unjust global ECONOMY
Identifying shortcomings of the global economic order to mitigate risks to Sri Lanka's economy
The global political and economic order represents a web of unequal power relations. Norms and structures governing globalization, international trade, and financial systems are devised to embody and perpetuate the vested business interests of the Global North. The World Bank (WB), International Monetary Fund (IMF) and World Trade Organization (WTO) , as well as regional financiers, such as the Asian Development Bank (ADB), dictate the development parameters for countries of the global South, such as Sri Lanka. Increasingly they are called out by global development experts, such as Joseph Stiglitz, Dani Rodrik, Jayati Ghosh, Isabel Ortiz, Radhika Balakrishnan, and Guy Standing, for protecting the interests of transnational corporations and private creditors located all over the world at the cost of working-class people. In addition, the unholy trinity of the Bretton Woods twins (IMF and World Bank) and WTO has ensured that Development for countries like Sri Lanka means paving the way for market forces through liberalization, deregulation, and privatisation. These policies have pushed the local economy and working people, including farmers, fishers, women, and small and medium industries, into crises. Instead of progress and empowerment, labouring people, as well as local industries, have been pushed into debt and bankruptcy.
- How could a small developing country like Sri Lanka navigate a pro-people and pro-local industry development trajectory in the current global order?
- What alternative alliances and development partnerships enable Sri Lanka to safeguard the economic sovereignty and interests of the working people?
The IPE works towards raising awareness of power and hegemony embedded in the global order and global institutions while underscoring the significance of south-south partnerships and de-colonialism as a development strategy to mitigate risks faced by the small dependent economy that Sri Lanka has become.
Undemocratic, underfunded multi-lateral institutions
Multi-laterals (IMF, World Bank etc.) prioritise the interests of countries of the global north instead of addressing unique challenges faced by emerging economies
Country rating mis-classifications
As only low income countries have access to concessionary loans from multi-lateral organisation, misclassification forces emerging nations to borrow from global money markets.
Lack of a sovereign bankruptcy mechanism
The absence of an international bankruptcy mechanism or a restructuring mechanism to help debt-distressed sovereign nations with odious debts is failing them.
Tax havens and off-shore secretive banking
Mechanisms that enable wealthy individuals and businesses in capital flight and evade taxes from emerging nations increases debt burden of the countries
Transfer pricing, mis-invoicing and stolen assets
Illicit financial flows into the financial system of the global north from countries of the global south contributes to the debt crisis.
Monopoly profits and exporting inflation
Multinational corporations based in the global north often engage in profiteering practices by exploiting their market dominance, leading to inflationary pressures on domestic economies
US dollar supremacy (fiscal stimulus and sanctions)
The excess liquidity created by the expansionary monetary policies, which flows into global financial markets is inflationary and undermines the principle of fair trade.
Environmental destruction and global inequality
The current economic order perpetuates environmental destruction and exacerbates global inequality that hampers sustainable development.
Geopolitical rivalry and military expansion
Politicisation of economic and financial assistance and rivalry between power blocs around the Indian Ocean (USA, EU, China, India) can result in fluctuations in foreign direct investment, hinder tourism, and impact export markets and so on.