Gota goes: Sri Lanka’s president resigns

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Hello and welcome to the Intelligence from the Economist. I'm John Fastman and I'm still in London. Every weekday we provide a fresh perspective on the events shaping your world. The recessions of 2001 and 2008 hit Europe's tech firms much harder than their American counterparts. But times have changed. Europe's tech sector is hardier and may well weather any coming downturn better than America's. And Peter Brook was among the most innovative theater directors of the last century, known especially for his spare, uncompromising Shakespeare stagings. Our obituary's editor reflects on the legacy of a man who, in rehearsals for one of his plays, would make his cast scream for hours on end. But first, After months of protests and economic upheaval, thousands of people stormed Sri Lanka's presidential palace on Saturday demanding President Gotabaya Rajapaksa's resignation. 55 people were injured in the commotion, the speaker for the Sri Lankan Parliament announced the Gota, as he is popularly known, will step down on Wednesday. He said that Gota asked for cooperation in order to maintain peace. The president had clung on in May in the face of public protests, sacrificing his brother Mahinda Rajapaksa, who is the prime minister. Instead. Now Prime Minister Ranil Wickremesinghe, whom Gotha appointed to help solve Sri Lanka's economic crisis in May, has said he'll resign too. But the protesters say they won't leave the grounds of the palace until the prime minister and president have officially left Office.

On Saturday, July 9, tens of thousands of people assembled in Colombo, many outside the Presidential Secretariat, big beige building that used to be the Parliament calling for the president Gotabhaya Rajapaksa to go.

Leo Morani is the Economist's Asia editor.

They've been calling for him to go for months, but this time he at last listened to them and announced that he would resign a few days hence on July 13. At the same time, the prime minister has also said that he will resign. So Sri Lankans, after months and months of protest, have finally got what they want, which is an end to the government that has brought them to the place they are.

So what did the scenes look like? What did we see there?

By Saturday afternoon, there was an enormous, angry sea of humanity covering every inch of space outside the secretariat. There were lawyers in black coats, there were nurses in white frocks. University students were there in humongous numbers. But it's important to remember this was not just professionals or students. This was people from every walk of life. These people had come not just from Colombo, they had come from towns and villages outside. In many cases, they walked because public transport was unavailable. There's no fuel in the country, so they couldn't fill up their cars. But they were determined to get rid of Gota, as the President is known. And so they piled into buses and they piled into lorries, and they piled even onto tractors, whatever vehicles were available. And remember, Joan, this is a country with deep, deep ethnic divisions. It's a country that had a 26 year long civil war. And yet this government's catastrophic ineptitude has brought Sri Lankans together.

Was the government prepared for this to happen?

The government was well aware that this massive protest was coming. They did not know whether the protesters would make it in such large numbers given shortages of fuel and public transport. But they did try their best to prevent such a huge turnout. The previous day, police had declared a curfew. Trains and public transport were cancelled. The telecoms regulator even told phone operators to turn off data. The operators did not comply. And then, of course, thousands of members of security forces were deployed in the center of the city. Nonetheless, the protesters managed to make it and eventually they were able to breach the security. There were people lounging on the President's bed, taking selfies. They were making tea for themselves in the presidential kitchen. They were swimming in the presidential swimming pool. It was kind of joyous. Our correspondent described it as a cross between storming the Bastille and a field trip.

We've talked a lot recently on the show about protests and unrest in Sri Lanka. But what was it about this specific point that caused things to boil over?

So things have been simmering away for a while. Starting last year, Sri Lanka's economic situation started to deteriorate. And then early this year, that deterioration accelerated. By April, the government had announced it would no longer be able to service its foreign debt. It had stopped trying to defend the Sri Lankan rupee, which was a good thing, a sensible thing. And so that tanked imports became very, very dear and in effect the country is out of money. The Prime Minister Ranil Vikramasinghe said as much last week. He said we are bankrupt.

Leo, what do you think is behind the level of anger we've seen from.

Protesters in May, exactly two months to the day before this weekend's protests, a bunch of government goons had shown up at the protest site and violence had broken out. And that escalated and led to the resignation of the then Prime Minister who was Mahinda Rajapaksa, a former president and the current president's brother. The hope was that that would stabilize the situation, that people would calm down. But the President refused to ghost it and that was the main cause of everyone's Ireland. So this protest over the weekend was organized to mark the two month anniversary of that one. And some of the scenes we saw were somewhat similar. In fact, two months ago protesters set the Prime Minister's personal residence ablaze and the same thing happened this time. This time, however, the President finally saw that it was over and said he would go. The thing to understand here is Sri Lanka was not a poor country. Sri Lanka was a middle income country, had clawed its way to upper middle income status. On average, Sri Lankans were better off than Indians, Pakistanis, Bangladeshis, most of their neighbors. So what you're seeing now is people who would have been comfortably middle class a few months ago and they are now skipping meals. So you can understand the rage of these people.

So what happens next?

