The American Presidential Election and its Repercussions on the Third World
Posted on January 28th, 2017

By Garvin Karunaratne

The  President of the United States, Donald Trump has declared that America will change course. It is America to Produce and for the Americans to Buy American Products. This of course is a policy that has been ignored by the multimillion dollar multinationals whose craze for profits made them move factories to countries where there was cheap labour. The result was unemployment and poverty in the USA.

This change has deep repercussions on the Third World Countries.

The Third World Countries today depend as an appendage of the Developed Countries. In the Fifties and Sixties these countries had self sufficient and sound economies.  Take Sri Lanka. It had funds to build the Gal Oya Development Project, a major irrigation project.

Similarly countries like Ghana, Tanzania, Kenya had sound economies and they even attracted  teachers and engineers from Sri Lanka who were paid in dollars, better salaries than they could dream of in Sri Lanka.

That situation of prosperity, of being able to meet its commitments from its income was achieved by careful national planning, control of imports and by careful use of the foreign exchange that was earned. Then no country had to beg and borrow foreign exchange. Instead they had to manage with what they had. The countries produced their requirements and also produced some items for export.  Import Substitution was a key policy that was followed and this had its repercussions on the Developed Countries  because they could not sell their manufactured products. The Developed Countries saw unemployment.  They suffered from stagflation.

The Developed Countries then came up with a master plan – Free Trade and Liberalization, which was poured on all Third World countries through the International Monetary Fund and the World Bank. The Plan was built up by the Chicago School of Economics by Milton Friedman and pursued by President Ronald Regan of the USA and Margaret Thatcher of the UK. They together built up the Structural Adjustment Program which they forced on the Third World Countries whenever they sought help. The major opportunity for this was when the Oil Sheiks of the Middle East increased the price of oil almost three fold in the Early Seventies and many countries finding it difficult to find money to buy their oil supplies flocked to the IMF for help. The IMF of course provided them with loans under the condition that they followed certain policies.

Little did the country leaders know the sinister plan of the IMF and the World Bank. There was no reason to doubt them  either,  because these were the two institutions formed by the United Nations to help the world countries in finance and development.

The variety of policies that were imposed comprised liberalizing the use of foreign exchange, taking control of the foreign exchange out of the hands of the Government; instead it was to be decided by the market forces of supply and demand which really meant that it was handled by the banks- the banks decided the exchange rate. The use of Foreign exchange  was liberalized allowing anyone to use it for any purpose. A high interest rate  was imposed and any commercial infrastructure that the Government had was to be closed down. Import tariffs were reduced or abolished. (From How the IMF Sabotaged Third World Development by Garvin Karunaratne)

When these Policies were imposed the economies of the countries became indebted and gradually the debts piled up and more and more money had to be found on loan to enable the dues on the loans to be paid. This was The Structural Adjustment Program of the IMF. In actuality it was a Program that structured the economies of the independent countries to make them  indebted and thereby brought them under the control of the Developed Countries. This time unlike in the colonial days the countries were ‘conquered’ by making them indebted.

The IMF, the World Bank and such other financial institutions retained erudite professors like Jeffery Sachs, Joseph Stiglitz to further this program. They arranged loans to enable the countries to become more and more debted. It is an irony that their views are now being sought as to what we should do.

Further the institutions employed professionals to draft plans and programs, with loans where with implementation the funds coming in were shunted back to the donor countries  through expenses for consultancies, evaluations  etc while leaving the country indebted to the extent of the loans. This was revealed in the form of a confession by one of the experts, John Perkins who admitted this in his book Confessions of an Economic Hitman.

What can be done. Most countries go begging for more loans from the IMF and go licking the boots of foreign investors to come in. Our experience has been that investors come in to invest a small amount of money, and get income for ever. This has happened to many countries and it is happening right now.

Take a small tea estate – the Janet Valley on the Gampola Nuwara Eliya Road. Fifty years ago the waters of the stream that flowed from Udagama was tapped and it provided power to the Tea factory and the bungalow. The Electricity Board enticed the owner to close up the hydro power plant and buy electricity from them. The owner an uncle of mine asked for my opinion and I advised him that he should instead develop the hydro power plant. However he was bought over by the Electricity Board, dismantled his hydro plant and bought power. Five years later when I met him he spoke in tears as the Electricity Board had jacked up the power prices. Now he is no more and the hydro plant is sold to a foreigner who is developing it for the past many years. He is in the process of building the plant and will sell electricity to the people and the Electricity Board itself and the profits will flow in foreign exchange from Gampola to Germany for ever. It is the waters of the Mahaweli that has been converted to cash to feed the Germans in foreign exchange!

