On 16 August 1976, representatives from eighty-six countries met in Colombo, Sri Lanka, for the Fifth Conference of Heads of State or Government of Non-Aligned Countries. This was the first summit of the Non-Aligned Movement (NAM) to be held in Asia and perhaps the largest international conference ever held in Sri Lanka.
In her inaugural address to the summit, Sri Lankan Prime Minister Sirimavo Bandaranaike – the world’s first woman prime minister – put the issue of economic sovereignty on the table: ‘If we really and truly want to blunt the weapons of imperialism and colonialism we must surely fashion countervailing weapons in the areas of international money and finance’.
The 1976 NAM summit marked a decisive shift in the Third World movement, from the lofty ideals of anti-colonialism and national sovereignty towards the much harder institution-building process of economic transformation. Two years earlier, in 1974, the countries of the Third World had successfully lobbied the United Nations General Assembly to adopt the Declaration on the Establishment of a New International Economic Order – a set of proposals to reform the global economy and correct centuries of colonial exploitation. The meeting in Colombo sought to build the institutions for this new order – the ‘countervailing weapons’ of the Third World.
Two weeks after the conference in Colombo, Sri Lanka’s Permanent Representative in New York, Hamilton Shirley Amerasinghe, transmitted the results to the UN Secretary-General for circulation to the General Assembly. That 154-page document is perhaps the fullest articulation NAM ever produced of what a different world economy would look like. Half a century on, it reads less like a historical curiosity than an unfinished checklist.
Forging the Countervailing Weapons
The Economic Declaration adopted at Colombo insisted that ‘nothing short of a complete restructuring of existing international economic relations’ would resolve the crisis of the developing world. From Sri Lanka to Ghana, political independence often failed to translate into genuine economic sovereignty, with the existing structure of production, trade, and finance monopolised by a few corporations headquartered in the United States, Europe, and Japan. The declaration highlighted several essential elements of reform that remain remarkable for their precision and enduring relevance.
On production, the declaration called for a new international division of labour, with industry redeployed from North to South and technology transferred on favourable terms. On trade, the declaration argued for the pegging of commodity prices to the cost of manufactured imports – this was to counter the phenomenon of declining terms of trade so that a given volume of tea or cocoa would not buy steadily less machinery each year.
On finance, the declaration demanded a radical overhaul of the international monetary system to ‘remove the dominant role of international currencies in international reserves’ and ‘prevent the domination of any single country over decision making’. On debt, the declaration asked for conversion of loans into grants, moratoria, rescheduling, and outright cancellation for the least developed countries, particularly those that had ‘suffered from foreign occupation and aggression’.
Perhaps most significant was the attempt to assert tighter regulation of transnational corporations, which had grown beyond the power of many nation states. The declaration asserted the right of states to the ‘supervision, authority, regulation and nationalization of transnational corporations’, and denounced firms that ‘exhaust the resources, distort the economies and infringe the sovereignty of developing countries’ and ‘frequently resort to bribery, corruption and other undesirable practices’.
Among the proposed institutions of collective South-South self-reliance were: a Council of Producers’ Associations for raw materials, a Special Fund to finance commodity buffer stocks, a Bank of the Developing Countries, a Developing Countries Payment Union drafted by Egypt, and studies towards ‘a countervailing currency backed by the economic potential of the non-aligned and other developing countries’.
The Debt Crisis and Long Reversal
By the late 1970s the terrain began to shift rapidly in favour of Northern capital. The Volcker Shock of 1979 sent US interest rates soaring, increasing the costs of borrowing for the South. Mexico’s default in 1982 announced the arrival of the Third World Debt Crisis and a lost decade for many newly independent states in Africa and Latin America. The NAM’s demands for reform were replaced by the IMF’s demands for structural adjustment – the terms of the debate had changed.
The negotiations towards a UN code of conduct on transnational corporations collapsed outright in the early 1990s. That collapse contributed to a long period in which the role of transnational corporations in geopolitics was completely erased. Questions of good governance, corruption, and human rights were increasingly weaponised against newly independent states in the South – conveniently ignoring the destructive role of transnational corporations which controlled production and the arteries of trade and finance.
Sri Lanka’s own trajectory compressed the whole reversal into eighteen months. Less than a year after the fifth NAM summit, in July 1977, Sri Lanka elected a right-wing government that made it the first economy in South Asia to liberalise its economy. In a sense, the host had abandoned the agenda domestically even before the ink had dried. The subsequent policy trajectory reinforced many of the same economic dynamics which the 1976 conference had sought to undo.
An Unfinished Project
In 2022, Sri Lanka became the first country in Asia to default on its external debt in the twenty-first century. Under its seventeenth IMF programme, the country has gone through a fundamentally pro-creditor debt restructuring process – including an externally imposed domestic debt restructuring that targeted worker pension funds and novel ‘macro-linked bonds’ which tie debt repayments to GDP growth. The Sri Lankan government now spends more than 40 percent of its budget on debt servicing.
When Sri Lanka defaulted, there was no common framework for restructuring the debt of middle-income countries. Nor was there any meaningful South-South coordination amid what was essentially a wave of debt crises in the South. Sri Lanka’s own situation in 2026 vindicates the need to fashion those countervailing weapons proposed in 1976.
The demands of 1976 echo many of the major policy debates in the South today. The weaponisation of access to the US dollar, US-controlled payment systems, and the US market has once again brought to the fore the danger of domination by a single country. Contemporary demands for national ownership over, and domestic processing of, natural resources – from Indonesia to Zimbabwe – echo the 1976 critique of the international division of labour. The 1976 insistence on technology transfer on favourable terms prefigures contemporary debates on climate justice and green industrial policy.
What has changed is the material basis. In 1976 the South’s leverage was rhetorical and demographic; South-South trade was thin, and the institutions Colombo proposed were never capitalised. Today, the centre of gravity of the global economy has shifted to Asia, trade among developing countries exceeds their trade with the North, and Southern-led projects of development financing and local-currency settlement have expanded.
Though the objective conditions for forging those countervailing weapons may have improved, the subjective conditions remain challenging in parts of the South. State formation across much of the South has entrenched elites whose fortunes are tied to the agenda of transnational corporations and foreign creditors. These elites surrender quickly in the face of tariffs, credit ratings, and bombardment. Forging these weapons therefore requires changing the social basis of leadership in the South itself. Only then can the countervailing weapons transmute from an idea into a material force.
