By Kusum Wijetilleke
The Nobel Prize for Economics was not one of the original prizes established by Alfred Nobel, which in 1901 included five awards, for: Physics, Chemistry, Physiology or Medicine, Literature and Peace. The Economics prize was created in 1968 by Sweden’s central bank, nearly seven decades after the original Prizes. The initiative came from Riksbank Governor Per Asbrink, an economist by training and powerful Social Democratic central banker who had famously asserted monetary-policy independence in Sweden’s 1957 “interest-rate coup”. Asbrink developed the proposal with Assar Lindbeck, a professor at the Stockholm School of Economics and one of Sweden’s most influential mainstream economists, who became a central figure in establishing and subsequently administering the prize. The Nobel Prize for Economics thus emerges from the institutional world of central banking and professional economics. Curiously, there has never been a Chinese winner of the Nobel Prize for Economics and no prize has been awarded for work related to Chinese models of economic management and development.
Much of what we have come to regard as ‘economics’ is actually the analysis of economic policy and outcomes through a particular intellectual prism. Mainstream or orthodox economics, whose theoretical foundations are substantially from the neoclassical school, nonetheless remains just one of many traditions within the broader field (Eg: Keynesian, post-Keynesian, institutionalist etc).
The extraordinary influence of the neoclassical school came partly from its success in establishing its assumptions and analytical methods as the common language of academic economics and of the institutions responsible for economic policymaking. Its emphasis on individual choice, incentives, market equilibrium, marginal analysis and the role of prices, became central to how economies were understood. Yet different schools of economics begin with different assumptions and can examine the same evidence and reach very different conclusions. The problem arises when one school becomes so dominant that its assumptions are presented not as one approach to economics but as the only approach.
Institutional gatekeeping has reinforced this dominance: leading universities, journals, central banks and international institutions, increasingly began to shape what counted as legitimate economic inquiry. Alternative traditions were not necessarily disproved; many were marginalised, received less institutional support, or were relegated to history, sociology or politics. The result was a narrower discipline in which contested assumptions could increasingly be presented as economic orthodoxy.
The past is prologue
Today, we live with a field of economics that largely treats the neoclassical tradition as its natural centre, with other approaches measured by their deviation from it, thus legitimising policies that lead to premature financial liberalisation, accelerated deindustrialisation and the growing financialisation of various sectors.
The consequences of the last fifty years are striking. Living standards are falling across the middle class, poverty and inequality are at record levels in Sri Lanka while governments across much of the world now carry enormous debt stocks, approaching or exceeding 100% of their GDP. Yet the corresponding accumulation of wealth has not produced comparable prosperity for ordinary households.
This raises a fundamental distributional question: if our economies have generated enormous amounts of new wealth, where has that wealth accumulated? The Government is in debt, the wealth has not reached the middle class, the working class, or the poor, so the answer becomes increasingly clear: wealth has accumulated disproportionately among those who were already wealthy. This is, in significant part, the world constructed by the economic ideology of the centre-right, the supposedly sensible, serious technocrats.
Sri Lankans should take note of the failures of the global centre-right; its economic programs, social contracts, political philosophy; and recognise that this ideology still infects our country’s policy elites. Sri Lankan economists continue to analyse the country through a 1990s prism: privatize, liberalize, deregulate, cut expenditure, raise revenue, gain market access, attract investment; Thatcherism without Thatcher.
This is a warning to the Sri Lankan political class, if you have any sympathies with the political centre-right, if you see your project as belonging to the centre-right, then some self-analysis and soul-searching is recommended. Just take a look at the base of the global centre right, what it has evolved into: Reform UK/ Restore UK, Donald Trump and MAGA, Germany’s AfD, France’s National Rally, Italy’s Brothers of Italy, Austria’s Freedom Party, and similar movements. Far from being isolated political phenomena, this is a clear reaction to the long-term failures of the traditional centre-right.
For decades, mainstream conservative parties promised that lower taxes, deregulation, privatization, fiscal restraint, and liberalized markets would steadily improve living standards. As decades of evidence of deteriorating material conditions pile-up, the centre-right increasingly appears detached from the everyday realities of the societies it seeks to govern. In to this inevitable vacuum steps a new generation of right-wing populist movements with a central political message, that national decline is primarily the result of immigration, global elites, and supranational institutions.
