What do we really need?
The invisible hand of Adam Smith, as acclaimed as it is, has failed to explain the fiascos of trade liberalisation. In third world countries like ours where law sides with the powerful, litigation stands no chance against the monopolistic cult
The national budget for the fiscal year 2017 and 2018 has been announced. The drill remains the same. Paperwork can’t be called anything less than “stellar”. All fundamentals of economics are razed to ground. This deftness can only be expected from someone with a history of being economical with truth, our finance minister Ishaq Dar. Loans are primarily the source of developments and debt servicing. GDP targets missed as always. All mega projects like orange train, metro buses, laptops, power plants, motor ways constructions, and literally every project is set up by foreign loans or against an indemnity.
None of it unfortunately came as surprise. This was just as expected as it could be. For the next month or so statistics and numbers will be muckraked and thrown at each other in TV shows, Newspapers and parliament eventually to settle in yet another embarrassing fiasco. The debate however is misplaced and utterly futile. Question that should be answered honestly is how long is this going to be tolerated? Thomas Picketty, the famous French economist, has written arguably the most influential book on income and capital in our times. The amount of historical data he draws his conclusions from is phenomenal. He argues that inequality has increased throughout history alongside the amount of capital we have been able to generate. At some level, Karl Marx’s prophecy of private wealth generation ending up in fewer hands is already a reality.
The invisible hand of Adam Smith, as acclaimed as it is, has failed to explain the fiascos of trade liberalisation. In third world countries like ours where law sides with the powerful, litigation stands no chance against the monopolistic cult. By all standards of acceptable economics, Pakistan is following the road to nowhere. Loans on top of loans on top of tax cuts to foreign companies while agonising the middle class with regressive taxes is unprecedented except in autocracies. While our prime minister paints a rosy picture out of this oligopoly facts speak for themselves.
Luckily history is not only the source of embarrassment but also the hope. In Poland around mid 16th century the wages for workers were paid. By the end of the century only half of the wages were paid rest of it was landlord’s. Mecklenberg, Germany was a lot of worse than that. People got paid only four days a week and their children worked for free. Irony is the fact that this all was legislated. Something that becomes a law does not automatically become an evidence of it being justified and even ethical. In England it was as early as 1381 that peasant’s revolt began and took over London. They demanded an end to extortions and Statute of Labourers to be put in effect. Wat Tyler the heroic leader however was captured and executed in a tragic turn of events but the momentum it gave to reformation movement was irreversible. Apartheid by definition was legal, holocaust was performed under Reich’s orders and Spanish colonization of Latin American was normal trade. Today these are the dark chapters of human history.
Year 2000 was a special one for Zimbabwe. Story became a laughing stock for international community by for Mugabe It was just another windfall. A lottery was organised for everyone who held atleast 5,000 USD in bank accounts. Is it a coincidence that Mugabe won it after he had been organising mock elections for 40 years? The country in 2008 topped the countries where unemployment ratio has hit 94pc. Pattern is same in all countries at the top of this index. Chad, Libera, Nepal, Sudan, etc. John Perkins writes at length in his bestselling book ‘Confessions of an Economic Hitman’ about under the table perks these ‘orchestrated’ leaders of developing nations enjoy. This exploitation of domestic resources in the name of trade liberalisation happen under shameful terms using these countries as funnels for the foreign loans that end up in their own pockets.
The historical and rhetorical speech of Shahbaz Shareef still resonates where he would cut open President Zardari’s stomach and bring back the looted money from the Swiss Banks. Once in power it turned out that instead of cutting other people’s stomach a ‘wise man’ feeds a bigger one.
The historical and rhetorical speech of Shahbaz Shareef still resonates where he would cut open President Zardari’s stomach and bring back the looted money from the Swiss Banks. Once in power it turned out that instead of cutting other people’s stomach a ‘wise man’ feeds a bigger one
Is it then incredible that young children of our beloved prime minister in their tender ages have outsmarted business tycoons around the world when we look at their income declarations? Apart from this rampage, do we not see the similarities with what we call first world nations in their days of misery and penury? Less bread and more mouths to feed. Serf labour, child labour, lawlessness, extravagance of the nobles, illicit arrangements between the aristocracy and regressive taxation.
