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Idiot’s guide to global and domestic debt



Immortal invisible god only wise

by Kumar David

“In light inaccessible hid from our eyes”, is a line from an 1867 hymn set to the tune of a Welsh ballad: it is not a quip about the mystery of global debt but it could well be. Economists don’t enlighten you on the nature and ubiquity of debt because they are muddled themselves. The eclectic hither and thither is recounted in The Economist’s ‘A new era of economics’ – 25 July 2020. There is no shared paradigm, laymen have to cogitate and pick up as best they can. Scientists, finicky about cause and effect cannot suppress the need to frame things in intelligible terms; see if you can pick up anything useful from this idiot’s guide to the ubiquity and explosion of global and domestic public and private indebtedness. Public or national refers to central and local governments. Private is corporate, non-central-bank, bank and household borrowing; the last includes mortgages, personal overdrafts and credit-card indebtedness.

There have been four stages in economic theology since the 1930s. The Keynesian gambit, the neoliberal (Friedman-monetarist) nightmare and the two post-2009 phases. Yes, two phases, the first till about 2018 and the second thereafter which accelerated with Covid-19. I say little on Keynesian macroeconomics or neo-liberalism; the former reigned from the Great Depression till the 1970s when it was invalidated by stagflation, and the latter, that is the neo-liberalism of Pinochet-Regan-Thatcher-IMF, gripped the world by the throat till the 1990s. The last nail in the coffin of dying neo-liberalism was the Great Recession (GR) of 2009-10; the last captain of that sinking ship, Tony Blair, earning himself the epithet Blatcherist. GR proved that unchecked free-market capitalism contained the germs of its destruction in its own DNA, collapsing under its own rationale.

The ratios vary from country to country. In the US Public Debt is about 100% of GDP but semi-Public Debt is small while Corporate and Private Debt are roughly 50% and 70% of GDP. In China Public Debt is not large (48% oh GDP) but Provincial Governments have run wild with infrastructure and waste, which summing up with household debt to over 200% of GDP. In Japan government, debt is 230% of GDP but corporate debt is below 10% and household debt is minimal. For Sri Lanka the big item is Public Debt; nearly 90% of GDP. It doesn’t sound bad, comparatively, but we don’t have the resources to service it.

A feature of the global economy since the 1990s is mounting debt, now astronomical public plus corporate debt, and in the run up to GR acute household mortgages. Strangely, no one asks: “If-all the world is in debt, who is the creditor? Who owns the loot? What the source?” Leaving aside the printing press, a substantive topic of this essay, there are two tangible sources; the enormous wealth accumulated in the hands of the ultra-rich (the “One-Percent”) and public savings in provident funds, social-security coffers and in Japan Post Office Savings accounts. The former is the surplus created by social labour appropriated by capital or siphoned into institutions called private equity, mutual and hedge funds and into mighty investment banks. Maybe half Lanka’s foreign debt is owned to these money-market funds, the other portion to multi-lateral agencies IMF, ADB and World Bank and foreign governments, mainly China and its state banking arms. The point I am driving is that the people of the poor half of the world are deeply in hock to the moguls of international finance capital, including the mighty One-Percent.

The first period of the post-GR phase which lasted for a little less than a decade was characterised in metropolitan centres by measures intended to revive economic growth. Credit was created by central banks (US Fed, EU’s ECB, Japan’s BoJ and limping along, the Bank of England) by the shipload and pumped out to Treasuries, or by purchases of corporate bonds, or shoved into bank vaults. The hope was that there would be investment, growth and employment. It fell flat on its face. Though employment did pick up a bit for reasons too long to detail here, production-capital did not take the ball and run. Instead finance took the money and put it into shares (equities), commercial property and Treasury Bonds, creating an asset bubble.

Central bank money did not go into economic activity; it was siphoned through the ultra-rich into the asset bubble, that is the rich got richer. For this reason, demand for goods and services did not grow (how many bottles of Premier Cru can a millionaire imbibe?). Sans demand, economic growth did not take off in the US, Europe or Japan, hence inflation was stuck below 2% and the economy did not fire up (if inflation escalates, the economy exudes full employment and output is near capacity-output they call it “heating up”). Economic misery in the lower orders created anger and populism (Occupy Movements and radical fundamentalisms). Outrage at the rich getting richer and everyone else getting poorer also triggered the Trump Base, the grip of Marine Le Penn, the popularity of Nigel French, Brexit, near fascists Hungary’s Victor Oban and Poland’s Andrzej Duda, and Hindutva’s Muslim-hating Amit Shah and Narendra Modi. In sum the first phase of post-GR intervention was neither an economic success nor was it politically soothing, it was a failure.

