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Archive for October, 1988

Economic Scenario

Leaders anywhere in the world can never resist the temptations of resorting to populist slogans, particularly when faced with assessment from the electorate. Normal perceptions of mass psychology dictate that voter preference is usually accorded to those who promise the most, all other factors, charisma included, being favourable. Emphasis is laid on a rescue act from the “gloom and doom” scenario, with the aspirant office-seekers presenting themselves as glorified versions of Sir Launcelot and Lord Fauntleroy rolled into one, the bottom line being the ability to deliver on all promises made, which are liberally strewn about, pledging everything but the sun and the moon, bread in plentiful abundance, universal housing, free education and medical care, water, gas, electricity, public transportations, etc in whichever order you may prefer it. Very seldom do political parties (or for that matter, military regimes) come up with comprehensive plans to tackle the issues, a total plan to ameliorate the miseries of the common man. Pakistan today is no exception to the given rule, rhetoric being in abundance, the matter of substance in short supply, a scarcity microscoping into oblivion by the lack of credible economic planners who are electable in any of the major political groups. We have seen the tinkering of the economy by those who are least electable in the present regime, a situation of genius gone amok. As much as there is a surfeit of agriculturists in the form of major landowners among professional politicians, the absence of economists and businessmen in the electoral field is always acutely felt and the present election process is no exception.


Converting Garbage into Dreams

One of the perennial problems facing the Third World is lack of energy. This translates into FORCE-MULTIPLIER effect down the line contributing to the many miseries of hapless, burgeoning populations. The primary cause of the acute paucity of energy is the absence of durable energy resources, high price of fuel and the determination of western countries to avoid nuclear proliferation by refusing nuclear technology to developing countries. Even if Less Developed Countries (LDC) have energy sources, they may lack the economic resources, the skill and/or the expertise to convert those sources of energy to useful use. The shrinkage of arable land, increasing birth rate and heightened expectations with respect to creature comforts makes it imperative to have enough energy means to maintain the status quo — sounded economic progress remaining in the realm of possibilities only because energy is the locomotive of economics. Our leaders may be well meaning but in the absence of fuel and power, the populist slogans promising the people everything except the moon, remain what they are, figments of imagination meant for vote-getting and are fulfilled partly by well-publicised show-piece efforts designed to dazzle the populace. Without adequate energy there can be no question of translating promises into reality. As industrial output remains below capacity, workers remain idle, their purchasing power going into a flat spin, depressing the whole spectrum of the economy.


A Reason for Hope

The economic situation in the world is in a peculiar ambivalent state, pressurised by centrifugal forces acting to destroy the monetary system, with overtones of general chaos manifest in its wake. The prolonged financial and monetary instability has had a debilitating effect, particular cause for concern being the increasing of indebtedness of almost all the Less Developed Countries (LDCs). Realizing that concrete steps have to be taken to arrest the explosive situation from deteriorating further, Trade Ministers meeting at a Special Session of Contracting Parties at Punta de Este (Uruguay) decided in September 1986 to launch Multilateral Trade Negotiations (MTN) calling it the Uruguay Round. These negotiations were to be open for participation to all the Contracting Parties of GATT including those that have acceded provisionally. As a measure of bringing more countries into the process, those countries applying for and even intending to apply for admission have been invited to the discussions. This has created a truly world-wide forum intended to draw the maximum number of nations into the mainstream of an acceptable solution to all concerned, cognizant of the fact that the efficacy of any system devised will depend upon maximum participation.


Found and lost – Countertrade

Before money was invented (or innovated – as you may prefer it), barter was the primary trade mechanism that instituted commerce in the world. In going the full circle, a recreation of the simple transactions of earlier times, the concept of Barter has come back into vogue in a world beset with credit crunches and growing protectionism. Progressing from transactions consummated by the swap of exchangeable items and as commerce has multiplied manifold, a common means to enhance multiple transactions was found by the means of money, initially in the form of gold and silver in daily use, giving way to special paper supported in standard, till recently, by a country’s precious metal reserves held in lieu. Very early on, money-lenders started the early version of credit, usury becoming a bad word since time immemorial.

Barter as a means of transaction is a great trade equalizer, a mechanism that ensures that (1) you pay for what you need with what you have thereby ensuring a market for your produce while (2) you only take what you really need since you have to ensure that you can pay for your needs with what you have. Whatever economists may say (and IMF may frown upon), barter stands for a reasonably fair equation between respective entities and in essence the swap ensures that a corresponding equality is maintained, in effect a total trade balancing mechanism. In a world where credit is getting to be in short supply, it becomes a crucial factor for LDCs. The GATT inspired MTN may take note of possibilities arising from barter transactions.