Menace of inflation is back

AFTER a period of low rate between 2000-01 to 2002-03, inflation started to pick up during the last two years. The upward trend in prices has accelerated during the last six months confirming that the menace of inflation is back. This period also witnessed a surge in world oil and non-oil commodity prices but that cannot explain the acceleration in Pakistan’s inflation measured by CPI or in non-oil, non-food core inflation, especially since the government initially did not pass on the burden of higher oil prices to consumers.

The decision was subsequently reversed for budgetary reasons, so the full impact of higher oil prices is now coming through. No matter how one looks at it, inflation is on the increase. The latest data shows a further acceleration in the CPI to 10 per cent in February. What are the causes of the resurgence of inflation and what is the outlook?

A review of monetary and fiscal developments during the last three years shows that the government and the State Bank are directly responsible for the monetary and financial conditions that are feeding inflation now and the full impact of those actions is yet to come through. It all followed the adoption of a managed float exchange rate regime by Pakistan necessitated by years of current account convertibility and a gradual liberalization of the capital.

Previously the SBP followed a pegged exchange rate regime, which had an important advantage for Pakistan in providing a useful and credible nominal anchor for private expectations about the behaviour of the exchange rate and the warranted supporting behaviour of monetary policy to contain inflation.

Under a loosely managed float as adopted by Pakistan, market forces are allowed substantial latitude to influence the exchange rate. Through official intervention in the foreign exchange market and monetary policy adjustments, the SBP seeks to limit exchange rate fluctuations in the short term, but there is no explicit commitment to keep the exchange rate within some range or crawling brand. The exchange rate is no longer a nominal anchor for monetary policy.

Consequently, under the flexible exchange rate regime, a key issue for the SBP was to establish a credible alternative nominal anchor for the successful adoption of the new regime. Pakistan already fulfilled the first prerequisite, the operational independence of the SBP to help mitigate fears that the lack of an exchange rate anchor could let loose the money printing demon. But the successful adoption of a floating exchange rate arrangement also required the SBP to define the guiding objective for the conduct of monetary policy and accordingly provide the foundation for private sector expectations.

For this purpose, targeting a low level of inflation and consistent monetary aggregates were essential, especially since the relation between monetary growth and inflation is reasonably reliable in Pakistan and the SBP can exercise relatively good control of some monetary aggregates. Money growth targets are also useful since they are an effective means of communicating the intentions of the monetary authorities, as well as compelling authorities to explain deviations from their announced targets as an essential part of their public accountability.

Contrary to conventional wisdom on monetary policy under a flexible exchange rate regime, the SBP did not formally adopt an inflation target (although an inflation rate is given in their projections). This would have required the systematic adjustment of monetary policy instruments to maintain inflation in line with the target, apart from announcing and ensuring that controlling inflation was the overriding objective of monetary policy.

Instead, the SBP announced a wide range of objectives which included a resolve that the current growth and investment momentum in the country is not impaired in any significant manner; support for the government’s debt management efforts; maintaining export competitiveness while inflation is kept under control. These were too many objectives for monetary policy alone.

Furthermore, the SBP abandoned the targeting of monetary aggregates (reserve money and net domestic assets of the SBP) and instead relied totally on the use of short-term interest rates to control credit expansion, principally by announcing the cut-off rate in the auction of six-month T-bills, while open market operations were conducted to manage liquidity and stabilize the overnight rate. The discount rate and reserve requirements have not been used for some time now.

The result was that during the last three years we have witnessed an unprecedented growth in both reserve money and broad money. Reserve money grew by 15 per cent in the last two years and is likely to exceed the SBP projections for the current year. Together with a rise in the reserve money multiplier, this has led to growth in M2 which exceeded the growth in nominal GDP by large margins in each of the last three years.

In contrast, growth in M2 had kept pace with nominal GDP over the previous ten years when inflation was in decline. Conventionally, it is believed that demand for money adjusts to an increase in supply, through changes in factors (like output, prices and interest rates) that influence demand for money.