Enter the second post-GR stage starting in 2018 but fouled up and drowned by covid-19. The world’s ruling powers had to take note that growth was not picking up, political resentment was swelling, inflation doggedly low and interest rates peering into the moat of negativity. Then corona hit! It summoned gigantic “stimulus” packages; in the domain of economic theory four schools of were jostling for space.


MMT (Modern Monetary Theory)

MMT is really odd in the eyes of regular economists; I too find it difficult to digest. Were I to exaggerate but only a bit, the theory says print money, print as much as you like, it won’t and it can’t do harm. Governments should not break their heads about deficits, central banks should not let inflation fears hold them back, they should create stimulus money by the bathtub and pour it into investment markets; household should party late into the night. The argument is that by turbo charging the economy with cash, productive activity will take off and rising output will defeat the demon of galloping inflation. The more serious-minded supporters of this school want to keep it going only till inflation and growth pick up and unemployment falls sufficiently, then slacken. But I am not persuaded. When inflation hits it hits fast and hard. Governments and the unwary, soaked in debt, will be overwhelmed by rapidly rising interest rates which will drive them to bankruptcy. Going in search of a free lunch is never unproblematic.


Fiscal splurge driven  strategies (FS)

The more conventional last-ditch efforts are Fiscal Splurge (FS) and Monetary Control (MC). The former is the de facto method employed, whether consciously named FS or not, in broke, crisis driven, debt wracked or plain basket economies. While these pejoratives do not all apply to Lanka, some do. The bottom line is that in poor countries with high populist expectations, or enjoying electoral democracy that can oust politicians, governments if they wish to survive, have no option but to resort to fiscal deficits. That is spend more than their revenues to keep the masses stoned, an alternative opiate to religion. In a debt-intoxicated country this means monetary policy and fiscal policy have to merge, the former becomes a service provider to the latter; Prof Laxman transmutes into front office receptionist for President and PM.

In the long-term fiscal profligacy has disastrous consequences that are so well-known that I don’t need to dwell on the it here.


Monetary control and manipulation (MC)

This is typical of the EU; the US is a mix of FS and MC. With MC power rests in the hands of the central bank not government, finance ministry or treasury – FS is the other way round. The prime example of MC is the European Central Bank, I dare say with the Bundesbank breathing down its neck, which drives a chariot whose lowly drays are individual EU governments. BoJ too is not a sub-contractor of the Japanese government. The Reserve Bank of India tried to talk big in the era of Raghuram Rajan but Governors and the Bank have since been cut down to size. Central banks in dominance use interest rates and money supply to manage inflation with an eye on the side turned towards employment and growth.


Restructuring (social concern or state-led)

This is an outlier in a discussion of how capitalist economies (including Scandinavian version) are struggling to cope with explosive debt, income and wealth gaps, and retain social instability. The two key concepts in understanding this fourth option are restructuring and involvement of the state. State-led, but market sensitive and capitalism-accommodative, one party China seems an obvious prototype but it is not an exemplar because this essay is focussed on capitalist (the majority) nations of the world. An imagined President Bernie Sanders Administration in the US is a hypothetical example of this option. I don’t need to explain how this will be different from the US we know, but the point of this essay is that US national debt is large and will be larger in the hypothetical case. At the moment in the debate about coping with a belly-up economy, staggering stimulus packages are on Congress’ table – the Republicans want to cap it at $2 trillion, Democrats to push it up to $3 trillion. Hypothetical Bernie and his Squad will make it larger.

Whatever the version, stimulus money will be part channelled to government (Treasury Bond purchase) and a comparable sum will be siphoned into corporate bonds and private assets. Soaring debt will undermine faith in America’s ability to measure up to its commitments and will damage faith in the dollar as the world’s reserve currency. Debt has come to stay in every corner, an unwelcome guest determined to hang on till there is a global transformation. Sri Lanka is a footnote to the story.

