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Image: President J.R. Jayawaradene : the 1977 general election signified a turning
point in the history of state formation in post-colonial Sri Lanka


(11 June 2018) July 1977 and May 2009 signify critical events in the post-colonial
history of Sri Lanka. The election of July 1977 brought the centre-right United
National Party into power, which inaugurated a new period of capitalist
development. It emphasised the private sector, markets and openness to global
capitalism. Regimes elected subsequently have continued with these policies.
There are differences in how these policies have been implemented by different
regimes depending on their political composition and internal ideological battles.
But there has been no going back to a situation where pre-1977 ideas became
hegemonic in economic policy. Therefore, if we look at the post-colonial
economic history of Sri Lanka, post-1977 stands out as a new period.
A key development in this process was the People’s Alliance government, elected
in 1994, accepting the broad direction of economic policies inaugurated in 1977.
The main constituent elements of the PA government were the centre-left SLFP,
and what in Sri Lankan political lexicon were called old Left parties. In the past,
they had formed a Centre-Left political coalition. By aligning economic policies
of Centre-Left parties to the ideology of a liberal economy, the PA government
brought in a consensus among the political class regarding economic policies. Not
only that, any serious opposition to the new phase of capitalist development from
political parties that had an electoral base among the Sinhalese disappeared.

In addition to these new directions in economic policy, the 1977 general election
signified a turning point in the history of state formation in post-colonial Sri
Lanka. The primary factor was the Sinhala nationalist character of the state, and
failure to develop a state structure that could accommodate the plural character
of Sri Lankan society. This resulted in the Tamil United Liberation Front, the
principal political representative of the Sri Lankan Tamil minority, contesting
the July 1977 general election on a platform of a separate state.

The election result showed how polarised the country was. On one side the UNP,
contesting the election on an agenda of a new period of capitalist development,
won the election with a five-sixths majority in parliament. On the other side, the
TULF, contesting on a separate state demand, swept the Northern Province and
won the bulk of seats in the Eastern Province. The Tamil separatist struggle soon
evolved into an armed struggle, with the Liberation Tigers of Tamil Eelam
becoming the strongest militant group. The Sri Lankan armed forces were sent
to the North in 1979 after the enactment of the Prevention of Terrorism Act. The
armed conflict prevailed for more than thirty years. At times the LTTE
controlled significant sections of the Northern and Eastern Provinces.

This meant that polarisation in the country due to challenges in state formation
came into sharp focus right from the beginning of the new phase of capitalism in
1977. From this point, the Sri Lankan Tamil demand for a separate state, and
the armed struggle that followed, became the biggest challenge faced by the
ruling elite in their effort to promote a new period of capitalist development.
Therefore, one of the major political objectives of the ruling elite was to regain
control over territory of the Sinhala nationalist state. While Sinhala nationalism
was an important driver to regaining control over the territory of the Sinhala
nationalist state, this was also necessary for the development of capitalism.
Another way of looking at this situation is to note that throughout the post’1977
period the implementation of economic reforms needed to strengthen capitalist
development was carried out by a state where Sinhala nationalism was a
dominant ideology.

The only political answer to the Tamil demand of restructuring the state was the
enactment of the 13th amendment, and establishment of provincial councils. This
was established due to pressure from India, reminding us that for all the talk of
sovereignty the Sri Lankan state exist in a context of an international system.
There is a body of literature that has shown the limitations of the
13th amendment as a solution to Sri Lanka’s intractable problem of building a
state that has legitimacy among all ethnic groups. But even these provisions have
not implemented successfully.
Global context
The politics of the inauguration of the new period of capitalist development in Sri
Lanka was largely internal. But it coincided with a period of reforms in global
capitalism that is now popularly known as neoliberalism. ‘Neoliberalism is a
theory of political economic practices proposing that human wellbeing can best
be advanced by the maximisation of entrepreneurial freedoms within an
institutional framework characterized by private property rights, individual
liberty, unencumbered markets, and free trade. The role of the state is to create
and preserve an institutional framework appropriate to such practices’.1 The
state was, of course, expected to set up a security apparatus and legal framework
to secure private property rights and markets. ‘The market imperative was
extended to areas such as education, health, social welfare and environmental
pollution. If there were no markets operating in these areas, they must be created
through state intervention if necessary’2.

