A barrel of woes

I should have used a longer title for this article and called it "A barrel of woes and a tank full of worries". The reason is that the subject I will cover today is not just what is happening to the world oil markets and how that would impact the global economy and the economy of a country such as Pakistan that depends so much on the availability of imported oil at an affordable price.

Sultan Ahmad, my columnist-colleague, alerted his readers on October 21 of the likely consequences for Pakistan if the price of oil remains at the record levels it touched in the past several weeks in the international markets. He is correctly worried about the negative impact of this unhappy development not only on the rate of inflation in the country but also on the rate of growth of GDP.

He was concerned that the recent pick-up in economic growth might be stalled if the high price of oil is allowed to dampen investment and consumption. There is a worry that the poor will be hurt since the present price policy does not protect them against a sharp increase in the cost of imported fuel.

But not letting the domestic price of imported fuel move with international price would not be the right policy to adopt to cushion the impact on the economy. Such an approach would only create a large fiscal burden and postpone the adjustment the economy needs to make to some time in the future.

The right approach would be to adopt policies aimed at the way the economy uses energy in order to direct it towards the sectors that have the largest social impact. I will return to this point a little later. For the moment, let me go back to the international oil markets and discuss how their recent performance is likely to influence the global economy.

On October 15, the price of a barrel of oil crossed $55. This was a record in nominal terms; in real terms, the price adjusted for inflation, was still below the level it reached after the "second oil shock" delivered by the Opec in the late 1970s. In spite of the sharp increase in oil prices in the last several months, the record established in 1981 has not been beaten. In other words, the impact of this increase on the global economy may not be as severe as it was a quarter of a century ago.

This is particularly the case for rich economies that now use a smaller amount of oil for every unit of domestic output they produce. The main difference this time around is that high oil prices are here to stay for some time to come. The global economy made a number of adjustments to high oil prices the last time they increased. This was possible since there was a great deal of waste in the way energy was used in rich countries, particularly in the United States.

Over the last two and half decades, the pattern of global consumption changed in significant ways. While consumption as a proportion of GDP has declined in industrial countries, this has not happened in the developing world. China - and to some extent India - have become major consumers of hydrocarbons.

The unrelenting demand in China for energy will continue to create pressures on global demand that will not abate in the foreseeable future since the consumption per head of the population in that country is still considerably below the average in rich countries. If India's growth rate also picks up there will be a further upward push on prices.

The immediate impact on the global economy of high oil prices, however, will be via the American economy. This, in turn, will be the result of consumer behaviour. The American consumers have accepted for now the prevailing view in the market that the current hike in oil prices is the result of shocks that will work through the system without influencing long-term trends.

It is believed that exceptionally severe hurricane season in the Gulf of Mexico and the states in that region - a region that is a major source of supply for the United States and also the location of a significant amount of refining capacity - created shortages that will be temporary and, therefore, will not have a long-term impact.

Accepting this interpretation, households in America have gone back to the stores and retail sales increased by 1.5 per cent in September. These were fuelled in part by a significant increase in automobile purchases, an item whose demand for obvious reasons is influenced by the price of oil. The consumers were convinced that the increase in the price of petrol was a passing phenomenon and would not leave a lasting impact on their pocket books.

However, if price rises persist - even if they remain close to the present levels - consumer sentiment may change suddenly. If that happens, the US economy would be badly hurt since it depends on consumption as the main driver of growth. This, however, is not the only negative consequence on the American economy of high oil prices. The country's exports will also be hurt as the purchasing power of those who buy American goods and services will decline in order to accommodate increase in oil prices.

The US has factored an increase in exports in projections of a healthy economic recovery in the remaining months of 2004 and in 2005. There was an expectation that the significant drop in the value of the dollar would help to increase exports and bring a semblance of balance to trade. However, the trade imbalance widened sharply to $54 billion from $50.5 billion in July.

According to Alan Greenspan, the perennially optimistic chairman of the US Federal Reserve, the risk for the American and global economies "of more serious negative consequences would intensify if oil prices moved materially higher". He went on to assert that such a move seemed unlikely although the world will have "to live with the uncertainties in the oil markets for some time to come." What is likely to happen is that oil prices will fluctuate wildly as perceptions continue to change significantly about long-term global demand and it is this aspect of the oil markets that is of great concern to countries such as Pakistan?

