THERE can be debate among economists on many issues. It is a discipline that is less rigorous than the physical sciences where laws are established based on logic and experimentation.

That notwithstanding, there is a consensus on certain things. There is no contention about the relationship economists have long postulated between supply, demand and price. If demand exceeds supply, prices go up; the reverse happens if supply outstrips demand.

Another point of agreement is that governments must not overspend and if they do overspend they must not finance the difference between expenditure and government revenues by printing money. If the governments respond to the printing press then the economy will lose its balance, inflation will result, the poor will suffer, income disparity will increase and the rate of growth will slow down.

This chain of events will happen and the government that tolerates it should be held responsible for following the wrong sets of policies. This line of thinking is as close to a set of laws that economics as a discipline can get to. These together constitute the economist’s law of gravity. An economy that expects to produce growth by allowing large fiscal deficits will, sooner or later, come crashing down and hit the ground.

Less well known and appreciated among lay people is the relationship between fiscal deficits and deficits in the balance of payments. Large fiscal deficits increase demand, including that for imported goods. The amount of money spent on imports outstrips that earned from exports. The result is a growing balance of payments deficit which has to be financed. Some governments do this by borrowing from abroad which results in increasing the burden of debt which has severe long-term consequences. Others allow the exchange rate to depreciate, making imports more expensive and thus helping to narrow the trade gap.

Those who have followed Pakistan’s economic developments in recent months will recognise all these principles at work. There is little scope for debate about these. Where there can be a vigorous debate concerns the policies the government should adopt in order to address the serious economic situation the country faces today. This discussion is all the more necessary since much of the rest of the world is working on using various kinds of stimuli to keep economies growing. This approach has been followed most spectacularly by China which has announced plans to pump $586bn into the economy to stop the rate of growth from decreasing significantly.

The Indians are thinking of giving their economy some stimulus as well. In the industrial world plans are being announced almost daily to stimulate economies. Even the IMF has suggested that the world’s rich countries should expand government expenditure by at least two per cent of their GDP to prevent their economies from slipping into serious recession.

The economists who are advising president-elect Barack Obama on managing the US economy are working on a stimulus package that may amount to considerably more than the target suggested by the IMF. A figure of $600bn is being mentioned. This is about three per cent of the American gross domestic product.

There is one interesting feature of the programme being developed by the Obama team. This has relevance for Pakistan. According to one adviser, Obama “feels very strongly that this is not just a short-term fix but a long-term retooling of the American economy”. The stimulus package being developed “will lay the groundwork for long-term sustained economic growth.” It will include programmes aimed at healthcare, improving educational infrastructure and “the greening of the economy”. Obama, in other words, is using the crisis as an opportunity. And that brings me to the case of Pakistan.

For obvious reasons, Pakistan cannot stimulate its economy; it does not have the fiscal space which would allow Islamabad to pump more money into the economic system. On the other hand, it has to increase government revenue and reduce government expenditure in order to narrow the fiscal deficit to a sustainable level of about four per cent of GDP.

However, the government should allow social policy to enter the picture in selecting the areas needing state action. There are three that will need the government’s attention as a part of a strategy that not only deals with the current crisis but also seeks to address a number of problems that have been with us for a long time. Economists call them structural weaknesses. The three I have in mind are tax policy, expenditure policy and policies aimed at building institutions. Today I will deal with the first, saving the other two for discussion in later columns.

Pakistan remains an under-taxed economy; the proportion of tax to GDP has been declining and is now less than 10 per cent, one of the lowest among the world’s major developing economies. This must increase in order to allow the government to spend more on social programmes such as those of education and healthcare. But the increase in revenues must come from the rich not the poor and middle classes.

A lax tax administration that has allowed the rich to escape the tax net should be tightened, the sectors of the economy that are not taxed or are taxed lightly should pay their due, only the poor should be subsidised and all others must pay for the services the government provides, and governments at the sub-national levels should be allowed a much larger role in raising tax and other revenues for the state.

Pakistan has been trying to improve its tax structure and its tax policy for decades but, in spite of the effort that has gone into it, the effort has not produced good results. There are many reasons for failure; perhaps the most important being the lack — and over time loss — of confidence on the part of the people in the working of the government.