That is what all investors are doing to us.

There is no point in begging any more. It is up to our leaders to understand what is happening and act in the interests of the nation.

We do have the resources. Sooner or later America will not want the shirts, pants and blouses sewn by our factories. President Trump can easily set  up factories within a few months and that is how he will bring incomes to the Americans. He has vowed to do that. Looking at his stern face I am dead certain  that he will achieve that. His face is not childish like the faces of earlier Presidents. He does mean what he say. What will happen is that our garment factories will close down.

We have to hark back to what we did in the Seventies under Prime Minister Sirimavo. That was Import Substitution. Take what we did achieve then. In Kotmale the Divisional Secretary built up a Paper factory which was commercially viable.  There were many Smithys that made implements like knives, mammoties, forks, etc. Now we import knives from as far as Mexico. In Matara where I was the Government Agent we established a Smithy which has a roaring trade even today. We established a Mechanized Boatyard that made sea worthy in-board motor boats that were sold to Fisherman Cooperatives and our fishermen roamed the seas fishing. This Factory  was established within six months. This Boatyard was disbanded not because it was not profitable but because the IMF had to be pleased. Even today we import fish.

Take the Crayon Factory that I established in Deniyaya.  I had submitted plans and projects for various industries which were refused and even the boatyard was achieved after fighting every inch of the way. The Secretary of the Ministry was scared to approve any new industries. Once I decided to teach him a lesson. I thought of doing something that would be remarkable. I had an able Planning Officer a chemistry graduate and I directed him to commence experiments to making crayons.  He with the support of science teachers tried and in the process even sought the advice of the science faculty at the University of Colombo only to be turned away. We got more determined and continued experiments at the science lab at Rahula College every night from six till midnight. It took two long months of experiments and we finally fine tuned making crayons till we reached the fineness of Crayola Crayons. Then we gave the recipe to the Deniyaya Cooperative Union and its President Sumanapala Dahanayake  the Menber of Parliament did wonders to get going. Within two to three weeks we made a few rooms full of crayons and the Minister of Industries opened the sales. Finally the crayons were sold island wide till the Government of President Jayawardena closed it down to please the IMF.

Every word that I have written is the truth and I am certain that this will open the minds of some of our leaders to open up Import Substitution industries to bring employment to our people before it is too late.

foolish to ignore his words. His voice,  its firm and its boldness tells me that he means business. It is up to us  to forget the IMF that has conned our countries for the past three decades. Forget the IMF, bring back National Planning, control imports and control our foreign exchange , build up industries to make everything that we need. That is the message I convey in my book, How the IMF Sabotaged Third World Development(Kindle:

5 Responses to “The American Presidential Election and its Repercussions on the Third World”

  1. AnuD Says:

    IMF also stopped Sri lanka growing Paddy and instead, they wanted to import rice from vietnam. they wrecked the economy of Mali or some other african countries that way.

    that was globalization and Those who have internalized currency earning transaction charges. On the other hand, poor countries sopeasants are destroyed.

    Crayon company closed means Sri lanka had destructive politicians.

  2. Christie Says:

    Take Sri Lanka. It had funds to build the Gal Oya Development Project, a major irrigation project. And KKS Cement Factory, Pranthan Chemicals, CSIRO, Colombo Harbor, Ratmalana Railway Factory, CSIRO, Best Hospitals in the world those days eg. Ratnapura, Central Colleges the best schools those days.

    All that ended up with your Hero Banda who was funded by Indian Colonial Parasites and the Indian Empire.

  3. Fran Diaz Says:

    We thank Dr Karunaratne for this article.


    The Chinese PM told the US President that he is looking for a ‘wini-win situation’.

    Same for Lanka re all Trade Deals, without Borrowing.

    Also say NO to “Crash & Sell” style of RW.

  4. Fran Diaz Says:

    Correction : ‘win-win situation’.

  5. Fran Diaz Says:

    Sale &/or 99 yr leases of Lanka Land to foreigners is not a good idea. This is the Grabd Plan as envisaged by RW.
    LAND is the Fixed Asset, the Appreciating Asset.

    During the MR govt times, ‘planes were bought and deals done. ‘Planes are a Moveable and Depreciating Asset and can be bought and sold.

    It is far better to have many Free Trade Zones, all over the country. These will provide jobs for all as well as foreign markets.

    What is to be done with the Tea estates held by the govt ? It is the marketing side of Tea that has to be handled in a clever way. The packaging and marketing could be handled by foreign companies. Brooke Bonds and Lipton are already in Lanka. What is the problem here ?

    Do NOT sell the the Tea lands of Lanka to foreigners.

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