Weekly Reflections: Cobweb of economic crises

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By Dr Abdul Saboor

 Not necessarily Pakistan itself but an ordinary Pakistani is surely confronting the challenging situation amidst a series of economic crisis including inflation and unemployment. General business community is weeping, small farmer is creeping in the chase of livelihood, poor women and children are sneezing as if the economy has caught cold. People in public and private services are actually spending their saved money as the purchasing power of their salaries is going down and down.

It has been noted that in the developing economies where underground commercial and trade patterns are quite high, where political system is substandard and weak, and where the social train has been derailed, even a minute crisis gets aggregated quickly and thus aggravated as the time passes. There are unseen and undefined mafias both local and of foreign nature which have capacity, connections and tricks to turn the table of such an economy to anywhere. Even the visionary leadership in political fronts is controlled through the creation of such kinds of crises.

Any single crisis, as for example the debt crisis, is not as serious as the associated crisis emerged at its consequence. Even some developed and welfare economies have to face crisis situation. But they develop governance and management system to control the spread of such adversity of one economic sector towards others sectors. They always go for the local solution of such problems. They believe that no crisis is stronger than the intellectual power of local thinkers and policy experts.

Crises are to be controlled by the state organs rather than these are left at the hands of some mafias and foreign thinkers. They are actually trained to protect their own vested interests and thus to make the situation more adverse in the race of gathering more wealth. There are always some economic players who enjoy the crisis situation for it brings hidden opportunities of tremendous benefits for them. When economy starts speaking their language, they fully reap such benefits though quite oddly leaving more debris behind. Business rules and commercial regulations thus stand nowhere. This is how we not only prolong the crisis but invite a chunk of other crisis in the attempt of solution of existing crisis.

We can witness that there is a long list of deficit crises tending towards more serious state as the time passes. It is not merely fiscal deficit but balance of payment deficit is also gaining ground. Above all, there is trust deficit between government and public, between bureaucracy and political leaders, between judiciary and executive authorities, between establishment and other state organs. Imported solutions are often problem ridden which carry the germs of creating more problems rather than solving the existing ones. As for instance, failure of implementation of taxation system is now being treated with Amnesty Schemes so as to provide an opportunity to mafias for converting black money into white one. This incentive would ultimately strengthen them to have a command of the economy and thus to run it at their sweet will.

 

Adding salt to the economic wounds is not a new phenomenon. We have been following such kind of macroeconomic policies and most of the time the result has been discouraging. Next time, the same problem emerged with more serious consequences. It appears as if every time we are given the same tablet with different coating of colors. One must realize the fact that creators of economic and financial crisis would never be interested in settling the complex affairs though some temporary puncturing can be made for winning satisfaction of masses. Solution of economic problems mostly lies within the system though bold steps are to be taken. And in most of the occasions, the solution is not merely in the coining of comprehensive strategy but the way that strategy is executed with complete commitment.

Crisis management is a full-fledged science which only works if right persons are placed in right decision making positions. Crisis cannot be removed by a kind of strategy which is creating a new crisis. Most of the solutions we borrow from ‘others’ bring new crisis or enhance the extent of existing ones. Why does it always happen like this way? Why imported policy ideas are leaving footprints of economic failure and more frustration for the masses? Foreign experts are hardly competent to diagnose the problems of a State which is strange for them. Their expertise can hardly grasp the situation of inexperienced circumstances of a foreign land. This is very unlikely that their intellectual eyes would touch the grass root level realities of life. Resultantly, we see partial diagnosis of the crisis which might offer a treatment suggesting nothing but incomplete and temporary solution.

The fast traffic of the consumer’s economy would have to be controlled very carefully. See the consumption pattern of majority of the consumers which is not fairly rational in the macro sense though rationality at micro level is qualified if not truly justified. The increase in the size of ‘Basket of goods and services’ is not necessarily a good news for the economy. Contentment and morality filters may be more important tools than just taking more loans from IMF. Luxury tax might be a good starting point for discouraging imported items as well as for reducing the size of basket of goods. The argument that it would reduce the momentum of revenue generation and other economic activities is baseless. It is merely a threatening tool to keep the odd capitalism alive.

Consumption based economic activities ruin the economies particularly when there is a crisis of inflation, unemployment, poverty and inequality. This takes the shape of a more serious issue when major chunk of consumable items are being imported. On the other hand, production based economic activities are highly desired for an economy like that of Pakistan as it would address the employment and trade related issues. Backed by rational economic policies, an export orientation of production would help minimizing most of the macro economic crisis. Moreover, besides hard attributes, the placement of public men should be on the basis of soft attributes of merit which could justify their integrity and honesty profiles.

This is quite a universal phenomenon that local experts in the shape of bureaucrats, politicians and technocrats are rich source of making a mini-revolution if they are strategically mobilized and honorably trusted. India has practiced it and found good results. China is seriously following the policy of honoring local leaders so is the case with Malaysia and Turkey. There might be rarely any developed state of the world that has made progress by borrowing the expertise from other countries in running their economic and development affairs. Not only UK and USA but France and Germany made tremendous progress through the agency of local experts who have been honored for their in-depth understanding of grass root realities.

In this regard, for addressing any economic crisis, indigenous solution is required rather than repeating the same and already tested experiments again and again. The so called intellectuals who spent a major proportion of their professional life in international agencies and in foreign environment are certainly worthy of recognition but not fairly fit to grasp the indigenous situations. In some perspectives, such over qualified professionals are more dangerous than the under-qualified slots of public servants. They might be good scientists, teachers or good researchers but their theoretical ideas could not take the shape of a workable solution in an environment which has never been a part of their close observation and continuous experience.

All those Pakistanis who really love their country would like to urge the Prime Minister and his committed team for acknowledging the folk wisdom and respective scholars and policy experts who enjoy that wisdom. If that jubilant team is really interested in making Pakistan a developed state, a myopic eye would have to be kept on the internal and external forces who try to control political governments through economic and financial tricks. This is unfortunate and history is witness to the fact that the same treacherous forces turn the governments toppled with the agency of economic strength. Now the casting vote is in the hands of top leadership whether ‘aliens’ are to be allowed to play the same gory drama again and again or curbed them forever.

 

Dr Abdul Saboor is Professor of Economics and Dean, Faculty of Social Sciences, PMAS Arid Agriculture University, Rawalpindi