There are now more variables in the oil demand equation than was the case in the past. Will American consumers scale back their purchases if the economy shows signs of weakening? Will China be able to constrain the rate of economic expansion by producing a soft lending? Will the rate of growth of the Indian economy pick up and reach the level attained in the 1990s? Will the situation in Iraq stabilize, and will that country join the ranks of major exporters of oil, as was the hope when the Americans launched their invasion? How will the political situation evolve in Saudi Arabia and how would that affect that country's participation in global oil business?

A negative answer to any of these questions will rock the international markets. The consequences would be really grim if more than one of these variables move in the wrong direction. The probability of unfavourable developments remains very high which is the reason why policymakers in Islamabad must brace themselves for sharp fluctuations in oil prices around a level that will remain high. Also complicating the global energy picture are some recent developments in the sector of natural gas.

Natural gas is the fastest-growing source of primary energy in the world, with global consumption estimated to increase by over two per cent annually through 2025. In the United States, once again the largest consumer of this fuel, consumption is likely to increase by 40 per cent over the next two decades. Some analysts believe that a number of changes are occurring in these markets that will have a profound influence on the supply and long-term price of this important fuel.

Russia, the world's largest producer of natural gas with 28 per cent of known global reserves, is central to these changes. It is following an approach that might result in creating an Opec-like cartel for natural gas. Russia would dominate such an arrangement to a much greater extent than Saudi Arabia has managed to do in the business of oil.

Moscow has tightened its grip on the suppliers of natural gas in the region it calls its "near abroad". In April 2003, Gazprom, the Russian gas giant, concluded a 25-year deal with Turkmenistan to purchase natural gas from that country. This way it will be responsible for managing the entire export of gas by that large Central Asian producer.

In June of this year, Presidents Vladimir Putin and Islam Karimov (of Uzbekistan) signed an agreement that gave Gazprom the right to develop Uzbek gas reserves. The Russians are also negotiating a deal with Tashkent that could result in Moscow acquiring a 44 per cent share in Uzbektransgas. Moscow also has an interest in developing Afghanistan's gas reserves.

What are the various options available to Pakistan to deal with a complicated and unstable global energy situation? State policy in the sector of energy has three components - price, supply and demand. On the price and demand sides, past policies have allowed household consumption to increase at the expense of consumption by industry and agriculture. While there may be a case for helping the poor this has to be done with care since subsidies directed at the poor have a way of being captured by the well to do.

As already indicated, it may be tempting to keep the price of various kinds of fuels low through state subsidies. Such an approach would do long-term damage to the economy. Instead, the government should adopt policies that help reduce fuel consumption while, at the same time, develop alternative sources of supply.

On the supply side, Pakistan can no longer postpone the exploitation of the only source of energy that is available in abundance - hydel power. Political disputes among the provinces on the location of storage capacity have caused expensive delays in the construction of dams at Bhasha and Kalabagh. This must not be allowed to continue. Also on the supply side is the question of providing incentives to the private sector to invest in the development of gas and coal reserves.

Pakistan has a large deposit of coal. To use this for generating electricity will need to be done in an environmentally friendly way. The Chinese have developed technologies for the clean burning of coal for producing power. These could be imported into the country. Still on the supply side is the question of participating with countries in Central Asia including Afghanistan, with Iran and with states in the Persian Gulf to bring natural gas not only to Pakistan but also to all of South Asia.

What is needed, in sum, is a comprehensive energy policy that is economically viable and politically acceptable to most segments of the society.

Uncertainty marks today's US polls

The outcome of the US presidential elections being held today will be too close to call. But in some sections of the American public opinion, there are fears that the result may not be known for several weeks, with the possibility of a lawsuit on voter registration problems and that provisional ballot counting or possibly postal ballots may deciding the fate in a few so-called battleground states.

If current estimates are to be believed, the result of one small Midwestern state, e.g. Wisconsin, going from Bush to Kerry could tip the balance in latter's favour. There are similar situations in some bigger states like Florida, Pennsylvania and Minnesota. Under the peculiar laws of the US system the winner of the popular vote in a state gets all the "electoral votes" of the state.

The electoral college consists of the combined electoral votes assigned to each state respectively on the basis of its population. Thus it is possible, and indeed was the case in the 2000 elections, that the winner of the popular vote may end up losing the elections owing to the arithmetic of the electoral votes. Hence the importance for both candidates of trying to push those states that are just at the edge, over the edge.

