Tuesday, September 2, 2008

We will all be dead in the long run!

Our Finance Minister Mr. Naveed Qamar is a nice, optimistic and overly hopeful person. I have been reading and hearing him speak on media about his policies. The thrust of his policies is that in the short term there will be tightening of the monetary and fiscal policies. He is asking the nation to make sacrifices in the short term and the fruits will somehow follow in the long term!

The basic premise of the Finance Minister's approach is that in the long run, everything will even out and therefore government does not need to anything to rectify the short term problems in the economy and should concentrate on the long run.

I would just like to remind our Finance Minister of John Maynard Keynes' famous remark 'in the long run, we are all dead'.

Our Finance Minister should aggressively push to rectify economic problems being faced by Pakistanis (preferably within our lifetimes), rather than letting everything work itself out. The market forces have been noted, in recent times, to be not doing what many free market economists expect them to. The recent financial crisis in the USA is an example of laissez-faire policies. And, the biggest advocate of the free market economy has been forced to intervention in the market by the government! Perhaps it is time for our own minister to think afresh about the merits of the free market economics in the current times.

I am not sure if the tightening of monetary policy is a wise idea. The rationale behind increasing the interest rate is that it will some how restrain the inflation. The problems with such approach are many:

(1) one is that you encourage the people from putting their money in the banks and earn interest rather than investing in the real productive ventures;

(2) another is that you make the capital expensive and thus difficult for businesses to carry on, discourage the local entrepreneurs from expanding their businesses or starting new ones thus increasing unemployment; and

(3) another related issue is that by making the local capital expensive you leave the market open to foreign investors who have access to cheaper capital. These investors may invest but then they will take away their capital and earnings abroad in foreign currency putting pressure on the exchange rate of the local currency.

On the fiscal front, our finance minister wants to cut the government spending and thus reduce the fiscal deficit! The lack of investment and demand thus created is sought to be overcome by foreign and local investment! However, by making the local capital expensive (due to high interest rates), you basically shut out the local investment. Thus practically these policies are only encouraging foreign investment. This is a recipe for disaster.

In my opinion, foreign investment with our current policies of allowing full repatriation of the profits and the capital in the form of foreign exchange is worst than the biggest of the deficits that our government can have. If you look at it practically, there is no difference between fiscal deficits and foreign investment. Both need to be repaid and in the case of the latter it has to be in foreign exchange thus dwindling your foreign exchange reserves and leaving your economy's survival on the whims of few CEOs.

The point is that if our economy is not at the optimum level of employment and resource utilisation then fiscal deficit and cheaper domestic capital are much better policy options than sole reliance on foreign investment.

Our government needs to seek out of the box solutions to the current economic crisis. High interest rates and lowering government spending in these critical times will surely lead to an economic catastrophe.

The government needs to reduce the interest rate to a maximum of five percent and increase government spending albeit by printing notes to make up for the lack of investment by the private sector.

Wednesday, March 12, 2008

Containment and the current US foreign policy

During the Cold War years the US foreign policy was characterised by the word containment which meant containing the spread of communism and that translated into limiting the influence of the former Soviet Republic.

The current US foreign policy also revolves around the same word, namely containment. However, this time around the containment means containing the economic and military powers of all potential adversaries.

The theoretical underpinning of this policy was provided in the late 1980s in a book titled,"The Rise and Fall of Great Powers". The thesis described in that monumental work is that when nations grow economically then they also grow militarily and if that growth continues unhindered then such nations start to expand and then turn into new empires which then threaten the existing powers or empires.

The logical policy implication of this thesis is that the existing empires or powers must check and retard the economic and military growth of all potential adversaries in order for them to sustain their supremacy.

The clearest example of the application of the above was provided in the explanation for the second invasion of Iraq in 2003. Among other arguments, it was stated that Iraq had wealth and the manpower to develop economically and militarily and with a potential adversary in power, that country could become something like Nazi Germany thus its progress had to be stopped and the potential adversary taken out of power.

