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THE ECONOMY of the Democratic Socialist Republic of Sri Lanka quickly collapsed after President Gotabaya Rajapaksa announced his socialist “grand experiment” of green agriculture during the unraveling of the structure of globalized capital (caused primarily by Draconian COVID-19 measures). These facts resulted in the mass protests of desperate citizens whose collective anger brought down the government and forced the president to flee the nation. Sri Lanka now faces its worst financial crisis in decades.
The crop failures that ruined small farmers should have demonstrated the unviability of “organic farming”. This may have saved the government, assuming — of course — that the socialist leaders had the resources to import food and the common sense to abandon its failed environmentalist experiment. But what triggered the uncontrollable mass protests was that millions of Sri Lankan citizens could no longer afford food, medicine, and fuel in the midst of rapidly worsening poverty. Between June 2021 and June 2022 food prices soared 80% while a socialist government — which was losing revenue from agricultural exports and tourism at the same time — could not import enough food.
Sri Lanka is an underdeveloped agricultural economy that Rajapaksa threw into the suicidal experiment of the theories of the new Western environmentalist left: organic farming and the replacement of economic profitability criteria for those of “higher” Environmental, Social and Governance (ESG)
Rajapaksa announced in April 2021 that Sri Lanka would be the first fully organic agriculture in the contemporary world. He banned the import and use of chemical fertilizers, promising the new self-sufficient economy recommended by radical Western environmentalism. Two million Sri Lankan farmers were forced not to use fertilizers and pesticides, condemning the country’s agriculture to disaster.
While ruining millions of farmers with its environmentalist delusions, the Sri Lankan government accumulated a gigantic foreign debt to Beijing for Silk Road and Belt Initiative (BRI) loans, which coupled with the drop in tourism during the COVID-19 pandemic, left the country with more debt, less income, a contracting economy, rising unemployment and transportation costs soaring by 128% since May 2022.
One-third of Sri Lanka’s agricultural land was idle in 2021 due to the fertilizer ban. More than 90% of Sri Lankan farmers were using chemical fertilizers and after the ban 85% suffered crop losses. Rice production fell by 20 % and prices soared by 50 % in half a year. Sri Lanka went from being self-sufficient in rice to importing 450 million dollars of the vital cereal in just a few months. At least 15 of the country’s nearly 22 million inhabitants depended, directly or indirectly, on an agriculture that was being destroyed by the ruling socialist leadership’s ecological experiment.
In regions like Rajanganaya, where most farmers farm small plots of two and a half acres, small farmers lost between 50% and 60% of their crops, leaving the country without tons of rice and vegetables in six months. But the biggest economic impact was caused by the fall in tea production, which before 2021 generated $1.3 billion a year in exports, which in turn paid for no less than 71% of food imports. Tea exports plummeted by 18 % between November 2021 and February 2022 falling to their lowest level in 20 years.
In May 2022, Sri Lanka defaulted on $77 million of its external debt, a small default that put the country in a tough position to borrow more money, so the government devalued the currency. Inflation rose by 30% and the socialist government ran out of foreign exchange to import fuel, food, and medicine.
Guillermo Rodríguez is a professor of Political Economy in the extension area of the Faculty of Economic and Administrative Sciences at Universidad Monteávila, in Caracas. A researcher at the Juan de Mariana Center and author of several books // Guillermo es profesor de Economía Política en el área de extensión de la Facultad de Ciencias Económicas y Administrativas de la Universidad Monteávila, en Caracas, investigador en el Centro Juan de Mariana y autor de varios libros