What lies at the core of all this is an inspirational change and source of hope and solace. Facts today themselves reflect the message that this all can be overcome with collective effort. Human civilisations did not move from parasitical hunting societies to producing societies and then knowledge societies in a matter of years. This thought evolution took centuries and informational building blocks. European history took a violent and individualistic path to development. History of the orient has a different trajectory from its Caucasian counterparts. The region between the fertile crescent to the subcontinent had always been an intellectually rich one. Many have argued that the reason foreign invasions on these lands have been so successful is because they were too used to the comforts of poetry, philosophy, arts and grandeur that their military might lagged behind their aesthetic one.
Days of de facto colonisation were numbered even before that and direct occupation was not possible in a world where the powers that be signed the United Nations charter and rules for international community. The empty space that Russia created was bound to be filled and like all victors US made herself at home at the political throne. Along with its queen the Britain, capitalistic ideals were unstoppable. Although many of the cases made for it are lopsided and twisted, Singapore, South Korea, Taiwan and Hong Kong are touted as the wonders of free market. We were made to believe we have found the way to wonderland.
This one missed the target in a spectacular fashion. For starters, the arguments didn’t hold up against the facts. Korea was in terrible shape around the 50s. The bureaucracy was so corrupt that they had to send their officials for training to countries like Pakistan and Philippines. Thanks to its strategic location that can be utilised to neutralise North Korea as well as China and other foreign players, along with Japan, Korea has been the recipient of US bailouts at multiple occasions. Ethical considerations have been overlooked throughout discussing the Korean case where in 80s Korean ‘maquiladora’ shops were at the center of brutal labour conditions and the income earned from them was sent to rebuild the Korean economy. This wasn’t the ‘invisible hand’ that adjusted the trade markets. It was plain intervention of capitalistic powers in play. Le Monde Diplomatique, monthly French magazine stated in one of its report that in 1995 the US shoe imports were $12 billion. Half of it came from China and only 3pc of it were from South Korea. Against all odds, out of the blue, onlythree years later the numbers shifted to 25pc of the imports from South Korea. Now argument can be made that cheap labour is the reason these numbers keep changing. If that is true a comparative study of Latin America and South Korea clearly makes the former best place to invest for the US by all standards of business acumen. If Koreans could go all the way to Latin American and run sweatshops, why couldn’t US with all the resources at its disposal?
Now that we have discarded conveniently all three systems of economics we have known, is Alice’s wonderland for real and the magic path to success plausible? Depends on who you ask. Case can be made for almost any side. Swedish system of ‘folkhemmet’ clearly bends toward the social welfare state with heavy progressive taxation and focus on education and innovation. The compromise there however is what Margaret Thatcher referred to as the choice between security over freedom. American economics share the arrogant view of making the proverbial ‘pie’ bigger from which eventually everyone will benefit, in theory at least. A third view is rather serendipitous one. If you are dealt the cards that Gulf countries are dealt, you can create an autocracy out of that, basking in the wealth as long as the oil lasts and then resort to compromising defense deals with the US to protect them from each other. This by no means requires a serious discourse.
For the past 70 years intelligentsia in this country failed to produce consistent and pragmatic economic policy for this country. Apart from the political instability, antagonising neighbours, rancorous kins and missed opportunities we couldn’t unite on a strategy that could take us somewhere unanimously. Liaquat Ali Khan right after Pakistan’s independence chose to side with US bloc over the Kremlin and that didn’t turn out to be a happy marriage. Everything headed south after Afghan war and we fell out of good books. Is it not the time we put our heads together and seriously reconsider our core values? Are we out of mature people who can find us ways to invest in long term educational, infrastructure, healthcare, environmental, social and political reforms? How long can countries survive with mudslinging, horse-trading and daylight robberies? It seems like instead of clairvoyant policy decisions all we have left to do is to discuss the prices of grain and rice, metro buses, Turkish garbage trucks and politics of region and language. Let us raise above ourselves and start talking about year 2050 not today.