Sri Lanka is having a textbook currency crisis, triggered by policy mistakes

https://noahpinion.substack.com/p/why-sri-lanka-is-having-an-economic

by paulpauper • 4 years ago

382 356 4 years ago

noahpinion.substack.com

imperio59• 4 years ago

Literally was just watching something on this from the excellent Breaking Points show https://youtu.be/Tdnr3wOzymE

blackoil2• 4 years ago

Because of Islamophobia people elected known corrupt leaders, who made all the bad decisions possible. The pandemic and Ukraine war unraveled it all.

lanstin4• 4 years ago

Or anti-Tamil. The Islamophobia is sort of new, since the Easter bombing, but the Rajapaksas have been authoritarian for much longer than that.

itsbits• 4 years ago

Lol.. Islamophobia started after bombings. These leaders were there way before. Don't just link all political issues to Islamophobia.

blackoil2• 4 years ago

2019 elections are won post Easter bombings. They were there before but the super majority they were able to get is because of Islamophobia.

sacrosancty• 4 years ago

In some countries, Islamophobia is a valid and justifiable fear because there is a real threat of Islamists doing bombings and taking power. Hard to distinguish a non-political Muslim from an Islamist since they share so many beliefs and interests.

davmar• 4 years ago

Here's a Sri Lankan giving an in-depth analysis about this: https://www.youtube.com/watch?v=HpZ5oiUGqW4. I like this guy, think he's got good opinions.

h0l0cube• 4 years ago

This is very insightful well-balanced commentary, and counterpoint to simpler explanations like Rajapaksa's corruption, China's influence, or organic farming, as the primary cause.

redtriumph• 4 years ago

I decided to hear him out and I completed the entire video. In short, he blames current crisis to mix of corrupt politicians, mismgmt. of foreign loans and predatory lending by West. He proposes SL to become more industrialized and integrate itself in Asia's monetary system rather than West.

roody152• 4 years ago

agree he has an interesting take and makes some good points.

umeshunni• 4 years ago

I’m surprised he didn’t mention tourism in the video while mentioning foreign remittances as a source of forex.

nova22033• 4 years ago

This is not a very good take. His solution is for SL to join a China led block that somehow has India and China as allies?

afterburner4• 4 years ago

But the most boneheaded, bizarre mistake that the Sri Lankan government made was a disastrous plan to shift the entire country to organic agriculture. In April of 2021 the government banned the import and use of pesticides and synthetic fertilizers. This devastated Sri Lankan agriculture, since, as it turns out, fertilizer is really really important. Production of tea — Sri Lanka’s main cash crop — fell by 18% in a year. Production of rice — the main food crop — fell by even more.

From https://foreignpolicy.com/2022/03/05/sri-lanka-organic-farmi... :

By 2020, the total cost of fertilizer imports and subsidies was close to $500 million each year. With fertilizer prices rising, the tab was likely to increase further in 2021. Banning synthetic fertilizers seemingly allowed Rajapaksa to kill two birds with one stone: improving the nation’s foreign exchange situation while also cutting a massive expenditure on subsidies from the pandemic-hit public budget.
But when it comes to agricultural practices and yields, there is no free lunch. Agricultural inputs—chemicals, nutrients, land, labor, and irrigation—bear a critical relationship to agricultural output. From the moment the plan was announced, agronomists in Sri Lanka and around the world warned that agricultural yields would fall substantially. The government claimed it would increase the production of manure and other organic fertilizers in place of imported synthetic fertilizers. But there was no conceivable way the nation could produce enough fertilizer domestically to make up for the shortfall.

You don't get anything "for free", and cutting supports like this will inevitably doom a sputtering economy, when the actual solution was almost certainly more government spending, not less.

The US is actually lucky to understand this at the deepest levels of policy and law making, with massive aid packages to prevent total collapse. Even Europe tried harsh austerity in the wake of 2008, and the fad lasted way too long there.

The Sri Lankan leader's hostile attitude towards the Sri Lankan population is what made protesters storm the leader's home.

themitigating2• 4 years ago

The US is very lucky as a significant amount of people have been taught that government aid/handouts are wrong, as in generally. I'm even impressed Trump spent a few trillion and still didn't get blasted for it by most people. The only two serious politicians who spoke up about it was Ben Sasse who in a conference call with constituents said "he spends like a drunken sailor" and Ted Cruise who at the end with the last aid package voted against it.

What will happen to this country if the next president actually stops spending in order to do what his voters want?

walrus016• 4 years ago

What's funny is the deepest red counties in the reddest states are also the largest recipients of US domestic agriculture subsidies and benefit programs.

Then you have other things like Walmart and similar McJobs where the government is indirectly subsidizing the companies, by various child food aid, healthcare and benefits to employees because the company doesn't pay enough for its employees to live without aid.

imtringued7• 4 years ago

Ok, but how do expect money to keep circulating? Negative interest rates?

adrr• 4 years ago

People in the US are only against handouts to other people who aren't them. I wonder how many people would opt out Medicare or SSI if they could?

My mother in-law complained about letting refugees into the country and says we shouldn't allow due to the cost yet she is a war refugee herself. When asked about her situation, she says she deserved it.

Also how many companies opted out of PPP loans.

hgomersall• 4 years ago

You get a recession, like every other time the state has reduced spending below taxation whilst running a trade deficit.

duxup• 4 years ago

You would hope that someone wanting to switch to organic agriculture would encourage it … rather than just flip a switch…

bergenty• 4 years ago

Organic agriculture is where it belong. Mom and pop farms sold in stores where it costs 3x as much for no particular increase in nutritional value. Fertilizers are tangentially bad for the environment but not directly, only in that it causes algal blooms in water bodies. Pesticides are bad yes but the research should concentrate on finding pesticides that work well with the environment. We got close with glyphosate but we’re finding out that we didn’t.

The nutrients in soil are a non-renewable resource. You can’t grow on the same piece of land and expect a bumper crop every year if you don’t use fertilizers.

BurningFrog2• 4 years ago

Reminds me of governments who try to switch people to public transport by making driving harder, rather than making public transport better.

treeman79• 4 years ago

A lot of people feel the need to force others to do what they think is right. Regardless of consequences

xyzzy123• 4 years ago

cutting supports like this will inevitably doom a sputtering economy, when the actual solution was almost certainly more government spending, not less.

In the US that might be a sensible policy decision but SL can't do that.

The concrete supports that are needed (fuel, fertilizer, food) are bought with dollars and yuan. The government ran out of those, because it was already spending unsustainably to prop up the economy.

afterburner4• 4 years ago

The government slashed taxes, right when the government needed the money. They were not making an honest effort to support the economy, they were setting up to loot it.

nostromo2• 4 years ago

The US is actually lucky to understand this at the deepest levels of policy and law making, with massive aid packages to prevent total collapse.

The current inflation crisis suggests that even the US economy can reach its limit with endless money printing and stimulus.

With the cost of borrowing going up, the executive and congress are going to start feeling pressure to cut spending or dramatically raise taxes.

ceeplusplus• 4 years ago

With the cost of borrowing going up, the executive and congress are going to start feeling pressure to cut spending or dramatically raise taxes.

