The blindness of our times

Published September 22, 2016
The writer is a member of staff.
The writer is a member of staff.

NOW here’s a thought: have you noticed that each of the major epoch-making events of the past quarter century caught all the experts off guard? Consider a few examples.

The collapse of the USSR in 1991, the Asian financial crisis of 1997, the so-called Arab Spring of 2011 and its turn towards the Arab winter later, all were completely unforeseen by those whose job was to observe these regions carefully.

Start with the USSR. By the end of the Cold War, Kremlin watching was such an ingrained part of the American political culture that it was a veritable industry. The established grooves within which the debates amongst the Sovietologists had fallen were somewhat disturbed by the reforms initiated by Gorbachev. But, ultimately, the canon established by their forebears — George Kennan and Paul Nitze from the 1950s — remained the lens through which they all perceived the changes under way in the beleaguered USSR throughout the late 1980s. None of them realised that underneath the realities they were examining, gigantic forces were stirring that would change the map of that region for all time.

Likewise with the Asian financial crisis. One of the principal institutions whose job is to watch economic developments in countries around the world and issue forecasts — country specific, regional and global — is the IMF. And yet, in July 1999, exactly two years after the crisis began, one of its senior staffers from the Asia and Pacific department could still write a paper eulogising the growth rates of the region in decades past, then adding “[i]t is therefore not too surprising that no one predicted the Asian crisis”.


How could the experts get it consistently wrong? Massive developments are years in the making and don’t come about spontaneously.


He was not exaggerating. Those of us who remember the ‘roaring nineties’ will recall how the Asian economies were being presented as examples of an invulnerable growth model, with growth rates in excess of eight per cent for over a decade, and per capita incomes growing by “tenfold in Korea, fivefold in Thailand and fourfold in Malaysia” over 30 years, in the words of Stanley Fischer, the first deputy managing director of the IMF in those years.

How could those tasked with observing this phenomenon up close miss the fact that along with these impressive results, massive vulnerabilities were also opening up within these same economies, vulnerabilities so powerful that they could bring these economies crashing within a matter of weeks?

After listing all the faults in the policies of the countries involved, Fischer added this line: “an imprudent search for high yields by international investors without due regard to potential risks” as an important driver behind the large-scale private capital flows to developing countries, half of which landed up in the crisis-hit countries of East Asia.

Of course, the role of the IMF in encouraging these flows and applauding their catalytic effect on growth was glided over quickly as the narrative he built shifted the blame entirely on domestic factors. What could not be mentioned was the role played by this “imprudent search for high yields” in first lifting those economies, then bringing them crashing down. Only a few years earlier in 1996, Alan Greenspan had used his famous phrase — “irrational exuberance” — to describe much the same phenomenon in the case of the dot.com bubble.

The Arab Spring and the great financial crisis of 2008 were similarly not foreseen even in their outline, although in the case of the latter there were a few individuals who did sound the warning. Throughout the financial crisis, the questions being asked in policy circles revolved largely around the interests of those same driven by an “imprudent search for high returns” or by “irrational exuberance” towards rising asset values. Is this a recession? Will the emerging world decouple? How long will the downturn that began in December 2007 last?

But the crucial questions for posterity, it turns out, were not even asked. How is this crisis affecting the ordinary guy? Is it too much to think that the tendency in the American electorate to drift towards lunatic candidates accelerated in the years following the crisis? Did the social impact of what was mainly perceived to be a financial crisis pave the way for the rise of Donald Trump?

How many Middle East experts, in Western universities and think-tanks, even had an inkling of the coming of the Arab Spring? And those who rushed to pronounce on it early, including some of those who absurdly suggested that this was the vindication of the vision of George Bush, that the demand for democracy would assert itself across the Middle East once Saddam Hussein had been toppled via military action, were all proven wrong once again when developments turned towards civil war instead of the blossoming of liberty.

How could the experts get it consistently wrong? Such massive developments are obviously years in the making and don’t come about spontaneously. Where do their tools let them down in discerning the imbalances being created under their very watch?

The forces that drive these events are invisible to those who claim to study them. And the larger impact they have in shaping the lives and perceptions of millions of people is almost largely unknown to us. This has left us guessing at the rain of bewildering events that is falling upon us with increasing ferocity. The rise of xenophobia in the advanced industrial democracies mirrors the rise of ethnic and religious hatreds in much of the Muslim world, as well as the emergence of vapid anti-Americanism in countries like the Philippines, or the stoking of old hatreds across the rest of Asia.

In a world where Trump might well win the election — an unthinkable thought at the moment — where the fate of the European Union is hanging by a fraying thread, perhaps the madness and anxiety that have characterised our own country for so long are not such an anomaly after all.

The writer is a member of staff.

khurram.husain@gmail.com

Twitter: @khurramhusain

Published in Dawn September 22nd, 2016

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