The liberal ideas of transforming societies in the periphery of capitalism began to

dominate in both economics and politics. This is best illustrated in the notion of
liberal peace. Liberal peace views global capitalism and globalisation based on
free markets as a benevolent system that incorporates more and more people into
a market economy, bringing about an interconnected world that spreads
prosperity and freedom into all corners of the world. The elements that go into
promoting this political vision include developing a market economy,
establishing liberal democracy, reforming the state based on liberal principles,
addressing the problems of marginalised social groups such as women and
minorities through a discourse of rights, promoting human rights, and
strengthening civil society as a countervailing power to the state. These add up to
a vision of the total transformation of aid-receiving countries based on liberal
principles. The other key feature of this vision, which is often implied, is the
continuation of Western hegemony, led globally by the United States.
This liberal vision of transforming societies is nothing new. Some of the ideas of
trying to bring in 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. For example, these
ideas are found in political thoughts of John Stuart Mill, an ideologue of classical

Inaugurating liberal market policies in this global climate of liberal hegemony

had a beneficial aspect for the Sri Lankan ruling, elite in their task of
consolidating the Sinhala nationalist state. On one hand the new economic
policies brought in massive support from developed capitalist countries of the
West, multilaterals and Japan. The generally pro-Western foreign policy of the
country augmented this support. First and foremost, this support was in the
form of resources channelled through foreign assistance. There was budgetary
support from the IMF, and support for public investment. This meant that, even
when the government had to spend funds on a military strategy, there were
always funds from external sources to continue with normal development

Foreign assistance became crucial for the public investment programme. These
public investment programmes were essential for carrying out the normal duties
of a state, and to maintain relations with society while waging a war. This was
especially important for sustaining relations with the majority Sinhala
population. There was support from a large section of the Sinhala majority for a
military agenda, based on an ideology of Sinhala nationalism. But the ruling
regime could not rely on this support purely based on nationalist sentiments.
Especially in a polity that is used to throwing out political parties in power, and
expected so much from the state, support for a costly military agenda could
evaporate if the state was not seen to be fulfilling other obligations towards
society. The bulk of external assistance received during the period was on
concessionary terms or at relatively low interest and with long-term repayment.
This obviously helped the Sinhala nationalist state to manage public finances
while implementing costly military strategy.

Apart from this direct support through resources, the country had legitimacy
within the structure of global governance led by the West. In other words, Sri
Lanka was never a rogue state, and in the eyes of Western countries did not come
anywhere close to it. This also meant, in a world where economic sanctions are
widely used for political purposes by developed capitalist countries, Sri Lanka
did not come under such sanctions-until recently, when the country’s foreign
policy strengthened relations with China.
The basic outcome of this relationship with developed capitalist countries and
multilaterals was that the country could continue on the path of capitalist
transition while waging an expensive civil war.
However, as argued above, the neoliberalism that prevailed globally in the post-
1977 period was not just an economic project. It was also a political project that
hoped to reform the world based on liberal principles in economics as well as
politics. Most importantly, it also believed that these principles would bring in a
peaceful world. Therefore, assistance to Sri Lanka had both these economic and
political dimensions embedded within it. This included solving Sri Lanka’s
conflict through political means and upholding democratic and human rights.
While the ruling elite and external backers could see eye-to-eye when it came to
promoting the economic agenda, this was not the case when it came to the liberal
political agenda. Throughout the post-1977 period we see episodes where ruling
elites clashed especially with Western developed capitalist countries, on issues
related to political solutions to the conflict, democratic and human rights. In
addition to this, the emphasis on the liberal political project strengthened many
non-state actors in their struggle for rights in various spheres of society.

It was under the short-lived Wickremasinghe government from December 2001

to April 2004 that we see the hegemony of liberal peace in Sri Lanka. Faced with
an economic crisis in 2001, the PA government that was in power sought the
assistance of the Norwegian government to begin negotiations with the LTTE.
But under the Wickremasinghe regime that came to power in December 2001,
this initiative expanded into a strategy that included signing a ceasefire
agreement with the LTTE that accepted that the LTTE was in control of one
part of the country, a full-blown neoliberal economic agenda, and securing
support from international actors from developed capitalist countries for this
agenda. The collapse of this strategy paved the way for Rajapakse to come into
Rajapakse deviation
Rajapakse gave leadership to a task that many were hoping for due to different
reasons. This was destroying the LTTE through military means, and
consolidating the territory of the Sinhala nationalist state. This brought to an end
violence challenges to the state that had begun in the early 1970s.
The obvious admirers of this development were Sinhala nationalists, and those
who have always argued that the LTTE must be dealt militarily. There are
sections of the Tamil and Muslim population who welcomed this for their own
reasons. But at the same time important beneficiaries of this success were the
capitalist class, for whom the prevailing civil war was a barrier to capital
accumulation. Although there were many business people talking about peace
during negotiations with the LTTE, they were looking for stability to continue
with profit-making rather than peace. Similarly, the ideologues of neoliberalism
were happy to see a barrier to economic growth disappearing. There were many
international players who were happy with the outcome, because the LTTE
posed a potential threat to maritime security in the Indian Ocean, which was fast
becoming important for global trade. Obviously, India had its own reasons for
welcoming the defeat of the LTTE.

