Sri Lanka is having a textbook currency crisis, triggered by policy mistakes
noahpinion.substack.com
noahpinion.substack.com
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.
I know nothing about P and K though.
Ash is a good source for K if there are no other K-rich fermented dead plants available.
You get a lot of both from coffee grounds so someone might have to drink a lot of coffee.
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.
This also affected staple crops like rice which are eaten domestically, effectively forcing the country to start importing food instead of fertilizer.
It's not plausible to move the entire agricultural sector towards luxury exports by government fiat.
.. overnight.
Some countries have managed to pivot towards luxury exports, and indeed this is one of the standard things that the IMF tries to make failing countries do, but it's a multi-decade process.
Beyond that, it's easy to get rid of modern fertilizers, but the tradeoff is significantly lower yield. To make up for the loss of yield, you need more space. Sri Lanka is a small island that is densely populated, so space is at a premium. Yielding less crop for the same money might have worked out if not for the pandemic, except for the fact that they domestically consumed most of their domestic staple goods, exporting the surplus. Now they've resorted to importing.
Perhaps your niches are smaller than mine. Some people regard tea as an indispensable bulk commodity.
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.
Quite justified in my opinion.
This only really works with a UN declaration/international support. Having historically friendly ties makes this a better proposition.
It was abundantly transparent to all commentators at the time that this was purely to try and reduce capital outflows.
It might be more profitable in the long term, but a hard cutover sure isn’t.
It's not clear that switching to organic agriculture in any way reduces capital outflows. Do you mean reducing import costs by not having to import chemical fertilizer? If that were the case, I think Sri Lanka would focus on boosting domestic production and finding cheaper suppliers.
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.
To the extent they have less mental free space to actually do work.
Even in abridged form... that's a lot. https://campbellmgold.co.uk/archive_definitive/red_book_chai...
As soon as you have a government run for the benefit of a small group, you no longer have a democracy.
Elections don't change this. Not even nominally free and fair ones.
The problem - as always - is that any system of government trends towards capture by Dark Tetrad types. No matter what decisions they appear to make, and no matter whether they're left/right populist/monarchist democratic/authoritarian, the consequences are always disastrous.
The Roman title of Dictator is different from a modern day dictator, agreed — but if you read carefully no-one argued otherwise. The Roman title of Dictator more aligns with the modern concept of "emergency powers."
If you have bigoted populace, it's dead easy to bait them into voting for some immediate emotional relief. Sri Lankan's wanted to have fun watching Tamils and Muslims get hurt, so it wasn't all that hard for some politician to get the people vote for him. The worse thing is they even put up with his bad decisions for the same reasons. And they did this for years.
The population is entirely responsible for this.
As it turns out they ran out of time, there's always that one point after which everything comes melting down.
Sri Lanka clearly is a democracy, albeit a degenerate one
Sri Lanka is a democracy, in that they have elections, but it is also hilariously corrupt, with extremely authoritarian governance.
Regarding the authoritarian governance, can you please supply the valid examples? Srilanka is just one example. There are many countries like Bhutan, Nepal which seems to be sliding day by day. I hope we won't label them authoritarian when they fail?
Democracy is not immune as people expect. We can't label demagouge who sways people as authoritarian. Democracy is only sucessful if majority of people aren't biased and vote based on merit rather than religion, greed etc.
* 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.
Thanks for the recommendation.
Anyway, even agricultural output grew in USSR until mid-80ies and, importantly, salaries were at least double of city workers' salaries.
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.
Yes. How did Sri Lanka, in Asia, get it so wrong?
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.
"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."
it is a bit moot point as organic fertilizer can't be practically transported/imported for any significant distance.
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.
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.
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!
> 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)
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.
Nineteen Eighty-Four (from 1949) literally has Oceania, Eurasia, Eastasia :-)
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?
https://www.gov.uk/government/statistics/united-kingdom-food...
Result: The UK grows enough wheat alone to give enough calories to support its population, with plenty to spare. It also produces all the major food groups in quite large quantities. If cut off from the world, the UK people wouldn't starve, but they might have to switch out their caviar for something else.
Try plastic-wrapped garbage at Co-op and Sainsbury's!
