Debt: a longer view

Published January 13, 2023
The writer is the author of What We Get Wrong About Education in Pakistan (Folio Books 2022) and Pakistan ka matlab kya (Aks Publications 2022).
The writer is the author of What We Get Wrong About Education in Pakistan (Folio Books 2022) and Pakistan ka matlab kya (Aks Publications 2022).

“INSANITY is doing the same thing over and over and expecting different results,” is a saying intended to suggest that such behaviour is stupid. Is that interpretation correct in the context of our debt crisis?

Pakistan is in an IMF programme for the umpteenth time. Neither the remedy nor the outcomes have ever varied. Instead, the situation has progressively deteriorated to the point where the country is staring into the abyss. How does one explain this endless repetition in the framework of stupidity?

It would be hard to argue that highly qualified IMF staffers are stupid. Those on our side are remarkably adept at advancing their own interests; their cleverness is the envy of many. So, what gives? Could it be there is a method to the madness and only the public is stupid enough to swallow the same story repeatedly, missing the forest for the trees?

Debt has an old history and we would gain by reading David Graeber’s 2011 classic Debt: The First 5,000 Years whose major argument connects the enforcement of debt with state-sponsored violence. For our purposes, we need only go back 100 years to recall when India was a colony, ruled to enrich Britain not the Indian masses.

Former colonies have been kept economically captive, serving the same purpose in the global economy as they did before decolonisation.

Who would argue that after decolonisation the former colonists had a change of heart and became devoted to the welfare of their erstwhile subjects? The evidence is quite the contrary — neocolonialism emerged as the continuation of colonialism by other means.

Consider the evidence. First, the placing of ruthless strongmen like Somoza and Stroessner (‘our bastards’ according to one US president) wherever the interests of powerful states were at stake, reducing many nominally sovereign countries to ‘banana’ republics. Second, the removal, often by assassination, of leaders who threatened to prioritise national over foreign interests, eg Mossadegh, Allende, Lumumba. Third, by resorting to regime change when all else failed, eg Noriega and Saddam Hussein.

These extreme examples leave little doubt that the objective in every case was to ensure that former colonies — now politically liberated — remained economically captive, continuing to serve the same purpose in the global economy as they did before decolonisation. It was to make these countries safe for capital that needed profitable outlets and to serve as outposts of the imperial system on the side of the ‘free’ world.

The desideratum, of course, was to do without such extreme measures which revealed the ugly face of neocolonialism that critics could decry. Inconspicuous arrangements were much to be preferred. These required three elements: pliant national rulers who would play along; a policeman who would make sure they did; and an instrument that would tie the two together.

All three were available. There was no shortage of pliant rulers of the type Mao colourfully called ‘the running dogs of imperialism’; the policeman was the IMF whose rules were drafted by the big powers who also exercised a veto over its actions; and the instrument was debt. It was no surprise that an analyst as astute as Samuel Huntington considered Ayub Khan just the kind of leader newly liberated colonies needed rather than someone like Suhrawardy who might have proved less amenable to signing on to the dictates of neoimperialism. Ayub obliged promptly by strengthening ties with the US and opening the debt pipeline that briefly offered the captivating mirage of Pakistan turning into a model of development.

Lest all this seem far-fetched recall some aspects of our past and present. During colonial rule, even princely states not directly under British rule had an Office of the Resident with the authority to depose rulers acting against the empire’s interests, a practice we continued with political agents in Fata. And we long had the institution of indentured farm labour, tying down generations through the manipulation of debt which continues today in the brick kiln industry where lenders and contractors flourish at the expense of workers.

The analogy should be clear: we can recognise the managers, the contractors, and the workers in the global system. We have seen, repeatedly, the crushing of trade unions, austerity for the majority, and the carrot-dangling of debt forgiveness and cancellation that keeps the system alive by securing new debt to pay the old, the variation across countries being a function of the relative competence and honesty of their leaders.

Is there a way out? Think of the examples from history. Instead of forgiveness, cancellation or renegotiation, the USSR repudiated all debts in 1917; China did the same in 1949 and Cuba in 1961. While the US was able to suffocate Cuba with sanctions (after attempts to assassinate Castro and an invasion), the other two built up robust economies, against stiff opposition and at huge cost, once freed of the yoke of debt. Attempts to find pliant rulers, the White Bolsheviks in Russia and Chiang Kai-shek in China, failed. The USSR became powerful enough to force a long Cold War; China lifted millions out of poverty and is now so powerful that a new cold war is in the offing.

This history suggests no relief for Pakistan. Whether the country defaults or not is missing the point. The majority is fated for grinding austerity while exporters gain concessions and pliant rulers receive fresh leases to perpetuate the status quo. Just as bonded labour continues to exist despite its gross ugliness, so would dependent capitalism till its chains are broken.

The New International Economic Order and the Non-Aligned Movement promised one such possibility for economic liberation but was snuffed out. Perhaps it wasn’t a surprise that the BCCI, which was emblematic of South-South collaboration, was decimated so ruthlessly while many other global banks engaging in similar practices got off with lighter penalties.

This may not necessarily be the right explanation for our predicament but we do need to think of alternatives. Those who keep telling us we have to go to the IMF else we won’t survive are not doing us any favours. At the very least, their second ‘we’ does not include the vast majority of poor Pakistanis.

The writer is the author of What We Get Wrong About Education in Pakistan (Folio Books 2022) and Pakistan ka matlab kya (Aks Publications 2022).

Published in Dawn, January 13th, 2023

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