Good governance, in other words, is a big part of the solution Pakistan must come up with in order to ease the revenue constraint under which the state operates. Here a democratic government should be able to help since by definition it hears the voice of the people and acts upon it. It is interesting to note that it was the people’s voice that forced the executives of the American car companies from their private planes into using energy-efficient cars as they came begging again from Detroit to Washington.

AFTER the recent terror attack on Mumbai, India and Pakistan are hurtling towards a precipice.

They must stop before it is too late, before attitudes harden and there is no going back.

Accusations and counter-accusations are being flung, and the atmosphere gets murkier by the hour. The terrorists came from Pakistan by sea and were trained and indoctrinated in Pakistan, says New Delhi. Give us proof that they are Pakistani and where the training camps are and we will take necessary action, says Islamabad.

Here is a list of 20 fugitives being harboured by you we want sent back to India, says New Delhi. If they are in Pakistan, we will try them ourselves, responds Islamabad.

And so it goes on, getting us nowhere.

The US secretary of state lands in New Delhi, expressing her support for India and then flies to Islamabad to urge the Pakistan government to nail the perpetrators of the Mumbai terror attack and the outfit — or outfits — behind them.

Meanwhile, after declaring that it too has been a target and is also fighting the terrorist menace in the tribal areas bordering Afghanistan and has lost several hundred troops in the process, Islamabad issues a thinly veiled threat: if India’s belligerence continues, we will be compelled to move some of our troops from near the Afghan border to the border with India.

In other words, we will have to shift our attention from helping you (the US) in taking on the Taliban, to confronting the Indian threat. Is blackmail too strong a description of that?

At the same time, there are mad voices making themselves heard in India. A panellist on a popular TV programme seen by millions, advocates bombing Pakistan, to the applause of the audience. Even the Indian foreign minister does not entirely rule out such a course of action, saying that “appropriate steps” will be taken to protect India’s sovereignty.

US president-elect Barack Obama virtually echoes the Indian minister when he says that nations have the right to defend themselves. His choice of Hillary Clinton as his secretary of state must also have dismayed Islamabad. Both Hillary and Bill are known to have a soft corner for India, having made several unofficial visits to the country. And Pakistanis must recall when in 1999 during the Kargil war a furious Bill Clinton summoned the then Pakistan prime minister Nawaz Sharif to Washington and virtually compelled him to withdraw Pakistan troops from the conflict zone, thereby humiliating Islamabad.

No wonder Pakistan feels beleaguered, with its back to the wall, nursing the sentiment that not only India but just about everybody is pointing an accusing finger at it.

I should add here that currently in India there is a strong backlash against our politicians in the wake of the Mumbai terror attack. A certain distaste among the Indian public for the political class was always there — for its corruption, its inefficiency and its arrogance. But it was hidden. Now it has come out in the open.

Politicians make sure they have plenty of security, even when some of them don’t need it, with armed bodyguards and commandos constantly surrounding them. But what about our, the common man’s, security? Why aren’t we being adequately protected?

Insensitive remarks and thoughtless actions by Indian politicians after the Mumbai terrorism have also cost them dear. The Maharashtra chief minister was sacked after he went on a tour of the devastated Trident hotel, with his actor son and a well-known film director in tow. How about terror tourism, with a little bit of Bollywood thrown in? India’s feisty news channels attacked him mercilessly, repeatedly showing the damning film footage.

His deputy chief minister suffered the same fate after he tried to play down the attacks by saying that such “small things” tend to happen in big cities and that the terrorists were planning to kill 5,000 people (so only about 200 killed was not such a bad deal).

After the incensed father of one of the commandos killed in the Mumbai carnage refused the chief minister of Kerala entry into his residence, the chief minister had the gall to hint that the father was mentally ill and that “even a dog” would not go to his house. A demonstrator had a fitting answer to that with a placard reading, “We would prefer a dog visit our house than a politician”.

Just as Pakistan feels on the defensive, so do India’s politicians. The best way to deflect criticism is to grandstand, to posture and talk tough. That is exactly what some of India’s leaders have been doing and will continue to do in the days to come: yes, we will consider a strike on Pakistan, to take out the terrorist-training camps — and to hell with the consequences.

The tragedy of it all is that just before these terror attacks on Mumbai, the peace process between India and Pakistan was well on course. Numerous cultural and sporting exchanges were taking place, beginning with the cricket one-day internationals in Pakistan in 2003.

I was in Lahore and Islamabad then as part of a tennis team playing with our Pakistani counterparts. We were greeted with such warmth and affection that it often brought tears to my eyes. Taxi drivers would refuse to take fares when they realised we were from India.