> but they might have to switch out their caviar for something else
That's frivolous: the report talks about meeting 100% of caloric requirements from grain in an emergency scenario. The mostly-bread diet would be comparable or worse than WW2 rationing, it's not just luxuries that would be impacted.
For purposes of comparison with Sri Lanka, I also note: "The UK imports roughly 50% of its ammonium nitrate, with 75% of imports for fertiliser use coming from the EU (primarily from Lithuania, Poland, and the Netherlands) and the remaining 25% from Georgia and Russia."
See the section on meat, dairy, fruits, vegetables, etc... It would be a decent diet.
And obviously within a year or so, land use could be adjusted to make it an even better diet.
For that matter, I don't understand why human poo is treated as pollution, rather than being composted.
Because human waste contains shigella bacteria which would be disastrous if runoff makes it to the water supply.
https://www.epa.gov/biosolids/basic-information-about-biosol...
If you would include nitrogen pollution and use of fossil fuels/CO2 production into the cost, using natural fertilizer would be a no-brainer.
If I remember a fragment of chemistry from 50 years ago, it's something like "all inorganic nitrate salts are soluble in water at STC". Ammonia's also water-soluble (and volatile); rivers and groundwater can recover from nitrogen pollution more quickly than from phosphate pollution.
One other thing: phosphate fertilisers basically have to be dug out of the ground, and as reserves begin to run low, prices are increasing. But human poo is very high in phosphates.
I mean, even if there's a yick factor, let's face it: every glass of water we drink, whether from the tap or the mineral spring, has probably passed through the kidneys of dozens of animals, including fish, mammals and insects, and certainly hundreds of dinosaurs and millions of bateria. Why should we be concerned if the phosphate salt we use was once a part of human poo, which probably contained nasties at some point? And nobody's proposing that humans should chow-down on phosphate salts extracted from human poo; stick to bananas, and put the fertiliser on the banana tree.
Specifically, no water treatment process today tests for viruses in treated water, and there are plenty of viruses that can survive sitting in a bubble tank for a few hours..
Boiling the water for 10 minutes first would satisfy me that very little biological contamination can make it out, but it is a huge amount of energy required to boil all the wastewater.
https://www.epa.gov/biosolids/basic-information-about-biosol...
In the USA, food poisoning rates are far higher than Europe, and part of that is probably the biosludge...
https://extension.psu.edu/use-of-biosolids-in-crop-productio...
Treatment methods eliminate more than 95% of the pathogens in sewage sludge; the risk of disease from those that remain in biosolids is short-term because most of them do not survive beyond 30 days in the soil environment. In addition to requiring pathogen reduction treatment, Pennsylvania's biosolids regulations contain several risk reduction and management requirements that reduce the likelihood of disease to very low levels. These requirements include:
treatment and management practices to reduce the attraction of disease vectors and thus the probability that pathogens would be transferred from biosolids to humans or animals application setback requirements from occupied dwellings and from water sources minimum time requirements from biosolids application to harvest, ranging from 30 days for forage and feed crops to 38 months for some food crops no grazing allowed within 30 days of biosolids application to pastures If carefully followed, these requirements make the risk of disease from land-applied biosolids similar to or lower than that of land-applied manures. In fact, there are no documented cases of human or animal diseases being contracted from land-applied biosolids.
https://extension.colostate.edu/topic-areas/nutrition-food-s...
Changes in microorganisms have undoubtedly contributed to this increase, as have changes in growing, harvesting, distribution, processing and consumption practices. Listeria monocytogenes, Clostridium botulinum and Bacillus cereus are naturally present in some soils. Their presence on fresh produce is not uncommon. Salmonella, E. coli O157:H7, Campylobacter jejuni, Vibrio cholerae, parasites and viruses can contaminate produce through raw or improperly composted manure, irrigation water containing untreated sewage or manure, and contaminated wash water. Contact with mammals, reptiles, fowl, insects and unpasteurized animal products are other sources of contamination.
Animal manure is a far more common source.
Pretty much every investment in agriculture, from buying tractors to the collection and distribution of organic fertilizers is heavily subsiduzed and controlled.
https://www.bloomberg.com/news/articles/2022-06-08/high-gas-...
"Enough wheat to give enough calories to everyone" only means that in an extreme situation and with very strict rationing nutritional needs could be met. Which is self-sufficiency at the limit only.