Where the traditional centre-right has made its greatest mistake is in failing to process these movements as occurring in a context of decades of underinvestment and financialization; features of the centre-right’s design of public policy. And its failure was not simply one of policy, but of diagnosis. Rather than confronting the structural causes of declining living standards, the centre-right often dismissed public anxieties or treated them as communications failures. In doing so, it ceded the political terrain to movements offering simpler, more emotionally compelling explanations.
The lesson is that citizens ultimately judge economic systems by whether they can afford a home, access quality public services, find secure employment, and can reasonably expect their children to enjoy a better standard of living and a higher quality of life. When politics ceases to address such material concerns, more radical alternatives inevitably become more attractive.
Paying for the sins of others
In Sri Lanka’s case, the centre-right has promised development for decades, to be delivered through faster growth led by the private sector. While GDP has risen at various times, development did not follow automatically; requiring production, exports, technology, infrastructure, state capacity; a political project capable of mobilizing society around a national developmental mission. The tragedy of Sri Lanka’s centre-right is that it had the perfect vehicle with which to assert a lasting political and economic social contract: the post-independence United National Party (UNP). Instead of appreciating this ethos, it instead adopted neo-liberalism, which was all the rage in the 1990s.
D. S. Senanayake was not a neoliberal; Dudley Senanayake was not a market fundamentalist; J. R. Jayewardene, particularly as Finance Minister and in his early reformist period, retained a developmental instinct. Ranasinghe Premadasa, above all, showed a path to a unique model of development with private-public sector partnerships for development, simultaneously strengthening welfare and social programs. This is a conceptualisation of the State as an instrument of nation-building, not a fiscal burden to be managed.
This ‘developmental state’ is now widely understood across fields such as development economics and political economy, as central to the successful industrialisation of most modern economies. The lesson is that markets and the state are complementary institutions: private enterprise creates dynamism, while an effective state directs investment, builds capacity and capabilities, provides public goods and ensures that GDP growth translates into broad-based development.
Ranil Wickremesinghe recently noted that Sri Lanka’s foreign exchange earnings would likely be compromised when the moratorium ends; full external debt repayments recommence in 2028/2029. As the former President and Finance Minister who led the negotiations, Wickremesinghe should be familiar with the step-up nature of the repayment plan under the IMF program and debt restructuring agreement that he himself championed just four years ago.
The tragedy of Sri Lanka’s centre-right
Under Ranil Wickremesinghe, the UNP drifted into a technocratic, urban and elite-oriented form of neoliberalism, failing to articulate a convincing national production strategy and abandoning the language of development. This was one of the central reasons the UNP ceased to function as a party of mass appeal, increasingly confusing market credibility for national development and conflating IMF programmes with economic strategy. Macroeconomic stabilisation could not generate structural transformation because there was no accompanying development strategy. This ideological failure can be seen clearly across Sri Lanka’s last two IMF programmes: the 2016 programme negotiated by a Wickremesinghe-led government and the current programme negotiated under his stewardship following the 2022 collapse.
Sri Lanka needs the IMF as a ratings and credibility anchor and, in many ways, as an anchor for elite consensus. Without an IMF programme, Sri Lanka risks losing access to capital markets at reasonable rates, struggling to rebuild reserves and remaining vulnerable to another confidence crisis. The IMF largely delivers what it says on the tin: macroeconomic stabilisation, improved creditworthiness and, eventually, renewed access to international capital markets. But an IMF programme will not, by itself, transform a consumption-led, import-dependent, low-productivity economy.
The current IMF programme ’s binding architecture and most consequential reforms are overwhelmingly directed towards restoring fiscal, monetary and debt sustainability: revenue-based consolidation, primary surpluses with reserve accumulation and restored market confidence. These may be necessary conditions for stability, but they do not constitute an industrial strategy. The programme contains measures intended to improve competitiveness, trade and the investment environment, but it does not answer the fundamental developmental questions:
(1) What will Sri Lanka produce
(2) What sectors will generate productivity
(3) Which industries can become internationally competitive
(4) What industrial policies enable domestic firms to acquire technology and scale
Any deal will do
Sri Lanka defaulted not simply because it had accumulated too much debt, but because it failed to develop an economy capable of carrying that burden. It accumulated large external liabilities without building an export and foreign-exchange-earning base capable of comfortably servicing them. External borrowing supported persistent fiscal deficits and an economic model characterised by high import dependence, consumption, construction and infrastructure investment, while the productive external sector remained comparatively weak. When access to new foreign financing disappeared, the underlying vulnerability of that model was exposed.
