The model of export-led growth has long been promoted as the ideal development strategy for nations such as Sri Lanka. However, this approach is now exposed as deeply unstable. Rising global protectionism, geopolitical tensions, and weaponised trade policies signal that Sri Lanka must urgently pivot towards economic self-sufficiency, academic and political economist Dr. Ahilan Kadirgamar said recently.
Kadirgamar, a Senior Lecturer at the Unversity of Jaffna, was speaking during a panel discussion titled “Trump’s Tariff Wars and the New Cold War: Impacts on the Global South”, organised by the Tricontinental: Institute for Social Research. He was joined by distinguished scholars including Indian economist Prof. Prabhat Patnaik and Canadian political theorist Prof. Radhika Desai.
Supporters of export-led growth emphasize its capacity to create jobs, attract foreign investment, and generate critical foreign exchange earnings necessary for importing essential goods and servicing debts. For decades, this model promised rapid economic development, allowing countries to integrate into global markets and benefit from global value chains. However, Kadirgamar said that these perceived advantages come with inherent vulnerabilities, especially when global economic conditions deteriorate.
Sri Lanka’s vulnerability to global trade wars
The consequences of global trade volatility for Sri Lanka are immediate and profound. Around a quarter of Sri Lanka’s exports, mostly garments, go to the United States, employing nearly 350,000 workers. The recent decision by the Trump administration to impose a 44 percent tariff on Sri Lankan exports is nothing short of catastrophic, Kadirgamar said. “Firms are already laying off workers,” he said, predicting sharp rises in unemployment, suppressed wages, and widespread social distress.
He said that such impacts extend beyond Sri Lanka, pushing down wages and deepening economic instability across the Global South. In effect, vulnerable economies become locked in a destructive race to the bottom, fighting each other over shrinking export markets, leading to growing labour reserves and deepening inequality.
Historical roots of economic dependency
Kadirgamar traced the roots of Sri Lanka’s economic vulnerability to decisions made immediately after independence in 1948. Instead of seeking assistance from former colonial ruler Britain, then-Finance Minister J.R. Jayewardene turned to the U.S., working directly with the U.S. Federal Reserve to establish the Central Bank of Sri Lanka. A Federal Reserve official, John Exter, not only drafted the proposal but became its first governor, highlighting how deeply the country’s postcolonial economic institutions were influenced by American priorities.
This informal empire shaped Sri Lanka’s economic trajectory in the decades that followed. When Sri Lanka pursued import substitution policies in the 1960s and ‘70s, the country faced capital strikes and funding freezes from Western institutions. In 1977, when Jayewardene became Prime Minister, Sri Lanka swiftly embraced neoliberalism, becoming the first South Asian country to liberalise its economy fully. The World Bank, closely aligned with U.S. interests, rewarded this shift with extensive financial backing, notably the Accelerated Mahaweli Program, one of Sri Lanka’s largest-ever development initiatives.
From debt dependency to weaponised trade
Sri Lanka’s deeper integration into global financial markets during the 2000s, primarily through international sovereign bonds, created vulnerabilities that became fully apparent when the country defaulted on its debt for the first time in 2022. At that moment, there was fear that Western powers would weaponise trade by blocking Sri Lankan exports to force debt repayment. This concern remained theoretical until Trump’s recent tariff actions made it a frightening reality.
Kadirgamar said that Trump’s tariffs are not merely random policy choices; they represent a strategic shift in imperialist extraction from the Global South. Previously, wealth extraction occurred primarily through financial means, debt dependency, speculative investments, and conditional loans. Now, tariffs are the new tool for imperial accumulation, backed implicitly by U.S. military might.
Urgent need for self-sufficiency
In response to this reality, Kadirgamar called explicitly for Sri Lanka to shift towards economic self-sufficiency, especially in essential areas such as agriculture and food security. “The model of export-led growth is deeply unstable,” he said, pointing out that the conditions underpinning such growth, Cold War geopolitics and Western economic patronage, no longer exist. Instead, Sri Lanka must urgently prioritise food sovereignty, resilient agriculture, and cooperative modes of production.
He acknowledged that the current Government, led by the National People’s Power (NPP), has taken initial steps towards this goal, including initiatives to bolster agriculture and support cooperatives. However, he said that transformative change remains challenging under the strict austerity measures dictated by the International Monetary Fund (IMF).
Beyond external pressures, Kadirgamar stressed the critical need to confront domestic elites who have benefited immensely from Sri Lanka’s neoliberal trajectory. He said that Sri Lanka’s financial classes remain deeply embedded within the global Capitalist system, insulated from the economic fallout impacting ordinary citizens. “Redistribution,” he said, “is not only a matter of North versus South, but also of rich versus poor within our own societies.”
Global perspectives: the crisis of Capitalism
Kadirgamar’s insights resonated with analyses provided by his fellow panellists. Prof. Prabhat Patnaik, an esteemed Indian economist, said that the purported “rules-based international order” was always fundamentally imperialistic, subordinating the economic sovereignty of smaller nations to the interests of global capital. “Under neoliberalism, the freedom of movement was granted to capital, not to sovereign States or their citizens,” Patnaik said, adding how nation-states lost meaningful democratic control over economic policy.
Similarly, Prof. Radhika Desai from Canada characterised contemporary capitalism as not merely declining, but fundamentally crisis-ridden. She described Trump’s tariffs not as coherent economic policy but as desperate attempts to deflect attention from structural failures of the neoliberal economic model.
Desai said that the United States, losing economic dominance, is increasingly resorting to coercion rather than persuasion to maintain its waning global hegemony.
Regional cooperation and the Bandung legacy
Amidst these global shifts, Kadirgamar highlighted the enduring relevance of international solidarity among nations of the Global South, echoing the spirit of the 1955 Bandung Conference, where newly independent nations sought an alternative, non-aligned global order. He said passionately that countries such as Sri Lanka must forge equitable economic relationships within the region and beyond, fostering mutual support and cooperation as alternatives to Western dependency.
Standing on our own feet
Sri Lanka, Kadirgamar said, stands at a crossroads: it must either reinforce a discredited export-led development model or boldly pursue autonomy, equity, and resilience. The choice, he said, is clear.