It is clear that despite concerns about domestic issues e.g. about jobs going overseas, the ballooning federal debt and the cutbacks in social spending under Mr Bush, the emphasis of the campaign and the voters' primary concerns have been the "war on terror", the war in Iraq, and their own security in a world that they do not comprehend.

The Republican campaign portrayed Senator Kerry as someone who has changed his position on the war in Iraq and cannot be trusted with the security of the country. TV talk shows made fun of his stated intention of taking the world along in such ventures as attacking another country in the pursuit of terrorists, as "seeking their permission" before he acts to protect America's security.

Senator Kerry, of course, referred to his war record in Vietnam to establish his patriotic credentials and putting his life on the line as opposed to President Bush whose family connections enabled him to spend the war years in the safety of National Guard duty in the US.

It was astonishing for an outsider watching these endless debates among partisans from both sides, promoted by media stalwarts whose primary concern, as always, remains network ratings in their cut-throat competition for advertisement money, how little diversity there has been in analysis and discussion.

There was apparently an unwritten agreement between the two parties on not even mentioning some issues that the rest of the world feels are basic to understanding the phenomenon of terrorism as it affects the US. These discussions did not focus on the fact that terrorism is heinous and totally unacceptable for all civilized human beings, not Americans alone.

There is also a political dimension to this problem that has to be understood and addressed in the context of the role of the US in the political processes of these countries producing "Islamic" militants. Terrorism is simply taken as an irrational phenomenon to be addressed militarily, in defiance of international laws and obligations, if necessary.

Secondly, no mention is made of the connection of Israel and the Palestinian problem to this terror threat, or of the anti-Americanism that the US's unqualified support to Israel generates in most of the Muslim world.

Another issue made conspicuous by its absence from the discourse is the devastation taking place in Iraq, of the Iraqi people and society. While the loss of American lives in Iraq remains a very sensitive issue, and is apparently creating unease among many people in the US making them feel the echoes of Vietnam; there has been no discussion ever of the horrendous killings and casualties of the Iraqi people in this continuing conflict; no admission of the fact that the US refusal to hand over matters to the UN after the fall of Saddam, is a key factor in fuelling the insurgency there.

While recognizing that no weapons of mass destruction were ever found, there is no remorse over the fact, no sense of wrongdoing, at having invaded a country on the basis of doctored intelligence reports, recognized as such even by key members of the intelligence subcommittee. That key members of the Bush administration were pedalling their own agendas and played havoc with a country that had no connection to the terrorist attacks in the US in 2001, found no mention in popular discussions.

It was significant to note that during the course of the presidential debates Senator Kerry pointed out the apparent contradiction between President Bush's statement of withdrawing US troops as soon as the Iraqi troops were able to fend for themselves and the declared plans to establish several US military bases in that country.

The level of unawareness in many Republican voters, as surveys have shown, is such that some still believe that weapons of mass destruction were indeed found in Iraq; that there was some connection between Saddam and the terrorists, while for many others, the US is the target of terrorists for the reason that "they hate our freedoms and our way of life".

This irrational fear that Kerry has correctly pointed put, though not identifying it in so many words, remained the single palpable theme of this election. Aware that if this continues to dominate the mind of the electorate he would not be able to unseat the sitting war president, even one as obviously a blunderer as Bush, Kerry emphasizes that he would want people to vote "not for fear but for their hopes".

In a revealing statement President Bush accused his rival "of having a pre-9/11 mentality", seemingly suggesting that the realities of the world have somehow changed fundamentally after that momentous date. One feels sorry for Senator Kerry since he appeared to have realized the folly of his country, at least in trying to take the war to Iraq, but cannot articulate the reasons for this folly in a convincing way for fear of alienating mainstream America.

At the same time, he was unable to satisfy those who wanted a clear statement about the wrong that has been done and what the alternates to Bush's policy are for the next US government. Kerry has thus chosen to target the president for having sidetracked the war against terrorism by defocusing it from Al Qaeda and Osama by attacking Iraq. By implication he means that Iraq had no connection to the attacks against the US, which seem to have become the defining moment of contemporary US history.

Senator Kerry, while highly critical of the decision to go to war, unfortunately could not articulate the domination of the US corporate interests and Israeli political interests in defining this course of action. That would be political suicide in a country where mention of corporate interests wins you the label of "radical" and criticism of Israel, that of a "Jew hater".