Hmm, not sure that's the case given recent headlines in Politico.

lkrubner• 4 years ago

The current spike in inflation is a world-wide phenomena, effecting every country on Earth, and therefore it seems unlikely to have much to do with the USA's creation of new money. The USA printed trillions of dollars of new money after 2008 and yet inflation remained very low for the next decade. If, now, the USA's printing of money is having some new effect, you have to explain why Argentina, South Africa, India, Vietnam and China are suddenly vulnerable to USA monetary policy to a degree that they've never been vulnerable before.

UkrainianJew2• 4 years ago

You don't get anything "for free", and cutting supports like this will inevitably doom a sputtering economy, when the actual solution was almost certainly more government spending, not less.

Government spending isn't free magic money either. You increase the amount of money in circulation, hoping that people will produce more goods. Instead, you increase the size of the bullshit economy - low-effort activities that only exist under the abundance of money. So more and more stuff gets imported from China because nobody in the right mind will take a $1/hour factory job if you can be a wellness youtuber for a multiple of that. The amount of useless bureaucracy grows, the number of people willing to take responsibility dwindles, but everyone is happy because, well, Mother Government takes care of us all.

Occasionally you notice that the wages don't grow and the housing is unaffordable because the workers don't really have any leverage anymore, but you brush off those thoughts because there are far too many distractions anyway.

Then BOOM, that fragile supply line involving slave labor in China and natural resources from Putin's friends gets broken, and suddenly, we have a shortage of everything, can't manufacture our own stuff, and that freshly minted dollar can buy you many shitcoins, but won't get you any baby formula.

I think, we are about to find out that excessive spending was nothing more than borrowing from our future prosperity, and the time for that debt to mature is coming fast.

ip262• 4 years ago

That’s when it goes bad, but borrowing against the future to kickstart today is also the principal behind innumerable success stories.

asciiresort5• 4 years ago

Without imports, many Sri Lankans will quickly find themselves hungry, stranded

How did these island nations sustain themselves before ? In other words, what has changed that they can’t live off the land anymore? And by that, I mean the sea.

Has Sri Lanka’s fish been pillaged? Is it being exported to wealthier nations that command higher prices, even as there is a domestic food crisis?

How much of this is because of globalism and developing hard dependencies? I’ve traveled to all 47 of Japan’s prefectures and I still see bountiful agriculture in the countryside. Even as developed and wealthy as Japan is, with many global dependencies in imports/exports, it is still heavily invested in agriculture.

lanstin4• 4 years ago

As the article notes the government forced the food production to go all organic in one year with no plan, yields crashed, and now they have to import even rice.

It sustained itself thru tourism and local food production.

They have sold tea overseas since being a British colony.

Also, another factor is they have to import all their medicines and oil, which is also dependent on foreign reserves. So now not enough food, no cooking fuel, no medicines, no petrol, and not enough fuel for electricity. Truly a wretched set of problems.

You can buy Dilmah tea to help, Hand made Batik shirts, and visit. It is a truly lovely country, with good tourism facilities.

markdown• 4 years ago

It is a truly lovely country, with good tourism facilities.

Not to mention the people. Absolute wonderful human beings despite years of war and turmoil.

panarky• 4 years ago

Cancelled flights, fuel shortages and street violence aren't helping the tourism sector.

yunohn2• 4 years ago

Dilmah tea to help, Hand made Batik shirts

In my experience, exported goods provide very little profit to the original manufacturer. The middle layers greedily absorb all the profit. In fact, in the west, labor costs to stock/sell it in the supermarket are significantly higher than what the manufacturer made for their effort.

Instead, I’d really recommend donating the money to an action group or trusted charity, ideally if you can also verify they are doing actual things on the ground.

netsharc• 4 years ago

As the article notes the government forced the food production to go all organic in one year with no plan, [...]

Because spending on fertilizer was a lot of their foreign currency spending, and the government thought "We'll just force 'organic farming' so our spending will look better!".

nibbleshifter11• 4 years ago

I'm looking forward to going back in a year or so, when the situation stabilises.

My risk appetite is significantly higher than the average tourist, but even I'm not stupid enough to go there right now when there's the potential for things to get much worse, very quickly.

aetherson• 4 years ago

Sri Lanka's population is 2x what it was in 1965.

https://www.macrotrends.net/countries/LKA/sri-lanka/populati...

Japan imports about 60% of its food.

https://www.merlofarminggroup.com/agri-view-japan%E2%80%99s-...

asciiresort5• 4 years ago

I am well aware that Japan imports food.

The point is not about whether a country imports at all, but whether it can mobilize domestic production of essential food crops in times of crisis.

Even China import and has rice reserves. There is a reason these government have and subsidized rice reserves rather tea reserves.

plantain• 4 years ago

Well, not from producing copious quantities of tea. Globalization meant they (thought they) could specialize in growing tea and let someone else specialize in growing food. In theory - everyone wins.

chii4• 4 years ago

In theory yes, but in practise, you cannot completely 100% specialize without taking on an asymmetric risk (that of the outside party not selling you food due to their own or some other crisis).

The risk is asymmetric because your specialty (tea) isn't an absolute necessity (may be 'cept to the brits), and yet, you _need_ food (an absolute necessity).

mannerheim5• 4 years ago

Sri Lanka was self-sufficient in rice as recently as a few years ago. Banning fertiliser cut yields by 35%.

https://www.canr.msu.edu/prci/publications/Policy-Research-N...

tlear• 4 years ago

Population grew.

In Japan agriculture is heavily subsidized, in particular rice production. Stuff that is not heavily subsidized focuses on high margin premium. They can't compete on volume/price but can on quality. After eating expensive apples or grapes there nothing really compares anywhere else

asciiresort5• 4 years ago

That’s my point about Japan.

Rice, unlike tea, is a defensive measure for times of crisis. Even as Japan imports food, the point is whether the country can quickly mobilize and ramp up to essential food crops. The point is having options and a hedge, which allows you leverage during economic negotiations for other things.

The percentage of imports you can have should be bounded by the runway and time horizon you have.

It seems Sri Lanka went all in on one crop without a hedge, and it would infeasibly take years to convert.

walrus016• 4 years ago

Has Sri Lanka’s fish been pillaged

The fishermen can no longer afford or acquire fuel for their boats to go out and catch the fish. Due to the non fish related economic disaster outlined in the article.

asciiresort5• 4 years ago

They need fuel because they need boats that go far. They need to go far because the supply of fish has decreased.

Fishing is not a modern activity. Rafts existed long before people rode horses.

BurningFrog2• 4 years ago

Before globalized trade, nations sustained themselves in ways we today see as extreme poverty.

romeros• 4 years ago

not 100% sure.. my guess is that they depended upon tourism and it was severely impacted by the pandemic.

For Sri Lanka, the right thing to have been done (in hindsight) is to keep the country open for tourism and disregard covid impact. Kind of like Texas/Florida.

