IN a nutshell, from experience alone, this economic plan is unlikely to work; why? Because six years ago we did exactly what they (the IMF) said for three years — with the net result that we are significantly worse off today.
And since they have consciously or unconsciously always prescribed the same medicine for patients like us, the world over, irrespective of the symptoms or ailment — which medicine, it can historically be proven, only added to the sufferings of those it purportedly was treating — why would it be different this time?
Of course, the GDP may improve again for a bit, albeit this time around that will require some serious fiddling and a lot more luck than just low oil prices, and the casino business will be booming again; but they accomplished all this the last time too, except what was really broke never got fixed — the real economy.
One is at one’s wit’s end, forever trying to comprehend this strange obsession with GDP; conspiratorially speaking, the developing world has been brainwashed to run after this useless indicator, similar to chasing the taillights of a truck.
This time we have a bigger national debt and trade deficit.
Nonetheless, considering the mess we were in, and the way the global financial systems are deliberately stacked against the ‘trying to be free’ world, there really was no other choice but to buckle under.
So, IMF, we are back; and this time around we have a bigger national debt and an even bigger trade deficit.
If not for the unending desire of the political elite to get elected by hook or by crook, including promising expensive lollipops to the voters, it can be argued that we might have sidestepped most of the white elephant type projects, and perhaps curtailed our debt.
If democracy had not forced the power hungry to buy votes, to the extent that we even subsidised luxury vehicles and other toys of the rich, let alone pay a crazy wheat support price which never got to those for whom it was supposedly intended, would the nation have racked up a monstrous debt, landed in a unassailable debt trap, and sold its soul to the devil? Probably not.
And those were not the only mistakes we made.
We partied endlessly on subsidised imported burgers, soft drinks, French fries and chocolates, and now wonder about the horrendous trade deficit and monstrous external debt; hilariously the solution that has been dreamt up is not to stop partying on subsidised imports, but selling subsidised State Owned Enterprises — the solution is rather reminiscent of the line from the Bard: “what fools these mortals be”.
Clarifying for the benefit of the uninformed mostly found on the idiot box, all of this is not based on fantastic assumptions; these are facts based on hard-core numbers, and the very few who understand numbers can vouch that while everybody may lie, numbers do not.
‘Fantastic assumptions’ is reminiscent of an old joke which rather aptly puts in perspective our propensity to search for imported technical advice for everything, rather than working hard and diligently ourselves.
We are obsessed with everything imported.
The joke: a physicist, a chemist and an economist are stranded on a desert island with a single can of food. How are they to open it? The economist answers: “assume we have a can opener...”
Doubtless, irrespective of whatever they might assume, higher interest rates will not get you a can opener, nor will a weaker rupee get you one, nor will the government spending less on development will make a can opener, nor can a lower fiscal deficit produce a can opener.
The only way to get a can opener is to manufacture one, and here is where we made the wrong choice; rather than making a can opener ourselves, we went with the economist’s suggestion, based again on the fantastic assumption that the better option is to buy one from someone who has a comparative advantage.
It never is the better option.
The imported one is definitely shinier, and it has those fancy buttons, and the cabin crew is so efficient and polite and smart, and the food tastes excellent; but you have a hole in your pocket and simply cannot afford an imported can opener, and you also don’t have the plates to print dollars.
So what will work?
Rather than getting drunk on borrowing, you should only have bought from elsewhere that which you couldn’t produce yourself, even if what you produced was older or less shiny; the state used to have this very mantra until it fired the watchdog over imports, and all hell broke loose; no marks for guessing that, once again, the genesis of this horrible decision was recommendations from the economists and their fantastic assumptions.
Bring CCIE back!
The writer is a chartered accountant based in Islamabad.
Published in Dawn, July 4th, 2019