State formation, the politics of capitalist transition and conflicts

Given the wars and conflicts that engulfed the world at the end of 2023, peace and conflict studies have become even more important as we welcome 2024. This short article is based on the experience of Sri Lanka. Using the example of Sri Lanka, its aim is to show the importance of taking into account the politics of capitalist transition when studying conflicts. But getting into this specific discussion, it is necessary to explain the foundational concepts underlining this note. This is based on the idea of studying conflicts as a question of state-society relations. 

State formation and conflicts

The conventional idea of the state treats it as a self-contained entity that has attained a final status. The legal notion of sovereignty strengthens this idea. Those who control the state, and their ideologues, always try to convey this notion. A whole paraphernalia of rituals, histories and symbols have developed both to promote this idea and to convey the eternal character of the state. 

In contrast to this, the moment you start to look at states as a product of historical processes, which are open for change in the same way as other social phenomena, then new ways to look at the state and avenues for understanding conflicts emerge. States are formed under certain historical conditions. They continuously undergo change, and under certain circumstances can even totally disappear. A cursory glance at the history of the world shows this.  

Therefore, what we need talk about is not the state, but state formation - where change is integral to the concept. State formation involves developing mechanisms to control territory and manage strategic state-society relations in a specific historical context. These processes don’t develop in the same way in all states. They have to be analysed taking the specific historical context into account. This means rejecting global blueprints for peace such as ideas behind liberal peace. 

The strategic state-society relations of the state formation process can be managed through either coercion and consent. When consent overrides coercion, we have states that have legitimacy in society. In these situations, the hegemony that sustains the state is strong. When coercion predominates, state security is given priority - but it undermines the security of individuals and groups in society. There is an inherent weakness in the hegemony that sustains this type of state. 

State formation processes have to be analysed in a global context. The global context consists of various territorial forms of power that include states, organisations formed by states, and global capitalism. In other words, state formation cannot be understood by confining our minds within the borders of a state. This is often an outcome of looking at the state as a self-contained finalised entity.   

Finally, a state needs resources to sustain itself, and to manage relations with strategically important social groups. These two dimensions constitute the economic security of the state. These resources have to be secured within the process of capitalist transition. When the state has enough economic resources, and is able to manage relations with the strategically important social groups through specific policies, there is an element of consent in certain dimensions of state-society relations. When this fails, the state resorts to coercive measures.

Post-colonial state formation in Sri Lanka

In the post-colonial history of state formation in Sri Lanka, three types of strategic state-society relations have been important - relations between the centralised state and minorities; electoral politics and state formation; and relations between the state and the Sinhala majority in the context of the politics of capitalist transition. All three strategic state-society relations are important in the Sri Lankan state formation.

This short article focuses on the third variable. But we need to remember the status of the first two. In the case of state-minority relations what has happened recently is the territory of the state has been brought under central control through military means, with enormous social costs. With this the Sri Lankan state joined many other states in the world where similar processes have happened. Political issues in relation to minorities have not been addressed. In some areas things have become worse, and we need to address issues in relation to Muslims and Hill Country Tamils, in addition to focusing on Sri Lankan Tamils. 

During the post-colonial period, electoral politics of Sri Lanka has not been able to construct a national political space. Instead, it has produced ethnic political spaces with regional identities. In countries with electoral processes, elections have contributed to overcoming regional divisions and producing a national political space. This has been important for the state formation process. This has not happened in Sri Lanka. 

Politics of capitalist transition and managing relations with the Sinhala majority   

Capitalist transition within a state 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 creating a hegemony.

The establishment of the hegemony of markets is not a technocratic process, but a political one. The agency of the political elite who control the state is central to this process. Conflicts and struggles are always a part of it. The process of capitalist transition takes place in a particular society within its own history. This means that capitalism is not some sort of model. It is shaped by political struggles and historical processes in a particular context. 

In the post-colonial history of capitalist transition in Sri Lanka, there have been two ideological currents within the political elite on how to bring about this transition. One of them emphasise a greater role for the private sector, export orientation and openness to global capitalism. The other favoured a greater role for the state. This state capitalist dimension was legitimised through various arguments such as state-led industrialisation, import substitution and various forms of economic nationalism. It is important to remember these ideological currents have co-existed throughout the post-colonial period.

As the socio-economic impact of capitalism is always unequal, various sections of the Sinhala majority benefitted more than others from this process. In other words, although the Sinhalese were unified in ethnic terms, they were divided in class terms. The inequality generated by capitalist transition within the Sinhala majority could always combine with the Sinhala nationalism that legitimised the state, to oppose the regime in power. The opposition to regimes could also turn into an opposition to capitalism, and a general opposition to the state itself. The Sinhala majority also had a greater influence in the electoral process. Due to these reasons the political elite could not ignore the differential social impact of capitalist transition. 

In order to meet this challenge, the post-colonial state developed a number of policies. These are what are usually called ‘welfare’ policies. The use of the term welfare ignores their strategic role as a technique of state formation. During the post-colonial period these policies were influenced by a number of ideas. These included a universal food subsidy, state responsibility for health and education, protecting the peasantry, and institutions to protect the rights of labour. 

The ability of the state to continue with these policies depended on the performance of the economy within global capitalism. In the post-colonial period, there have been several instances when this strategy of state formation broke down, resulting in protests, and sometimes violent challenges to the state, and state repression. The 1953 ‘hartal’ and 1971 insurgency were two such events.

