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Surviving the World economic crisis

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The outbreak of the Covid-19 pandemic precipitated a world economic crisis. Many commentators suggest that the pandemic caused the crisis. In actual fact, several economists, such as Sri Lanka-born Howard Nicholas, have predicted this economic downturn for several years.

The roots of the crisis go much deeper than the Coronavirus. The economies of the world are mired in debt. Because of the hegemony of the financial elite, companies in the advanced industrial nations have not, for years, invested in new plants and machinery but have, instead, used government subsidies to buy back their shares from shareholders. Investors have used this mechanism to increase the apparent value of their assets, enabling them to borrow more from banks.

This is because investors expect to make money, not from the dividends enabled by company profits, but by speculating in company shares. Many of the so-called “unicorn” companies (new, fast growing companies valued at over US$ 1 billion) make no profit, but grow because investors believe they will grow in value.

Economic stagnation

For the same reason, many big companies, such as Apple, Facebook and Google, instead of increasing their own value by investing in production, or research and development, buy other companies. Profitability is increased by reducing staff numbers, or hiring temporary staff at much lower remuneration, often on a “gig” (for-the-job employment) basis. This in turn has an effect on workers’ purchasing power, which affects the growth of markets negatively.

This kind of economic stagnation occurs from time to time. It used to be solved by more “inefficient” companies (that is, companies that do not make a profit, even if they happen to be more efficient by other criteria) going bankrupt, and more profitable companies expanding into the space they create. This has changed now. For example, the old hiring-car-based company Hertz, which made a profit of US$ 168 million in the last quarter of 2019, went bankrupt, while Uber, which made a loss of US$ 1.1 billion in the quarter, is doing famously. Companies able to attract capital prosper, while those seen as not expanding, fail.

The economy recovers from such crises by investing heavily in new technological methods to increase productivity. In the last two decades, however, companies in the West, especially in the USA, have invested in technologies that enable them to extract the greatest profit from “gig” labour, and essentially in sales, delivery and other services, rather than production.

On the other hand, East Asian countries have invested heavily in high-tech manufacturing industries. China, Japan and South Korea, together, account for two thirds of all new industrial robot installations, while Europe and North America only account for 30%. In the context of the current crisis, such countries will probably lead the recovery, with brand new technologies. Other up-and-coming industrial powers, notably Vietnam, Iran and India, will also accelerate their technological capabilities.

The continued economic stagnation, in the USA, has several corollaries. In the first place, as the world’s biggest consumer of imports, the exports of export-based economies will suffer. In the second place, investors are fleeing the US Dollar for gold, the price of which has risen from US$ 48,000 per kg in March to over US$ 65,000 per kg today. The consequent fall in the value of the US dollar (from € 0.94 in March to € 0.85 today) means that exporters will be even more disadvantaged.

The USA is also the world’s biggest consumer of petroleum – using more than the combined consumption of the next two countries, China and India. The price of crude petroleum in Dubai fell from US$ 64 in January to US$ 23 in April. Although the price rose again, to US$ 43 in July, the lower value of the US Dollar means that the real increase is less than this. This means the income of the Middle East and Russia will be affected severely.

Different approaches

How have other countries coped with the economic downturn? The USA, China and Germany represent three different approaches to the problem.

Apparent economic growth, in the USA, before the pandemic, was based on short-term, low wage jobs. Once Covid-19 hit, the country experienced its fastest unemployment growth in history. In reaction, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which budgeted US$ 2 trillion (10% of GDP) to boost the economy. More than half of this went to companies, while less than a quarter went as compensation to poor people losing their jobs or otherwise affected by the crisis.

This stimulus package helped cushion the collapse of the US economy. However, the payments made to the affected poor people often went to pay immediate food and rent needs. Most of the consumer spending due to payments to individuals went to online delivery companies, such as Amazon and Uber, which employ workers on “gig” terms. They did not spend it in shops and supermarkets which employ permanent staff, so unemployment rates remain high.