Similar arguments are given for the invasion on Iran and the so called War on Terror.

Now one can question the validity of Paul Kennedy's thesis but the fact of the matter is that most of the US policy makers have read and digested his thesis in their college days or otherwise and firmly believe in it. So we must be ready for the continuation of the new "containment" for foreseeable future.

Now one can draw many conclusions from the above analysis for Pakistan, India and China. All three are growing economic and military powers. Will the US policy makers allow their growth unhindered and risk them becoming a threat to the US?

In case of India, because it is a democracy and a liberal country the threat to US is not that apparent and thus the US may not object to its growth. However, Pakistan, because of its Islamic and somewhat militant Islamic nature, and China because of its centrist regime and also because of the fact that it is now in the third phase as per the said thesis i.e. expansion of influence and borders, the US foreign policy makers may not allow their unhindered growth without some sort of assurance that these two countries will not be a threat to them.

Both China and Pakistan need to build a strong and reliable partnership with the US with democratic reforms at home if they wish to avoid friction in the world in the coming years.

As a Pakistani, my advise to fellow country men and women will be to pursue a fair pro US policy which simply means minding our own business and not become a pawn in the designs of Anti-US forces.

Saturday, February 23, 2008

Pakistani Elections 2008: fair results?

The starting point has to be Mr. Nawaz Sharif's attempted return to Pakistan in September 2007. Apparently, the masses did not turn up to receive him and he was deported to the Kingdom of the House of Saud. The lack of public agitation and reaction to this deportation was analysed as a proof of the lack of popularity of PML(N) and a poorly managed political party. However, the results of 18 February's elections have gone totally to the contrary. They reflect in Mr. Nawas Sharif a popular leader who can galvanize public in a mere couple of months and a highly organised political party which can contest and almost win an election in the shortest possible time in the most adverse circumstances possible. Something is amiss!

According to the unofficial results the PML(N) received around 20% of the total votes but gained more than 24% seats. The same statistics for PPPP are 32.7% and 32.7%! And, those for PML 24% and 15.4%. Now despite getting less votes than PML, PML(N) has gained more seats! Generally, this is taken as a classical sign of rigging! Is it? In the 2002, elections the PML(Q) got 26.63% of the votes but earned 33.2% of the general seats in the National Assembly. It was assumed by all and sundry that those results were rigged.

There is a theory circulating that the establishment wanted a weak government at the center which could be goaded by it. However, the establishment was afraid of the PPPP's landslide victory especially in the wake of the tragic assassination of late Ms. Benazir Bhutto. The PML could have stopped that landslide but even a fair victory for PML would not have been digested by the masses and could have resulted in wide spread chaos in the aftermath of the elections.

Thenceforth, entered Brigadier (R) Niaz in the picture and the alleged meeting between Mr. Shahbaz Sharif and President Musharraf. The only way to stop the victories of the PPPP and PML both of which were unacceptable for different reasons was to manipulate the elections in favour of PML(N) provided that it was ready to play ball. Apparently, the results it indicate that it was so ready! Nobody could have cried foul as a so called most opposed opposition party was favoured at the expense of the most favoured political party! The real victim was the PPPP.

It certainly is the case that PML(N) has agreed to play the role of the Queen's opposition but is pretending as having as an anti-establishment stance to save face. However, Mr. Zardari has called PML(N)'s bluff. By offering coalition governments at the centre and province Mr. Zardari's is trying to preempt the role set for the PML(N) by the establishment.

The only option for the PML(N) will be to create differences with the PPPP on one issue and part ways. The most likely issue will be the restoration of the former Chief Justice Ifitkh(ar Ch.

(The article was written in March 2008 but not published to give the PML(N) the benefit of doubt)

Wednesday, February 6, 2008

Proclamations and PCO(s): What then is the law?