The government assumption was that - once the population realises they're going to be starved - they will revolt and insist on agreeing terms with Germany in exchange for food. Given what we later saw in Japan (which did starve its civilian population and they did not in fact rise up and force Japan to surrender) perhaps they were too pessimistic, we will never know because the next convoy got through.
Self sufficiency is advisable for the poorer countries though.
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.
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.
I wonder how many people died in Fukushima vs how many Ukrainians were killed by Russian soldiers this year.
Electricity and natural gas aren't interchangeable commodities, particularly given Germany's infrastructure.
Also Europe produces a lot of electricity with natural gas fuelled turbines.
Wind and solar cannot guarantee production. This means you need storage. The problem with storage is you need to determine how much you want. If you decide on 1 month of storage what happens when you have limited wind and sun for a month and you are running out of stored power?
Nuclear doesn't have that problem. This is why nuclear is a must in the future.
New nuclear is expensive. Existing nuclear is not.
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.
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.
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.
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.
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.
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...
https://web.archive.org/web/20190122012624/https://www.wefor...
> 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.
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.
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).
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.
What will happen to this country if the next president actually stops spending in order to do what his voters want?
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.
It's also possible that it's impossible to get subsidies spent in a way that isn't rife with such corruption. I would say that the only way it may be possible is small government. Not because subsidies are bad, but the only way to watch government closely enough to keep corruption low is to make it small enough to watch in entirety.
Like a computer program, if it has less lines and less features, or less overall complexity, it should be easier to spot bugs and egregious mistakes. That's not the same as not wanting features at all. Or, it can become a political version of Zawinski's law where people want more from government and the resulting size and complexity is such that a group of corrupt developers can spread their corruption across so many branches and parts of the project that no one can watch it all (after all, isn't that how the 3 letter agencies undermine security software?)
Well said, this sort of thinking needs to both be better understood on the right (all gov spending, taxation, and intervention isn’t immediately bad) and on the left (every critique of government doesn’t mean the only alternative people want is some radical anarcho-capitalist zero government fantasy world).
Instead it’s smaller and more effective government but still strongly supporting it where it makes sense ie subsidized education, healthcare, and other places with uncontrolled externalities that markets can’t properly serve.
More about being cheerleaders for what works, not just lazily pushing a government spending free for all nor a “stop everything” approach where only soft targets get reduced like teachers salaries instead of subsidies to billion dollar companies.
It’s harder and nuanced, but still worth fighting for.
What can cause this is welfare cliffs and systems with asset tests like SSI.
Bernie does like to say this because it sounds good, but he knows it’s false.
You saw this play out across the pandemic: business owners complained that the increased level of state aid was damaging their ability to employ at the minimum wage level.
Also it's got to be said: some people aren't good at negotiating and/or don't know their value. In aggregate the effect you see is employee supply drying up as the total number willing to work at that level decreases, but in specific there will be individuals who haven't made that choice yet.
Of course there's a lot more to it than that.
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.
> Also how many companies opted out of PPP loans.
This is exactly what I was going to highlight, people who use the narrative that some how a $1200 stimulus check sent nearly years ago is what is keeping people from taking low paying, dead-end jobs are the first to overlook the fact that PPP was the biggest welfare handout to the business class in some time, compounded on top of lower tax obligations. And 75% of the PPP [0] was never actually used for payroll!
It's insulting to working class people to see this narrative be as persuasive as it is, even amongst their own, but if I've learned anything about US culture is that was it 'trashy' for the lower class, is some how 'classy' for the rich. It's a pathetic attempt to divide people into already highly contentious tribes in order to maintain the illusion of business as usual.
0: https://finance.yahoo.com/video/report-shows-most-paycheck-p...
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.
No one is expecting bumper crops without any nutrient inputs. Synthetic fertilizers are not the only possible nutrient inputs.
I'm sorry but they actually are. Every time you do tillage you start from scratch. Hence you run out of nutrients much faster than if you used no till. Most of the fertilizer in tillage operations just gets washed away during rain which results in an over application of fertilizer and the runoff results in algae blooms.
Carefully considered mixed planting can remove the need for pesticides too.
