The Ides of March
After the gyrations of the world economy beginning on Black Monday in October 1987, the world is passing through a relatively calm period. Stocks and shares have rebounded to their previous high levels and the US dollar has hardened against the Japanese Yen and Euro-currencies. All this has been possible due to international cooperation on an unprecedented scale. By the help of massive purchases of US dollars the West Germans and Japanese have halted and reversed further slide of the US dollars against their currencies. Due to the improvement of US export/import figures, the US dollar has been bolstered on the long road back to respectability. The markets are no longer volatile though a deep suspicion remains dormant within the whole edifice. There is expectation that after 2 months and right upto the final run-up to the US Presidential election, the US dollar may weaken by as much as 10%. One can only hope that the money soothsayers are wrong because as Daniel Webster has said, “A disordered currency is one of the greatest political evils.”
Political stability contributes to investor confidence in the economy and March 1988 has been a welcome month for Pakistan. In an outstanding exhibition of political sagacity, PM Junejo invited all the major opposition leaders to a first-ever dialogue on any one subject. That it happened to be the No. 1 priority, Afghanistan, only lent greater importance to the conclave. As the Afghanistan situation normalizes, Pakistan’s economy will have to adjust itself to the changed circumstances, particularly the slackening of western economic – and military aid. As it is, the situation is likely to change from bad to worse as the various factions slog it out among themselves for supremacy. More likely, yesterday’s government is likely to end up as tomorrow’s rebels and the see-saw will continue, without the Russians this time and as such without supporting western aid in various forms to help us through the lean patches.
Good political news is usually synonymous with an upbeat economic scene. Not only did the opposition leaders come to the PM’s invite but their political views reflected mature positions accurately reflecting a broad cross-section of the national viewpoint. Our people are generally desperately poor and they need peace and stability to dynamise the economic sector. Responsible opposition (as symbolized by the leaders to the RTC in Rawalpindi) ensures that anarchy does not reign in the realm, disrupting industrial and commercial activity. With the prospect of total civil war to follow the Afghan revolution on the country’s borders, Pakistan needs to be a trouble-free region if it is to fend for itself. As Hegel said, “Order is the first requisite of liberty”.
Two thousand and thirty two years ago Julius Caesar went to his death in the Roman Senate despite being warned to beware of the Ides of March. We have had economic warnings galore for the past few years and very much like Caesar, tend to regard them as old women’s tales. One of the more potent signs has been the proliferation of investment companies without the umbrella of a duly constituted act to govern the process. Voltaire said that “when it is a question of money everybody is of the same religion.” This has created a terrible financial maelstrom with the likelihood of an economic disaster in the making when the bubble bursts as it certainly will, as surely as night follows day. The tragedy is manifold, as it will swallow the hard earned savings of the vast middle class and the poor while also destroying the concept of investment companies as dynamic stimulus for the economy. All this could have been avoided by early sanctioning of private investment banks/companies, which given a properly annunciated law, would have been a boon for industrial development. Henry Wilson showed the way by selling the Eiffel Tower twice and our national genius has managed to refine the adage, “a fool and his money are easily parted”. If only this inherent business acumen could have been duly harnessed and put to proper international commercial use we would be in a much better state economically as a nation. We have to take urgent steps to contain the damage, particularly vulnerable are the hapless, small investors who will be hard-hit when the fly-by-night companies fly off into the night as they have already started doing. If our poor people can recover more than fifty cents on the dollar, it will be a heaven-sent boon to them. Our laws must be so constructed in the future so as to give the small depositor some insurance against such unnatural vagaries in the future. Hopefully this national desire will not remain a pipe-dream confined to some bureaucratic pigeon-hole.
We have talked previously about mobilising resources locally to meet with national industrial targets. One such targeted section has been the black economy and the innovating of legal temptations to merge with the white. Senator Dr. Mahbubul Haq, Federal Minister for Planning and Commerce, innovated a couple of imaginative devices when he was Minister for Finance. Losing out in the political re-shuffle thereafter, he went out into the cold and his ideas froze in limbo, the final nail being driven by the arrest of the Vice President of the Karachi Stock Exchange recently for dealing in “stolen” Foreign Exchange Bearer Certificates. Since the FEBCs carry no instrument or record of purchase or sale, this myopic viewpoint of a motivated section of the enthusiastic police will carry economic repercussions far outweighing the sensational handcuffing of a respectable trader doing routine transactions. Hopefully by the time this Economic Letter reaches the Ides of March, the Government will have seen fit to unambiguously define its viewpoint, preferably in same economic terms. Otherwise, the lack of money due to flight of investment will become the over-riding factor deciding matter on the economy, as according to P.T. Barnum, “Money is a terrible master and an excellent servant”. Another sector of the economy, buttressed and booming by the influx of black capital no doubt, will hit the dust.
At this point of time, the choices are simple and need no great elucidation. The requirement is an initiative very much like the PM’s daring invitation to the opposition to discussions on Afghanistan. Dynamic movement is the need of the hour to get the economy on even heel. We must plan with meticulous care and be bold in execution. As Seneca said almost 2000 years ago, “Our plans miscarry because they have no aim. When a man does not know what harbour he is making for, no wind is the right wind.”
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