The very fact that the Rajapakse regime gave leadership to bringing to an end a
violent challenge to the state opened the space for a new trend in economic
policies within the framework inaugurated in 1977. The Rajapakse regime was a
combination of the hegemony of Sinhala nationalism, a highly centralised state
with authoritarian tendencies, a prominent role for the security establishment
and continuation of the new period of capitalist development – but with the state
having a more directive role in the economy and greater emphasis on economic
nationalism. As happened in the past, this was another case of the specific
ideological orientation of the regime influencing how the new period of capitalist
development would evolve.

During the Rajapakse regime there was no talk of going back to the economic
policies that prevailed before 1977. But privatisation of state ventures was put on
hold. The state was given a prominent role. Nevertheless, the end of the war
made it easier for the private sector to expand its accumulation. Many in the
private sector came to an understanding with the Rajapakse regime through
various means. It is also possible that Rajapakse opened the door to new sections
of capital.

In addition, the Rajapakse regime embarked on significant investment in

infrastructure development. This had three objectives – incorporating war-
affected areas into the rest of the economy, consolidating control over these areas
for security reasons, building the infrastructure necessary for capitalist
development and boosting the political image of Rajapakse. The latter was
mainly through investment in the Hambantota district, the political base of the
Rajapakse family.

A by-product of three decades of armed conflict was expansion of the security

sector. Hence the character of the state at the end of the armed conflict was quite
different to what prevailed before. By the end of the war the Sinhala nationalist
state was backed by a well-developed armed force. A largely ceremonial army
had expanded to a much more powerful institution. By the time the war ended
the armed forces absorbed around 3 per cent of GDP, and close to 20 per cent of
national expenditure.

The war ended with a significant presence of armed forces, especially in the
Tamil-dominated Northern Province. There is no sign of any significant
withdrawal of armed forces from these areas. The armed forces expanded their
role into many social and economic spheres. Armed forces initiated their own
economic ventures. The Urban Development Authority was brought under the
Ministry of Defence. This meant many urban development programmes in the
capital city of Colombo, which were essentially part and parcel of strengthening
the new period of capitalist development, came under the Ministry of Defence.

When it came to the global context, the big departure during the Rajapakse
regime from what prevailed since 1977 was the development of closer links to
China, which by this time had become one of the new centres of capital
accumulation. This is a product of post-Cold War global capitalism. In Asia, this
has led to the emergence of India and China as new regional powers within a
global political order dominated by the US. These two new powers have joined
the US and Japan in a regional matrix of power relations. The relationships
between these centres of power will be a major factor affecting Sri Lanka in

Two factors were important in Rajapakse regime developing a close relationship

with China. First, China gave consistent material and political support in the
military campaign against the LTTE. Second, given the surplus of capital
available in China for investment abroad, China’s assistance could be secured
for investment in infrastructure.

For China, Sri Lanka became both a location of investment of surplus capital
and an ally in fulfilling her strategic interests in the Indian ocean, where global
and regional powers are looking to assert their hegemonic powers. But, in the
matrix of regional power relations this departure of Sri Lanka’s foreign policy
from what prevailed since 1977 was not to the liking of other powers. Therefore,
one sees during this period several efforts to put pressure on the Rajapakse
regime. This took the form of pressure on the economic front, and continuous
efforts to bring sanctions against the regime for human rights violations and war
crimes during the last stages of the war.

In conclusion it has to be noted that the Rajapakse period initiated a departure

from the hegemonic ideology that prevailed from the Jayawardena era. This
included an economic policy that was more nationalist and gave a prominent role
for the state within the neoliberal framework inaugurated in 1977, very little
chance of moving beyond the 13th amendment as a political solution to the Tamil
question, and bringing China in as a factor in our international relations. This
contrasts with the agenda which prevailed before Rajapakse came to power – the
continuation of economic reforms that emphasise markets and the private sector,
constitutional reforms that can make some improvements on the 13th amendment
and looking towards the developed capitalist West and Japan as the principal
backers. But these are two ideological currents within a framework of developing
capitalism and consolidation of a Sinhala nationalist state. These two ideological
current are bound to dominate Sri Lankan political battles in the near future.

1 Harvey, D. 2007. ‘Neoliberalism as Creative Destruction’. The Annals of the

American Academy of Political and Social Science 2007: 610; 21.

2 Harvey, D. 2007. Ibid.

Posted by Thavam