They had to choose between the lesser of the two evils. This is a hard decision to make.

chii4• 4 years ago

the right thing to have been done (in hindsight) is to keep the country open for tourism and disregard covid impact.

but even if they did, would tourists still be arriving? I suppose if the leaders thought that the human toll is worth keeping the economy alive - but then again, they wouldn't have mandated "organic" farming if they could come to that conclusion.

And in any case, the inflation and war in ukraine raising fuel prices would not have been helped by tourism imho. A double whammy isn't easy to recover or prevent tbh.

nibbleshifter11• 4 years ago

Their healthcare system would not have coped - as things were, it was pretty much at breaking point.

Also, the rest of the world had curbs on travel, which would have made it non viable anyway.

socialdemocrat3• 4 years ago

Not producing enough food is pretty normal. In my native Norway we have not been self sufficient in hundreds of years. Only 2.5% of the land is arable. Any time there was a serious war and shipping lanes got blocked like in Napoleonic wars we got into deep trouble. Plenty of people died. Same deal in the Netherlands. They were not self sufficient in their Golden age. The Soviet Union was not self-sufficient. It was a big reason why it collapsed. It got import problems just like Sri-Lanka causing political turmoil and eventual collapse.

Funny what being unable to import can do to a country. The US cannot have this problem since it controls the world reserve-currency. It can in principle print itself out of any problem.

rmatt20002• 4 years ago

It can in principle print itself out of any problem.

Except inflation, as we are learning.

chii4• 4 years ago

The US cannot have this problem since it controls the world reserve-currency

you got that the wrong way around. The US has the world reserve _because_ it cannot have this problem (of not having enough domestic production of necessities).

The world isn't entirely controlled by the US - even though they do dictate a large portion of financial policy all over the world, the countries of the world decided to use the US currency as an intermediary because of the stability and assurances (that has recently been shocked by financial sanctions of magnitudes never seen before).

vishnugupta2• 4 years ago

In other words, what has changed

It's often a series of mis-steps that lead to catastrophic failures such as being suffered by Srilanka. Here are a few that come to my mind, in no particular order.

  1. Tourism took a big hit due to COVID lockdowns.

  2. They took on huge debt from China to fund their massive infrastructure developments with close to zero plan as to how to reap the benefit of that infrastructure. For instance this airport[1]

  3. The knee jerk banning of fertiliser.

  4. Corrupt and authoritarian (despite being democratically elected) government favouring their cronies.

News articles trying to analyse look for a recent bad policy choice such as fertiliser ban but one could see that even 5 years ago that Srilankan economy was being badly managed. The ingredients of catastrophe were there and COVID acted as the catalyst.

[1] https://www.forbes.com/sites/wadeshepard/2016/05/28/the-stor...

[2] https://www.reuters.com/markets/commodities/sri-lanka-rows-b...

FooBarWidget11• 4 years ago

#2 is actually false. Only ~10% of Sri Lanka's debt is Chinese. The majority is from western private market lenders. Chinese debt also have lower interest than western ones.

See this detailed report by The Atlantic: The Chinese ‘Debt Trap’ Is a Myth https://www.theatlantic.com/international/archive/2021/02/ch...

And this study by British campaign charity Debt Justice, which found that the situation in Africa is similar: https://debtjustice.org.uk/press-release/african-governments...

The Chinese debt trap is a lie made by mainstream media, who for some reason blindly writes negative China articles without any kind of factual investigation. Worse, these lies distract us from actual debt traps initiated by western actors — over we which we have far more control than China. If we actually care about these countries then we need to first demand from the media that they do factually correct reporting.

spaceman_20204• 4 years ago

Most countries are simply not meant to have as many people as they do. Its an aberration of history brought about by easy and cheap accessibility to fertilizers, genetically modified crops, and cheap oceanic transport.

The true cost of feeding the world is much higher once you take away the subsidies and security architecture that makes all of the above possible.

incomingpain• 4 years ago

How did these island nations sustain themselves before ? In other words, what has changed that they can’t live off the land anymore? And by that, I mean the sea.

Well the chemical fertilizer ban means no living off the land. ~85% of the farms are expected to fail or have failed.

Has Sri Lanka’s fish been pillaged? Is it being exported to wealthier nations that command higher prices, even as there is a domestic food crisis?

No, they have tremendous inflation(54.6%) and therefore fishermen cant afford fuel to go get those fish. Major fuel shortages means no eating food in sri lanka.

https://www.scmp.com/news/asia/south-asia/article/3172540/pl...

How much of this is because of globalism and developing hard dependencies? I’ve traveled to all 47 of Japan’s prefectures and I still see bountiful agriculture in the countryside. Even as developed and wealthy as Japan is, with many global dependencies in imports/exports, it is still heavily invested in agriculture.

It's not dependencies persay but rather yes globalists are entirely at fault. This is the work of Davos/WEF.

https://www.sundaytimes.lk/180902/news/pm-this-is-how-i-will...

This used to be an article on WEF but they deleted it because obviously WEF is responsible for what is happening in Sri Lanka 100%.

The funny thing about the WEF conspiracies or for that matter the sri lanka politicians didnt see the trap they were falling into. Personally I dont believe WEF has done anything, they just convince stupid politicians to do stupid things.

Sri Lanka believed and even achieved an ESG score of over 95, beating most countries.

trashtester• 4 years ago

How did these islandnations sustain themselves before ?

They didn't. At least by today's standards. The poorest parts of the world have become immensely richer over the past 50 years. In the 80s it was still common to have famines that could wipe out millions in a small area.

Despite a massive population growth in the world's poorest areas, such famines basically don't exist anymore.

kumarvvr2• 4 years ago

The drastic move to organic farming is puzzling.

Any level headed person, forget a politician, would want to experiment first, see the results, gauge and then expand selectively. That is common sense.

I guess when you are a dictator ish government and you rule the country with an iron first, the institutions of the state stop being anything and simply become rubber stamps.

This also underlines the importance of self sufficiency in necessities. A country ought to feed its people, provide basic services like power and medical facilities on its own, without depending on imports.

soldehierro• 4 years ago

Believe me, the organic transition had nothing to do with agricultural practices and all to do with economics, with the logic being that fertilizer was an expensive import, and by banning fertilizer they could hemorrhage foreign exchange reserves a little less. Of course, they also earned a lot less because the bone-headed transition lead to a marked reduction in yield, only worsening the forex problem the ban of agricultural chemicals was meant to solve.

kumarvvr2• 4 years ago

I guess that makes sense, initially, on paper. I would guess some organic farming fanatic put put the numbers that fertilizers import can be reduced XX%, and the dollar signs in the eyes of the ruling family lit up (All those dollars not spent on imports can be embezzled)

HyperSane• 4 years ago

A smarter person would have understood that there is a return on investment for fertilizer.

pfdietz2• 4 years ago

Organic fertilizer requires that the N, P, and K actually came from somewhere. Often, that's from something else that used non-organic fertilizer. So if a country goes all organic not only are yields down on the fields using organic fertilizer, the supply of organic fertilizer itself could dry up.

spaceman_20204• 4 years ago

Very honestly, it might have worked out fine - organic produce fetches a much higher price overseas. If its already a somewhat niche product like tea, organic produce might go even higher and make up for the loss in yield.