So in theory, Gotabhaiya and Ranald Vikramasinge are still running the country because neither one of them has actually resigned. They have said they will resign. The President is supposed to resign on Wednesday the 13th. The Prime Minister, Ranil Vikramasinge is also still in post because he has said he'll hang on till a unity government is formed. What that means is an all party government that's in charge of steering the country through the crisis. There's also talk of early elections, although Sri Lanka doesn't have any money to hold elections at the moment. But the legitimacy is extremely important.

Do you think the resignations of the President and the Prime Minister will be enough to stabilize the situation in Sri Lanka?

Will this be enough? I think so. Sri Lankans know that their economy is in terrible, terrible shape. They know that negotiations are ongoing with the imf. They know that the coming months are going to be very, very difficult. The problem was that there was no legitimacy at the top. The problem was that the very people who had let them into this situation was still running the country and trying to lead them out of it. So with a fresh government, with a fresh president, most importantly, because the president has enormous power in Sri Lanka, Sri Lankans will feel some degree of confidence that the path ahead is different from the path that led them to where they are now.

Is there any reason to think that a new government will be able to deal with Sri Lanka's economic problems more effectively?

Absolutely, John. Everybody knows what needs to be done. They need to continue talking to the imf. They need to come to terms. Debtors need to accept those terms. Sri Lankans recognize that they're going to be a lot poorer for quite a while. The main problem here has been one of legitimacy. And the new government, whoever it is, will have that legitimacy because they're not the right rajapaksas and because ideally there'll be early elections and they will have been voted in as well. But even without that, they're not the rajapaksas. And that's a very important starting point.

All right, Leo, thanks so much for joining us this morning.

My pleasure, as always, John.

After a pandemic driven boom, tech firms fear worse times ahead.

The top tech companies are facing hiring freezes and layoffs due to cost cutting measures.

Even industry giants are looking at the clouds gathering over the economy and preparing for the storm. Facebook's owner Meta is cutting back on hiring engineers. Netflix is making a second round of job cuts after losing subscribers. The layoff tracking site Layoffs, FYI is showing a sharp increase in job losses across the industry. But will the pain from any new tech crisis be felt evenly on both sides of the Atlantic?

So in past crises, European technology firms suffered much more than their American counterparts.

Ludwig Siegel is our European Business editor.

That happened when the dot com bubble burst at the turn of the century. Basically, European startups were decimated and people looked for other jobs. Similar thing happened after the financial crisis in 2008. But this time around, I think things will be much different.

And why is that?

The European ecosystem has grown quite rapidly, especially last year. So it's unlikely that a crisis, even something like the dot com bubble collapsing, would decimate it. So last year, for the first time, more than 100 billion euros were invested in European startups. That investment has driven up valuations of these companies. And now we have 150 unicorns in Europe. That's private companies that are worth more than $1 billion and that is 13% of the world's total. So it's quite significant it won't disappear overnight as happened after the dot com bubble burst. Of course, the European ecosystem is still much smaller than the American one. So depending on the metric, it's one third of the American ecosystem. But the size of the European ecosystem has doubled in the past year.

You mentioned the amount of VC investment in Europe. Why has European venture capital taken off in this way? Where's the money come from?

In some ways, it's a mechanistic effect of the huge amounts of money that were invested in tech startups last year. So you had lots of American VCs becoming interested in European unicorns simply because they were cheaper compared to American unicorns. The valuations weren't that high. And you had a lot of what's called non traditional investors, hedge funds, corporate venture capital firms. They started investing in startups too, and that led to a flood of capital flowing into Europe. But there were also European venture capital firms investing more than before.

What about the rest of the ecosystem in Europe? How are things looking there?

The European ecosystem has grown much bigger, but I think the more significant development is that the flywheel which it represents has taken off. So in many digital markets you have what's called network effect. More a product is used, a platform is used, the more valuable it becomes. And we've seen that with Facebook and the like. We've seen that with computer operating systems, Windows and so on. Similar effects is happening to technology ecosystems. So at some point they take off, they power themselves. Success breeds success, and I think that has happened in Europe. It produces its own capital, people have become rich, they then reinvest their money. That produces more startups and so on and so forth.

And Ludwig, what about human capital in Europe? Is that growing as well?

So people start a startup, they may fail once or twice, but they learned a lot. And the third time it works out. So the more mature an ecosystem gets, the more experience is accumulated. And I think that's happening in Europe. An analysis by Dealroom, that's a data provider, they did a survey of 38,000 startup executives in Europe and they found that almost two fifths of them had already worked in startups and established firms. So that's signaling there's a growing collection. Also, Mosaic Ventures, a London based venture firm, looked into the careers of nearly 200 founders of unicorns and they found that two in three were repeat entrepreneurs. So you have an accumulation of experience of people who know how to do startups, and that of course produces more startups.

And is there something about the types of startups or the structure of the companies in Europe that are being founded now that Gives them an advantage.