Consequently, it is natural that following such a rapid growth in money supply, we are observing some stimulation of output, but at the same time, prices are rising and there is pressure for interest rates to rise as well. Because the impact of monetary expansion on prices comes with a lag, inflationary pressures can be expected to continue for some time, also because the continuing rapid pace of expansion in reserve money in 2004-05 will impact M2 in the coming months. This will further impact prices in the future.

What were the acts of omission that led to the expansion of liquidity? The reasons for the growth in reserve money were different before and after mid-fiscal year 2004, and in each case the response of the SBP has been inadequate. During fiscal year 2003 and first half of 2004 when the external accounts were running surpluses, it created strong pressures for the rupee to appreciate. The SBP intervened in the foreign exchange market to moderate the rise of the rupee, and in the process accumulated NFA on its balance sheet contributing to an increase in reserve money.

Despite the SBP interventions, the rupee appreciated from Rs64 to Rs57 against the dollar. The SBP made some attempts to sterilize the accumulation of NFA by reducing NDA on its balance sheet to moderate the increase in reserve money, but the sterilization was not enough, with the result that reserve money grew excessively. What seems to be lost on the SBP is that during this period, since foreign exchange inflows were largely exogenous (private transfers including remittances), the pressure on the rupee to appreciate was symptomatic of a “dutch disease”, as a result of which, both exports and domestic import substituting industries were losing competitiveness.

Under these circumstances, the SBP should have intervened in the foreign exchange market more aggressively to halt the appreciation of the rupee, accompanied by a more active sterilization of the additional NFA to constrain the growth of reserve money. Sterilization involves some quasi-fiscal costs, but these costs pale in importance relative to the need to maintain the competitiveness of exports and domestic import substituting sectors while restraining the growth of reserve money to control inflation.

As the surpluses on the external accounts subsided after mid-fiscal year 2004, the pressure on the rupee to appreciate also ended. Reserve money was no longer growing as a result of the accumulation of NFA. Yet reserve money continued to expand, this time due to growth in Net Domestic Assets of the SBP. The latter was triggered by government borrowing from the SBP. Although the governments’ overall budget deficit continued to decline during FY04, its borrowings from the banking system increased, most of which was from the SBP.

In addition, as part of its debt management operations, when the government wanted to borrow rupee funds to pay off its expensive foreign loans, it borrowed the entire amount from the SBP which directly increased reserve money.

While the government’s borrowings could, in practice, have been made from the commercial banks thereby restraining the growth of reserve money, this would also have strengthened prevailing market expectations of a sharp rise in interest rates, and contributed to a higher fiscal burden of interest payments.

Hence, to accommodate the government’s debt management needs and protect the budget from higher interest payments, the SBP monetized government borrowing and added to inflationary pressures, contributing further to market expectations of a further rise in interest rates.

This episode seriously casts doubt over the de facto independence of the SBP from fiscal dominance in determining its objectives and conducting its operations notwithstanding the independence accorded under the State Bank Act. And it raises questions about the motive for letting the rupee appreciate earlier, since appreciation helps the government in reducing its debt servicing obligations but hurts the rest of the economy.

What can be done now? The SBP must immediately tighten monetary conditions to contain inflation, which could slow down growth slightly for a short period, and be happy to achieve a ‘soft landing’, otherwise delayed action could warrant a tougher monetary stance leading to a ‘harder landing’ in terms of growth deceleration. Accordingly, in the short term, the SBP needs to sharply reduce liquidity through open market operations and raise interest rates.

It should examine raising reserve requirements of commercial banks to reduce the reserve money multiplier as well, even if it will reduce somewhat the profits of intermediation, (after all, the banks are making good money and corporate tax rates are coming down).

Over the medium term, the SBP must adopt targeting of reserve money and keep it consistent with an expansion of M2 that equals the growth in nominal GDP. Short-term interest rates alone are ineffective in impacting demand for two reasons in Pakistan.

First, the transmission mechanism for the six-month T-bill rate to impact lending rates is not well established. It was quite recently, in January 2004, that the SBP directed all banks to benchmark their corporate lending to KIBOR for purposes of establishing a uniform benchmark, and the SBP is still in the process of improving the transmission mechanism of T-bill rates to KIBOR through increased open market operations.