For Sri Lanka, it was the perfect storm of covid decimating tourism AND overseas demand for their produce.

Without Covid, they might have been able to stay afloat on tourism dollars until the organic farming thing started showing results.

pjc508• 4 years ago

A phrase to remember: "Exports are made out of imports". Almost every export industry depends on an import in its production chain somewhere, which is why trade wars and sanctions are so destructive. Import-substitution planned economies have to be very clever about how they approach this to get it to work.

lanstin4• 4 years ago

The Rajapaksa family gave out jobs based on nepotism not expertise, and weren’t the sharpest knives in the drawer. It is completely insane policy, as was flatly running out of currency before doing anything about it. It will be a long road to recovery. At least they have kicked out the family from the government, and have a pretty solid plan to reverse the authoritarian sections of the constitution put in place by the Rajapaksas a few years ago. And the movement to oust the Rajapaksas has brought the whole populace toghether in a way that Sri Lanka sorely needs, Sinhala, Tamil and Musliam all working together non-violently can only be good.

thematrixturtle4• 4 years ago

The immediate problem is that the entire legal order of succession (PM, president, Speaker etc) are Rajapaksa cronies who are busily getting the hell out of Dodge^W Colombo, so it's not at all sure who is going to form or lead the next government.

There are also a lot of unresolved tensions left over from the vicious civil war that devastated the island for decades, so it's sadly possible that things take a turn for the worse.

ktaylora2• 4 years ago

There's a premium that can be exacted from switching to organic agriculture that isn't be discussed in this article. Sri Lanka has a limited land mass available for food production and they mostly export commodities to other countries. We're talking ~25,000 sq-mi. For context, the US state of Kansas is ~82,000 sq-mi. If you cannot physically expand the footprint of agriculture in Sri Lanka to boost revenues, the thinking in government was probably to try to switch to organic to fetch a higher price for exports. The mistake is that you can't just flip a switch and transition to organic production. That kind of change requires a generational change in farmers to pull off, and you will still fetch far lower yields in the interim.

andrewmutz2• 4 years ago

If you are short on land, organic is not a good approach. It takes 40% more land compared to traditional farming.

bradleybuda• 4 years ago

That's the nice thing about free trade and free markets - everyone is running a decentralized version of that experiment and incrementally updating the data live. If you make both paths available (organic vs fertilizer) and let the farmers whose livelihoods are on the line choose, then they are very likely to make the best choice.

robbiep• 4 years ago

Not to be rude but did you bother to think before writing that post? Sri Lanka is a net importer of food. It is not self sufficient. You can’t get a organic premium if you can’t feed your own people, and organic food has a well known yield reduction.

It was abundantly transparent to all commentators at the time that this was purely to try and reduce capital outflows.

TulliusCicero• 4 years ago

If you could profitably get higher prices like that, wouldn't farmers have already done it?

nostromo2• 4 years ago

This is a common feature of dictatorships: a boneheaded decision from a central government wreaks havoc on the people in the field that would know better.

It reminds me of Mao ordering all sparrows be killed because they eat agriculture seeds.

This of course caused a much bigger crisis with insects destroying crops - because everyone knows sparrows also eat lots of insects.

epistasis2• 4 years ago

Well to be fair to Mao, sparrows are renowned for their bourgeois capitalists tendencies.

pishpash• 4 years ago

It's not that, really. There are only so many boneheaded decisions that can come from a central government, and you risk over-weighting one person directly. More frequently, it's the indirect, created conditions typical of centralized power that allow sycophants and incompetents to run decision-making at lower levels -- where there is more impact and volume -- based on purely political and personal reasons.

sumanthvepa• 4 years ago

Sri Lanka is not a dictatorship. They have regular elections. The Rajapakshas might have been authoritarian, even corrupt. But they won the last election in a landslide. Sri Lankans cannot entirely absolve themselves of blame for repeatedly electing a populist regime.

wesleywt• 4 years ago

This was populalism with a dose of nationalism. Not a dictatorship, more in vain of Trumpism.

hunglee22• 4 years ago

'bad government must be authoritarian' meme is interesting to observe, as if it is impossible for bad governance to occur in democratic systems.

Sri Lanka clearly is a democracy, albeit a degenerate one

adrianN• 4 years ago

I'm not sure that "people in the field" would have predicted that killing all sparrows will lead to a surge of insects.

hellomyguys• 4 years ago

This is a common feature of most hierarchical structures (and also democracies)...

epistasis2• 4 years ago

I've been reading a lot of Soviet history lately and it provides a source of a huge number of similar agricultural disasters. Both Russian and Chinese attitudes towards agricultural peasants has been that they are dispensable humans, and it shows in how these countries have had disasters:

* collectivitzation leading to the Holodomor in Ukraine, mass famine in Kazakhstan, and hunger throughout the USSR, killing millions upon millions through starvation. All the act of a single, paranoid, murderous tyrant.

* Kruschev's love affair with corn, that ended up being a crop failure after a few lucky years in smaller trials. This is actually the more level-headed play than Stalin's, but such a large shift, even with a trial, was a gigantic failure.

Lately I've been completely enamored with the book How Asia Works lately, and in detailing the success and failure of many different Asian nations development in the 20th century, it homes in on agricultural independence as a corner stone for further economic development to industrialization. Without a broad base of independent small farmers, that have small farms that they can directly profit from, a large base of a middle class can never develop. Large industrial farms, favored both by capitalists and Marxists concentrate power into too few hands and are also far less productive in total agricultural output, even if they they are more profitable. It doesn't talk much about Sri Lanka, focusing more on north east Asia, but I would be quite curious about how and if Sri Lanka's land reforms from the 70s were effective.

MonkeyMalarky• 4 years ago

Lysenkoism should be taught in schools as an example of how extremely dangerous pseudo science can be.

virgulino• 4 years ago

Lately I've been completely enamored with the book How Asia Works

Thanks for the recommendation.

cpursley• 4 years ago

How Asia Works was good. Especially the land land reform bits. Any recommendations on Soviet history?

sam_lowry_3• 4 years ago

In the end if 70-ies and beginning of 80-ies agruculture was booming in USSR. Read your book until the end.

pjc508• 4 years ago

Both Russian and Chinese attitudes towards agricultural peasants has been that they are dispensable humans

You can see elements of this in the West as well: agricultural work is often done by precarious non-citizens, and every now and again an entire semi-trailer of these people being imported turn up dead.

worik3• 4 years ago

, it homes in on agricultural independence as a corner stone for further economic development to industrialization.

Yes. How did Sri Lanka, in Asia, get it so wrong?

CrackerNews2• 4 years ago

There was the context for collectivization as rapidly industrializing agriculture, which did lay the foundation for the rapid urban growth afterwards and the prevention of further famines which were regular occurrences up to that point through the new established agricultural infrastructure. The middle class developed from the resulting maturation of industrialization and urbanization instead. So the economy itself underwent a rapid shift from peasant based to factory worker based and beyond to catch up with the developed world.

