the new global context, while not treating the Sri Lankan state as a self-contained finalised entity. The dynamism of the state formation process has to be built into the analysis. This thinking must go beyond what dominates at present. Ideas of those with liberal persuasion continue to be determined by a belief in the post-Cold War liberal utopia. Some other currents of thinking are based on categories generated during the Cold War. The thinking of the political elite seems to be determined by their own political agendas and interests. In this context researchers and intellectuals have a special role to play.