Jan 05 - 18, 2009

The year 2008 was an ominous year for Pakistan's economy. It wreaked havoc with the help of all possible combinations of negative forces - law and order being just one of them. It was more home-grown political destabilization program than anything else that took our economy to the cleaners. Terrorism, yes, but our economy kept growing till 2007 despite the ongoing terrorist activities. It was the tug of war between the democrats and the autocrats that pushed the economy to the brink of disaster. The democrats won but at what cost? The war to install the other set of democrats and to destabilize the elected set of democrats is still on while the economy gets worse in the process. So, was it really between the democrats and the autocrats? Our follies though horrendous in consequence, always have a touch of mystery about them. After doing a lot, we never find ourselves in a position to explain why we did that! The table below gives an overview of the unfortunate events that took place during 2008.

Suicide bombing attacks 39
Out of which 22 took place during the period 13-09-08 to 20-11-08
Bomb explosions 26
Auto bomb explosions 4
Rocket, missile and grenade attacks 4
Riots 4
Total 77

The statistics clearly prove that only 4 incidents out of the total 77 were, in essence, law and order related. The remaining were directly linked to the terrorist activities emanating from the FATA, NWFP and Baluchistan's political situation. So, it is the political ineptness rather than the administrative failure that has given rise to the so-called law and order situation. Another conclusion is that the terrorist activities escalated after the exit of president Musharraf. Didn't we opt for a right thing (democracy) at a wrong tome?

Surprisingly, the responsibility-fixing for an unfortunate steep economic downfall was lost in such preposterous debates as, 'can we afford a consumption-led economy" and, "should the finance minister be an economist or a banker." Still more surprising was the debaters' inflexible attitude that woefully defied sense and logic. No one was prepared to concede to the presentations based on facts and reason. So heavy was the guilt of having committed something really wrong that they shamelessly took to ill-reasoning and obstinacy. Consumption-led growth had paved way for gradual shift to production-led growth through development of agriculture, industrial and natural resource bases. The macroeconomic health achieved through the use of one model should have been sustained to allow for a phased induction of another model. Economy is not the game of a child who dismantles the ongoing game to start a new one.

The economist versus banker debate too is uncalled for and childish. Economists are the architect of theories that are put to practical use by bankers. Economists are market watchers while bankers are market players. Economists are theorists while bankers are practitioners. Global economy and finance are controlled by the world central bankers, not the economists. Economists have to wait for decades, even for centuries to see if their theories really work. In case of failures, they may not be alive to take blame. A banker tests his ideas in the livewire financial markets and gets rewarded or punished then and there. The current global financial meltdown is an example. Alan Greenspan's admission of mistake of allowing a free hand to the financial derivative market players is proof that bankers too are human. Economists more often than not spell doom (like Mal-thus), while bankers stand tall in the face of crisis and take their economy out of harm's way (like Paul Volcker).

A stable law and order condition exists under the patronage of a stable government. Our economy grew because we had a stable government after the four infamous rounds of unstable democratic periods. As it is now, the law and order problem was there during the semi-democratic (or autocratic) Musharraf era but the then macroeconomic health and government stability heavily discounted that factor. Once the stability was gone, the monster of law and order raised its ugly head to its full range height to bring about the unfortunate economic meltdown. During unstable periods, the greed game kicks off and continue in full swing. The outflow and choked inflow of foreign investment is inevitable in such situations but what about the ten (or twenty or even thirty) billions of dollars that our elite took away overnight to the lucrative Dubai and London property markets. In an eye opening Asia Post article, James Crickton writes:

"Pakistani official data shows that its foreign exchange reserves have fallen from $16.5 billion in October 2007 to $6.75 billion in November this year. While many Pakistanis living in the UK have commented that there is nothing wrong in investing where returns are safe and guaranteed, they agree that large amounts of cash are slipping out of Pakistan in transactions which are of questionable nature. Most of these deals have the involvement of politicians as well as senior military officers, who employ reliable and dependable friends for such transactions and therefore raise suspicions as to the acquisition and depositing of this wealth."

Despite the unfavorable conditions, our foreign remitters didn't desert us. The genuine foreign investment outflow did not have the destabilizing force. It was domestic outflow of money that pushed our economy and financial sector to a deep crisis situation. The international oil and commodity prices too were not such unmanageable as to sweep away our economy. The then foreign reserve position could well have taken care of it, albeit with certain amount of pain. Our going to IMF shouldn't have been on the card but for the callous and cowardly knee-jerk action of our elite society. So man, don't blame it on the law and order. Let the politicians and the elite of this country take time out to think in retrospect and take major portion of the blame.