Of course there is the human cost of such rapid change, but I wonder if the swiftness was compacting human immiersation into a tighter time frame rather than having it evened out over a long period of time. Perhaps the huge economic disruption led to more overall immiseration? Or did the planners think that rapidness would have resulted in less overall immiseration like a trolley problem? If South Korea was an example, students depised the pro-industrialization military dictators, but later generations have started to appreciated the fruits and sacrifice of pro-industrialization.

Interestingly as a side note, North Korea has a more corn based agriculture out of necessity to adapt to the poorer agricultural conditions of the north versus south, which was traditionally the farmland of Korea.

manojlds• 4 years ago

Singapore is doing well right, so not sure if lack self sufficiency is sure shot failure.

croes• 4 years ago

Seems like the switch wasn't about chemical fertilizer vs organic fertilizier but imported fertilizer vs local fertilizer.

"When Sri Lanka's foreign currency shortages became a serious problem in early 2021, the government tried to limit them by banning imports of chemical fertiliser.

It told farmers to use locally sourced organic fertilisers instead."

https://www.bbc.com/news/world-61028138

trhway2• 4 years ago

Seems like the switch wasn't about chemical fertilizer vs organic fertilizier but imported fertilizer vs local fertilizer.

it is a bit moot point as organic fertilizer can't be practically transported/imported for any significant distance.

tbrownaw• 4 years ago

Any level headed person, forget a politician, would want to

Maybe this is just a result of things being filtered for newsiness, but a lot of our politicians seem to be not so level headed a lot of the time.

afterburner4• 4 years ago

They wanted to cut taxes. To cut taxes, they needed to cut costs. Not paying for fertilizer would be one way. But of course it would destroy the economy.

johntb86• 4 years ago

In most countries I expect the private sector to pay for fertilizer. In Sri Lanka, due to the currency peg the government was paying for fertilizer. It seems that they chose the wrong solution to that problem.

modo_mario2• 4 years ago

Cut taxes? Weren't they more worried about their foreign currency reserves that went to these fertilisers?

paganel• 4 years ago

Any level headed person, forget a politician, would want to experiment first,

We are also not doing that here in the West when it comes to pushing almost of our energy inputs into renewables. Also, see the recent Dutch farmers' revolt and the reasons behind them, seems like not that much thought was given there, either.

cnxsoft• 4 years ago

As I understand it, it was to improve their ESG score (they got up to 98) in order to spur up foreign investments. It did not quite work out as expected...

shp0ngle• 4 years ago

Yeah. Europe is learning this the hard way too. We cannot drastically shift to “green” and then buy everything “not green” from our adversaries!

Although the crisis is not nearly as bad as in Sri Lanka. Sri Lanka now needs to import rice, even when they were an exporter before!

oblio3• 4 years ago

Europe had a ton of time to convert. The push was not strong enough, especially during the rather long economic boom (circa 2012 - 2019).

pjc508• 4 years ago

(The original article is very good at providing a beginner's explanation of forex crises, and should be bookmarked for every time someone wants to talk about inflation)

A country ought to feed its people

This is much harder than it sounds, not just for dense tiny countries like Singapore but for much of Western Europe. The UK hasn't been able to feed its population from native production only since before WW2. I see a Norwegian making the same point in this thread; the proportion of Norway's five million people that could be sustainably fed by fishing, reindeer hunting, and agriculture on the few flat bits of the country is probably very small.

provide basic services like power and medical facilities on its own

Even harder. Only a superpower could begin to attempt having its own production chain for both of those. Everyone else has to buy from Siemens or Westinghouse, or Pfizer etc.

It sounds like you're saying that only superpowers or mega-countries should exist? Would the EU count as a self-sufficiency unit for this purpose?

(edit: Singapore imports 90% of its food! https://www.sfa.gov.sg/food-farming/singapore-food-supply/th... - not really suprising given that it's an island megacity with a population of 20,000 per square mile)

mjevans2• 4 years ago

Arguably countries are on a logical trajectory to consolidate into economic superblocks, if not in literal than in defacto status.

Gundam 00 comes to mind as an example, https://en.wikipedia.org/wiki/Mobile_Suit_Gundam_00 , one of the main characters is a former child warrior from the then severely economically depressed post-oil 'middle east' region, while each of the three economic superblocks has it's own space elevator connecting to an orbital ring of solar collectors.

noja• 4 years ago

The UK hasn't been able to feed its population from native production only since before WW2.

What does this mean though?

That the UK does not generate enough calories to meet a certain minimum baseline? That the UK does not generate enough calories to meet the current consumption? That the UK eats things that they do not grow?

MomoXenosaga2• 4 years ago

The Netherlands is still able to import LNG because it is almost satanically rich.

Self sufficiency is advisable for the poorer countries though.

usrn• 4 years ago

Countries that can't feed their people probably shouldn't be taking in massive numbers of immigrants.

drited4• 4 years ago

Not just a dictatorship problem. Look at the halting of nuclear in Germany - a decision made by Angela Merkel after a bottle of wine with her husband according to The Atlantic.

I would argue that the current energy crisis was also partly caused by the ESG drive which while laudable in aspiration got ahead of physical practical implementation capacity.

koide• 4 years ago

What I don't get is how nuclear goes against any ESG. It's just fear.

xorcist• 4 years ago

Large scale buildouts of natural gas infrastructure is not ESG.

I know it is tempting to pin this one on the environmentalists, but this is on the establishment. Starting with Schröder who realized he could find an easy way to keep German industry competitive and line his pockets and live a comfortable life forever.

This is similar to the Sri Lankan situation. It does not matter how you label it. The lack of fertilizer was clearly not voluntary.

cinntaile• 4 years ago

Merkel is pro nuclear, the public sentiment forced her hand after Fukushima though.

vbezhenar• 4 years ago

Angela Merkel was in power for 16 years. How is she not a dictator. She usurped power.

nisa• 4 years ago

The amount of shilling for nuclear energy on this site is never ceases to amaze me. It's just more expensive than alternatives https://en.wikipedia.org/wiki/Economics_of_nuclear_power_pla... and the costs related to storing fuel, decommission old reactors and so on are also huge and paid by the taxpayer.

cloutchaser• 4 years ago

Any level headed person, forget a politician, would want to experiment first, see the results, gauge and then expand selectively. That is common sense.

Are you kidding me? The complete religious level consensus on the "save the planet" or "climate change" side of the discussion is everything should go back to being organic and sustainable, and unquestionably right now, with no testing.

Take a look at the greens in germany, who are still getting the last 3 nuclear plants shut down RIGHT NOW. I mean what the fuck.

And this isn't politicians. Politicians just reflect what their voting base want. There is an insane dogma now that anything artificial is basically evil, for many many of the public.

LatteLazy• 4 years ago

"A wise prince acts within that which constrains him"

The issue is that often people come to power based on unfulfillable promises and corruption. So the food supply is one constraint, but so is the fact you promises 1001 bribes and special favours. So now you have to deliver on the latter soon and the former can wait for months. So you do and desperately cling on.