One thing is that European startups, at least when they're younger, they tend to be more thrifty. And the simple reason is that costs in Europe are lower. So to get an experienced developer, if you find them, I have to add. But an experienced developer is perhaps half as expensive as in Silicon Valley, and salaries is the most important cost for a startup. The other thing is America's ecosystem used to be very concentrated in Silicon Valley. That's changing. There's New York, there's Austin, there's Miami, but that's a relatively new development. Whereas in Europe, it was always a very distributed ecosystem. So you had several tech hubs like Berlin, London, Paris, Stockholm. Also, because these national markets were rather small or smallish, these startups quickly had to focus on expanding abroad, so they know how to function in a distributed way. That's an advantage, especially after the pandemic. And a third advantage, European startups or unicorns are, I think, a bit less prone to recessions. They play less in the consumer space. So stuff that's directly sold or offered to consumers, more like in the B2B space, corporate software, deep tech, and of course, in something related to sustainability, how to waste less resources. That's very often part of the mission of European unicorns. That's actually a good thing as the world gets more serious about fighting climate change, at least, hopefully.

So if you're an ambitious entrepreneur right now, do you actually want to start your company in Berlin rather than in Austin or Miami or Singapore?

I would say that certainly is something to think about. Ten years ago or 20 years ago, what typically would happen is if you started in Europe and you were successful, then you would very often move to the us. If you had American investors, they would say, oh, you have to come to Silicon Valley or you have to come to New York or whatever. And I think that's much less the case. So you can stay in Europe if you want to be successful. And even very serious entrepreneurs stay in Europe.

All right, Ludwig, thanks so much for joining us today.

Thanks, John.

What's next for Britain now that Boris Johnson is to step down as Prime Minister? Tomorrow at 5pm British Summer Time, our Editor in chief, Zanny Mitten Beddoes will host a special online event with a panel of our own politics and economics experts. You can sign up now@exterator.com Boris resigns and there's a link in the show Notes.

When Peter Brook was at Oxford, he thought he might be a film director and tried making a few films. But it was a lot Harder than he thought.

Anne Rowe is the Economist's obituaries editor.

So in order to have any job at all, he looked at theatre. He put on a production of Salome by Richard Strauss with designs by Salvador Dali, which was quite a scandal and ended with him being kicked out of Covent Garden. So he went definitively into theater, although the prospect was not very enticing. The theatre in London then was a very safe middle class pursuit. There were safe comedies and traditional plays, farces and undemanding serious plays. All the productions used the same sets and costumes. He really couldn't put up with that. His father had actually been a communist revolutionary in Latvia. He decided that he too had to feel that fire and he had to go around the West End breaking a few shop windows. Very soon he managed to build up a reputation for doing just that. His plays became famous because they were noisy and bloody and extraordinary and seemed to demand such a lot of the actors. When he was rehearsing Oedipus, Seneca, he made the cast scream, just scream in a primal way for hours and hours and act like beasts.

If we should find ourselves locked in a conflict with China, in your opinion, General, could we subdue China by an all out bombing attack against them? Nuclear bombing.

When he put on a play called Us, which was against the Vietnam War in 1966, the actors told the audience what it would feel like to be napalmed in their nice suburban gardens. The play was famous for setting fire to a butterfly on stage. And then the most famous perhaps of all these shocking plays was The Marasad of 1964, which featured the inmates of an asylum in France putting on a play about the murder of the revolutionary Marat under the direction of the Marquis de Sade. Actors all mad, all rampaging across the stage with buckets of blood and minders in butcher's aprons. One particular shock he wanted to administer was to their performances in their productions of Shakespeare.

Hallo, spirit.

With a wonder you.

Seized the public imagination. Imagination was the new take he had on them. For example, A Midsummer Night's Dream was played in a white cube with trapezes and swings. The actors running about in dayglo costumes, racing from one side of the stage to the other. It was an extraordinary production. No one who saw it has ever forgotten it. Then there was a King Lear which was really a meditation upon the concept of nothingness in a very Samuel Beckett way. So stripping down particularly became what he was known for as well as shocking. And he wrote a book called the Empty Space, which began with the thought that if you were just to give him an empty space and then a man was to walk across it and someone else was to observe him, then immediately you had an act of theater. What he liked about live performance was that there was a possibility for what he called a fleeting and burning sense of another world. There was a sense that an invisible force would come through to the visible and that audiences would be moved by something they were hardly even aware of. He was much influenced in these ideas by the writings of George Gerdiev, a Russian philosopher who taught that humans were actually in a waking sleep. They didn't know what reality was. What they thought was reality was just a crust and the real world was underneath. They had to break through into another, higher consciousness. Peter Brook was always aware that this was something theatre could do. He liked to sit among his audiences and just watch them as they watched the stage and wait for that silence, not that deadly silence he'd found in London when he'd first gone to the theatre there, that silence of boredom. It was a silence of having been taken somewhere else and being transfixed. And that was what he was wanting to achieve in theater for the whole of his career.

That was Ann Roe on Peter Brook, who has died at the age of 93. That's all for this episode of the Intelligence. Let us know what you think of the show. You can get in touch@podcastconomist.com and you can subscribe to the economist@economist.com intelligenceoffer. The link is in the show Notes. We'll see you back here tomorrow.