Unfortunately, even this funding ended at the beginning of August. The government and the opposition (which controls the legislature) argued about a new stimulus package. President Trump wanted to spend only US$ 1 trillion, reducing payments to unemployed people. The opposition Democratic Party wants to spend US$ 3 trillion, mostly on benefits to the affected people and on government programmes, including schools. The two sides could not agree.

“The Democratic Party continues to insist on radical left-wing policies that have nothing to do with the China [sic] virus,” Trump said. On 9 August he signed four “executive actions” regarding payment of reduced unemployment benefit, a moratorium on income tax for poor people, relaxing rules on evicting tenants and action on student loans. Critics say the executive actions may not be workable.

“Six guarantees”

China, the world’s biggest manufacturing nation, the first to suffer from the Covid-19 pandemic, has seen its economy recover. According to “The Economist” magazine’s Intelligence Unit in Beijing, local government investment, in public medical facilities, city infrastructure, old community renovations, transport, power grids and telecommunications, drove construction growth. This, in turn, stimulated production of construction-related machinery and goods, driving up manufacturing output.

The Chinese government has revealed a “six guarantees” recovery plan, based on creating jobs, giving financial support to ensure livelihoods, protecting small and medium enterprises, food and energy security, stability of the industrial supply chain, and facilitating the path from lockdown to a vital social life.

The Standard Chartered Bank says that China’s government is prioritising social goals ahead of GDP growth by creating employment and indicating that fiscal policy will be its preferred way to stimulate the economy. Officials have suggested that they are willing to almost double the budget deficit to support gross domestic product growth, while allowing money supply and credit growth to reach higher levels. There also appears to be a clear shift in China’s strategy; moving from an export focus to paying greater attention to domestic demand, to releasing consumers’ potential, and investing in new and traditional infrastructure projects. It projects a growth rate of 2-3% this year, a surprisingly high outcome for an economy which shrank rapidly in the first quarter of this year.

“Green” recovery

Meanwhile, Germany, the biggest European economy, has put in place a radical “green” recovery plan. The € 130 billion plan consists of fifty measures designed to boost consumption and speed-up economic recovery. The Government of Germany’s actions will be structured on this recovery plan. It is based on three pillars: € 78 billion on short-term economic recovery (about), about €5,000 billion on investment in future-proof and green technologies, and, € 3 billion on European and international solidarity (in addition to the efforts of the European Commission’s recovery plan).

Reducing VAT by 3 percentage points (12 percentage points for the catering and restaurant sector) – to stimulate consumption and revive employment in businesses, particularly in the hard-hit food and beverage sector – will cost the government € 20 billion.

The short-term recovery plan includes a huge green effort: subsidies on consumption of renewable energies, together with a carbon tax, will move use to electricity from other modes. In the transport sector, subsidies for buying electric vehicles are doubled, and support is given to battery and charging infrastructure, modernising commercial vehicles, ships and aircraft, and to public transport and railways. The construction sector has € 2 billion allocated for energy efficient retrofitting to existing buildings.

A key point in the plan is the new green hydrogen (produced by electrolysis from renewable electricity) sector, for which the government is allocating € 3 billion to develop 10 GW of electrolysis units by 2040. Together with the budget for European and international solidarity, this will put Germany firmly in the lead in this technological area.

Lanka’s markets

In the second quarter of this year, the USA’s gross domestic product declined by 35%, and the government recorded 23 million people as unemployed, the highest rate in 80 years. In the European Union the GDP declined by 7%, and unemployment increased to 14 million. In Britain, GDP has declined by 9%, driving unemployment up to 2.5 million. In Russia, GDP dropped 8%, and unemployment rose to 1.7 million. Middle Eastern economies will slow by 5%, affecting migrant labour employment.

These are Sri Lanka’s biggest markets. This shrinkage will adversely affect Sri Lanka’s economy. Both exports, and foreign labour opportunities, will decline. With a collapsed tourism sector, this will allow the country little foreign exchange to buy the things it needs.

