Barbarians at the Gate?
Facing a very serious economic situation internally and beset by the proximity of one externally, Pakistan must be thankful that the rather creditable efforts of the present government as well as the Governor State Bank of Pakistan, has kept us from going under. Kudos are also in order for former President Farooq Leghari, for if he had lacked courage in sending the Bhutto regime packing in late 1996, we could never have survived Zardarinomics — every person in his pocket, every pocket his own — a few more weeks. In the bad economic environment of Asia, economic survival has taken some doing. We may also thank our lucky stars that George Soros probably considers it beneath his contempt to play around with our meagre foreign resources. As for financial analysts, they are no different than weather pundits, how many eulogizing the so-called “Asian Tigers” a year ago predicted the Asian financial crisis? Given that economic forecast, particularly with false or unreliable indicators, is risky business, given that the present global electronic environment where flight of capital takes seconds only is hardly conducive, one thing is very predictable, the leaders of Pakistan have to put in a seven-days-a-week, 24 hours-a-day superhuman effort to escape economic apocalypse. The present 9-to-5 hours-a-day six days-a-week syndrome is hardly conducive to economic amelioration of the masses. Lip-service with flourishes of the ZA Bhutto-type rhetoric will not do, deeds are much more appropriate to the times, as far pragmatic and as much related to the need as possible. A recent presentation to the PM in Zurich by a group of Pakistani financial experts based in the US (who came all the way to Zurich on their own time and expense) brilliantly identified the causes of Pakistan’s economic woes, they also suggested pragmatic remedial measures. Where they got stumped in was in the implementation of the proposals made, that is our greatest failing, a continuing lack of success in executing plans well-laid. And even the plans fall short of being revolutionary, to quote the PM “it will take a revolution, to take us out of this mess”. Mr PM, if the situation leads to anarchy, that may well-bring about a street revolution beyond the means of any government to contain.
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.