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Port City Bill Requires Referendum



by Dr Jayampathy Wickramaratne,PC

The Colombo Port Economic Commission Bill was presented in Parliament on 08 April 2021, while the country was getting ready to celebrate the traditional New Year. With the intervening weekend and public holidays, citizens had just two working days to retain lawyers, many of whom were on vacation, and file applications challenging the constitutionality of the Bill in the Supreme Court within the one-week period stipulated in the Constitution. One wonders whether the timing was deliberate.

Special economic zones are common. They are created mainly to attract foreign investments. In return, investors are offered various concessions so that their products are competitive in the global market. Several negative effects of such zones have also been highlighted. The sole purpose of this article, however, is a discussion on the constitutionality of the Bill.

The Bill seeks to establish a high-powered Commission entrusted with the administration, regulation and control of all matters connected with businesses and other operations in and from the Colombo Port City. It may lease land situated in the Colombo Port City area and even transfer freehold ownership of condominium parcels. It operates as a Single Window Investment Facilitator for proposed investments into the Port City. It would exercise the powers and functions of any applicable regulatory authority under any written law and obtain the concurrence of the relevant regulatory authority, which shall, as a matter of priority, provide such concurrence to the Commission. The discretion and powers of such other authorities under the various laws shall thus stand removed.

The Commission consists of five members who need not be Sri Lankan citizens, quite unlike the Urban Development Authority, the Board of Management of which must comprise Sri Lankan citizens only. One issue that arises is that the vesting of such powers upon persons with loyalties to other countries, especially superpowers, would undermine the free, sovereign, and independent status of Sri Lanka guaranteed by Article 1 of our Constitution. It would also impinge on the sovereignty of the People of Sri Lanka guaranteed by Article 3 read with Article 4.

The removal of the discretionary powers of the various regulatory authorities is arbitrary and violative of the right to equal protection of the law guaranteed by Article 12 (1).

Under Clause 25, only persons authorized by the Commission can engage in business in the Port City. Clause 27 requires that all investments be in foreign currency only. What is worse is that even foreign currency deposited in an account in a Sri Lankan bank cannot be used for investment. Thus, Sri Lankans cannot invest in the Port City using Sri Lankan rupees; neither can they use foreign currency that they legally have in Sri Lanka. The above provisions are clearly arbitrary and discriminatory of Sri Lankans and violate equality and non-discrimination guaranteed by Article 12. They also violate the fundamental right to engage in business guaranteed by Article 14 (1) (g).

Under clause 35, any person, whether a resident or a non-resident, may be employed within the Port City and such employee shall be remunerated in a designated foreign currency, other than in Sri Lanka rupees. Such employment income shall be exempt from income tax. Clause 36 provides that Sri Lankan rupees accepted within the Port City can be converted to foreign currency. Under clause 40, Sri Lankans may pay for goods, services, and facilities in Sri Lankan rupees but would be required to pay a levy for goods taken out of the Port City, as if s/he were returning from another country! The mere repetition of phrases such as ‘in the interests of the national economy’ throughout the Bill like a ‘mantra’ does not bring such restrictions within permissible restrictions set out in Article 15.

Clause 62 requires that all disputes involving the Commission be resolved through arbitration. The jurisdiction of Sri Lankan courts is thus ousted.

In any legal proceedings instituted on civil and commercial matters, where the cause of action has arisen within the Port City or in relation to any business carried on in or from the Port City, Clause 63 requires Sri Lankan courts to give such cases priority and hear them speedily on a day-to-day basis to ensure their expeditious disposal.

The inability of an Attorney-at-Law to appear before the court even for personal reasons, such as sickness, shall not be a ground for postponement. These provisions are arbitrary and violate Article 12.

Clause 73 provides that several Sri Lankan laws listed in Schedule III would have no application within the Port City. Such laws include the Urban Development Authority Act, Municipal Councils Ordinance, and the Town and Country Planning Ordinance. Under Clauses 52 and 53, exemptions may be granted by the Commission from several laws of Sri Lanka, including the Inland Revenue Act, Betting and Gaming Levy Act, Foreign Exchange Act, and the Customs Ordinance.

The Commission being empowered to grant exemptions from Sri Lankan laws undermines the legislative power of the People and of Parliament and violates Articles 3 and Article 4 (c) of the Constitution.

Several matters dealt with by the Bill come under the Provincial Councils List. They include local government, physical planning, and betting and gaming. Article 154G (3) requires that such a Bill be referred to Provincial Councils for their views. As Provincial Councils are not currently constituted, passage by a two-thirds majority will be necessary in the absence of the consent of the Provincial Councils.