And secondly, because of the liberalized capital account, interest rate changes have an immediate impact on foreign exchange flows and the exchange rate.

The exchange rate management by the SBP to maintain export competitiveness also warrants a review. Prior to the commencement of the surge in foreign exchange inflows in Q3 of 2001, the exchange rate of the rupee/$ was Rs. 64.1 in the kerb market, and the nominal and REER index were 88.75 and 90.21 respectively.

During 2002 the rupee appreciated, and both the nominal and real effective exchange rate indices rose from the Q3 2001 levels to 93.48 and 96.73, respectively. Subsequently the two indices declined slowly, indicating a gradual depreciation of the rupee.

But during the next three years, the depreciation was so slow that the REER index in 2004 was at 91.82, or two per cent above the Q3 2001 level. This implies that competitiveness measured by the exchange rate changes and inflation differential was worse in 2004 as compared to the period immediately preceding the onset of the dutch disease.

The jurisdiction dilemma

ON March 15, four of the five men convicted in the Mukhtar Mai rape case, but later acquitted by the Multan bench of the Lahore High Court, were released by Central jail authorities only to be re-arrested on March 18 on the intervention of Prime Minister Shaukat Aziz. Meanwhile, nearly three years after she was raped by four “volunteers” on the order of a village panchayat, Mukhtar Mai still awaits justice.

While the denial of justice to Mukhtar Mai is appalling, the release and re- arrest of the four and the events surrounding the progress of the case raise yet larger questions about the sorry state of Pakistan’s legal system.

Fourteen people were accused of involvement in Mukhtar Mai’s case; eight of them were found not guilty by the Dera Ghazi Khan Anti-Terrorism Court on August 31, 2002. The remaining six were convicted and sentenced to death.

In its judgment overturning the verdict, the LHC stated that the prosecution could not prove that a panchayat had ordered the gang-rape of Mukhtar Mai. It stated that, “the prosecution miserably failed to prove the accused guilty.” The LHC added that it found it “strange” that the “trial court in spite of not an iota of evidence on record had convicted and sentenced the appellants.”

The Federal Shariat Court’s subsequent suspension of the LHC verdict on the grounds that high courts had no jurisdiction to hear appeals in cases pertaining to Hudood laws, and the Supreme Court’s action to take jurisdiction of the case in response, underscore the jurisdictional problems that have plagued Pakistan’s higher judiciary since the inception of the Federal Shariat Court in 1980. The Supreme Court apparently took over the case in order to prevent damage to the judiciary’s reputation and to prevent a turf-war between the Shariat court and the LHC in the full glare of international media attention.

Precisely because of international attention there is still hope — recent court decisions and jurisdictional confusion notwithstanding — that Mukhtar Mai’s rapists will be brought to justice. This is important, not least because international and Pakistani human rights groups have documented countless cases of others caught in similar situations with no such hope of seeing justice done.

Though the Supreme Court has intervened in this instance, the Mukhtar Mai case illustrates the need for a comprehensive overhaul of the country’s judicial and policing system. Why was an anti-terrorism court used to hear a rape case? How did the anti-terrorism court convict without an “iota” of evidence? How did the investigating authority fail to gather evidence in a case as public as Mukhtar Mai’s? What is the jurisdiction of the Federal Shariat Court in relation to high courts and the Supreme Court itself?

What would the likely outcome have been had the Shariat Court heard the Mukhtar Mai case in the light of the existing Hudood law, which has been described by the National Commission for Status of Women as a law that “makes a mockery of Islamic justice” and is “not based on Islamic injunctions”? Is the Shariat Court even capable of providing justice to rape victims so long as they require four male eyewitnesses to testify? These are questions that need immediate answers.

The LHC judgment highlights to the world what anyone who has ever traversed the muddy waters of Pakistan’s law-enforcement and judicial system knows all too well: the investigative capacity of the police is virtually non-existent and the lower-level judiciary simply lacks the training, means, and awareness to adjudicate within the framework of the law.

