Policy Challenges of Globalisation in Sri Lanka

The following sections are included:

• Dedication
• Preface
• About the Author
• Acknowledgements
• Contents
• List of Figures
• List of Tables
• List of Abbreviations

As stated in the preface it is reasonable to ask why there is a need for another book on globalisation when there are many already by leading economists of the day, such as Jagdish Bhagwati, Joseph Stiglitz, Dani Rodrik and Martin Wolf. While they have different views, they are dealing with the same subject matter. These books were published on globalisation in the early 2000s. In Globalisation and Its Discontents (2002) and Making Globalisation Work (2007), Stiglitz took on the issues of globalisation before most other economists did. Stiglitz’s concern that globalisation could lead to increase in poverty and worsening distribution of income was yet to be confirmed. Jagdish Bhagwati, in his In Defence of Globalisation (2004), found that when other economists started probing the arguments of those who saw no benefits in globalisation, ended up finding problems with globalisation rather than addressing some downside risks. Better policies can mitigate these risks. Dani Rodrik in The Globalisation Paradox: Democracy and the Future of the World Economy wrote about “hyper globalisation” when there were hardly any barriers between a particular country and other countries, much like the situation within a country. He considered the European Union to be a hyper-globalised entity, where there are also no policy conflicts with respect to the movement of factors of production and money with similar interest rates and exchange rates. Rodrik was also a sceptical about globalisation, underscoring the view that the disadvantages of globalisation exceeded its assumed benefits. Martin Wolf in Why Globalisation Works (2004) found that the benefits of globalisation exceeded its costs. The world has changed since then with the World Financial Crisis (WFC) in 2008–2012.

Liberalisation is a movement towards globalisation. It allows relative prices to determine the allocation of resources. The liberalisation of the economy in 1977 allowed Sri Lanka to benefit from globalisation compared to other South Asian countries. Sri Lanka has not been subject to currency or capital account shocks such as those other East Asian countries suffered from in the late 1990s. Equally, it has not done as well as the East Asian economies. In fact, one stated ambition of Sri Lanka as articulated by politicians and officials (at least before the East Asian Crisis) was that Sri Lanka should become like an East Asian economy. Sri Lanka’s movements towards globalisation created opportunities for trade, capital and labour movements. But it didn’t continue over time and, around 2005 with a change in government to a more left of centre and somewhat nationalistic government. Over the next 5 years, the trade regime became more protectionist, in part due to the ideology of the party that came into power in 2005, which was more left-oriented and nationalist, and in part due to the need to raise trade tariffs and taxes to finance the war against the Liberation Tamil Tigers of Eelam (LTTE) separatists…

The following sections are included:

• Introduction
• Brief Biographical Sketches and Challenges
• The Background to the Papers: The Prevailing Economic and Policy Environment in Sri Lanka
• The Core Content of the Eminent Economists’ Contribution
• Economic Performance during the Ten-Year Plan Period
• Conclusions

The following sections are included:

• Introduction
• What is Ideology: Leading Definitions
• Policymaking Paradigms
• A Policy Paradigm
• The Comparative Ideological Experience of Sri Lanka across Time
• Comparative Ideological Experience of Sri Lanka Across Countries
• Conclusion

The following sections are included:

• Introduction
• Economic Issues Faced by Sri Lanka in the 1970–1985 Period
• World Bank’s Economic Work on Sri Lanka
• Nature of Economic and Sector Work in Sri Lanka
• Conclusion
• Appendix A
• Appendix B

The following sections are included:

• Introduction
• The IMF
• Sri Lanka and the IMF
• Sri Lanka-Specific IMF Programmes
• Conclusion

The following sections are included:

• Introduction
• The Case for Industrial Policy
• East Asian Countries’ Experiences and their Relevance for Industrial Policy in Sri Lanka
• Sri Lanka’s Manufacture Export Experience
• Conclusions

The following sections are included:

• Introduction
• Inflation and its Related Concepts
• Inflation Episodes and Consequences
• Inflation and Macroeconomic Imbalance in Sri Lanka
• Consequences of Continued Inflation
• Appendix A

The following sections are included:

• Introduction
• The Analytical Framework
• A Historical Perspective on Macroeconomics and Trade
• Macroeconomic Policy and Their Evolution
• Export Performance Measures and their Evolution
• Other Sectors and Policy Considerations
• Main Derivations and Implications for the Nexus
• Fiscal and Monetary Policies to Support Export Growth
• Conclusions: Appropriate Macroeconomic Policies to bring about Export Growth
• Appendix A

The following sections are included:

• Introduction
• Different Views on Globalisation and Income Distribution
• Conclusions

As noted in earlier chapters, Sri Lanka has been open to globalisation with its GF policies through trade, FDI and migration of labour. The consensus in the world is that, following a short slowdown during COVID-19, globalisation resumed and many parts of the world followed globalisation-friendly policies.

However, this would not be true for Sri Lanka which went through a huge economic crisis and political crisis. There were country-wide demonstrations demanding the resignation of the president. In mid-May 2022, President Gotabaya Rajapaksa resigned. Meanwhile, Ranil Wickremesinghe was appointed as prime minister by the president on May 14, 2022. In line with the constitution, an election was conducted by the speaker among members of the parliament, which led to the appointment of Ranil Wickremesinghe as the new president of the country. He took on the enormous task of reviving the economy…

The main aim of this book has been to examine the challenges of globalisation for a small economy like Sri Lanka. This book covers 60 years, a reasonable period to examine the main aspects of globalisation. Within these 60 years, the economy went through different phases of change and continuity that would be of value to other countries of similar size, endowments, policy orientation in terms of history and ideology, and adaptation to changing global economic conditions. Small countries have to adapt, while large countries influence the global economy…

The following sections are included:

• Bibliography
• Index