The exclusion of the Municipal Councils Ordinance from the Port City area is not possible under the Constitution. When the Greater Colombo Economic Commission was sought to be established in 1978 under the 1972 Constitution, a similar exclusion was held by the Constitutional Court not to be arbitrary. Since then, under the Thirteenth Amendment under the 1978 Constitution, local government has been given constitutional recognition and included under the Provincial Council List. Under the present constitutional provisions, therefore, the Port City cannot be excluded from laws on local government.

The writer submits that in the above circumstances, the Colombo Port Economic Commission Bill requires to be passed by a two-thirds majority in Parliament and approved by the People at a Referendum. Quite apart from the constitutional issues that arise, such an important piece of proposed legislation needs to be widely discussed. It is best that the Bill is referred to a Parliamentary Committee before which the public, as well as citizens’ organizations and experts in the related fields, could make their submissions.

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Investigative Journalism?



I usually end up totally exhausted when I finish reading the local newspapers from the Pearl. There are so many burning questions and so much is written about them but there are no conclusions and definitely no answers. For example, we seem to have three burning issues right now and this is not in order of importance.

We have a lengthy report that has been published on the Easter Sunday carnage. Everybody knows what I am talking about. However, no one, be it an editor, a paid journalist or a single one of the many amateurs who write to the papers, has reached a conclusion or even expressed an opinion as to who was responsible. At least not a believable one! Surely there are energetic and committed young people in the field of journalism today who, if asked, or directed properly will go out and find a source that would give them at least a credible hypothesis? Or do conclusions exist and has no one the courage to publish them?

At least interview the authors or should I use the word perpetrators of that report. If they refuse to be interviewed ask them why and publish an item every day asking them why! Once you get a hold of them, cross-examine them, trap them into admissions and have no mercy. It is usually geriatrics who write these reports in the Pearl and surely a bright young journalist can catch them out with a smart question or two, or at least show us that they tried? The future of the country depends on it!

We have allegations of contaminated coconut oil been imported. These are very serious allegations and could lead to much harm to the general populace. Do you really believe that no one can find out who the importers are and what brands they sell their products under? In this the Pearl, where everyone has a price, you mean to say that if a keen young journalist was given the correct ammunition (and I don’t mean 45 calibres) and sent out on a specific message, he or she couldn’t get the information required?

We are told that a massive amount of money has been printed over the last few months. There is only speculation as to the sums involved and even more speculation as to what this means to the people of the Pearl. Surely, there are records, probably guarded by extremely lowly paid government servants. I am not condoning bribery but there is nothing left to condone, is there? There are peons in government ministries who will gladly slip you the details if you are committed enough and if you are sent there to get it by a boss who will stand by you and refuse to disclose his sources.

I put it to you, dear readers, that we do not have enough professional, committed and adequately funded news organisations in the country. We can straightaway discount the government-owned joints. We can also largely discount those being run by magnates for personal gain and on personal agendas. As far as the Internet goes, we can forget about those that specialise in speculative and sensationalist untruths, what are we left with O denizens of the Pearl? Are there enough sources of news that you would consider willing to investigate a matter and risk of life and limb and expose the culprits for the greater good of society? Can they be counted even on the fingers of one hand?

In this era when we have useless political leaders, when law and order are non-existent when the police force is a joke, it is time the fourth estate stepped up to the mark! I am sure we have the personnel; it is the commitment from the top and by this, I mean funding and the willingness to risk life and limb, that we lack. Governments over the last few decades have done their best to intimidate the press and systematically destroy any news outlet that tried to buck the usual sycophantic behaviour that is expected from them by those holding absolute power.

Do you think Richard Nixon would ever have been impeached if not for the Watergate reporting? Donald Trump partially owes his defeat to the unrelenting campaign carried out against him by the “fake news” outlets that he tried to denigrate. Trump took on too much. The fourth estate of America is too strong and too powerful to destroy in a head-to-head battle and even the most powerful man in the world, lost. Let’s not go into the merits and demerits of the victor as this is open to debate.

Now, do we have anything like that in the Pearl? Surely, with 20 million-plus “literate” people, we should? We should have over 70 years of independence built up the Fourth Estate to be proud of. One that would, if it stood strong and didn’t waver and collapse under pressure from the rulers, have ensured a better situation for our land. Here is Aotearoa with just five million people, we have journalists who keep holding the government to account. They are well-funded by newspapers and TV networks with audiences that are only a fraction of what is available in the Pearl. Some of the matters they highlight often bring a smirk of derision to my face for such matters wouldn’t even warrant one single line of newsprint, should they happen in the Pearl.

