Economies of Peace

The notion of being one of the most dangerous countries in the world more often than not shrinks foreign investment or business interests flowing in. However, the traditional “which came first?” question remains pertinent in this regard. Does economic strength and stability lead to peace in society or does the existence of peace trigger markets domestically and attract foreign capital for their development? With no right-or-wrong answer to the concerned question, one can say without a doubt that the two do have some kind of a correlation.

Pakistan and India in the light of GPI

Pakistan is one of the ten-most dangerous countries of the world, according to the Global Peace Index (GPI) 2011, which is released by the Institute of Economics and Peace and ranks countries according to their peacefulness. It takes into account 23 “peace indicators,” including, a country’s military expenditure, the level of organised conflict in it, the number of conflicts fought, the number of deaths from internal or external skirmishes, its potential as a site for terrorist acts, disrespect for human rights, its weapons exports and other signs of unrest and instability. That image is definitely not a positive one to pull in investment from abroad, however as we shall see, there are other factors at work. Pakistan ended up at 146 out of a 153 countries for which the data was collected. The major contributing factors for Pakistan need no elaboration and every Pakistani is aware of the current situation. Nonetheless, one must shed some light on the economic aspect of the country. Our GDP growth rate turns out to be a mere 2.4 per cent, in contrast to its predictions of being more than 4 per cent. The devastating floods have also been responsible; however some role has also been played by the lack of foreign investment for either public or private projects. Despite Pakistan’s stance with regards to supporting Western powers in fighting terrorism and the security threat the nation faces every single day for the last decade, the commitment does not seem to be strong enough for many. Attacks on many foreigners, including Chinese working at development projects in Balochistan, have instigated a global wave of fear and do not prove to be an invitation for working on developmental projects here.
Talking about India on the other hand, it appears at 135 on the GPI 2011. Getting its name on to the top-twenty most dangerous countries of the world, mainly due to its internal conflicts, the country is still able to portray its image as an emerging economic power and has achieved a GDP growth rate of more than eight per cent in the last fiscal year. It goes without saying that India today faces immense challenges on many fronts including social evils such as corruption, poverty and economic inequity, given its huge population. However a limited analysis discussing progress in cosmopolitan centers like Delhi can serve as an insightful outlook. While the citizens of Lahore continue to consider the existence of a mass transit system a far-fetched dream, Delhiites can enjoy an intra-city metro system of international standards. If one travels via the Delhi Metro to the extremely congested area of Chandni Chowk in the older part of the city, one witnesses a massive crowd of ordinary people utilising the service, saving on time and money. Infrastructure development in India is on the rise along with the maintenance and improvement of their railways. Both Pakistan and India were home to railway networks since their colonisation period; however the current deplorable condition of the Pakistani Railways depicts our failure to even maintain it, let alone its expansion and improvement.
At this point, the question that would cross the minds of many is that how could India, being at 135 on the GPI manage to create an image of an emerging economic power of the region and also prove it with its commendable success in terms of GDP growth rate, its literacy rate and infrastructure development, while on the other hand Pakistan could not. One factor that differentiates the security considerations of India and Pakistan is that the latter’s placement at 135 is mainly governed by ethnic and other internal conflicts across the country with its urban centers, e.g. Delhi, Mumbai and Bangalore (India’s IT hub) relatively unaffected and providing a stable outlook for economic, financial and technological activities. However, Pakistan’s position as an ally for the “war on terror” and a nation harbouring terrorists has global appeal and relevance in the post 9/11 world. The notion of “terrorism” rules and dominates security aspects over inter-ethnic domestic conflicts all around the world. The price that Pakistan and its citizens have paid in terms of being a target for innumerable terrorist attacks is an explicit one. Its implicit costs further involve image deterioration linked to an inadequate support structure for economic activities. In today’s globalised world, the quote, “no man is an island,” is pertinent. In order to follow the path of economic success, nations need to open up to the world and the whole advantage of being a “late industrialiser” revolves around importing technology already developed by others during their periods of industrialisation. Similarly, Pakistan is also inclined to follow an open-door policy for FDI; however the issues discussed above hinder such actions in recent times. Undoubtedly, various factors go into the status quo of economic and social development including the lack of political will, a weak financial system, inconsistent policies and societal evils, the limited analysis discusses the impact of the security situation or more so its image.