In this situation, what can countries like Sri Lanka do? There are a few simple answers to this question. First, reduce imports to match the reduction in foreign exchange sources. Second, find new foreign markets to replace the declining economies. Third, find new products to replace the ones currently being exported. Fourth, develop the domestic market for domestic products, to advance the economy.

Of course, walking the talk will be less simple. How can it be done? The path taken by the USA is the road to ruin, while Sri Lanka does not have the financial resources to emulate China or Germany – although it can emulate many of the measures they have put in place, on a far smaller scale. It remains for the state to create the policy parameters to drive recovery on new paths, using our existing resources, and developing indigenous knowledge. New technology will be a large part of this, but we must use it wisely. We have an educated population which can adapt itself rapidly to new skills. That is our biggest resource in this economic battle.

Vinod Moonesinghe

 



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Opinion

War with Iran and unravelling of the global order – II

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A US airstrike on Iran

Broader Strategic Consequences

One of the most significant strategic consequences of the war is the accelerated erosion of U.S. political and moral hegemony. This is not a sudden phenomenon precipitated solely by the present conflict; rather, the war has served to illuminate an already evolving global reality—that the era of uncontested U.S. dominance is in decline. The resurgence of Donald Trump and the reassertion of his “America First” doctrine reflect deep-seated domestic economic and political challenges within the United States. These internal pressures have, in turn, shaped a more unilateral and inward-looking foreign policy posture, further constraining Washington’s capacity to exercise global leadership.

Moreover, the conduct of the war has significantly undermined the political and moral authority of the United States. Perceived violations of international humanitarian law, coupled with the selective application of international norms, have weakened the credibility of U.S. advocacy for a “rules-based international order.” Such inconsistencies have reinforced perceptions of double standards, particularly among states in the Global South. Skepticism toward Western normative leadership is expected to deepen, contributing to the gradual fragmentation of the international system. In this broader context, the ongoing crisis can be seen as symptomatic of a more fundamental transformation: the progressive waning of a global order historically anchored in U.S. hegemony and the emergence of a more contested and pluralistic international landscape.

The regional implications of the crisis are likely to be profound, particularly given the centrality of the Persian Gulf to the global political economy. As a critical hub of energy production and maritime trade, instability in this region carries systemic consequences that extend far beyond its immediate geography. Whatever may be the outcome, whether through the decisive weakening of Iran or the inability of external powers to dismantle its leadership and strategic capabilities, the post-conflict regional order will differ markedly from its pre-war configuration. In this evolving context, traditional power hierarchies, alliance structures, and deterrence dynamics are likely to undergo significant recalibration.

A key lesson underscored by the war is the deep interconnectivity of the contemporary global economic order. In an era of highly integrated production networks and supply chains, disruptions in a single strategic node can generate cascading effects across the global system. As such, regional conflicts increasingly assume global significance. The structural realities of globalisation make it difficult to contain economic and strategic shocks within regional boundaries, as impacts rapidly transmit through trade, energy, and financial networks. In this context, peace and stability are no longer purely regional concerns but global public goods, essential to the functioning and resilience of the international system

The conflict highlights the emergence of a new paradigm of warfare shaped by the integration of artificial intelligence, cyber capabilities, and unmanned systems. The extensive use of unmanned combat aerial vehicles (UCAVs)—a trend previously demonstrated in the Russia–Ukraine War—has been further validated in this theatre. However, unlike the Ukraine conflict, where Western powers have provided sustained military, technological, and financial backing, the present confrontation reflects a more direct asymmetry between a dominant global hegemon and a Global South state. Iran’s deployment of drone swarms and AI-enabled targeting systems illustrates that key elements of Fourth Industrial Revolution (4IR) warfare are no longer confined to technologically advanced Western states. These capabilities are increasingly accessible to Global South actors, lowering barriers to entry and significantly enhancing their capacity to wage effective asymmetric warfare. In this evolving context, technological diffusion is reshaping the strategic landscape, challenging traditional military hierarchies and altering the balance between conventional superiority and innovative, cost-effective combat strategies.

