No more mangoes!
(This is the first in a series of weekly articles which will attempt to explore the advantages/disadvantages of barter /Countertrade as opposed to the liberal trade policy in vogue in Pakistan)
Barter and Countertrade have been in the news recently in Pakistan and the world over. Before money was invented as a means of settling transaction, barter was the only means of trade, whether it be among individuals, associations or countries. As trade expanded and money became an important catalyst of business, barter faded in importance, but never really ceased.
In layman’s term, what is trade? The purchase and sale of commodities, goods and services is called trade. Commercial transactions are labelled as trade. Whereas the exact meaning of trade would imply an exchange of goods, commodities and services, in balanced proportions, in actual fact trade has become imbalanced in favour of the industrialised world.
Say, I wish to buy a few bags of onions and milk on a daily basis. In common terms in vogue nowadays, the purchase of these items constitute “trade” but it is not actually so. Only if I could sell something in return, maybe the mangoes that I produce, which can “offset” the onions and the milk, if not wholly, partly, can it really be called trade. But now this would be known as “trade-off” or “barter.”
On the other hand, there may be other variations. If I cannot pay for the onions and the milk with the mangoes that I produce, than I have to use hard cash, and in the shortage of that, use loans or credits. However, there may be someone else who may want to take my mangoes and sell me hockey sticks, which the seller of the onions and the milk may need. So I (the first party) take the onions and the milk from the second party and pay for it in mangoes, which is actually delivered to a third party who pays for it in the form of hockey sticks, which the second party accepts from me as payment for the commodities sold to me. This is where barter becomes sophisticated ie. it becomes Countertrade.
The IMF frowns on all barter transactions and forbids them between member countries but the major international banks, Bank of America, Chase Manhattan, Citibank, Manufacturers Hanover Trust, Metallgeselschaft etc etc who provide the cadres of the IMF, etc have all recently set up sophisticated Countertrade Departments, giving substance to the credibility of barter and/or countertrade as a system. The most well-known recent case of barter was when Turkey contracted to purchase F-16s and pay for it partly in the form of tomatoes over a number of years. The F-16/Tomatoes swap is just a singular glaring example of economic independence, wherein Turkey, with access to Foreign Military Sales (FMS) credits from USA, elected to close the gap between its cash resources and the purchase price by paying for the F-16s in the form of its own produce rather than contract more loans and credits. However, if one thinks that General Dynamics (the makers of F-16s) have more tomatoes than they need, think again because in all probability they have pre-sold those tomatoes to another company.
What is trade in Pakistan? Other than the so-called barter agreements, Pakistan pays for its tea, cars, and airconditioners (among other luxuries) in hardcash, earned from the sale of its hard cash commodities like rice and cotton, and if we run short of our own cash resources, we simply turn to various loan giving agencies or the line of credit available to me, happily giving heavy interest for many years on the money loaned to me. There is no thought to the future, or the fate of my children and grandchildren, who will pay compound interest from 10, 20 or 30 years from the day I contract the loan to purchase the tea, etc.
The situation has now reached the stage, where our unborn children owe the rest of the world a substantial amount of money before even being born. For the people who would believe otherwise, there is no way you can spread the debt by increasing the population.
A question is now asked, how come when the matter is so simple to understand Pakistan takes loans from anybody? The answer is that sometimes we may not have anything to barter or trade-off and our urgent needs may be very great. For example we may want to build Kalabagh Dam to generate electricity, conserve water and may not have the rice and cotton immediately to pay for it. So, I resort to taking loans. The problem is that whereas I can pay for some of it with rice, cotton, naphtha, engineering goods, lubricating oil, pig iron, etc we chose not to do so. And that is where the real problem is.
Credit like sugar is not only a sweet pill but is like addiction. But whereas sugar in quantity may or may not give you problems, credit in quantity like addition will give incurable miseries to our country’s monetary system and once you get hooked on to it (credits from IMF and others) you will persevere till you collapse ie. the debtor countries of the Third World, of which Pakistan is a prominent member.
In countries like Pakistan we sent our knight errants to the IMF, World Bank, “Aid to Pakistan” Club etc and they return like champions of yesteryears with loans and credits on the point of their lances. These are really no champions but the harbingers of financial doom. A country’s body and soul is sold away and we merrily acclaim it. Macabre though it may sound, it seems we are made to celebrate our own funerals every year when they return with greater credits, incubating a cancer that spreads and spreads.
While remedy may be the subject of a full scale debate, the first-aid measures must be to stop the haemorrhaging by making sure that anybody who sells F-16s or turbines to us, takes part of the payment in mangoes (or rice, cotton, naphtha, etc) and where he sells those mangoes are his business.
In this way, not only will my mangoes not rot in my fields but they will be put to useful use, by closing the gap between purchase payment and the credit, which for the moment I may not be able to totally avoid.
Or else the day will come when we won’t be able to eat our own mangoes at all because not only the mangoes have been sold away till the year 2050 in payment of Principal Sum and interest thereof but the land that stands on it has been mortgaged.
Let us avoid the day when there will be no more mangoes!
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