Talking of intimidation from the rulers, most of us are familiar with the nationalisation of the press, the murder and torture of journalists, the burning of presses to insidious laws been passed to curtail the activities of Journalism. These things have happened in other countries, too, but the people and press have been stronger, and they have prevailed. We are at a watershed, an absolutely crucial time. It is now that our last few credible news sources should lift their game. Give us carefully researched and accurate reports with specific conclusions, not generalisations. Refuse to disclose your sources as is your right, especially now that the myopic eye of the UNHCR is turned in our direction.

All other ways and means of saving our beloved motherland, be it government, religion, sources of law and order and even civil society leadership seems to have lapsed into the realm of theory and rhetoric. Our last chance lies with the Fourth Esate and all it stands for. I call for, nay BEG for, a favourable reaction from those decision-makers in that field, who have enough credibility left in society, DON’T LET US DOWN NOW!



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The world sees ugly side of our beauty pageants



Yes, it’s still the talk-of-the-town…not only here, but the world over – the fracas that took place at a recently held beauty pageant, in Colombo.

It’s not surprising that the local beauty scene has hit a new low because, in the past, there have been many unpleasant happenings taking place at these so-called beauty pageants.

On several occasions I have, in my articles, mentioned that the state, or some responsible authority, should step in and monitor these events – lay down rules and guidelines, and make sure that everything is above board.

My suggestions, obviously, have fallen on deaf ears, and this is the end result – our beauty pageants have become the laughing stock the world over; talk show hosts are creating scenes, connected with the recent incidents, to amuse their audience.

Australians had the opportunity of enjoying this scenario, so did folks in Canada – via talk show hosts, discussing our issue, and bringing a lot of fun, and laughter, into their discussions!

Many believe that some of these pageants are put together, by individuals…solely to project their image, or to make money, or to have fun with the participants.

And, there are also pageants, I’m told, where the winner is picked in advance…for various reasons, and the finals are just a camouflage. Yes, and rigging, too, takes place.

I was witnessed to one such incident where I was invited to be a judge for the Talent section of a beauty contest.

There were three judges, including me, and while we were engrossed in what we were assigned to do, I suddenly realised that one of the contestants was known to me…as a good dancer.

But, here’s the catch! Her number didn’t tally with the name on the scoresheet, given to the judges.

When I brought this to the notice of the organiser, her sheepish reply was that these contestants would have switched numbers in the dressing room.

Come on, they are no babes!

On another occasion, an organiser collected money from the mother of a contestant, promising to send her daughter for the finals, in the Philippines.

It never happened and she had lots of excuses not to return the money, until a police entry was made.

Still another episode occurred, at one of these so-called pageants, where the organiser promised to make a certain contestant the winner…for obvious reasons.

The judges smelt something fishy and made certain that their scoresheets were not tampered with, and their choice was crowned the winner.

The contestant, who was promised the crown, went onto a frenzy, with the organiser being manhandled.

I’m also told there are organisers who promise contestants the crown if they could part with a very high fee (Rs.500,000 and above!), and also pay for their air ticket.

Some even ask would-be contestants to check out sponsors, on behalf of the organisers. One wonders what that would entail!

Right now, in spite of the pandemic, that is crippling the whole world, we are going ahead with beauty pageants…for whose benefit!

Are the organisers adhering to the Covid-19 health guidelines? No way. Every rule is disregarded.

The recently-held contest saw the contestants, on the move, for workshops, etc., with no face masks, and no social distancing.

They were even seen in an open double-decker bus, checking out the city of Colombo…with NO FACE MASKS.

Perhaps, the instructions given by Police Spokesman DIG Ajith Rohana, and Army Commander, General Shavendra Silva, mean nothing to the organisers of these beauty pageants…in this pandemic setting.

My sincere advice to those who are keen to participate in such events is to check, and double check. Or else, you will end up being deceived…wasting your money, time, and energy.

For the record, when it comes to international beauty pageants for women, Miss World, Miss Universe, Miss Earth and Miss International are the four titles which reign supreme.

In pageantry, these competitions are referred to as the ‘Big Four.’

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