November Handicap
During the month of October, the US dollar has come under considerable pressure in the world currency markets, mainly because of the continuing large US trade and budget deficits. A combination of bad economic management and bad news, underscored by a rise in West German interest rates led to a flight of capital which was further complicated by a panic selling sequence (compounded by computer programming) on Wall Street oddly reminiscent of a similar nosedive on Oct 29, 1929. That fatal day 58 years ago which paupered millions heralded in a world-wide recession followed by a depression in the 1930s. It indirectly contributed to the Second World War. The main reason for the financial collapse in wake of the plunge was the failure of banks. This time around the US banks were covered by federal insurance and the world as we know it survived, but just. The world’s economy is so hinged on the paper market of stocks and shares that any “correction”, as President Reagan calls it, effects thousands of businesses and thereby proportionally many more millions of people. Since the shares were artificially inflated out of investors greed in a “bull” market, the corrections downwards wiped out many across the length and breadth of USA. One of the poor guys who survived, the owner of Wal-Mart, reputedly one of the richest men in the world, lost more than a cool billion US dollars. Stockbrokers became quite unpopular symbolized by the gentleman who came armed to the Merrill Lynch office in Miami, Florida, and shot dead/injured a couple of people before killing himself. The 1929 syndrome of taking a running jump from a skyscraper was generally avoided though one did expect, as one wag commented, that computers would be falling out of windows. US$500 billion in assets was wiped out from the US economy in one single day and greedy investors aside, the shortage of liquid cash has created a severe downward spiral in sales even as Christmas-time approaches, effecting manufacturing, reducing jobs at a critical time, with the advent of winter looming, normally a bad season for employment by itself. A vicious cycle has been let loose and desperate efforts are being made to break out of the tail-spin. These “corrections” will definitely be felt eventually in greater magnitude in the Third World, including Pakistan.
We use the word “may” for Pakistan because though the Pakistani Rupee is linked with the US dollar and the months of November and December 1987 should in normal circumstances see a correction in the pegging of the Pakistan Rupee to closer 20 to the US dollar, our economy has an unreal quality about it which cannot be easily quantified in accepted economic terms. Our parallel black economy, surviving on bureaucratic corruption, drug money and traditional smuggling, has tenuous links with the world economic situation. This was highlighted by the Karachi Stock Exchange where share prices remained firm and steady even as daily the Tokyo market plunged, triggering a series of sympathetic plunges in Frankfurt, Zurich, London, ending in the rout on Wall Street in New York. A surreal quality exists about our economy, as if we live in a different world. One of the factors is that our administrative agencies do not have the resources to gather vital economic statistics and thus our generally optimistic figures are not only far from reality but bolstered upwards by the third force, an unregulated market area awash with untaxed liquid cash. Surviving on the crest of this artificial boom, successive governments have cocooned themselves, for crass political motives, within this false sense of security, instead of correctly parlaying the scant economic indicators available into a coherent language for commerce in a good government. Given the fact that the 70s DUBAI CHALO followed by the 80s HEROIN CONNECTION has made it exceedingly difficult to gather correct information, a progressive government could have used all its resources for a correct definition of the trends, leading to worthwhile and realistic assessment. Leaving all other economic indicators aside, the proliferation of consumer goods in the market, both domestically produced and imported, and their burgeoning sales, highlights the present well-being of the Pakistan economy, despite gloom and doom-sayers. True that there are aberrations galore, above all the tendency to exceed the annual budget on a regular basis and the total addiction to foreign aid, but the basic positive factors remain the same i.e. in a world of starvation, we are food-surplus and we can clothe ourselves. Our medical facilities may not be fairly well advanced but thankfully are barely adequate as is the educational infrastructure, certainly more than most Third World countries. Our real deficit areas are in defence equipment, crude oil, high tech — and deployment of skilled management at the right places. Our greatest asset is a reservoir of manpower unsurpassed in the world, both skilled and unskilled. Our greatest weakness is not putting our deserving skilled personnel into critical management positions, relying on a game of chance by delving into a small pool of bureaucrats, who may (or may not) have the will, but certainly do not (except in honourable exceptions) have the potential or the capability for keeping pace with modern economic needs.
It is an urgent necessity, in keeping with the worsening world economic situation, from which we cannot remain insular, to evaluate, albeit in a simple form, our daily needs as a nation against the potential of our agri-based infrastructure and developing industry. The complexities of world economics, when it catches up with us eventually, will give a short shrift to the false sense of security derived from our parallel economies. The black economy must be cajoled to transfer its liquid assets into growth-oriented industrial base, particularly for our critical needs in the defence industry. This would stimulate growth and retard the negative forces acting on our development as a nation which would then be able to stand on its own feet.
Someone somewhere has to take bold steps; we are now living on borrowed economic time!
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