The winds of change
Mr. Gorbachev went to Washington three weeks ago, ostensibly for a platonic mission of peace but more so because the Russian people needed an economic respite to ameliorate their present lot. The inordinate amount of funds being pumped into the Soviet war machine is detracting from the collective aspirations of the Soviets to better the quality of their present life. Mr Gorbachev, holding aloft olive branches, arrived in Washington on Dec 7, a day synonymous in US history with Pearl Harbour and the crippling of the US Pacific Fleet by Japan almost half a century ago. While the Super-Powers sat down to re-structure the world according to their perceptions and security needs, the two countries that lost the Second World War in 1945 were probably laughing themselves sick because the German Deutsche Mark and the Japanese Yen are engaged in an economic war of sorts which has pushed the US dollar to a 40 year low and the US economy almost to the brink of disaster.
The Russian economy and Rouble do not even come into contention, having been bludgeoned equally by socialistic economic inadequacies and the Soviet occupation of Afghanistan. Meanwhile the not so-hidden war goes on, fought by proxies in distant lands, while the two conflicting ideologies sit down to negotiate a safer world for themselves. The immediate impact of the INF treaty is the elimination of an entire category of missiles from each other’s armoury. This is indeed a welcome and giant step forward in the elusive search for peace. While for the Russians the long term goal is economic, the Americans are happy in that it is another milestone in the safeguarding of their present way of life and therefore the central theme for both the parties remains the same.
Wall Street survives on perceptions and the image of a strong American President bringing the Soviet Union on its heel, albeit with a number of concessions, will go a long way forward in stabilizing the stock market after Black Monday’s “corrections”. Now that the lessons have been painfully absorbed, it is hoped that variously chastened stock market players will proceed with caution, to revive small investors’ confidence and re-fuel the US economy. Mr. Ivan Boesky, sentenced recently to three years jail for inside trading, will not be sorely missed.
While the winds of change sweep the world, Pakistan remains economically dormant and except for a wedding here and a special wedding there, matters are routinely drifting aimlessly, particularly on the economic front. Strangely enough the State Bank of Pakistan seems to agree; not so strangely the Finance Minister says the economic scene is not so grim. Trade with our largest neighbour India has been agreed to be expanded. Logically, trade with neighbours should be an economic necessity but given India’s track record the last time around and its nagging penchant to make blatant political use of economic relationships, one has to be wary of such an accord, because according to Peter Drucker, “fools rush in where angels fear to TRADE”. At this point of time we are a food surplus country whereas India, though not exactly starving, is a net importer of food grain. Given that a fair quantity of our Ghee, mostly made from Palm oil, obtained at a premium on Barter from East European Countries, lands up in the cooking pots of Indian households, courtesy smugglers of various creed and dimension, one needs to monitor the import/export list quite closely, mainly to ensure that we should not end up importing Indian fire-bricks, among other non-essentials.
In this unreal world, while some of our boys die in Siachen others find employment on the Indian silver screen. Not exactly cricket, and no criticism intended, just a statement of fact, as much as to mildly chastise our business leaders in Karachi who vie with each other to attend the parties given by the Indian Consul General or his staff, particularly when a favourite Indian dancer or a singer is in town. Psychological warfare has many facets and if the Indians can convince the Karachi economic community that hegemony a la Sri Lanka is the fashion of the hour, we shall soon see an influx of Marutis on the streets of the country and the Indian Consul General becoming a Pro-Consul very much like High Commissioner Dixit is in Colombo.