Post 1977 capitalist transition and conflicts 

The post-1977 period is characterised by a new period of capitalist transition that emphasised markets, the private sector, and a greater degree of openness to global capitalism. This resulted in new challenges to managing relations with the state and Sinhala majority. 

Political strategies to manage relations with the Sinhala majority in this context consisted of three strategies – significant institutional reform, establishing hegemony of a new ideology in social policies, and state repression. The most important institutional reforms were the establishment of a presidential system and changes in the electoral system to proportional representation system of elections (PR). It was expected that the presidential system would allow the president to take decisions on economic reforms that were unpopular independent of parliament. The PR system was expected to do away with the large majorities in the parliament that the previous electoral system produced. This was expected to create a greater degree of political stability to continue with economic reform. 

When it came to social policies, the most important change was establishing poverty alleviation as the hegemonic ideology. The foundation of poverty alleviation within capitalist transition is the idea of growth and trickle-down. Sometimes these policies are called targeted safety nets. The argument was that these policies would safeguard the poor from the impact of capitalist reforms. This was supposed to be the main role that the state should play vis-à-vis the poor – in the long run economic growth would take place, and the benefits would trickle down to the poor. 

Poverty alleviation within capitalist transition tries to ensure minimum basic needs for the socially marginalised. Ensuring a basic living standard for the marginalised is interpreted as a great achievement in development. The analysis that underpins poverty alleviation always focuses on households in isolation from the structures of socio-political power that keeps this population in these conditions. Therefore, it takes us away from the need to tackle the reasons for marginalisation. 

Political resistance to the new policies that came from various sections within the Sinhala majority was met with state repression. The post-1977 period goes down as one of the most violent periods in Sinhala-majority areas in the country. The Sinhala word “Beeshanaya”, or terror, captures the environment that prevailed. In 1979 a Prevention of Terrorism Act (PTA) was passed to deal with the Tamil insurgency. This was a key development that enhanced the coercive power of the state and introduced a discourse of terrorism to ensure the security of the state. The arbitrary power that the PTA gave to the security forces was also useful to crush opposition within the Sinhala majority. 

State repression took a qualitatively new character in late 1989 to tackle the armed insurgency that arose in the Sinhala-majority areas. Killings became more common than arrests. Extra-judicial killings, disappearances and death squads were deployed to take care of the insurgency. It led to widespread disappearances. Dead bodies on burning tyres became a frequent event. People witnessed dead bodies floating down rivers and by the roadside. Estimates of the dead and disappeared are in tens of thousands. However, many of these accounts of violence focus on numbers, or reports of individual incidents. A much more focused study at village level would reveal the true nature of state-society relations in Sinhala majority areas during this period. 

It is also important to note that, despite numerous statements and reports of government and human rights organisations from the West, the violence in the Sinhala majority areas did not result any serious actions against the Sri Lankan state within international bodies. This shows the limitations of the ideology of liberal peace, and how it ignores violence associated with politics of capitalist transition.

Current context

We have in Sri Lanka recently witnessed another episode of politics of capitalist transition and state repression. The most important development underlying this episode was the post-war Sri Lankan state beginning to depend on global financial markets for its finances. This is not unusual in the process of capitalist transition. But the question is how the political elite that control the state manage this, and what do they do when things go wrong and there are reactions from society. 

The structure of the Sri Lankan state that began to depend on global financial markets for its external finances had undergone significant changes during the post 1977 period. It is a product of 30 years of armed conflict. The term post-war state is more apt to describe it. Three decades of armed conflict has seen the growth of the armed forces and the post-war state has to carry the cost of this security sector. In addition, there has been a proliferation of state institutions. The structure of the post-war state has institutions at presidential, parliament, provincial, district, sub-district and local authority levels. Almost all these levels include elected members and a bureaucracy. The introduction of institutions at provincial and sub-district levels was linked to conflicts. 

It is in this larger context that a series of events led to the Sri Lankan state defaulting on loan repayments to international financiers and leading to severe foreign exchange crisis. On Easter Sunday in 2019 suicide bombers, espousing an extreme form of political Islam, attacked churches. This shattered the image of post-war stability. This was followed by the spread of Covid-19. Both these had an impact on sources of foreign exchange. The final step that had an impact on the confidence of financial markets and undermined ability of the post-war Sri Lankan state to service outstanding foreign debt were the significant tax reductions in 2019. This was promised by the regime that came to power through the 2019 presidential elections which favoured state capitalism. 

The economic fall-out of post-war state’s inability to fulfil the demands of global finance capital gave rise to a protest movement. Popularly identified as the ‘Aragalaya’, it succeeded in removing Gotabaya Rajapakse from the presidency. According to a report from Carnegie Endowment for International Peace, in 2022 there have been 58 such protests globally due to economic reasons. Therefore, what we witnessed in Sri Lanka was a part of a global phenomenon within contemporary capitalism.  

The ruling political elite’s response to this political crisis is the familiar post-1977 formula. First, state repression to put down the protest movement. Second, coming together of two political currents to stabilise the situation – one that gave political leadership to consolidating the territory of the centralised state in 2009 and another that has always favoured undiluted neoliberalism. Third, implementing further reforms to promote capitalist transition, backed by international actors led by the IMF. 

What to do with the socially marginalised is dominated by the familiar formula of safety nets and poverty alleviation. This is happening in a society where more than four decades of liberal period of capitalist transition has negatively affected many sections of the population, and economic inequality has become worse. Some of the policies undertaken now will make the situation even worse, and there is bound to be reaction in society.