It is a sobering thought that, in contrast to the two-year training programme offered to civil servants, district judges receive less than a fortnight of orientation. These judges are meant to dispense justice without any training in judicial ethics and conduct, interpretation and application of the law, or even the basics of judgment writing. And they lack the staple of a proper judiciary: independence from the executive.

It is imperative that government authorities ensure that village panchayats, tribal jirgas and other customary councils act in accordance with the law and in a manner that respect women’s rights and do not usurp the proper judicial role of the civil courts. The government should identify mechanisms by which local administrations can monitor the conduct of such councils and intervene in instances where they have acted beyond their authority.

However, any attempt to do so will be doomed to fail unless the state moves speedily to put its own house in order. As the Human Rights Commission of Pakistan has stated, “The rise of the jirga reflects upon the decline of the judicial system. These informal forums of justice can only be eliminated if deficiencies in the judicial system are removed.”

Meaningful police reform must be instituted, resulting in a visible enhancement of public oversight, accountability and investigative capacity; discriminatory laws against women must be repealed or amended to be brought into conformity with international standards; the judicial system must be given back its independence and status so that its ability to function as a profession, coherent structure is not held hostage by the government itself or by a competing legal framework based on sectarian theological considerations.

As long as the state continues to fail to be an effective guarantor of basic security and justice, there will continue to be many more victims like Mukhtar Mai — people for the world to rally around from time to time, but who are mostly left to suffer silently in the shadows.

The writer is a researcher with the New York-based Human Rights Watch.

Revisiting the fall of Dhaka

BRIGADIER Abdul Rahman Siddiqui’s book East Pakistan — The Endgame: An Onlooker’s Diary 1969-71, which surfaced 34 years after the tragedy, raked up memories of a period in the country’s history that most people would rather forget. The wrenching apart of the eastern limb with all its accompanying horrors left a scar that will still take some time to heal.

Hundreds of thousands of people from all walks of life were uprooted emotionally and financially. An equally large number suddenly found itself stateless and without any moorings. Most important of all, the episode finally laid to rest the two-nation theory and the myth that a common religion can hold together two culturally distinct nations.

The author refers to himself as an onlooker in the saga that unfolded in East Pakistan. He was, in fact, in many ways a participant who not only had access to people in high places on both sides of the great divide, but also, on occasion, made valuable suggestions designed to save the army, particularly President Yahya Khan, from embarrassment. Though one detects certain sympathy for the people of East Pakistan, the fact that he has managed to observe a strict objectivity throughout the narrative is truly remarkable.

The two main contestants, who sat at opposite ends of the political chessboard, were Mr Zulfikar Ali Bhutto and Shaikh Mujibur Rehman. Each had a strong following in their respective wings, and in 1969 could not possibly have had any idea of how events would eventually unfold. When I interviewed Mujib in 1970 in his small office located in a narrow street in Dhaka, clogged with cycle rickshaws, he was totally relaxed. However, all I got was his Six Points, chapter and verse with footnotes thrown in. It was impossible to get in a question edgeways. It was the same with the handful of supporters who surrounded him, white shawls draped across hunched shoulders, watching their leader tamp aromatic tobacco into his pipe.

Though these were still the early days, one was aware of a certain tension in the air. There was considerable resentment against West Pakistanis, regarded as exploiters. After all, Ayub Khan’s 22 families belonged to the western wing, along with a succession of pompous civil servants appointed as administrators and accused of treating East Bengal as a colony.

A settler from Bihar who spoke fluent Bengali, confessed to me over a drink in the Purbani hotel, that he could never really pass off as a son of the soil. The locals constantly questioned him about his origins and loyalty. It was a no-win situation. It reminded one of the story of the gunman who stuck a revolver into an Irishman’s temple as he came out of a pub in Belfast, and asked him if he was a Protestant or a Catholic. The victim, deeply concerned and aware of the fact that if he gave the wrong answer, would get his brains blown out, said that he was not a Christian but a Jew. On hearing this, the gunman suddenly brightened and said that he must be the luckiest Arab in Ireland.