The war further exposed and deepened the weakening of global governance institutions, particularly the United Nations. Many of these institutions were established in 1945, reflecting the balance of power and geopolitical realities of the immediate post-Second World War era. However, the profound transformations in the international system since then have rendered aspects of this institutional architecture increasingly outdated and less effective.

The war has underscored the urgent need for comprehensive international governance reforms to ensure that international institutions remain credible, representative, and capable of addressing contemporary security challenges. The perceived ineffectiveness of UN human rights mechanisms in responding to violations of international humanitarian law—particularly in contexts such as the West Bank and the Gaza Strip, and more recently in Iran—has amplified calls for institutional renewal or the development of alternative frameworks for maintaining international peace and security. Moreover, the selective enforcement of international law and the persistent paralysis in conflict resolution mechanisms risk accelerating the fragmentation of global norms. If sustained, this trajectory would signal not merely the weakening but the possible demise of the so-called liberal international order, accelerating the erosion of both the legitimacy and the effective authority of existing multilateral institutions, and deepening the crisis of global governance.

Historically, major wars have often served as harbingers of new eras in international politics, marking painful yet decisive transitions from one order to another. Periods of systemic decline are typically accompanied by instability, uncertainty, and profound disruption; yet, it is through such crises that the contours of an emerging order begin to take shape. The present conflict appears to reflect such a moment of transition, where the strains within the existing global system are becoming increasingly visible.

Notably, key European powers are exhibiting a gradual shift away from exclusive reliance on the U.S. security umbrella, seeking instead a more autonomous and assertive role in global affairs. At the same time, the war is likely to create strategic space for China to expand its influence. As the United States becomes more deeply entangled militarily and politically, China may consolidate its position as a stabilising economic actor and an alternative strategic partner. This could be reflected in intensified energy diplomacy, expanded infrastructure investments, and a more proactive role in regional conflict management, advancing Beijing’s long-term objective of reshaping global governance structures.

However, this transition does not imply a simple replacement of Pax Americana with Pax Sinica. Rather, the emerging global order is likely to be more diffuse, pluralistic, and multilateral in character. In this sense, the ongoing transformation aligns with broader narratives of an “Asian Century,” in which power is redistributed across multiple centers rather than concentrated in a single hegemon. The war, therefore, may ultimately be understood not merely as a geopolitical crisis, but as a defining inflection point in the reconfiguration of the global order.

Conclusion: A New Era on the Horizon

History shows that major wars often signal the birth of new eras—painful, disruptive, yet transformative. The present conflict is no exception. It has exposed the vulnerabilities of the existing world order, challenged U.S. dominance, and revealed the limits of established global governance.

European powers are beginning to chart a more independent course, reducing reliance on the U.S. security umbrella, while China is poised to expand its influence as an economic stabiliser and strategic partner. Through energy diplomacy, infrastructure investments, and active engagement in regional conflicts, Beijing is quietly shaping the contours of a more multipolar world. Yet this is not the rise of Pax Sinica replacing Pax Americana. The emerging order is likely to be multilateral, fluid, and competitive—a world in which multiple powers, old and new, share the stage. The war, in all its turbulence, may therefore mark the dawn of a genuinely new global era, one where uncertainty coexists with opportunity, and where the next chapter of international politics is being written before our eyes.

by Gamini Keerawella
(First part of this article appeared yesterday (08 April)

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Opinion

University admission crisis: Academics must lead the way

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130,000 students are left out each year—academics hold the key

Each year, Sri Lanka’s G.C.E. Advanced Level examination produces a wave of hope—this year, nearly 175,000 students qualified for university entrance. Yet only 45,000 will be admitted to state universities. That leaves more than 130,000 young people stranded—qualified, ambitious, but excluded. This is not just a statistic; it is a national crisis. And while policymakers debate infrastructure and funding, the country’s academics must step forward as catalysts of change.