There is fundamentally no difference between this happening in Sri Lanka or here in the UK with Brexit and Boris. The only difference is that the Pound devaluing doesn't cause food shortages etc where as the LKR does. In both cases, corrupt leaders picked by a corrupt electorate that think they can get something for nothing.

pjc508• 4 years ago

Awful lot of food banks in the UK, though. A hyperlocal kind of shortage.

https://www.macrotrends.net/2549/pound-dollar-exchange-rate-... : ouch. Hard to believe it was £1.70/$ only eight years ago. The referendum itself slips it from $1.45 to $1.30 and it never really gets back up again.

I wonder how long the government will last with energy bills doubling and diesel hovering around £2/l.

denton-scratch7• 4 years ago

A country ought to feed its people, provide basic services like power and medical facilities on its own, without depending on imports.

Ah, wouldn't that be nice!

I live in the UK, a country that hasn't been able to feed itself using only its own produce for centuries; Napoleon called us a "nation of shopkeepers" because we couldn't survive without trade. Our staple is wheat; but our wheat isn't as good as North American wheat, and anyway we are far from self-sufficient.

We used to export coal, oil and gas; but the North Sea has largely dried up, the coal mines are mostly closed, and anyway coal is sort of un-hip these days.

I wish the NHS would stop putting services out to open tender. Private (overseas) medical companies bid for the business, so that more and more of our health services are provided privately, by US medical companies. We're perfectly capable of looking after the health of our population without overseas help; but apparently our politicians don't think it's a good idea.

kamaal2• 4 years ago

>I live in the UK, a country that hasn't been able to feed itself using only its own produce for centuries

From the past few centuries, Britain has been doing just fine colonising bulk of the world and taking their resources.

I guess the past before that wasn't all that glorious.

raxxorraxor3• 4 years ago

Every common farmer could have told you that you will run into huge problems if you don't use fertilizer on a soil that has been fertilized for years. The soil probably has zero nutritional value for plants and any water will quickly evaporate. It is basically just sand that may or may not be too acidic or too alkaline because of chemical residues. It would take years to prepare the soil. You will also need more land to plant different crops and let it regenerate.

Chemical NPK fertilizer is something terribly effective for that matter. It would be a huge improvement to regulate how much is allowed and farmers need to be compensated for the additional land usage to be able to do sensible crop rotations and allow the soil to actually build up nutrition. Overall this could easily take a decade or two.

Of course the motivation wasn't ecological, fertilizer got more expensive and there was no money to buy it with. Industrial fertilizer is made from natural gas after all... You could probably also use oil...

collyw• 4 years ago

Pushed into by the WEF. Now memoryholed.

https://web.archive.org/web/20190122012624/https://www.wefor...

an9n• 4 years ago

Any level headed person, forget a politician, would want to experiment first, see the results, gauge and then expand selectively. That is common sense.
I guess when you are a dictator ish government and you rule the country with an iron first, the institutions of the state stop being anything and simply become rubber stamps.

The precautionary principle. I've noticed this is ever-more fiercely applied to anything involving protection of the environment, but never, ever applied to protection of national ethnicities and culture in Western countries - where the mere mention of latter invites being cancelled.

simonh• 4 years ago

This also underlines the importance of self sufficiency in necessities.

Embarrassingly for your argument, trying to be self-sufficient is exactly what brought on this crisis. Reckless attempts at protectionism and nativism can be just as damaging as reliance on unreliable trade partners.

Economic security is very important of course, but for most countries self-sufficiency is either flat out unattainable or an incredibly expensive luxury. Fortunately there are other ways to achieve economic security, the most important of which is figuring out who you can trust, and hedging the risks of any exposure you have to those you can't.

BaseballPhysics• 4 years ago

The drastic move to organic farming is puzzling.

That's because it was a desperate response to a currency crisis.

They couldn't pay to import fertilizer, so the government trotted out the absurd idea of using domestically produced fertilizer.

The whole "organic" thing was a red herring to dress up what was a last ditch attempt to compensate for gross mismanagement of the economy.

Unfortunately, a lot of politically motivated folks have bought into this narrative--either deliberately or unwittingly--and are using it to attack sustainability initiatives, not recognizing that they're falling for simple propaganda (see cloutchaser's comment in this thread for a good example of that).

walrus016• 4 years ago

The first part of the article about how Sri Lanka would get foreign currency (swap, export or borrow) almost completely ignores the well documented devastation of the tourist industry, where people bring euros or dollars, due to covid19 and shutdowns of travel.

Yes I suppose it falls into the category of swap, because people bring euros and exchange them for local currency to buy local goods and services. But it was a big part of the "swap" that vanished for 2+ years.

thematrixturtle4• 4 years ago

It's mentioned later in the article, and while it's certainly a factor, there are a lot of other countries with an even larger dependence on tourism (Maldives, Fiji, Thailand, etc) that did not suffer a full blown economic crisis as a result.

belltaco• 4 years ago

The big reason why is this https://en.wikipedia.org/wiki/2019_Sri_Lanka_Easter_bombings

https://en.wikipedia.org/wiki/2019_Sri_Lanka_Easter_bombings...

worik3• 4 years ago

I do not know about Maldives, but Fiji and Thailand still have their community connections. Family ties going back a long way. I think that helps a lot.

aluminaient• 4 years ago

Havent had a crisis yet*

amacneil• 4 years ago

Tourism is an export. There might be some forex involved, but that is true of imports too.

batushka3• 4 years ago

And terrorists do not forget

rlt2• 4 years ago

Perhaps a dumb question: why does every little country need its own currency? Are they all just addicted to printing money?

Ignoring the volatility and environmental concerns, why shouldn’t all these small to medium-sized countries standardize on a cryptocurrency?

digianarchist• 4 years ago

Only rich countries can afford to peg their currencies.

likecarter2• 4 years ago

Even then, not a good idea for them, hence very few rich countries do it (unless they are very small).

Controlling interest rates is incredibly important, especially in times of crisis. If you were pegged to the USD right now (which is skyrocketing relative to most other currencies), you would be in trouble.

imtringued7• 4 years ago

You can peg your currency down but you can't peg it up without external energy i.e. debt.

chii4• 4 years ago

and so who controls that crypto? The biggest country of the group? Or the wealthiest?

What happens if one of the countries needs to print some money to get out of a bind?

What happens if external countries don't want to receive the crypto in exchange for imports/exports?

I dont think crypto makes any of the above any better than an existing currency owned by the fiat banking system.

mpyne• 4 years ago

why does every little country need its own currency? Are they all just addicted to printing money?

Controlling your money supply can be needed to improve your country's position with regard to foreign trade. Greece would probably have been better able to manage its recent debt crisis had it controlled its own currency rather than being tied to the Euro, for example.

Ignoring the volatility and environmental concerns, why shouldn’t all these small to medium-sized countries standardize on a cryptocurrency?

Because people still need to be able to transact with something, which is not a function well-served by cryptocurrencies, most of which have the bulk of trade in them carried on off-chain or via stablecoins that track a fiat currency.

rlt2• 4 years ago

Because people still need to be able to transact with something, which is not a function well-served by cryptocurrencies, most of which have the bulk of trade in them carried on off-chain or via stablecoins that track a fiat currency.