Bhutto was urbane and highly intelligent. But he was also unpredictable, like the time he addressed a huge crowd at Bhati Gate in Lahore. After publicly affirming that he enjoyed a peg or two of the distilled essence of grain, he said he did not suck the blood of the poor. Then, astonishingly, asked the crowd what the main difference was between Jesus Christ and the Holy Prophet, (PBUH). One never understood why he threw in the religious bit. It was certainly not the kind of question that Mujibur Rehman would have asked.

The fall of Dhaka affected families in the western wing in all sorts of ways, financially, emotionally and even ideologically. It is doubtful if there was a single man or woman in Karachi or Lahore at the time that could truly, hand on heart, say that they were not moved by the events.

In 13 action-filled chapters the author takes the reader on an eventful journey that starts with the sudden surfacing of President Yahya Khan, and carries on through the pre-election fever, the devastating cyclone, the rise of Bhutto, mutiny in East Pakistan, the military crackdown, the eventual parting of the ways, India’s military campaign and finally, the fall of Dhaka. The way he presents the facts, it all seems so logical, so inevitable, almost like a game of chess from which he borrowed the final phase of a conflict known as the endgame.

Along the way he meets, writes to, hears from or is otherwise in contact with 21 majors-general, lieutenants general and full generals, and also a clutch of admirals, air marshals and a number of lesser mortals in uniform.

The basic issue around which the entire sordid episode of the separation of the eastern wing revolves, which destroyed the Pakistan of the founder of the nation, can be expressed in one simple question. In a democracy however flawed, should a political party which has won an overwhelming number of votes and is in an absolute majority, be allowed to form the government and produce a constitution?

Initially, President Yahya Khan believed it should. He gave an assurance to Mujib that the army would remain strictly neutral if Mujib went ahead with his anti-Ayub demonstrations. The army, the bureaucracy and Bhutto, on the other hand, did not think so. The idea of having to fly to Dhaka every time a bureaucrat required permission to get a file approved was appalling. The army was not very happy either. The idea of the c-in-c of the armed forces reporting to a Bengali was unthinkable. Nobody at the time was willing to admit that much of the rancour that was displayed at the time had its basis in racism.

One of the most interesting chapters is the one that describes the pre-election fever and the cyclone. The two main parties in East Pakistan were the Awami League headed by Shaikh Mujibur Rahman, who controlled the vote bank in the urban areas, and the National Awami party led by Maulana Abdul Hamid Khan Bhashani, a sort of Martin Luther and Vinoba Bhave rolled into one, who controlled the rural areas.

Bhashani had no interest in national politics and had his sights on the province. He nevertheless had regular digs at Mujib who, he believed, was trying to replace Ayub Khan’s 22 families with 22 East Pakistani families.

What a lot of people probably do not know is that Mujib had agreed, in principle, to let Yahya stay on as president after the formation of the national government. He had also agreed in principle to let Yahya remain c-in-c of the armed forces. Yahya in return, in an indirect way made an oblique reference to Mujibur Rahman as the future prime minister of Pakistan. When he was quizzed on his return to Karachi as to why he made such a statement, Yahya said that it was customary for the head of the majority party to form the government. He then hopped into a helicopter and headed for Larkana.

This, of course, meant that Bhutto would become president. This was not at all to his liking . He didn’t relish the idea of becoming a ceremonial constitutional president whose main duties would have probably been handing out certificates at university convocations and helping oil-rich Gulf Arabs destroy the wildlife of Sindh during the hunting season.

Just why the great split finally took place, just why matters came to such a sorry end is described in lucid detail in the book. There are also some delightful passages strewn throughout the volume. Yahya Khan’s comment that “though his government was interim, it was not all that interim”.

The inevitability of the formation of two groups in Bhashani’s party, one pro-Moscow and one pro-Beijing. Nur Khan dragging his feet when asked to step down as head of the air force, which resulted in Admiral Ahsan also being asked to relinquish charge. Finally, Yahya’s reaction to the government documentary entitled The Great Betrayal, which showed 60 or 70 skulls and bones of people, killed in the March civil strife. How the hell can you distinguish a Bengali skull from a non-Bengali skull, Yahya wanted to know. Nobody has as yet come up with an answer.