Beyond the Numbers: A National Responsibility

Education is the backbone of Sri Lanka’s development. Denying access to tens of thousands of qualified students risks wasting talent, fueling inequality, and undermining national progress. The gap is not simply about seats in lecture halls—it is about the future of a generation. Academics, as custodians of knowledge, cannot remain passive observers. They must reimagine the delivery of higher education to ensure opportunity is not a privilege for the few.

Expanding Pathways, Not Just Campuses

The traditional model of four-year degrees in brick-and-mortar universities cannot absorb the demand. Academics can design short-term diplomas and certificate programmes that provide immediate access to learning. These programmes, focused on employable skills, would allow thousands to continue their education while easing pressure on degree programmes. Equally important is the digital transformation of education. Online and blended learning modules can extend access to rural students, breaking the monopoly of physical campuses. With academic leadership, Sri Lanka can build a reliable system of credit transfers, enabling students to begin their studies at affiliated institutions and later transfer to state universities.

Partnerships That Protect Quality

Private universities and vocational institutes already absorb many students who miss out on state admissions. But concerns about quality and recognition persist. Academics can bridge this divide by providing quality assurance and standardised curricula, supervising joint degree programmes, and expanding the Open University system. These partnerships would ensure that students outside the state system receive affordable, credible, and internationally recognised education.

Research and Advocacy: Shaping Policy

Academics are not only teachers—they are researchers and thought leaders. By conducting labour market studies, they can align higher education expansion with employability. Evidence-based recommendations to the University Grants Commission (UGC) can guide strategic intake increases, regional university expansion, and government investment in digital infrastructure. In this way, academics can ensure reforms are not reactive, but visionary.

Industry Engagement: Learning Beyond the Classroom

Sri Lanka’s universities must become entrepreneurship hubs and innovation labs. Academics can design programmes that connect students directly with industries, offering internship-based learning and applied research opportunities. This approach reduces reliance on classroom capacity while equipping students with practical skills. It also reframes education as a partnership between universities and the economy, rather than a closed system.

Making the Most of What We Have

Even within existing constraints, academics can expand capacity. Training junior lecturers and adjunct faculty, sharing facilities across universities, and building international collaborations for joint programmes and scholarships are practical steps. These measures maximise resources while opening new avenues for students.

A Call to Action

Sri Lanka’s university admission crisis is not just about numbers—it is about fairness, opportunity, and national development. Academics must lead the way in transforming exclusion into empowerment. By expanding pathways, strengthening partnerships, advocating for policy reform, engaging with industry, and optimizing resources, they can ensure that qualified students are not left behind.

“Education for all, not just the fortunate few.”

Dr. Arosh Bandula (Ph.D. Nottingham), Senior Lecturer, Department of Agricultural Economics & Agribusiness, Faculty of Agriculture, University of Ruhuna

by Dr. Arosh Bandula

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Opinion

Post-Easter Sri Lanka: Between memory, narrative, and National security

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As Sri Lanka approaches the seventh commemoration of the Easter Sunday attacks, the national mood is once again marked by grief, reflection, and an enduring sense of incompleteness. Nearly seven years later, the tragedy continues to cast a long shadow not only over the victims and their families, but over the institutions and narratives that have since emerged.

Commemoration, however, must go beyond ritual. It must be anchored in clarity, accountability, and restraint. What is increasingly evident in the post-Easter landscape is not merely a search for truth, but a contest over how that truth is framed, interpreted, and presented to the public.

In recent times, public discourse has been shaped by book launches, panel discussions, and media interventions that claim to offer new insights into the attacks. While such contributions are not inherently problematic, the manner in which certain narratives are advanced raises legitimate concerns. The selective disclosure of information particularly when it touches on intelligence operations demands careful scrutiny.