That’s a bit like saying the dollar isn’t a suitable currency because most transactions don’t happen directly through the Federal Reserve. Most people would transact through “layer 2” systems like Lightning, or even paper currency issued by one or more countries but backed by cryptocurrency reserves.

The cryptocurrency bit is to allow mutually distrusting countries to standardize on a single currency, if that’s something that might be valuable.

olalonde2• 4 years ago

Controlling your money supply can be needed to improve your country's position with regard to foreign trade.

This is basically protectionism, an economic theory that has been debunked time after time. If it were true, then why doesn't it hold true for individual states within a country? And while we are at it, why not a currency for every city or neighborhood?

Because people still need to be able to transact with something, which is not a function well-served by cryptocurrencies, most of which have the bulk of trade in them carried on off-chain or via stablecoins that track a fiat currency.

Those same systems could simply add support for cryptocurrency. Paypal did a few months ago (not sure if they enabled merchant support or p2p transfers, but there's no technical barrier preventing them to do so). Credit cards could also add crypto to the long list of currencies they already support. Etc.

likecarter2• 4 years ago

The whole purpose of fiat currency is so the central bank can literally dictate interest rates and "print money" in times of crisis. Pegging currencies to the USD has been tried and usually fails.

olalonde2• 4 years ago

Pegging currencies to the USD has been tried and usually fails.

Do you have a source to back that up? I can think of many countries where it was done successfully (e.g. Hong Kong, UAE, Panama, etc.).

andrewmutz2• 4 years ago

Most countries are better off with a money supply that can adapt to local economic conditions (local unemployment and inflation). Having a fixed currency prevents that. During economic crises, it is critical to be able to increase the money supply.

Also, most countries end up managing their currency reasonably well (better than having a fixed money supply). Sri Lanka is in the news for failing, but most nations are quietly doing reasonably well.

socialdemocrat3• 4 years ago

Having your own currency is what lets you adjust the exchange between your country and another one. You should never use a currency you don’t control or cannot influence in any way. That sets you up for disaster.

8note• 4 years ago

Fiat lets your currency grow with your economy.

Lots of deflation or inflation has bad effects by influencing how people spend.

roody152• 4 years ago

Sri Lanka doesn’t have a currency problem. There population doubled since 1960 and they never industrialized.

They simply don’t make anything to sell that has value other than tourism and natural resources.

Trade imbalance has been an issue for decades and they simply hid the problem by taking out loans.

They have simply run out of credit.

My two cents

zzleeper• 4 years ago

But it's not just that. With a free economy the problem would sort-of have solved itself, as there are a lot of poorer countries that don't have currency crises.

To get as screwed up as this you can only achieve with centralized planning, where a single decisionmaker mistake can mess up the sustenance of millions.

nibbleshifter11• 4 years ago

Hard to industrialise when you are busy fighting a war on your own soil tbh.

Good chunks of the North are still somewhat off limits and fucking littered with landmines too.

imtringued7• 4 years ago

Perhaps a dumb question: why does every little country need its own currency? Are they all just addicted to printing money?

Because money has a liquidity premium that allows you to disregard location, to make money less liquid you have to bind it to a national economy, otherwise buyers might decide to only import products from a handful countries. Look at Greece they run a trade deficit because German products are cheaper, this means Greek debt is impossible to unwind until Germany starts importing from Greece.

pjc508• 4 years ago

Quite a lot of the smaller countries just use the US dollar.

rramadass• 4 years ago

Must read on the Sri Lankan Economic crisis: https://en.wikipedia.org/wiki/2019%E2%80%93present_Sri_Lanka...

It was a series of events, all mistakes done and compounded by the Rajapaksa clan over decades in power. All their assets need to be seized/frozen, Everyone of them need to be brought back to the country, made to stand trial and put in jail for ruining the country.

IG_Semmelweiss• 4 years ago

I would love to go deeper into the rabbit hole here.

What is MIA in the Sri Lanka discussion is the underlying reasons for the situation.

It seems one of them was misguided govt policy, in that they banned common fertilizers in favor of ESG-friendly fertilizer. It seems said fertilizer collapsed output, which meant less exports, less hard currency to import (late on the game) regular fertilizer.

I still sont know why ESG was favored. I also dont know what was the upside for sri Lanka to do this.

ncmncm2• 4 years ago

"ESG is an acronym for Environmental, Social, and Governance. ESG takes the holistic view that sustainability extends beyond just environmental issues."

Nothing so sophisticated. No money left for fertilizer, no fertilizer. Dressing it up as "ESG" or "organic" amounts to blame-shifting.

no_butterscotch• 4 years ago

Right! And Sri Lanka was one of the top ranked countries in the world according to ESG score.

They wanted to appeal to Blackrock and their insane ESG rating.

aemreunal• 4 years ago

I see a lot of parallels with Sri Lanka and Turkey. Dwindling foreign exchange reserves, crashing value of the Turkish Lira, trade deficit, arbitrary decision making, etc. Makes me scared for Turkey's future...

pdevr• 4 years ago

Sri Lankan economy was, and still is, heavily dependent on thriving tourism [1](which accounts for 12% of the total GDP[2]). COVID-19 devastated the industry.

There are several other reasons, involving bad policies and bad rulers, but that was one of the main reasons for the sudden implosion.

[1] https://www.ft.lk/article/1778/Tourism-%E2%80%93-Engine-of-g...

[2] https://www.orfonline.org/expert-speak/how-tourism-in-sri-la...

dougSF70• 4 years ago

The paragraph starting with the sentence "So why is an exchange rate peg a mistake? It’s not necessarily a bad thing — it can help create financial stability. But if you peg your exchange rate at a too-high level, you’re setting your country up for disaster," is a good explainer for the cryptocurrency crisis too, especially those coins that pegged them selves against the dollar.

adamius• 4 years ago

Sri Lanka seems to be having a lot of problems lately. Is it really just policy or those that make or enforce them?

011000113• 4 years ago

Sri Lanka is the first of possibly many countries to fall or suffer serious consequences in the next year or two.

Inflation, coupled with a rally in the strength of the US Dollar, is going to push many smaller nations into resource shortages and ultimately towards revolution.

Even many of the major world currencies are doing poorly. The Euro is tanking(back to parity with the dollar, for now, but it may go lower). The Yen is in trouble. We may need another Plaza Accord. There is also a very real risk that we see populist governments come to power across the EU and much of the world.

If you think the recession and upheaval is getting ready to be over with you need to take a deep dive into the macro world and see what's happening. Bank runs and a major economic collapse in China. Brazil and India cozying up to Russia for oil, with Europe and Japan utterly dependent upon them as well. Industry in Germany and much of the EU about to grind to a halt.

pfortuny• 4 years ago

Your last point on EU industry is something I do not see taken seriously by any government, and it looks like it os going to be a real crash. I am amazed at the lack of strong actions from the governments, other than mere politics.

ls15• 4 years ago

There is also a very real risk that we see populist governments come to power across the EU and much of the world.