Shits not hard, but trading off the "big yield now" for "yields for longer" requires long term thinking that a lot of people are terrible at.
To keep land arable in the longer term, you need to do crop/usage rotation, no-till farming, etc.
Agriculture is fun.
It’s not like we’ve known this for 8,000 years
...which results in water that's so clogged it can't support fish, aquatic arthropods and so on.
Perhaps that doesn't matter, if the river rolling past your window is the Mississippi; but in this country, our longest rivers are only 100 miles or so.
The same applies to Berlin, London, and many other places.
TfL (Transport for London) do a lot of interesting things to manage traffic (rerouting people on foot through stations in interesting ways) to manage traffic/congestion.
Its also rather heavily surveilled and policed by the British Transport Police (a fully fledged police force specifically for the UK public transport networks).
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.
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.
Hmm, not sure that's the case given recent headlines in Politico.
> overheating of the market.
Citations needed.
This needs citation?
> overheating of the market.
I did say "My theory"
I remember seeing tons of economics articles talking about how the consequences of monetary expansion were historically being overrated by economists in the past and that countries have far more capacity than previously thought. But that was easily said during the good times when spending is high.
Blaming it all on a war in Eastern Europe seems to be convenient excuse but there’s a reason you don’t spend wildly during good times, so you have the capacity to spend during the bad times. This has consistent been a critique of modern monetarist and Keynes policy (although you could argue it’s far more monetarist since a Keynesian approach would be via things like infrastructure investments for working class jobs, instead of just endless spending on backchannel megacorporate dealing in thousand page bills).
India also didn’t print much money in the pandemic. The effect is clear now. We only had a short lived inflation spike after the economy reopened and its now getting back to normal.
Like in the 1970s. Crude oil prices went up 10X between 1972 and 1982. Is it surprising that the price of everything went up during that time, or economies everywhere experienced stress?
Fiscal and monetary policy isn't the whole explanation, no matter what certain recipients of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel would have you believe.
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.
The UK took so long to get to the Industrial Revolution because it had to save the money itself. Everyone since then has been able to rely on capital other people in order countries have saved to jumpstart their economic growth.
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.
We don't read articles over here!
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.
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.
Not to mention the people. Absolute wonderful human beings despite years of war and turmoil.
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.
But longer term, having Sri Lanka goods be valued on the world market will help the island. Dilmah employs a lot of people on the island.
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!".
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.
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-...
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.
To put it crudely Japan doesn't need to grow all its own food because people send it money for Toyotas and Mitsubishi cargo trucks and such, and it uses that to buy whatever food it wants.
Sri Lanka could, but not with the chemical fertiliser ban.
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).
https://www.canr.msu.edu/prci/publications/Policy-Research-N...
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
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.
We have had enough bad experiences in the past however to give up having some level of self-sufficiency.
If you ever wondered why nearly every European country is in the EU, except Norway well there you got part of it he reason.
Are you saying EU membership could affect Norway's agriculture?
There are many others, to be fair: Iceland, Switzerland, most of the Balkans, parts of Eastern Europe, the UK, and at least 5 microstates.
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.
Fishing is not a modern activity. Rafts existed long before people rode horses.
Right, because the locals have changed from fishing for themselves to fishing for others. This is market economy dynamics of engaging in activity that produces the most money.
/s
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.
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.
Also, the rest of the world had curbs on travel, which would have made it non viable anyway.
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.
Except inflation, as we are learning.
But you have to stop when the recession is over. That has proven hard for people to remember to do.
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).
After WWII, the world agreed to use the US Dollar as reserve currency because the US promised to exchange every 35 USD for one troy ounce of gold, as per the Bretton Woods agreement.
And when the US defaulted on this obligation in 1971 the world continued using the USD since there was no other politically viable alternative.
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.
[1] https://www.forbes.com/sites/wadeshepard/2016/05/28/the-stor...
[2] https://www.reuters.com/markets/commodities/sri-lanka-rows-b...
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.
Publicly that is. If you are private company there is still a lot of things you can get away with, but you won't get gunboats to show up anymore.
Simply put. China is doing the same thing. Performing business like decisions on international scale. West has just decided that such approach is immoral and mostly abandoned it as a policy.