Iraq war, deception and cynicism

AS we look back on the American invasion of Iraq on its second anniversary, two phenomena astound us: one was the help which leading American newspapers gave to their governments in matters of deception; two, how some Muslim governments went out of their way to encourage and help America in the war on Iraq. In fact, some of them wanted Saddam Hussein’s head more than some of America’s diehard neocons desired.

Most of the mysterious — and might one say fraudulent — aspects of the Iraqi war story stand revealed, though there is no doubt history will tell more. But even what has already become public knowledge shocks us. One is astonished that the neocons should run a government within a government, and it is this cabal that should influence, manipulate and direct the Bush administration’s policies, doctor intelligence and distort known facts.

Cabal here does not mean “principals” — which in the American political jargon means the vice-president, the secretaries of state and defence, the national security adviser and the CIA chief. Cabal here means men who, despite being positioned at the lower levels, exercised greater influence on foreign and defence policies than the principals. The main characters of this group were Deputy Defence Secretary Paul Wolfowitz, his deputy Douglas Feith, Richard Pearl, who was Pentagon policy adviser but later quit following embarrassing allegations, and Lewis “Scooter” Libby, “force multiplier” for Cheney’s agenda.

In the words of Bob Woodward, author of Bush at War and Plan of Attack, these men had formed a government within a government. Powell called Feith’s set-up “Gestapo office” and considered the neocons’ plans and predictions about Iraq “bullshit” and “lunacy”.

Fully supported by “Veep” Dick Cheney, Defence Secretary Donald Rumsfeld and the then National Security Adviser Condoleezza Rice, these men had made up their minds long ago to attack Iraq. The 9/11 tragedy provided them with the pretext they were looking for with a view to destroying Iraq, even though no link has till this day been found between Saddam’s secular regime and Al Qaeda’s religious militancy.

We also have a fascinating character in Prince Bandar bin Sultan, who enjoyed privileges no other envoy in Washington did. As Saudi ambassador he could call on President Bush and have one-to-one talks with him whenever he wished.

His meetings with Bush and his aides show how a number of Arab and Muslim governments were urging the US to attack Iraq while telling their own people and the world publicly that they were opposed to an attack on Iraq.

On Nov 15, 2002, Prince Bandar turned up at the White House and handed over to Bush a letter handwritten in Arabic by Crown Prince Abdullah, along with an English translation provided by Bandar. The letter asked Bush what measurers America was taking to overthrow Saddam Hussein. (In 1994, King Fahd had suggested to President Clinton a plan to overthrow Saddam by covert action; in November the same year Crown Prince Abdullah suggested to him that the two countries use as much as one billion dollars for this purpose).

Despite being so well-connected, Bandar thought America was still not serious about attacking Iraq, and that the Bush administration was exploring possibilities of overthrowing Saddam by covert means as late as March 2003 — the month in which the invasion began.

After handing over the letter’s English translation, Bandar told Bush that the delay in attacking Iraq had created doubts amongst Saudis about “how serious America is about the regime change in Iraq”.

By the first week of March 2003, things were becoming exasperating for those who wanted the Iraq war to begin. The US wanted a second resolution from the Security Council, but the French, German and Russian opposition did not guarantee this. Things seemed to be reaching breaking point, and King Abdullah of Jordan was a nervous wreck. “Let’s go”, he told the Saudis, “I can’t take it”. He suspected that Riyadh still wanted Saddam’s overthrow by covert means. Many had now begun to doubt if Bush would have the courage to bypass the UN and act alone.

On March 14, 2003 — seven days before the war was to begin — a haggard and nervous Bandar met Bush in the Oval Office again. The normally immaculately dressed Bandar hadn’t shaved, and the buttons of his jacket were straining. Bush asked him, “Don’t you have a razor, something to shave with?”

For Bandar, the wait for the war seemed nerve-racking. He replied, “Mr President, I promised myself I would not shave until this war starts”.

Bush said, “Well, then you are going to shave very soon”. Bush believes himself to be a man of action, taking tough decisions, and hates to be considered indecisive. He felt hurt when Prince Bandar said, “I hope so. But by the time this war starts, I will be like bin Laden” (he gestured with his hand to show a long beard).