At the Lahore ODI where I was present the spectators cheered the Indian players. I could not believe my eyes. I was looking at a new generation, a generation that was not carrying the bitter baggage of Partition but which nursed hope and friendship in their hearts.

The deranged beasts that struck Mumbai on Nov 26 want to return the two countries to an era of hopeless despair and festering hatred. Let us vow that they will not succeed.

The writer is former editor of the Reader’s Digest and the Indian Express.

singh.84@hotmail.com

ATTEMPTING at detecting someone telling lies are as old as humanity itself — one theory about the origins of human intelligence is that man’s relatively large brain evolved out of the need to recognise deception in other individuals living within the same social group.

Finding out the truth from unwilling interviewees came centre stage this week from two unrelated spheres, highlighting the difficulty of detecting deception in skilled, well-trained inveterate liars.

The sole surviving gunman of the Mumbai attacks is undergoing interrogation in India that will include the injection of a so-called “truth serum” in the hope of eliciting information about his past and his associates that he would otherwise not volunteer.

Meanwhile, it emerged in the Queen’s Speech on Tuesday that the Government is considering the introduction of lie-detector tests to expose untruthful benefit claimants.

Lie detectors, or polygraphs, do not in fact detect lies. They monitor the physiological changes to the body — such as heartbeat and skin conductivity, or sweating — that may, or may not, be associated with failing to tell the truth.

The idea behind the device is that there are involuntary actions that occur when someone experiences the stress of telling a lie, which can be detected by sophisticated machinery.

Polygraphs are widely used in the US but have been rejected in Britain because of their unreliability. Apart from whether they actually pick up on hidden signals of lying, their accuracy is predicated on the skill of the person interpreting the machine’s signals.

In extreme situations, torture and fear are some of the oldest means of extracting the truth. But that has the disadvantage of leading people to say things under duress that they know the torturer wants to hear — as well as being a breach of human rights.

Another method is to ply someone with alcohol, a technique immortalised in the Latin phrase in vino veritas — in wine there is truth — which is ascribed to the Roman scholar Pliny the Elder. Josef Stalin is said to have feigned getting drunk with comrades so to hear what they really thought. The earliest attempts at putting lie-detection on a scientific footing go back to the start of the 20th century.

Robert House, a US obstetrician had noticed the effects of an anaesthetic drug called scopolamine. One of his patients was in a state of “twilight sleep” after being given scopolamine. Dr House asked her husband to find a weighing scale for the newborn but he returned empty-handed, whereupon his wife told him exactly where it was while still apparently asleep. Dr House wanted the drug to be used as a way of supporting people’s claims to be telling the truth.

US police from the 1920s onwards began to use drugs for interrogation. They experimented with the psychoactive barbiturates sodium pentothal and sodium amytal. However, it soon emerged that the drugs were being misused on suspects. It became clear the drugs had the same problem as torture — they made people say things that they thought the interrogators wanted to hear.

During the Second World War the first intravenous anaesthetics — the same class of barbiturates — were used on traumatised soldiers who had lost their memories to get them to remember what happened to them.

After the war, some American doctors continued to use sodium amytal and sodium pentothal on psychiatric patients to get them to talk about hidden memories. Some of these doctors also took their expertise in this area to the police and the US government. The most notorious search for a universal “truth serum” was the secret MK-ULTRA project of the Central Intelligence Agency, which started in 1953. The CIA tested many drugs, including the hallucinogen LSD, sometimes without the knowledge or consent of people who unwittingly took part in the experiments.

Officially, the law-enforcing agencies of the American and British governments do not use drugs during interrogation and no court of law in either country would accept statements that have been made under the influence of a so-called “truth serum”.

Scientists have produced fairly convincing evidence that drugs such as sodium pentothal do not extract truthful memories. Instead, they tend to make interviewees more talkative in a way that makes them suggestible to cues elicited by interviewers. “After 9/11, there were discussions in the national papers about whether it’s a good idea to interrogate suspects using these drugs,” said Alison Winter, a science historian at the University of Chicago, writing for the magazine Scientific American.

“Every time there is a desperate need for information from people, you get speculation about whether these drugs are going to get that information. But you also get consistent warnings that the information may be less reliable than what you would get without the drugs,” Dr Winter said.

— © The Independent