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e-Con e-News 02-08 June 2024

Next year will be the 100^th anniversary of the so-called ‘Chetty Crisis’ of 1925, when a Chettiar moneylending firm collapsed in Lanka, and English banks stopped all loans to Chettiars. They, in turn, foreclosed on Sinhala borrowers. ‘Many local landowners lost property to Chettiars, with many a Ceylonese debtor jailed.’ So the story goes… It was a harbinger of the 1929 US Wall Street collapse and depression – capitalism would have to be resurrected again by another ‘World War’.

     Meanwhile, the colonial import-export plantation oligarchy, and the international capitalist infrastructure like the World Bank & IMF which would go on after 1945 to uphold such a wasteful archaic and crisis-ridden system, continues to this day.

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England’s King Charles this week especially thanked ‘Sikh, Muslim & Hindu soldiers’ (in that order) who had been killed defending London during WW2. This ‘multicultural message’ was especially transmitted by their ‘ethnic media’ outlets across the planet. He understandably forgot to mention his Hanoverian relatives who were collaborating with Nazi Germany at the same time. But he also forgot to add Buddhists and the rest of the 10,000s Sri Lankans also recruited as workers & soldiers. Of course, he couldn’t very well recall Gratien Fernando, who was among the only soldiers officially executed for mutiny against English colonialism during that English war in Asia.

     It is yet another English war to be remembered if only because, despite their rhetoric on free trade every now and again, they happily restricted imports & exports, wages & prices (including guaranteed fertilizer & minimum prices to cultivators), guaranteeing food rations, etc. A war where the English & their allies are trying hard to forget how they in reality were rescued by the Red Armies of the USSR & China. 

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ee recalls the 1925 Chettiar Crisis because great silences deafen and reverberate as great changes are being pronounced & sparked, and it’s not just electrical charges, and selling off national lands & seas. The government is going to sell 20% of the shares of such State banks as the Bank of Ceylon (BoC) and People’s Bank (PB). This should further close off rural people’s access to affordable credit, alongside hikes in interest rates. This should throw (mainly female) borrowers deeper into the armpits of private loansharks. We shall however expect more glossy advertising promising gender equality, columns deploring abuse and lack of diversity, and headlined random news about crime rates, which like prices, are always rising.

     The People’s Bank (PB) was primarily set up to serve the cooperative sector & rural agricultural communities. Multipurpose Cooperative Societies (MPCS) are today facing bankruptcy due to the programmed failure of the PB, whose job it has been to closely supervise and control the rural banking system, recalls Tennakoon Rusiripala (see ee Focus). 

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‘For those who have grown up in a village,

going to the village Multipurpose Cooperative Society (MPCS) was

part & parcel of life. Apart from the temple, it was the other focal point

of the village, where the entire village came together…

Cooperatives can also be called the most localized administrative

structure, and representatives are elected by ballot…

There should be more MPCS-owned filling stations,

so the local community itself can monitor the distribution of fuel….’

– Pramod de Silva, Sunday Observer, 3 July 2022,

Enhancing the Co-operative Movement (see ee Agriculture)

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The current hijacking of the State banks to prevent ‘lending to the productive sectors of the economy’ is therefore not just any story – but the story. It is perhaps not new, or news, but harks back to the colonial policy of preventing investment in modern industry, and then to keep undermining any ensuing attempts to enable productive investment.

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The credit structure in Sri Lanka remained monopolized by ‘European institutions’ (plantations!) and was operated to aid European investors in the export structure. The ‘indigenous capitalist class’ had to rely on European commercial banks or moneylending Chettiars. A Ceylon Banking Commission report followed the 1925 ‘Chettiar crash’, and a colonial state-sponsored Bank of Ceylon was set up in 1938. The Chettiar bankers responded to their diminished role by capturing political power among the local Tamils and Indians, by sponsoring visits by Mahatma Gandhi and Jawaharlal Nehru, etc.

     But as Philip Gunawardena, Minister of Agriculture & Food (1956-59) came to note early on: The Bank of Ceylon was strangled by the colonial office at its birth, to be ‘controlled by prosperous lawyers and other sharks’. ‘The People’s Bank, the so-called successor to the Cooperative Development Bank, established in 1961, became more or less a commercial bank.’ The Agricultural & Industrial Corporation kept fragmenting important land and capital assets, by selling to speculators, aided by the-then Minister of Finance. The Cabinet was also unwilling to hand over the monopoly of importing fertilizer to the Cooperative Wholesale Establishment (CWE). 5 big firms monopolized fertilizer pricing as well as the lowering of quality: Colombo Commercial Co, Baur & Co, Shaw Wallace & Co, Moosajee, etc. And yes, they’re all still around!

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‘Institutions catering for long-term credit require more funds

as their loans are not recovered within a year…

the main source of finance in the rural sector

are the private loan agencies, individual moneylenders,

landlords & merchants. In Ceylon, the debts from private sources…

could be traced to ‘undesirable sources’ where the rates of interest

charged are usurious! The tenant, without an effective cultivation committee,

and without a multipurpose cooperative that could provide credit,

was helpless, and had to fall back on the landlords.’

(ee, 8 Augst 2020)

Which is why Multi-Purpose Cooperative Societies bloomed under Philip Gunawardena, and why he was made to resign after insisting on a rural development bank as Minister of Agriculture & Food in 1959, just before SWRD Bandaranaike was assassinated. Which brings us to the latest machinations to preempt a representative government:

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‘President Wickremesinghe deployed the military & the police,

including the Special Task Force (STF), on July 22, 2022,

to clear the Presidential Secretariat of protesters. And all those

who were threatening to die for the ‘system change’,

they were ostensibly clamouring for, simply vanished into thin air.

