Fixated on the dollar

Published August 13, 2022
The writer is a political economist and heads the IBA, Karachi. The views are his own and do not represent those of the institution.
The writer is a political economist and heads the IBA, Karachi. The views are his own and do not represent those of the institution.

THE preoccupation of the Pakistani elite over the last several weeks has been simply to focus on the dollar-rupee exchange rate. For them, nothing else has mattered as much since the rupee lost a significant amount of its value.

One can understand why Pakistan’s elite is such an ardent follower of the dollar rate, since much of what they buy, where they buy it, where they holiday and the assets they hold are in dollar-denominated terms, if not literally then at least in their aspirations. Holidays and shopping abroad, the cost of tickets, education for their children, money being sent to support their offspring, and much more, understandably comes down to how easily and cheaply they can buy dollars. For them, the economy is simply the dollar rate.

This is also the case, it seems, for a huge section of the 7pm-11pm slot on television, known as ‘talk shows’, crafted around anchors who know nothing of basic economics. Many of these now very famous and influential anchors and other regular hosts know a great deal about politics, perhaps a little about complex, complicated and controversial judicial decisions, and a lot about what the military’s political machinations are, but the economy is not their forte. Fair enough, everyone has their niche and expertise.

What is surprising then, is that like most people who know nothing about a particular technical issue, they hold forth and demonstrate their complete ignorance. This is also the case with their political guests, most of whom attempt to score points against their political rivals regarding economic issues of which they know very little. As someone once wrote: everyone’s an economist these days, particularly those who know nothing about economics.

For these talk shows, over the last few months, it has also been the dollar-rupee rate which has mattered most, and the few economists invited as guests are absurdly asked to predict what is going to happen to the dollar rate over the next few days. As if we know.

This is not to argue that the dollar is of no consequence to Pakistan’s economy — far from it, for it is, what with our huge foreign debt and perpetual balance-of-payments crisis — but that it is merely one, albeit an important, metric about the state of the economy and nothing more. Moreover, it also not the single most important indicator about the state of the economy; there are numerous others which can claim that slot.

A thriving and robust economy which focuses on redistribution would be less affected by the exchange rate.

Read: How a strong dollar affects the economy — and your wallet

The dollar exchange rate does matter because we import most of our oil, and now increasingly, a greater part of our very basic food, as well as industrial and consumption goods’ inputs. If the price of the dollar were to double in a short span of time, one immediate impact would be, as it has been, an increase in the price of imported goods, particularly furnace oil, having a subsequent impact on numerous other goods and products, especially power tariffs and transport.

Economic and public action — and particularly inaction — could be of more consequence to the economy than the effect of devaluation. Many decisions have a far greater impact on people’s lives than how many rupees one needs to hustle to buy any number of dollars.

One of the most important aspects of an economy seldom discussed in these pages and never in talk shows is inequality, both in terms of access and as an input, but also, more importantly, as an output or consequence of neoliberal capitalist economics, which creates and accentuates inequality.

If the redistribution of opportunities and of resources was central to our economic and political economy, the dollar exchange rate would be of less consequence. What would matter would be job creation, equal access to free and quality education and healthcare. A thriving and robust economy which focuses on redistribution would be less affected by the exchange rate, with production and distribution mattering more.

Another equally important feature for a robust economy not in thrall of the dollar would be gender equality. Precisely when the chattering classes, at their dinner parties or on talk shows, were obsessing with the exchange rate, the Global Gender Report for the current year was published. The fact that Pakistan was second from last is of far more consequence than what the dollar rate is today, but other than a few op-eds, as always women were sidelined in the public discourse, because at that time everyone was apparently too concerned with the dollar rate.

Even if the public discussion would not have been held hostage to the dollar rate, this annual report would have received little coverage. Yet what happens to gender is far more important than what happens to cheaper trips abroad.

When the dollar-rupee rate comes down, as seems probable — at least temporarily, for some months — the persistent and ignored problems related to the economy will continue to be brushed under the table. Who wants to talk about strong and progressive taxation affecting the rich, or gender equality, or redistribution of resources? It’s always sexier to talk about the dollar on talk shows or on op-ed pages.

Imagine a talk show on equal rights for all, or opportunities for the poor other than the Benazir Income Support Programme. The longer we ignore substantive issues, the more our economy will be counted as amongst the worst performing in the world and having the third highest inflation currently. Once we better manage our economy, concentrating on the economic rights of individuals, redistributive justice and taxing the privileged who continue to lobby to get their miniscule tax imposed on them overturned, the dollar will become insignificant.

Until then, expect more chatter at dinner parties of the privileged and on television by the uninformed, all fixated on the dollar.

The writer is a political economist and heads the IBA, Karachi. The views are his own and do not represent those of the institution.

Published in Dawn, August 13th, 2022

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