State Formation and the Politics of Foreign Aid: Reflections on Sri Lanka

These are a few reflections based on my experience of working in conflict-ridden Sri Lanka for about four decades. It is this that drove me to reflect upon what is meant by peace. My own understanding of peace in Sri Lanka emerged from observing and analysing political struggles, and how the Sri Lankan state dealt with these struggles through the use of the coercive power of the state. This prompted me to look more closely how we understand the state and state power.

The conventional notion of the state analyses the state as a concrete self-contained entity that has attained a final status. The geographic space covered by the state is securitised. When it comes to discussions on security, state security becomes the focus. The spatial unit of the state is objectified in maps, and borders are drawn to demarcate it. A whole paraphernalia of rituals, histories and symbols has been developed – not only to promote the conventional idea of the state, but also to convey the eternal character of the state. Those who control the state, and their ideologues, always try to convey this notion. The notion of sovereignty, which came to dominate the world only after the Second World War, strengthened the conventional notion of the state. The dominance of these ideas of the state makes it difficult to bring about reforms of the state in areas such as its institutional structure, identity and critical public policies.

In contrast to this, states have to be seen as a product of history – the same as any other social phenomenon. They are the product of specific histories and political struggles. This generates a process of state formation. They are formed under certain specific historical conditions. They continuously undergo changes. Under certain circumstances states can even totally disappear. A cursory glance at the history of the world shows this.

In understanding the state formation process it is crucial to focus on state-society relations. Depending on specific histories of state formation, certain state-society relations become strategic. Strategic state-society relations can be managed either through consent or coercion. A consensual approach means developing policies that manage these strategic state-society relations peacefully. Coercion means using the coercive power of the state to manage these relations. The latter results in social costs, and certain sections of the society becoming victims of the coercive power of the state. Managing strategic state-society relations through consent is the foundation for a strong state. This also means questioning the conventional idea of security, which focuses on state security. In certain circumstances ensuring the security of the state can undermine the security of individuals or groups in society. Therefore, security must be analysed at different levels in society. Finally, the process of state formation must be studied in a global context, which consists other states, organisations formed by states, and global capitalism.

Sri Lankan state formation

The Sri Lankan state was formed in a global context when European colonialism dominated. Under British colonialism the entire geographic space of the island was covered by a single unit of territorial power controlled by the British. Institutional structures were formed to control territory and people. This included developing the coercive power of the state. It must be remembered that this entire idea of the state was a transfer of ideology that prevailed in colonial countries. Another dimension that has to be noted is that once the territory was consolidated under a single territorial power, the process of capitalist development intensified. 

During the post-colonial state formation of Sri Lanka two strategic state-society relations became important. First, relations between the centralised state inherited from the colonial period and minority ethnic and religious groups. The model of the state that emerged under British colonialism expected that this state would develop a single hegemonic national identity that would surpass separate cultural identities. Sometimes these individual cultural identities were considered as a sign of backwardness. The term ‘communalism’ was used to identify them. 

The second strategic state-society relation is the one between the Sinhala majority and the state in the context of the politics of capitalist transition. Capitalist transition is a process that involves changing institutions or the ‘rules of the game’, so that markets become the primary mechanism for resource allocation. These changes must be legitimised at an ideological level. When institutions to establish markets are successful, they become ideas that seem to be natural and common sense, thereby creating a hegemony. But this is a political process, and not a technocratic one. Conflicts and struggles are always a part of this. 

Right from the beginning of the post-colonial period managing these two strategic state-society relations has not been peaceful. Political struggles, conflicts and state repression have been part and parcel of the post-colonial Sri Lankan state formation process.

The post-1977 period - more specifically, from the time of the general election held in July 1977 inaugurated a new period of state formation. Developments during this period pushed political struggles, conflicts and state repression underlining the state formation process to a qualitatively new level. This was due to two reasons. First, the political elites who controlled the Sri Lankan state began to implement more liberal form of capitalism. This gave emphasis to the private sector, markets and openness to global capitalism. It posed new challenges to managing relations between the state and the Sinhala majority. Second, by this time the worsening relations between the centralised state and ethnic minorities had resulted in Sri Lankan Tamils demanding a separate state.

The use of the coercive power of state became a major means of dealing with these challenges. A high point of this history was in 2009, when the territory of the centralised state was consolidated through military means. This resulted in massive human costs. As a result of violence associated with managing both strategic state-society relations during the post-1977 state formation process, this period can be characterised as a period of mass graves.  

The politics of foreign aid and state formation

The inauguration of a more liberal form of capitalism resulted in a significant increase in foreign aid from developed capitalist countries of the West, Japan and multilaterals to the Sri Lankan state.  In this context a key question that has to be posed is: how did this increase in foreign aid deal with the conflicts, violence and state repression associated with the two strategic state society relations during the post -1977 period ? 

The politics of capitalist transition after 1977 created conflicts, political struggles and state repression. Donor policies did not pay much attention to the politics of capitalist transition. It was mainly seen as something confined to a separate sphere called the economy. When it came to social policies the main agenda was to consolidate the notion of poverty alleviation as the hegemonic ideology. This ignored the unequal distribution of capitalist transition and its political outcomes. The response to state repression was primarily a discourse based on human rights and supporting civil society activism. Donors were hoping to discipline the Sri Lankan state through this focus. But how effective these efforts were is an open question. However, what needs to be remembered is that, despite this discussion on human rights, foreign aid support to the agenda of a more liberal form of capitalism did not diminish. In fact, during the 1989/90 period, at the high point of state repression in the Southern part of the country, the flow of foreign aid to the state increased significantly, because the regime in power entered into several agreements with multilaterals to continue a range of economic reforms.

When it came to the question of relations between the state and the Tamil minority, except for a few projects supported by donors, there was very little focus on reforming the centralised Sinhala Buddhist state to suit a plural society. A major example of this nature during this period was the establishment of provincial councils with a degree of devolved power, through Indian mediation. Other possible areas of reform were the identity of the state and several public policy areas. Except for a few projects promoting bilingualism within the state, there was very little effort in this direction.

Instead of focusing on the nature of the state and state-society relations, the dominant discourse on peace and conflict supported by donors focused on society. Using opportunities provided by the English language, a variety of terms - such as social cohesion, social harmony, social integration and reconciliation were used to legitimise this approach. It is not that there are no problems in relations between ethnic and religious groups in society. But focusing on society became a means of ignoring the fundamental issues about the nature of the state and state-society relations. Finally, as pointed out in aid reviews, the availability of foreign aid, which took care of many functions of the state, allowed the state to use its own resources for military purposes. 

28^th September 2025