Has it though? They don't do it overtly but through IMF. When a debt ridden country approaches IMF for help that help comes with heavy strings attached such as cutting down social spending, and privatisation. And IMF is controlled by ex-colonial nations. Even a developed nation like Greece got a taste of it. The funny thing is through a debt ridden country IMF is in fact helping debtors who are mostly western entities.
There are quite a few layers here to peel but safe to say west hasn't abandoned their policy just that they outsourced it to IMF.
Western governments offer 'help', but it's rarely what local governments want. And often it means publicly complying with rules imposed from the 'outside'. When the 'outside' includes your former colonial overlord and you have turned anti-colonialism into most important aspect of your political identity (for example African Union has no problem with dictators, or genocide, but you better not have capital on different continent) you'd be undermining your regime by accepting it.
In the meantime China offers exactly what you ask for, and doesn't ask about minorities or how long your presidential term is.
For now it's mostly working out for locals, their governments at least. In the long run ... Congo had very beneficial relationship with Portugal during the first century or so, not so much afterwards.[0]
[0] https://en.wikipedia.org/wiki/Kingdom_of_Kongo#Foundation_of...
It's indeed an open question how beneficial the relationship will be in the long term. But it's not at all guaranteed that it will end up like Portugal. China was a big naval power during the Ming dynasty, but didn't colonize Africa or South-East Asia. One should be careful with projecting western history onto China.
Some high-profile Chinese figures recognize the problem that BRI projects don't always end up benefitting people. For example, Zhang Chun, researcher at the Center for African Studies at Yunnan University, said this:
"There is a lack of an accurate analysis of Africa's benefits from the Belt and Road Initiative and that needs to be remedied"
Source: 欧亚系统科学研究会 https://mp.weixin.qq.com/s/Vva1N_LVMBwcfpZcSl57rw
Same is the case with Africa, and many projects of which do not benefit the citizens of those countries in any way too. [2]
[1]: https://www.nytimes.com/2018/06/25/world/asia/china-sri-lank... [2]: https://www.youtube.com/watch?v=aJSD8XV3qzE
> Our research shows that Chinese banks are willing to restructure the terms of existing loans and have never actually seized an asset from any country, much less the port of Hambantota.
Even if we assume that Hambantota is a problem, total Sri Lanka debt owned by China is still at 10%, much less than non-Chinese debt. China is not the biggest problem, if it is one at all.
Whether projects benefit citizen really is up to African governments. Chinese companies build whatever African governments ask them to; Chinese don't force their projects on Africa. When I buy a house and the house doesn't end up benefiting me, that's my problem for having chosen that house, not the mortgage's fault for "debt trapping" me.
But it's not at all set in stone that none of the projects, or even the majority of the projects, are useless. In a recent study, "China Surpasses US in Eyes of Young Africans, Survey Shows": https://www.bloomberg.com/news/articles/2022-06-12/china-sur...
China absolutely throws its weight around - just like all the other big nations.
It also blindly pursues its own self-interest again like all the other big nations.
China also isn't a monolith, with companies and individuals making deals or going after projects abroad. Sometimes on win-win terms, sometimes trying to screw a target out of money. Again - just like other nations.
China uses money in diplomacy. That's just a fact. They do so not out of altruism but out of self-interest.
What is wrong with doing things not based on altruism? There is nothing wrong with business. Nobody builds bridges and hospital for free.
My understanding is more of the Chinese debt is unproductive. 5% borrowed to build a useless port saps FX in a way 20% borrowed to buy yield-boosting agricultural inputs does not.
Furthermore, a major reason why Chinese companies did the work was due to a lack of skilled workforce in the country. Some countries chose for a hybrid model, where they ask for Chinese companies to train local workers.
Finally, if something does go wrong, then The Atlantic's article says that Chinese lenders are often willing to restructure the loan.
Except they aren't as the contracts prohibit open bidding.
> The Atlantic's article says that Chinese lenders are often willing to restructure the loan.
Except when they are not willing, which is most often the case. They restructure when things are seemly fine but if shit hits the fan like in the case of Sri Lanka, they wont discuss it.
But the CCP prob jots it down to 'a mistranslation' and 'rumor' as they have done in the past.
Regarding being able to negotiate: high-profile African commentators, such as Gyude Moore, have pointed out on multiple occasions that it's perfectly possible to say no to an offer, after which the Chinese offer new terms. You should check out his videos some time.
