Behind economic meltdown

Daily: Pakistan Observer
Date: 25.10.08

The on-going economic crisis engulfing social and political sectors has finally made the
people think that the past government led by the ex-Prime Minister Shaukat Aziz was short
of a vision to forestall the predicament the country is stuck at the moment. Attached to that
thinking is the voice that the coups are no solutions for the problems of Pakistan.

It was General Ayub Khan’s era which every subsequent military dictator tried to emulate.
The period of Pakistan’s history devoured by General Pervaiz Musharraf had several
essential ingredients of the past martial laws. Under the tutelage of Musharraf, the regime
of Aziz spawned. The financial policies were formulated and executed supposing Pakistan
an industrial country. More emphasis was laid on the indirect taxes. A deliberate effort was
made to run the economy as a consumer economy; the production sector, including
industrial manufacturing and agriculture cultivation, was overlooked. The formula to
enhance circulation of money was to entice the people to spend more. For that the people
were provoked to buy more. Hence was the formula of consumption that ravaged the
society by originating not only inflation but also class conflict – these factors are major
reasons for crimes in big cities.

The resultant consumption called buying especially of the electrical and electronic goods
made the country’s earnings fly out of the country as import bill. Had the companies
manufacturing the mobile telephone and other electronic goods been invited to install their
industrial units in Pakistan, not only the foreign currency reserves would have been saved
but also the local people would have got know-how of the manufacturing sector; even if not
the manufacturing sector, the assembly of the parts of such items should have been done
in Pakistan. There should have been local made mobiles in the market. On the contrary,
now, the markets are full of electronic goods but the country is plunging down for the want
of economic reserves.  

The indiscriminate high import of electrical goods has caused enhanced consumption of
electricity, besides increasing the import bill. Further, the availability of the electrical goods
has habituated the people now to rely on the goods for utility. In other words, luxuries of
yesterdays have become necessities of today thereby making the trend irreversible.
Similarly, the inflow of luxury cars obtainable on easy available bank credit enhanced
consumption of oil thereby increasing the bill of oil import as well. The people who used to
ride motorbikes and were contented with that are now having latest model cars. Aziz, a
banker, made the banks centre of all economic activity. Perhaps, he thought that he was
assigned a job of running the banks only. Some people say that Aziz ran the country like a

Anyway, accumulatively, all these import practices led to trade deficit: high import
expenditure and low export earnings. Aziz did not realize that the major export earnings of
Pakistan were from the medium and large industrial products based on agriculture and
related activities. The medium sized industry like the Sports industry and the large sized
industry like the Textile industry were agro-dependent. Only Bhal-Safae campaigns were
not solutions unless some substantial input had been made in agriculture sector to
enhance its export-oriented productivity to match the high import bill.

Now, the country is in desperate need of inflow of dollars to pay the import bills. One
wonders what the consultants used to do in the Aziz’s government – if they could not
foresee the energy crisis stalking the country. Thus, the blame of the current financial crisis
can be apportioned to Aziz because of two main reasons: transforming the economy into
consumer economy and inability to foresee the energy crisis.

Nevertheless, Musharraf has to share the blame of the current economic melt down. The
brainless steps Musharraf took in the year 2007 had seeds of economic collapse. In the
day light, Musharraf endeavoured to subjugate the higher judiciary. Musharraf pressurized
the judiciary to serve his purpose and compromise with his blatant act of violation of the
Constitution. The consequent massage was aired openly: the powerful had a say in the
country called Pakistan. For the investors, foreign or local, the meaning was clear: if a
stronger party was on the other side of any of their case in the courts, they would lose the
case. In other words, in a country where might is right was the governing formula the
presence of a biddable judiciary was detrimental to the financial interests of the investors.
The existence of an amenable judiciary meant that the investors had to invest in the
judiciary as well to secure their investment in the country even if the former sort of
investment was not to seek any favour: an investor should be ready to invest in the
judiciary to save his investment in the country. Perhaps, the investor abhorred the idea of
the two-pronged investment and preferred to depart. Hence is the short story of the
ensuing economic crunch.

In Pakistan, the problem is not just the coup (like the one actuated by Musharraf) and the
blunders committed during the post-coup pseudo-democratic period (like that of Shaukat
Aziz’s) but also the pro-coup indemnity to both the coup-maker and the collaborators in the
post-pseudo-democratic era (like the incumbent one). Today, Musharraf is in hiding and
Aziz is in exile; both are accessible and answerable to no ordinary Pakistani. That is where
the dilemma rests. The present government seems under pressure not to call the past
players to rostrum to defend what they did to the country in the name of the battered
phrase, ‘national interests.’

In his nine years rule, Musharraf failed to appreciate that economy did not protect the
constitution but that the constitution protected economy: economy of a country burgeons
under the supremacy of the constitution. Even in his last speech, Musharraf spelled out his
knowledge on economy but failed to mention the constitution for even once. The last
address of Musharraf clearly indicated his abomination for the constitution – of course the
same he used to practice during his unchallenged rule for nine years. The same is the
bane of Pakistan.

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