Ouch. I find the current ones already pretty populist.

ccoreilly• 4 years ago

What events make you conclude industry in EU will grind? Is it gas scarcity or is there something else?

011000113• 4 years ago

Yeah, energy prices overall and specifically lack of methane ("natural gas") which is needed by many industries (i.e. German chemical industry).

TMWNN2• 4 years ago

Industry in Germany and much of the EU about to grind to a halt.

It's been striking how little discussion there is of this in /r/europe and /r/germany. (The latter has pinned a megathread for the topic, the classic way of killing discussion.) /r/de is slightly better, if only because of the absence of the constant "I don't know German but want to move to Germany and get a job" posts.

I don't mean to say that there's been nothing, along the lines of the 100% censorship that happened at /r/news the day of the 2016 Orlando mass shooter. There has been some. But there is far, far, far less. Just this week we've had

* a German minister stating that becoming dependent on Russian gas was a "grievous mistake", and that his country is begging for turbines from Canada "with a heavy heart"

* His government stating that entire industries might "collapse"

* Rationing of gas announced

* Local municipalities planning warm buildings that those without heat in their homes can visit during the winter

This is the greatest German catastrophe in 80 years. It is an existential threat to the German (and, thus, European) economy and nation. Any other topic half as serious would occupy far more of these subreddits' front pages.

FlyingSnake• 4 years ago

It's been striking how little discussion there is of this in /r/europe and /r/germany.

I suspect it's because most Germans don't hang out there and those forums are populated mostly by expats.

011000113• 4 years ago

Wow, looks like you got quite a lot of downvotes. I'm guessing it's just an emotional reaction because your post is accurate. The Germans will have to cozy up to the Russians and/or burn one hell of a lot of coal and trees to make it through the winter. They'd be doing better if it wasn't for the major accident which took out the main US LNG export terminal a month ago.

hoseja• 4 years ago

Oh, Belt and Road turning developing nations into debt slaves? Say it ain't so...

spaceman_20204• 4 years ago

Surreal how quickly it can all collapse.

I was there in December 2021. There were some extra long queues at petrol stations, but nothing too out of the ordinary.

Incredibly beautiful country and very generous, friendly people. Hope they see better times.

oblak• 4 years ago

When an entity fails this hard and the internet I consume is suddenly flooded with articles about it, I can't help but think: ok, who fucked them over?

Who are the biggest "friends" of Sri Lanka? The US, China? Who profits from a weaker Sri Lanka. That's the real question. I know this site has people from all over, so I'd love to read more from the people who are NOT on the other side of the world.

selimthegrim• 4 years ago

Notionally Pakistan is their friend too but they are in no shape to be bailing out anyone.

yread2• 4 years ago

Everyone really. Sri Lanka sold a naval base and large part of Colombo harbor to China plus the massive debts, refineries and power plants to India (who have a monopoly on gasoline) and LNG storage and power plants to the US.

Simon321• 4 years ago

This is something i see a lot in conspiratorial thinking, you can't believe a government would be so incompetent, so somebody MUST be behind it and have caused this maliciously. Never attribute to malice that which is adequately explained by stupidity.

guerrilla2• 4 years ago

There's nothing "conspiratorial" about assuming fundamental principles of human behavior, even baked into neoclassical economics (which you might also subscribe to) and any realist political theory. Not only that but real conspiracies at this level happen almost constantly[1], John Bolton just admitted being involved in some yesterday on CNN[2]. Don't be dismissive and condescending, especially when it's quite possible you're wrong.

1. https://github.com/binka/essays/blob/master/us_atrocities.md

2. https://twitter.com/justinbaragona/status/154695519704541593...

alams• 4 years ago

There are many countries who are next in line may be a bit more more self sufficient and with relatively less bigoted people.

Everything starts when people elect leaders based on hatred instead of good governance. Citizens of Srilanka or any of the countries that may follow the same step cannot just blame this cronies and escape. People needs to self realize their part.

thaumasiotes• 4 years ago

It seems weird to me to describe this as a "currency crisis". The post pretty plainly describes an actual crisis:

Production of tea -- Sri Lanka's main cash crop -- fell by 18% in a year. Production of rice -- the main food crop -- fell by even more.

The problem isn't the currency.

thematrixturtle4• 4 years ago

Sri Lanka's immediate problem is not lack of tea or rice, it's that they're out of money and can't pay for imports of essentials like fuel. In other words, a currency crisis.

logicchains2• 4 years ago

They're not making enough money to pay for imports because they're not producing enough. If they were producing enough then they wouldn't need to borrow money to pay for imports, so the cost of borrowing wouldn't matter.

nansari• 4 years ago

We are seeing a similar situation here in Pakistan :/ Feels scary!

dablweb• 4 years ago

"mistakes"

moffkalast• 4 years ago

If only they had double checked their numbers...

NKosmatos• 4 years ago

Very good analysis for us non economists. It gives many details and a credible explanation on what went/is going wrong in plain words.

throwaway4good• 4 years ago

First of probably many countries that will fall victim to the high dollar price.

Don't get me wrong; it is necessary for the US stop the inflation spiral, in particular now that it is in a defacto war with Russia (whos resource rich economy benifits from inflation).

But imagine having your loans/expenses in US dollars and your income in Japanese yen.

https://www.tradingview.com/symbols/USDJPY/

DSingularity• 4 years ago

The root of all problems in these neocolonized nations is corruption. The colonizing entity (ie the dictator or the “political family” or the king) are absorbing all the profits and eliminating cushions which would otherwise help promote recovery and stability.

TazeTSchnitzel• 4 years ago

And they're corrupt because they were made to be when they were originally colonized. The people put in charge by foreign empires were not chosen for their commitment to democratic governance.

denton-scratch7• 4 years ago

I do not understand why Sri Lanka did this very dumb thing.

I thought the reason was that Sri Lanka's fertilizer and pesticide supplies were all imported, and were therefore contributing to the BoP crisis. I'm not for a moment suggesting the ban wasn't dumb!

The Rajapaksa family are a bunch of cruel, racist, venal despots. I fail to understand why Sri Lankans kept electing them to power.

bheacox902• 4 years ago

I read this right as I woke up and thought this was a crisis that Sri Lanka’s school textbooks were way out of date.

bheacox902• 4 years ago

I read this headline as “Sri Lanka is in crisis because their school textbooks are way out of day” smh

culopatin• 4 years ago

At times it seems like I’m reading about Argentina. The problem is that people just sit around complaining until the crisis hits lvl 9000 to go out and throw a brick. It’s like boiling a frog. Argentina is the same way. And by then, it’s too late. In a weird way, sometimes I think these moments of touching bottom are needed for change to happen.

sylware• 4 years ago

This is common knowledge that organics crops yields way less food than pesticide-based ones.

I have a hard time believing in such a gross mistake.

thedrbrian• 4 years ago

Don't worry the WEF are going to turn them into a superpower by 2025

https://web.archive.org/web/20190122012624/https://www.wefor...

Sri Lanka is having a textbook currency crisis, triggered by policy mistakes

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