I CAN speak of matters in the realm of economics only as a layman. In hopes of improving my mind, I went to a meeting of economists at the Lahore School of Economics the other day. Dr Shamshad Akhtar, governor of the State Bank of Pakistan, was the principal speaker.

A lively discussion followed her presentation. Referring to our unbounded consumerism, spurred on by the easy availability of credit in this country, I asked if she intended to apply the brakes on the flow of credit. She did not, because she thought easy access to credit had improved the quality of life of many Pakistanis.

Her view may have merit from an economist’s perspective. One may say, for instance, that if women stopped buying things they did not need, the economies of the world, especially those of the highly developed societies, would come crashing down. But surely there are perspectives other than those of the proponents of capitalism. Quality of life is a subject open to interpretation.

I propose to present here my reading of the current urges to spend on the part of both individuals and public authorities and the styles of personal living and governance they call into being. People buy things they need. Needs vary from one person to the next, and from one situation to another. Genuineness of needs for the basic amenities of life can probably be verified and their limits determined. The happiness people expect from the fulfilment of their needs or wants is an ethereal state of mind. Different things or experiences make different persons, and the same person in different situations, happy.

These reservations notwithstanding, it seems to me that Pakistani culture is increasingly being monetised. People honour one another not so much for one’s attainments in arts and sciences and the professions as for the largeness of one’s material possessions. They compete with one another to demonstrate that they are just as well, or even better, endowed in this respect. A woman’s worth is judged largely by the brand name and estimated price of the handbag she carries and the shoes she wears.

I understand that a simple three-piece suit of clothes for women (shalwar, kameez and dupatta) can be had for as little as 300 rupees. (It looks pretty good to me.) Its defect is that maids and cleaning women can afford to buy and wear it. The ‘begums’ cannot be seen wearing the kind of outfits that their servants wear. If they want to maintain their higher status they will wear a known designer’s suits, carried by fancy boutiques, whose cost runs into thousands. They must consider what ladies in their peer group will think of them and say if they did any less.

I have no objection to high living on the part of those who can afford it and whose priorities include constructive pursuits beyond conspicuous consumption. I cherish the memory of Mr M.A. Jinnah and my admiration for him does not diminish because he spent a great deal of money on maintaining an elegant style of living. It pleases me that he was one of the world’s best-dressed men. But he did not borrow money to meet his expenses. He was wealthy, and he not only lived well but gave money to universities and charitable institutions. I admire M.K. Gandhi for his virtues and accomplishments but not for the fact that he went around in nothing more than a wraparound.

In sum I object not to living well but to living beyond one’s means. The culture of living on loans is not limited to Pakistan. It is spreading everywhere. Banks are in the business of lending money. If people did not borrow and pay interest on the loans they had taken out, banks would not be able to meet their operating costs: they would go under. They compete with one another in offering potential borrowers inducements to borrow from them.

Credit card companies do the same; many of them are willing to give you borrowing facility even if your credit rating is poor. Stores offer you merchandise on credit with no instalment payments due until a year after the date of purchase. A substantial part of many a citizen’s income goes towards the payment of interest on loans. The same kind of culture is making its way into Pakistan.

Public authorities are doing a lot worse than private individuals in respect of money management. Open-ended borrowing has become their norm at all levels — federal, provincial, and local. The federal government’s budget deficits run into hundreds of billions of rupees. Even when there is no money in its account with the State Bank, it keeps writing cheques which the Bank has to pay. These payments become part of the government’s domestic debt which is now counted in trillions.

The Bank keeps printing money to meet the government’s unending demands. The more money it prints for the government to throw into the market, the higher goes the rate of inflation which, according to some estimates, will soon reach 20 per cent. As prices of the necessities of life increase further, the poor will become poorer and more miserable than they are already.

In the mid-1950s Pakistan’s foreign debt used to be about $350m. It now stands at approximately $40bn. The country’s annual balance of trade deficit exceeds $10bn. This deficit may be met by dipping into overseas Pakistanis’ hard-currency remittances and foreign borrowings. Budget deficits are met by resort to the printing press and domestic borrowing. Nobody worries about whether the debts will ever be discharged. I suspect the lending institutions do not even want these debts to be repaid. They are happy to see the borrowers’ obligations mount so long as interest payments continue to flow into their coffers.

Numerous other states are acting the same way. America is the most heavily indebted country in the world. Its foreign debt surpasses that of many other nations put together. As this process goes on, an ever-increasing proportion of a nation’s public revenue goes towards paying the service charges on its domestic and foreign debt, leaving less and less for the delivery of vital services and amenities to its citizens, such as health care and education. This is already happening and it is being justified in the name of globalisation and privatisation.

I don’t know how economists see the future, but as a student of politics my own feeling is that the culture of spending beyond one’s own resources cannot last forever. I think that as more and more individuals approach bankruptcy, and as governments default on payments due and lose credit worthiness (so that no one will lend them any more funds), the prevailing culture and with it the economic system will collapse and spread chaos. The misery these developments cause the ordinary people will probably generate rebellions and bring down the existing political order.

The writer, professor emeritus at the University of Massachusetts, is currently a visiting professor at the Lahore School of Economics.

anwars@lahoreschool.edu.pk