(Still a draft)

General Musharraf has again given an opportunity to all and sundry to decide afresh what is the law by proclaming the Proclamation of Emergency and PCOs of November and December 2007.

To determine the validity of these pronouncements as law one has to determine what is law?

Following are some of the definitions of law:

(1) Law is what judges say it is.

(2) Law is what the man with the gun says it is. Law flows from the barrel of the gun. People have an ingrained habit of obedience to power and they accept the strictures of the man with the gun. The notion of revolutionary legality espoused by dear old Justice Munir is within this genre.

(3) Law is what God has ordained and exists regardless of whether or not it is followed i.e. natural law.

(4) Only those rules are laws which are recognised as such through the use of the rules of recognition i.e. those are formed in accordance with the accepted rules regarding how the laws are to be formed. For instance if the rule of recognition is that only a rule passed by elected representatives is law then a rule formed in any other manner will not be law.So is the PCO(s) law?

Lets apply these definitions or descriptions to the PCO(s).

(1) According to the first definition the judges will determine this question. The question then is who are the judges? If the PCO is law then only those who took oath under it are the judges. However, if the PCO is not law then the persons who acted as judges under the previously accepted law are the judges.

(2) The man with the gun has said that the PCO is the law and hence according to this definition so it is. The only challenge can be that another man with a bigger gun says that the PCO is not law.

(3) So what has God ordained? As the majority of us are Muslims so let us see what Allah has laid down as law and if the PCO is in accordance with it? The question in our common parlance becomes is the PCO Islamic or not?

(4) In our history the rules formed as has been the PCO have been recognised by the judges as laws and those were also followed by the public-at-large. Thus, it can be said that the PCO is a law. However, it can also be argued that the last valid rules of recognition were enshrined in the constitution and as the PCO is not in accordance with those hence it is not a law.

Now, you will see that there are no clear answers as per the above criteria. The answer will depend on what criterion one chooses to follow and what interpretation one adopts.

In my opinion the law and the morality can never be disentangled. Well, not generally by ordinary mortals. And, in Pakistan the morality is hardly ever different from self-interest. The equation thus becomes a simple one: if the PCO satisfies the interests of the people who have more power than those whose interests the PCO harms then the PCO will be accepted as law but it will not be so accepted if the reverse is the case.

Wednesday, January 16, 2008

Random thoughts!

(1) What is common between 'War on Terror' and 'Balls Scratching'?

The conditions that both of these actions are meant to improve, namely, terrorism and itching are worsened by these vary actions. Terrorism increases when people are targeted by the strong arm of the government and the bacteria (or whatever other organism causes the itching) spread to other parts of the skin when the scratching fingers touch other parts of the skin! Actually, the bacteria strategically causes itching to prompt the humans to transport it to new colonies where it can prosper again! Perhaps terrorists do the same!

(2) Do we get the top award for being the best at the Funerals?

Our whole society and polity is all about funerals! As a political aspirant I was expected to do only one thing with full vigour and zeal by my constituents namely to attend funerals! I was at pains to explain to them that it was not my area of strength and I could better spend my time by doing more useful things for them such as policy planning, thinking through the problems they face and highlighting their problems and solutions in the media. But, no funerals take precedence.

What about our leaders? Whenever people die through terrorism or other negligent governance, what is the only thing our leaders in the government and in the opposition are capable of doing? I will give you a hint: it is clear that they cannot govern or devise solutions. Well, they attend funerals! They do the 'Fateha'! And, they make sure they are pictured in doing so!

What was the whole of the leadership of Pakistan Peoples' Party doing after the 18 October 2007 Karachi blast? They were attending funerals and doing 'Fatehas' including the 'gaibana types'. I was flabbergasted. Wasn't sure why these people are not doing anything concrete to help the victims and their families and not concentrating on devising strategies for preventing such incidents again. But hey we are good at funerals and Fatehas so lets just keep doing those, Allah will take care of the rest.