I know you love the CCP but it’s hilarious how much credit you give them despite not wanting to live in China.
It is entirely possible to be fed up with anti-China propaganda while not being specifically a CCP supporter.
It is also entirely possible for an overseas American to say positive things about the US without living there.
If I do live in China you’ll just say that I'm being forced to say these things. Since you can't, you mock me for not living there, making up some arbitrary requirement that doesn't make sense. This is intelectually dishonest.
But calling it anti-China is a typical tactic to attempt to discredit people.
China credit is the only one knocking on doors and wanting ports to be built by paying off governments to push things through when the courts are saying it’s not a good deal and it has non favourable clauses with the end result of china getting to control the port they built at the cost of the government.
It's "only about the CCP" except Chinese scientists, Chinese engineers, Chinese students and other ordinary Chinese people are declared "linked to the CCP" without evidence, thereby destroying their lives. "Nearly 90% of the defendants charged with spying are of Chinese heritage. This includes citizens with connections to Taiwan, Hong Kong, and long-standing Chinese diaspora communities in Southeast Asia": https://www.technologyreview.com/2021/12/02/1040656/china-in...
And even if it's only about CCP, how does that justify not basing accusations on facts? I do not at all oppose you having legitimate grievances against CCP. I do oppose false grievances with no basis in reality, against any party.
You end your post with a claim. Please provide evidence that China forced countries to take loans, as opposed to countries having agency in this matter.
People have been critical of the CCP massively since Xi took power and started causing conflicts with all neighbouring countries with his power push.
Please lol blaming trump lol that’s funny on a whole new level.
"The Trump administration pointed to Hambantota to warn of China’s strategic use of debt: In 2018, former Vice President Mike Pence called it “debt-trap diplomacy”—a phrase he used through the last days of the administration—and evidence of China’s military ambitions."
Look, you keep lol'ing, moving the goalpost and making new claims, but how about you actually discuss based on facts and provide evidence? I keep providing counter-evidence but you keep moving the goalpost every time you can't counter those.
Again, I have nothing against legitimate grievances. But keep it factual rather than based on spite.
By changing from the narrative to a term you're shifting the goal post.
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.
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.
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.
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...
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.
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.
1. https://github.com/binka/essays/blob/master/us_atrocities.md
2. https://twitter.com/justinbaragona/status/154695519704541593...
This is absurd... I grant you that the CIA is in the business of destabilizing nations and use the World bank and IMF to that end, but what possible proof do you have that this is the case? It's clear to see that myopic policy (even I as a former Biodynamic farmer thought this transition was absurd) coupled with nepotism and a currency crisis due to COVID which directly impeded their ability to source fertilizer on the open market as the Russian invasion took place is what created their downfall.
This all seeing boggy-G-man narrative is of CCP levels of hysteria!
None, I made it up.
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.
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.
Maybe churches will need to install the kind of security fixtures commonly found furnishing synagogues in Europe. It generally does the job of keeping pathetic misanthropes who think it's good to bomb religious communities out on the curb where they belong, to issue empty threats and get carried away to a nice new home.
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.
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.
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.
Nothing so sophisticated. No money left for fertilizer, no fertilizer. Dressing it up as "ESG" or "organic" amounts to blame-shifting.
They wanted to appeal to Blackrock and their insane ESG rating.
> 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.
I have a hard time believing in such a gross mistake.
https://web.archive.org/web/20190122012624/https://www.wefor...
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.
Ouch. I find the current ones already pretty populist.
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.
I suspect it's because most Germans don't hang out there and those forums are populated mostly by expats.
While I do not have personal experience with /r/germany's moderators as I do with /r/europe's, if they are similar (likely, given how much inbreeding there is in big subreddits' mod teams), I suspect that submissions of said news coverage is being suppressed to avoid blurring The Message(TM).
Ignoring the volatility and environmental concerns, why shouldn’t all these small to medium-sized countries standardize on a cryptocurrency?
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.
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.
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.
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.
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.
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.).
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.
Lots of deflation or inflation has bad effects by influencing how people spend.
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
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.
Good chunks of the North are still somewhat off limits and fucking littered with landmines too.
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.