Normally, bureaucracy is apt to feel the sharp end of this pen but in the matter of India, they have been more than adequate guardians of the economic realm. A consistent and safe policy has been nurtured over the years with respect to trade with India, extremely correct and cordial, but circumspect in its innate caution. Criticism must be made where it is due but congratulations are in order when it is more than deserved, as has been the case with economic ties with India. Pakistan happens to be a vast market and the potential for Indian goods and commodities is immense, particularly because of the advantage of freight but the Indians must pay for it by showing true feelings of peaceful intentions and not the hegemonistic dominant relationship they really desire. Mr Junejo’s NO to the mention of the Indo-Sri Lankan Accord in the SAARC summit in Kathmandu has not got the plaudits he really deserved. As Mr. Arif Nizami has pointed out, this resounding NO stayed firm, not even being mellowed by the dinner hosted by King Birendra for all SAARC Heads of State. SAARC has real potential to be like ASEAN in the economic field, if not like the EEC. This can happen if Indians forsake their tendency to rub their neighbours noses in the dust now and then. Rajiv Gandhi recommended to the US to cut off the economic and military aid to Pakistan in the interest of the Indian dominated version of regional peace. After a suspension for a period of 4 months as the US Senate took stock of Pakistan’s “nuclear ambitions”, US AID has been resumed over loud Indian protests. But no less a person than US Senator Daniel Inouye, a Democrat and Chairman of the US Senate Appropriations Panel has stated that “the committee shares the conviction that the nuclear non-proliferation issue in South Asia can only be resolved through a regional approach. The Senate must face the fact that the root cause of the nuclear problem in South Asia is competition between India and Pakistan” and the root cause of the poverty in South Asia is that Pakistan has to spend millions of US dollars just to keep a 1:4 parity with Indian armed might. India, having exploded an extremely peaceful nuclear bomb back in 1974, is seriously concerned over the move, in the words of Indian Ambassador to US P.K.Kaul “to equate India’s nuclear programme with that of Pakistan”. The inference here is clear, India has the right to become a nuclear power but Pakistan does not and that is the ultimate equation of SAARC now increasingly dominated by India and that India has rights which its smaller neighbour in the region cannot have, as annunciated in his own inimitable manner by Congressman Stephen Solarz, erstwhile “Voice of India”. Those of our business leaders who seem to loudly think on the cocktail circuit that military domination by India would appease India enough to let Pakistan live in economic freedom are dangerously naive; economic servitude would follow hegemony as surely as night follows day. We live in a hard world , full of hard choices, but in this aspect we have no choice, we either deal with India as equals or perish.
The Bank of Boston has written off almost 25% of its Latin American debts, with provisos for writing off the rest subsequently. This would probably be emulated soon by the other major banks affected, Citibank, Bank of America, Chemical Bank and Manufacturers Hanovers Trust. Despite these seemingly huge losses, most of the banks will still manage to declare a modest year end dividend. Hopefully after the Latin and South American debts have been written off, the western creditor banks would do the same for Asian and African countries, a massive write off that will wipe the slate clean and allow poor, impoverished nations to develop with their own resources instead of relying on loans to pay off loans, an endless cycle of despair. Tied inexorably to western economic apron strings, third world countries are likely to face an uncertain year ahead. 1988 promises to usher in higher interest rates in the US, increased inflation and volatile financial markets, according to Henry Kaufman, Managing Director of a leading Wall Street firm, Solomon Inc, whose pessimistic views have earned him the nickname, “Dr Gloom”. All this will lead close to a recession and affect the economies of countries like Pakistan, dependant on foreign aid for the growth of its economy. Unless a miracle happens and the dependence on foreign economic aid ceases, Pakistan is bound to be affected, sooner or later, inspite of our parallel black economy. President Alan Garcia of Peru had the right idea in announcing on his inauguration that he would be limiting the repayment of loans and interest to 10% of the country’s foreign exchange earnings. Despite adverse reaction in the western media, the young President has survived though barely, and acts as a symbol of courage and conviction for leaders of other debtor nations.
Finance Minister Wattoo has hard choices before him for 1998. His problem is a financial bureaucracy steeped in IMF/World Bank education and an economy addicted to foreign economic aid. Even if Mr Wattoo had the political will of changing the economic destiny of the nation, his budget experience will deter his better instincts. But we live in hope and quoting Norman Cousins, “Hope is independent of the apparatus of logic”.
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