East Asian miracles
An analysis would be incomplete without the mention of a few other names that dominate the economic and financial circuit at present. The perceived link between peace and economic progress could very much be applied to China. Standing at number 80 in the GPI 2011, its high and sustained growth rates stemming from its export-led model where its contribution to global growth is 20 per cent today, leading economists raise the question of whether the world is too dependent on Chinese exports. One often sees claims flowing in from Western leaders and economists regarding the devalued yuan and its impact on export competitiveness of many other countries. Every now and then, you can also catch a glimpse of an expert analyst referring to the events of Tiananmen Square during a discussion focusing on Chinese economic success. A referral to violence, lack of security and the absence of basic human rights is often made to counter economic prospects a country or a region offers. As in the case of India, urban centers are playing a major role in providing an image of a regional power. The same is true for China. With the rapid pace of urbanisation in the country, Chinese cities are expected to comprise a population of one billion by the year 2015. As global interests march towards the services sector, cosmopolitan centers are the future of not just a country’s image and its motivation to grow but also its viability as a potential market for international companies. However, it should not be forgotten that developing countries are an attractive destination for MNCs mainly due to their abundance in low-wage labour, an advantage that diminishes over time as wages and standards of living begin to rise. There are a whole lot of benefits that MNCs bring along with them, including employment opportunities, specialised training of the labour force in terms of long-term skill set, technology transfers and a wider spectrum of choice for domestic consumers. The anti-MNC debate always circulates, claiming that technology transfers occur only in process-oriented methods and an all-inclusive transfer never takes place, which is true and debatable at the same time. The purpose is an attempt of to highlight the significance of investment coming in to an emerging countries and positively signalling the presence of potential markets to other investors as well.

Can you guess where Japan stands in GPI 2011? Well, to my surprise it is at number 3, only behind Iceland and New Zealand which hold the first and second positions respectively. The source of my surprise is the fact that Japan is the only country that has ever had to rebuild itself after the devastation brought by an atomic explosion and that too just about 15 years after the war, when its economy took a boost in the 1960’s. Japan’s post World War II economic miracle illustrates how a nation aimed towards prosperity and development could rise from ashes to emulate the flight of a phoenix. This provides inspiration and hope for our country that is caught in the web of a strange war being fought beyond borders and nationalities.

A question on US hegemony

Our focus now shifts towards the country whose global hegemonic status has become questionable today, the United States of America. Its rank of 82 on the GPI 2011 is mainly due to its military capability and sophistication, its number of jailed population per 1000 people, its level of disrespect for human rights and it being a potential site for terrorist acts. When relating economic success and security considerations, one could question the dominance of the US on the global economic framework in the contemporary world, post 9/11 and in the aftermath of the ongoing “war on terror”. Susan Strange, a leading authority in international political economy or more rightly its founder in Europe has defined four structures of power, namely security, production, finance and knowledge. As far as security is concerned, the US does dominate the world with its military expertise and advancement; however its own vulnerability as a terrorist site makes its authority weaker. In terms of production, majority of world manufacturing is in countries with a relatively low-wage labour force. This would render US with a lesser possession of power over world production. However, Strange talks about a “post-territorial world” in her later work that very rightly attributes power and authority to those who control production, i.e. major American giants and companies, even if manufacturing occurs beyond their borders. With regards to the third structure of power, New York City hold its indisputable position as the global financial centre, nevertheless an emergence of Asian markets such as Tokyo, Hong Kong and more recently Shanghai has changed things. Knowledge, my favourite one, referring to research and development (R&D) and innovation in products, processes and technology, has gained immense significance lately. Times have changed since countries acquired global domination post a successful industrial revolution. Technology rules the world today. The US has undoubtedly been the prime mover in terms of cutting-edge R&D across high standard universities and research centers, innovation and technologies with people like Bill Gates, Steve Jobs and Mark Zuckerberg taking the world by storm. Nonetheless, in recent times, the country with the highest level of innovation in technology was Singapore, which signals towards not exactly the decline of the US but the world catching up.
For the US, its questionable economic dominion comes at the price of not only its excessive military spending entailing an ever-growing budget deficit (the US currently faces its largest budget deficit as a percentage of its GDP, since World War II) but also the rest of the world taking away its monopoly in matters of finance, innovation and standards of living.

The impact that peacefulness can exercise on economic factors is flexible and varies according to the type of instability and conflict a country faces. A further elaboration entails an image that the said nation is able to portray with means of its security scenario. The global appeal of a certain issue and its relevance for world powers also play an essential role in determining what the image of that particular country would turn out to be.

The writer is sub-editor, Profit and can be reached at [email protected]