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Economics and the war drums

Updated March 04, 2019

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An economic exercise at this stage, to evaluate the impact of the events of the past two weeks, seems futile.— AFP/File
An economic exercise at this stage, to evaluate the impact of the events of the past two weeks, seems futile.— AFP/File

WAR is a problem not a solution. The world has learned this the hard way. The long and arduous Afghan war between the most and the least powerful nations in the last decades has reminded us of this time and again.

Besides the immediate death and destruction, war turns the development cycle backwards by mounting the crushing pressure of the conflict’s financial cost on already distressed public fiscals. It also compromises the future by scaring and sidelining the drivers of investment and growth.

Take a look: Israel playing big role in India’s conflict with Pakistan

It’s a pity that instead of focusing on removing pointless barriers for human development, the lagging South Asian region is once again embroiled in a military conflict that threatens its very existence and poses a serious danger for the rest of the world.

It is not clear why, but the instant reaction of the world to the tit for tat military strikes by India and Pakistan was too muted to force both nations to stop and restrain the irresponsible elements on both sides of the border trying to whip up war hysteria based on an archaic notion of nationalism.

Also read: India refuses to share proof of air strikes in Balakot

Special standard operating procedures (SOPs) for nuclear nations should have been in place and come in to effect immediately to stop India and Pakistan before they even fired the first shot.

Beside the two conflicting sides, the world leadership (be it US, Japan, EU or China) and the UN (thought to be the voice of the collective consciousness of humanity), share the blame for the hostilities.

An economic exercise at this stage, to evaluate the impact of the events of the past two weeks, seems futile. If we survive the madness there will be ample time to calculate the losses incurred by both sides

Charting a common agenda for human development (the sustainable development goals) by the UN is remarkable but ensuring and preserving peace is fundamental. Development becomes irrelevant when survival is at stake. Business, trade and finance are peacetime activities.

An economic exercise at this stage, to evaluate the impact of the events of the past two weeks, seems futile. If we survive the madness there will be ample time to calculate the losses incurred by both sides. The immediate challenge is to stop the attempt at a collective suicide in South Asia and ensure the mistakes are not repeated.

Currently there exists no cost-benefit matrix of war for the two nuclear powers, India and Pakistan. If by commission or omission the tussle assumes scale there will be no country left to gauge damage or celebrate victory.

It’s ironic that the situation erupted at a time when economic journalists from six nations (Afghanistan, Bangladesh, India, Nepal, Pakistan and Sri Lanka) had gathered in a conference in Dubai to understand and promote the process of convergence and economic integration in South Asia.

Many journalists who had to fly back last week were shut out of the region and remained stranded in the UAE, like hundreds of thousands of others booked to leave or arrive in Pakistan and certain cities of India, at the time of filing of this report.

Flights were suspended after the airspace was closed down last week following air manoeuvres from both sides. For those who care to see through the dust of accusations, this action reflects the failure of both governments to honour the pledge of being truthful custodians of the interest of their people.

It is fortunate that war has not been declared yet, but the two biggest South Asian nations are openly claiming and counter claiming airspace intrusion and resorting to a military reply.

Anchoring their optimism on the high financial stakes of developed countries in South Asia, experts and the diplomatic community believe that the de-escalation may start soon. Most developed countries source their imports from and export to the region, along with heavy investment by multinational companies.

“Behind the scene diplomatic efforts are afoot, applying pressure on India and Pakistan to retract and shun risky adventurist ideas and resolve issues across the table,” a senior US diplomat said privately.

Responding to a question by the scribe after the presentation by the World Bank panel on the benefits and potential of economic integration between India and Pakistan, Patchamuthu Illangovan, World Bank’s country director for Pakistan said he trusts the young dynamic population of the region to discard jingoism and root for an united effort to expand the job market and increase economic opportunities.

According to a recent report of the World Bank, the trade potential between the arch rivals is over ten times the actualised trade. The summit of economic journalists of South Asia was sponsored by the Donald Reynolds National Center for Business Journalism, Arizona State University and the US Department of State.

“There is no chance of either of the two countries escaping the adverse outfall. The war scare will drive away potential investors, cause disruptions in supply chain, inflation and shortages. The

collateral damage to the economy can haunt both countries even after tensions subside,” an economist of the region said anonymously.

Dr Posh Raj Panday, chairman, South Asia watch on trade, economics and environment, blamed the lack of political will in the leadership for disrupting the natural process of convergence in South Asia. “The economic potential of the region is held hostage by political power structures,” he commented responding to a question.

Published in Dawn, The Business and Finance Weekly, March 4th, 2019