Sri Lanka’s legal and institutional framework is clear on the sensitivity of such matters. The Official Secrets Act (No. 32 of 1955) places strict obligations on the handling of information related to national security. Similarly, the Police Ordinance and internal administrative regulations governing intelligence units emphasize confidentiality, chain of command, and the responsible use of information. These are not mere formalities; they exist to safeguard both operational integrity and national interest.

When individual particularly those with prior access to intelligence structures enter the public domain with claims that are not subject to verification, it raises critical questions. Are these disclosures contributing to justice and accountability, or are they inadvertently compromising institutional credibility and future operational capacity?

The challenge lies in distinguishing between constructive transparency and selective exposure.

The Presidential Commission of Inquiry into the Easter Sunday Attacks provided one of the most comprehensive official examinations of the attacks. Its findings highlighted a complex web of failures: lapses in intelligence sharing, breakdowns in inter-agency coordination, and serious deficiencies in political oversight. Importantly, it underscored that the attacks were not the result of a single point of failure, but a systemic collapse across multiple levels of governance.

Yet, despite the existence of such detailed institutional findings, public discourse often gravitates toward simplified narratives. There is a tendency to identify singular “masterminds” or to attribute responsibility in ways that align with prevailing political or ideological positions. While such narratives may be compelling, they risk obscuring the deeper structural issues that enabled the attacks to occur.

Equally significant is the broader socio-political context in which these narratives are unfolding. Sri Lanka today remains a society marked by fragile intercommunal relations. The aftermath of the Easter attacks saw heightened suspicion, polarisation, and, in some instances, collective blame directed at entire communities. Although there have been efforts toward reconciliation, these fault lines have not entirely disappeared.

In this environment, the language and tone of public discourse carry immense weight. The framing of terrorism whether as a localized phenomenon or as part of a broader ideological construct must be handled with precision and responsibility. Overgeneralization or the uncritical use of labels can have far-reaching consequences, including the marginalization of communities and the erosion of social cohesion.

At the same time, it is essential to acknowledge that the global discourse on terrorism is itself contested. Competing narratives, geopolitical interests, and selective historiography often shape how events are interpreted. For Sri Lanka, the challenge is to avoid becoming a passive recipient of external frameworks that may not fully reflect its own realities.

A professional and unbiased approach requires a commitment to evidence-based analysis. This includes:

· Engaging with primary sources, including official reports and judicial findings
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· Cross-referencing claims with verifiable data
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· Recognizing the limits of publicly available information, particularly in intelligence matters

It also requires intellectual discipline the willingness to question assumptions, to resist convenient conclusions, and to remain open to complexity.

The role of former officials and subject-matter experts in this discourse is particularly important. Their experience can provide valuable insights, but it also carries a responsibility. Public interventions must be guided by professional ethics, respect for institutional boundaries, and an awareness of the potential impact on national security.

There is a fine balance to be maintained. On one hand, democratic societies require transparency and accountability. On the other, the premature or uncontextualized release of sensitive information can undermine the very systems that are meant to protect the public.

As Sri Lanka reflects on the events of April 2019, it must resist the temptation to reduce a national tragedy into competing narratives or political instruments. The pursuit of truth must be methodical, inclusive, and grounded in law.

Easter is not only a moment of remembrance. It is a test of institutional maturity and societal resilience.

The real question is not whether new narratives will emerge they inevitably will. The question is whether Sri Lanka has the capacity to engage with them critically, responsibly, and in a manner that strengthens, rather than weakens, the foundations of its national security and social harmony.

In the end, justice is not served by noise or conjecture. It is served by patience, rigor, and an unwavering commitment to truth.

Mahil Dole is a former senior law enforcement officer and national security analyst, with over four decades of experience in policing and intelligence, including serving as Head of Counter-Intelligence at the State Intelligence Service of Sri Lanka and a graduate of the Asia Pacific Center for Security Studies in Hawai, USA.

by Mahil Dole
Former Senior Law Enforcement Officer National Security Analyst; Former Head of Counter-Intelligence, State Intelligence Service)

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