The Saudi prince obviously fell victim to the deception that any government planning a war resorts to. The web of deception crafted by the Bush administration was superb. If Gen. Tommy Franks, head of the US Central Command, went public with military movements, Rumsfeld or the spokesmen for the State Department and the Pentagon would feign ignorance. The plans for a war on Iraq — Op Plan 1003 — had been ready in 1998, and the first top war-planning session was chaired by Bush on Dec 28, 2001. But a discreet — and sometimes uncontrollable — campaign of disinformation confused both friends and foes.

In May 2002, President Bush met President Jacques Chirac and German President Gerhard Schroeder. In both Paris and Berlin he said, “I have no war plans on my desk”. And on March 6, 2003, exactly 15 days before America attacked Iraq, Bush said in a TV interview, “I’ve not made up our mind about military action”.

While the Bush administration had every right to deceive the enemy, what is regrettable is that such leading American newspapers as the New York Times and Washington Post willingly let themselves be used for purposes of deception. Administration officials often rang up newspaper offices to stop stories or insisted that their versions be included in a story they thought was adverse to them.

This was specially true about stories concerning Powell, whom inspired stories from the Rumsfeld camp portrayed as “soft” on Iraq. One day, editorials in seven newspapers called for Powell’s resignation, whose State Department was referred to by the neocon hawks as “The Department of Nice”. Such were the differences between Powell and Cheney that they could not have a sit-down dinner together, and Powell thought that the Veep specialized in turning “uncertainty and ambiguity into fact.”

In November 2002, American intelligence scared the administration by warning that a dirty bomb was on the loose somewhere between Afghanistan and Pakistan, and two Post reporters had got wind of the story. However, before it could be published, CIA chief George Tenet rang up Woodward, editor of the Post, to tell him that he thought the story would embarrass the Bush administration vis-a-vis President Musharraf, who would think it was planted to embarrass and pressure him. Consequently, Woodward asked the paper not to run the story.

The NYT and WP also published stories about Iraq’s weapons of mass destruction knowing them to be false and unreliable. Shortly before the war, Woodward had to correct his paper on this score. For all practical purposes, Woodward was an administration insider and knew more than what many high State Department and Pentagon officials did because of his unhindered access to Bush and his cabinet colleagues.

The publication of stories based on intelligence that he — and those publishing it — knew to be false prompted him to write a story and hand it over personally to the Post’s foreign editor, warning his readers that the leaks about Iraqi WMDs were false and based on doctored intelligence. The disinformation campaign about the war and the conflicting reports about America’s intentions were so “ludicrous”, said Rice, that they had become useful, and “I’m sure Saddam is by now totally confused.”

Bush, of course, missed no opportunity to flaunt American power. He told Hans Blix, chief of the UN inspection team, “The decision to go to war will be my decision. Don’t ever feel like what you’re doing is making the decision.”

Before the invasion began, Bush had left instructions that Bandar be informed of the war immediately. When Rice broke the news to the Saudi ambassador, he told her to tell Bush “he will be in our prayers and hearts”.

On a less sublime level one is shocked to note the uninhibited use of the four-letter word by the highest in the US government even in the presence of women, and Condi Rice herself was not averse to uttering profanities when it came to Saddam.

But there is more to the war story than deception and profanities, for one is baffled by the strength and brilliance of America’s political system, the sophistication of its policy-making apparatus, the interplay of democratic forces, the close coordination between the White House and Congress, the enormous amount of in-put that men and women in authority get from research institutions and individuals well-ensconced in the system; and the tremendous advantage which the Americans drive from the easy and first-name relationship with each other irrespective of status and position.

We of the Third World, still clinging to feudal values — worsened by our colonial past — have no idea what human dignity is, what concept developed and democratic societies have of egalitarianism and how they turn differences in opinion and approach into an advantage.

America’s victory in the war and the holding of the general election in post-war Iraq on January 30 cannot be attributed to military and economic power alone. Nazi Germany, too, had all this. America’s real asset is its system of government and a free and secular society.