How convenient! And how conveniently US Envoy

Julie Chung’s trap, too, shut on behalf of Aragalaya?’

– Shamindra Ferdinando, ee Quotes

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2022 is another number and name for the return of the IMF, and with a vengeance! Though they have never really left. All these moves to further weaken such institutions as the State banks may explain: the ‘sudden provocation’ by an unnamed external authority to ‘reform’ these State-owned Banks (SoBs). Such critics of the SoBs highlight the non-performing loans (NPLs) made to State-owned Enterprises (SoEs).  None of these supposed SoB defects are new. It is also not clear if many of these SoEs are really money losers at all. And it turns out this ‘sudden provocation’ may be due to the ‘IMF/World Bank /Hired Advisory Firms and/or some such agency’.

     Of course, they would rather ignore all those bad loans made to private corporations: Many banks & finance companies are involved in the import of foreign machines & parts. Hence, the unrelenting media clamor, that foreign exchange be spent on importing cars – some even invoking the tenets of ‘free trade’. This is not just grim satire, but a komedy of kanatte (as indeed Sri Lanka is a famed graveyard for old Japanese engines).

     And where are these banks’ gains invested? The People’s Bank, despite objections by staff, invested in finance company LOLC’s Browns Investments growing sugarcane in Sierra Leone! (Browns at that time recalled how they generate more than 2/3rds of their profits from their overseas ventures, and ‘the group has always been fortunate to have the banks in Sri Lanka backing them’ (see ee Agriculture, Browns’ Sunbird leads African entry). LOLC is backed by all the so-called US and Euro ‘development banks’. It is no surprise therefore that the grower Browns has indeed grown, recently declaring itself the world’s largest tea producer after taking over a Unilever Lipton’s operation in Kenya. Meanwhile, Sri Lanka is supposedly encoiled in Geneva and entrapped on Wall Street.

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‘Debt restructuring is fraught with difficulties

given the different interests of the multilateral agencies,

bilateral donors & commercial lenders. Multilateral agencies

are exempted from debt restructuring on the basis

of their claimed preferred creditor status, which is

being challenged by Sri Lanka’s major bilateral donor, China.’

– Ahilan Kadirgamar (ee Economists, Austerity, Dispossession

& Injustice: Facets of the Debt Crisis)

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‘Without external debt restructuring, you can’t get the next tranche.

China has to sign a document, the Paris Club has to sign a document,

& India has to sign a document. But that has not happened: They want

to see what the deal is with the ISB holders. In my view, the proposals made

by the ISB holders don’t look at all beneficial to the public of Sri Lanka.’

– CTC MP Harsha de Silva, ee Economists, Middle Class Disappearing

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As if with eyelids splayed out and cut, the country is being forced to gape at a long drama being dragged out in the drag of ironed suits and skirts and uniforms embarking and disembarking at airports and ports to headlines dancing, Will s/he? Won’t s/he? There’s the question of the constantly dangled IMF’s continuously withheld largesse. There’s the delightful possibility of merchant-dominated elections (the country’s most popular national sport!). It’s all a murder-romance comedy-mystery epic & soap opera (scripted & sponsored by the usual soap importers).

     17^th Coming of the Savior – The IMF is, after all, a US-dominated institution, and this is our 17^th dalliance with the number crunchers of revolving-door Washington & Wall Street. China is asking, why everyone who is involved in this game cannot be treated the same? ‘China controls just 6% of IMF voting shares despite contributing to 18% of global GDP.’ So what’s the big deal? Apparently, all this has to be examined midst the US & their imperialist cohorts seeking to maintain colonial dominance in the Indian & Pacific Oceans.

     The capitalist Anglo-Saxon mass media responds to criticisms by turning any & all accusations around on the victim. A prerogative of victory. Savages & Cannibals? That became us. Slavers? In the end, we became slavers too. Drug dealers? We that too. So we can be anything they want us to be?

     ‘Debt Trap’ was popularized as an English term, especially by Cheryl Payer’s 1974 book The Debt Trap: The IMF & the 3^rd World, to illustrate an IMF process to entrap countries, and profit US multinationals. Come the 21^st century, the multibarrel English media saturated the term, along with ‘colonial’ & ‘imperialist’ to stick it onto China.

     ‘Overcapacity’ has taken over from ‘Debt Trap’ as the latest ideological weapon in the USA’s Biden-Trump trade war against China. They wish to blame China’s industrial subsidies and production capacity for the US’ trade deficit and their supposed inability to reindustrialize their own economy. In this week’s ee Focus Shiran Illanperuma observes, ‘Western imperialism is in crisis and can no longer sustain the position of its old labour aristocracy.’ The charge of ‘Chinese overcapacity’ serves a dual purpose. The Western ruling class uses this to deflect criticism of its own capitalist policies in order to scapegoat China for the supposed destruction of its industrial base. It also allows that same ruling class to resort to protectionism & subsidies on behalf of monopoly capitalists.

     Illanperuma concludes: ‘For its part, China is developing technologies that are crucial for the future of humankind. It has done so while the ruling elite in the West gamble away wealth produced by workers through stock buybacks & real estate speculation. It is up to the Western Left to organize workers against imperialism and anti-China chauvinism, and to fight to liberate the productive forces necessary to address the socioeconomic & ecological challenges of this century.’ (see ee Focus)

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Contents:

Robbing the State Banks & Destroying the Co-op Movement in Sri Lanka