The economics of anger

30 Sep 2016

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ACROSS the world, the politics of anger has been playing out over the past year. And it has become shriller with the passage of time. Britain’s vote to exit the European Union and the rise of Donald Trump’s fiery brand of politics have been the most overt and egregious manifestations of a ‘hidden’ groundswell of anger of the electorate in even the most developed countries.

While the roots of this anger are being analysed and debated, the broad contours of its form and existence have taken clear shape: the core of this anger is ethno-nationalistic and xenophobic. It is reacting to a ‘loss of control’ as much, it seems, as to a ‘loss of purity’ of race, culture and a way of life.

Politics aside, what are the economic ramifications of this anger? The broad consensus is that Brexit is expected to significantly hurt the UK economy — the fifth largest in the world — over the medium term (though pro-Brexit advocates believe otherwise). The counter-party in this case is the European Union, which accounts for approximately 24 per cent of the global economy. Its combined economy is not expected to go unscathed after the departure of Britain — assuming for now that there is a ‘hard’ Brexit and not a soft one. Even more damaging for the EU is the possibility of a bigger rupture, with the far right (and far left too in some cases) political parties agitating for an exit of their own. Were such an outcome to occur, it would signal the near-complete demise of the European political as well as economic project.

The combined economies of UK and the EU account for nearly 28 per cent of the world economy. Added to this toxic brew is the Trump phenomenon in the United States, which is dredging hate, anger, frustration, xenophobia, racism, Islamophobia, China-bashing and anti-Mexican sentiment all in one go for political mileage and ultimately, votes.


A loss of welfare and prosperity confronts hapless populations around the globe.


With its anti-globalisation, protectionist and anti-immigration platform, the implications and consequences of the xenophobic vitriol passing off as politics, is likely to be hugely welfare-negative for everyone. The prosperity of nations, especially developing countries, has been built on the freer movement of goods, services, capital, ideas, and to a more limited extent, people over the past four decades or so (though it has not been evenly distributed within these countries). A complete dismantling of globalisation, or an attempt to cherry-pick and preserve those elements of this interdependent international order which suit one nation to the detriment of the other, will push the world economy back 70 years into uncharted waters. In a previous episode in history, it was also a precursor to world war.

Take the case of Trump’s vitriol against China’s alleged trade ‘manipulation’. Among the only part of his economic plan that has been spelled out and is not half-baked and sketchy , is his plan to slap punitive tariffs of 45pc on imports from China. According to a recent report by Daiwa Securities, such a move would be “highly contractionary, deflationary and wipe hundreds of billions off the value of the world’s second-biggest economy [China]”. An impact of such magnitude on the Chinese economy would have a huge knock-on effect on the global economy, hurting jobs and incomes virtually everywhere, including in the United States.

Meanwhile, here in South Asia, its hapless population of 1.3 billion is also watching an all-consuming anger of a not-too different sort morphing into obscurantism, religious fundamentalism and now jingoism and war hysteria. The politically ascendant Hindutva fundamentalist ideology in India seeks to marginalise and suppress minorities such as Muslims, Dalits, Sikhs and Christians (much in the same way elements of the far-right in Pakistan wish to treat the country’s minorities). More recently, the BJP government has unleashed a wave of brutal repression against unarmed Kashmiris, resulting in the killing and maiming of hundreds, many, including women and children, blinded by the indiscriminate use of pellet guns.

The attack by militants on Sept 18 on an Indian army brigade headquarters at Uri in India-occupied Kashmir has now turned the vitriol of India’s anger-brigade towards Pakistan. As with its counterparts in other parts of the world, this ideology and its adherents are defined by hatred against the ‘other’. From cow-eating Muslims, to ‘untouchable’ Dalits, to independence-seeking Kashmiris, its focus has now moved to ‘terror-sponsoring’ Pakistan.

For the past two weeks or so, India’s hardliners and its jingoistic media are wagging the country’s security establishment into making war with Pakistan. The use of nuclear weapons is being casually spoken about as an option on both sides of the border. The truth is the ramifications of not just a limited conventional war but even protracted tension — let alone an unthinkable scenario of nuclear Armageddon — is likely to be catastrophic for South Asia as a whole.

With hundreds of millions in Pakistan and India collectively mired in poverty and food insecurity, with millions of school-age children deprived of an education, rampant un- and under-employment, with one hospital bed available for over 100,000 citizens in either country, casual talk of war and ‘total victory’ is obscene. Ironically, this fact has been noted by none other than the Indian prime minister — but only after unleashing the dogs of war ahead of two crucial state elections.

Pakistan and India have a common history — and, as neighbours, a shared destiny. The voices of moderation, reason, peace, and progress need to step forward and reverse the march to war — or even the dismantling of the edifice of economic cooperation. Neither Pakistan nor India can afford otherwise.

The writer is a former economic adviser to government, and currently heads a macroeconomic consultancy based in Islamabad.

Published in Dawn, September 30th, 2016