The failure, therefore, was not that the IMF failed to provide Sri Lanka with a development strategy; the failure was that Sri Lanka’s political leadership treated restoring macroeconomic credibility as though it were itself a development strategy.
In this sense, the current IMF programme is almost a perfect expression of the Wickremesinghe UNP’s economic ideology. Its overriding objective is to make Sri Lanka fiscally credible and market-accessible, but the danger is that the country restores credibility to essentially the same debt-dependent economic structure without sufficiently transforming the productive structure beneath it.
This problem is particularly visible in the debt restructuring; Sri Lanka has emerged from default with a still exceptionally large debt stock and substantial future financing commitments. The restructuring provided important near-term debt-service relief, but comparatively limited reduction in the underlying external debt stock. Sri Lanka also secured a less generous reduction in creditor claims on an NPV basis than some comparable recent sovereign restructurings, including Ghana. The structure of the Macro-Linked Bonds goes further: if Sri Lanka’s nominal dollar GDP outperforms the restructuring baseline, creditor recoveries rise accordingly. In effect, part of the upside from stronger-than-expected Sri Lankan economic performance is contractually transferred back to bondholders through higher debt service.
The resulting settlement is therefore difficult to describe as neutral between debtor and creditor; it is a distinctly creditor-friendly restructuring, providing Sri Lanka with sufficient relief to restore debt sustainability under the IMF’s thresholds while preserving a substantial portion of bondholder claims and allowing creditors to recapture part of the upside if the economy performs better than expected. Sri Lanka is being asked to become “sustainable” while carrying a high post-default debt stock and large gross financing needs that will continue competing with public investment, education, healthcare and industrial development for scarce fiscal resources.
That distinction goes to the heart of the argument. The IMF asks whether Sri Lanka can service its debt. A national development strategy must ask what Sri Lanka needs to produce, invest in to transform and advance its external sector.
The future is not a choice between “big government” and “small government”; language and framing that is obsolete. The real choice is between capable states and incapable states; between productive economies and consumption economies; does policy incentivise industrial capital or speculative capital, and does this generate an expansion of the middle-class or simply more asset price-inflation.
The most successful Asian economies did not develop through laissez-faire, free markets: South Korea, Taiwan, Singapore, Japan, and later China, used market signals alongside State direction. Capital was disciplined while credit was directed carefully to strategic sectors through conditional support and time-bound protections. They incentivised firms to export and invest in technology and skills while funding research and development through State instruments and institutions.
Sri Lankan policymakers behave as though the developmental state doesn’t exist, as if empirical data for the rise of the Asian Tigers and China, remains incomplete, all while the world is reassessing globalization, industrial policy, supply-chain resilience and energy security. The Sri Lankan discourse still recycles stale binaries: state versus market or privatization versus nationalization. These dichotomies distort the deeper question: how does a small, import-dependent, debt-burdened country build productive capacity and a stable middle class in the twenty-first century?
The death of the centre-right should not be mourned but studied and analysed as the political consequence of its own rigid economic models that promised freedom but delivered insecurity and precarity. Ranil Wickremesinghe’s UNP was Sri Lanka’s last serious expression of that worldview, its collapse was the verdict of a disillusioned electoral base. The task now is not to rebuild the same old politics under a new name but to move beyond it completely.
(The writer is a political commentator, media presenter, and foreign affairs analyst. A former banker, he spent 11 years in the industry in Colombo and Dubai, including nine years in corporate finance, working with some of Sri Lanka’s largest corporates on project finance, trade facilities, and working capital. He holds a Master’s in International Relations from the University of Colombo and a Bachelor’s in Accounting and Finance from the University of Kent (UK). He currently serves as Advisor on Political Economy to the Leader of the Opposition of Sri Lanka, and is a member of the Working Committee of the Samagi Jana Balawegaya (SJB). You can contact the writer via email: [email protected] or Twitter: @kusumw)
Disclaimer: The views and opinions expressed in this article are those of the writer and do not necessarily reflect the official position of this publication.
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