Sri Lanka Just Fell. What Do We Have to Do With It?
Sri Lanka has fallen. On Saturday, thousands of protesters stormed the presidential palace. While the angry and the aggrieved swam in the president’s pool, had a cookout on his lawn, lounged on his bed, and set fire to his residence, the president was spirited away to a naval ship off the Sri Lankan coast.
The proximate reason for the chaos is that the nation is bankrupt, suffering its worst financial crisis in decades. Millions are struggling to buy food, medicine and fuel. Between June 2021 to June 2022, food prices rose by 80 percent. Last month, annual inflation hit nearly 55 percent. Since the start of the pandemic, half a million people have fallen into poverty.
If you’ve never paid attention to the island country just off India’s southeastern coast, you might think this is just how it goes in developing nations. But the truth is that Sri Lanka had been gradually rebuilding itself—after decades of civil war and authoritarianism—and then this happened. We in the West had a lot to do with it.
The underlying reason for the fall of Sri Lanka is that its leaders—starting with former President Maithripala Sirisena and continuing with his successor, the recently deposed Gotabaya Rajapaksa—fell under the spell of Western green elites peddling organic agriculture and “ESG,” which refers to investments made following supposedly higher Environmental, Social, and Governance criteria. Sri Lanka has a near-perfect ESG score of 98—higher than Sweden (96) and the United States (51).
What does having such a high ESG score mean? In short, it meant that Sri Lanka’s two million farmers were forced to stop using fertilizers and pesticides, laying waste to its critical agricultural sector. (Never mind that Tesla has been booted from the ESG S&P Index, while Exxon Mobil is in the top ten. None of it makes much sense.)
To be sure, there were other factors behind Sri Lanka’s fall. Covid lockdowns and a 2019 bombing hurt tourism—an industry that usually generates between $3 billion and $5 billion a year. Sri Lanka racked up huge foreign debt, with China lending the country billions of dollars as part of its Belt and Road initiative. Transportation costs have rocketed 128 percent since May due to rising oil prices. And overall trends have not helped: Since 2012, growth has been declining.
But the biggest problem was Sri Lanka’s chemical fertilizer ban, which passed last year and was central to the country’s effort to comply with ESG.
The numbers are shocking.
One-third of Sri Lanka’s farm lands were dormant in 2021 due to the fertilizer ban. Over 90 percent of Sri Lanka’s farmers had used chemical fertilizers before they were banned. After they were banned, an astonishing 85 percent experienced crop losses. Rice production fell 20 percent and prices skyrocketed 50 percent in just six months. Sri Lanka had to import $450 million worth of rice despite having been self-sufficient just months earlier. The price of carrots and tomatoes rose fivefold. All this had a dramatic impact on the more than 15 million people of the country’s 22 million people who are directly or indirectly dependent on farming.
Things were worse for smaller farmers. In the Rajanganaya region, where the majority of farmers operate two-and-a-half-acre lots, families reported 50 percent to 60 percent reductions in their harvest. “Before the ban, this was one of the biggest markets in the country, with tons and tons of rice and vegetables,” one farmer said earlier this year. “But after the ban, it became almost zero. If you talk to the rice mills, they don’t have any stock because people’s harvest dropped so much. The income of this whole community has dropped to an extremely low level.”
But the damage to tea was the key to Sri Lanka’s ruin. Before 2021, tea production generated $1.3 billion in exports annually. Tea exports paid for 71 percent of the nation’s food imports before 2021.
The fertilizer ban, starting in April 2021, changed everything. Four months after the ban took effect, the president, realizing that things were not going according to plan, lifted the ban on the import of chemical fertilizers—and then, two days later, reinstated it.
The results have been devastating and widely predicted by tea farmers, with exports crashing 18 percent between November 2021 and February 2022—reaching their lowest level in more than two decades.
“We don’t have enough chemical fertilizers,” Rajapaksa admitted in December 2021, “because we didn’t import them. There is a shortage.”
In May 2022, Sri Lanka failed to pay $77 million on its foreign debt repayments. That may seem like a small sum in the bigger scheme of things, but the default made it hard for Sri Lanka to borrow money. So, it devalued its currency, inflation rose 30 percent, and the government ran out of the cash it needed to import fuel, food and medicines.
What, exactly, were Rajapaksa and other Sri Lankan leaders thinking? Why did they engage in such a radical experiment with the most important industry in their country?
After World War II, Sri Lanka, like many poor nations, subsidized farmers to transition from biofertilizers, like manure, to chemical fertilizers in what is known as the Green Revolution. (This was popularized by Norman Borlaug, the Nobel Prize-winning agronomist.) Rice yields rose quickly, and the nation overcame chronic food shortages and started earning foreign revenue through the export of rubber and tea.
As yields rose, young people were able to get jobs in cities. Salaries increased—so much so that Sri Lanka became a middle-income nation.
But what looked like a dream to most Sri Lankans looked like a nightmare to many environmentalists in the West. In the 1970s, Stanford biologist Paul Ehrlich and other activists raged against the Green Revolution. They claimed that overpopulation would cause mass death and suffering and that humankind needed to play “triage.” In other words, we had to let some people die so the rest of us could live.
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