He has been critical of President Bush's tax cuts to the super-rich and the burden it has put on the middle and lower classes and in doing so has played the populist themes of the Democratic Party, but going by the surveys he has not been able to light a fire due to his very cautious approach. Kerry's constraint, lest we forget, is that the Democratic Party too is funded by some of the same corporations and it too stands to benefit from the control and hegemony over resources and decisions of other countries for which these wars are basically being waged.

It is clear that the elections while being very close shall also witness probably an unprecedented voter turnout in modern times. The black community, in particular, is not going to see itself being disenfranchised as it partially was last time round when thousands of black voters found their names struck of the electoral lists, on one pretext or the other.

Over 20,000 volunteers including over 5,000 lawyers and law students are ready to fight for ensuring a fair chance to their supporters. It thus appears that the wild card in this very tight race is going to be the voter turnout, a very high one most likely favouring Senator Kerry.

One consequence of this enthusiastic involvement of the public, and a positive one at that, is that irrespective of which candidate wins we may expect to see a significant change of US policy regarding unilateral interventions. While a Kerry win shall see him relying more on building a consensus with the allies and the UN, a chastened Bush with a very narrow victory, in an election fought on the issues of Iraq and the war on terror, is not going to be in a position to push through unilateral military agendas without invoking a storm of protest from a very large part of the American public.

The writer teaches physics at Quaid-i-Azam University and is a visiting scholar at the University of Delaware, US.

Greatest show on earth

The Americans go to the polls today and the tumult and the shouting will die. Or will it? Chastened by the experience of 2000 when a split verdict of the Supreme Court declared George Bush the winner, this time no chances are being taken and some 10,000 lawyers are at the ready with their challenges.

It is possible that the results may not be known for a few days. But this election seemed a long coming, or so it appeared and each day made the world an even more dangerous place. One had not expected Iraq to be an election issue. Usually the American voter is unconcerned about what is happening outside the continental limits of the United States. Vietnam never influenced the elections as such and only Lyndon Johnson called it a day because the anti-war demonstrations got to him.

But Iraq has forced its way to the top of the agenda and the choice before the voters will not be whether George Bush or John Kerry will make a better president but a better commander-in-chief. George Bush has campaigned almost entirely how his tough measures and his even tougher language has made the United States a safer place.

John Kerry who had started with domestic issues has now been reduced to hunting down the terrorists. There is no mention of weapons of mass destruction. If Saddam Hussain did not have them, there is ample proof that he wanted to have them, which is the same thing as having them.

There is no doubt in Bush and Blair's mind that the world is a better place without Saddam Hussain. This is the moral justification for the pre-emptive strike against Iraq. Besides, Iraq had invaded Kuwait, which was a violation of the charter of the United States. Not so when the United States invaded Panama and Grenada.

Even more where was this morality when the Soviet Union invaded Afghanistan? Of course the United States went to the aid of the Afghans but in a circuitous way, by remote control, arming the Afghan freedom-fighters using Pakistan as a conduit and getting Saudi Arabia to fund the resistance. But that is old hat and world has moved on.

This has been a particularly nasty election campaign and feelings have been running high yet there is no single overriding issue that divides the voter. The election is not a referendum on the war in Iraq. George Bush has done a remarkably good job in scaring the living daylights out of the American people.

The security alerts became so common that one would have imagined that they would have become the equivalent of fire-drills that are carried out from time to time in big buildings. Yet the security alerts, which were always based on credible intelligence managed to convince the American people, that another attack by Al Qaeda was round the corner. The single greatest achievement of George Bush was that he was able to get the American people to believe that there was a connection between Saddam Hussain and 9/11.

Mountains of testimony exists to the contrary but Mahatma Gandhi once observed that it was possible to wake up a person from his sleep but impossible to do if the person was only pretending to be asleep. The American people wanted to believe that there was a connection between Saddam Hussain and 9/11. The Iraq war could not have been sold otherwise. Imagine weapons of mass destruction in the hands of the terrorists and Saddam had them and had links with the terrorists. It was a perfect set-up.

If Iraq is to be the key issue that will decide the elections, then a dangerous situation exists for the average American voter does not know that the war is going horribly wrong and though American casualties are relatively low, the Iraqis are paying a heavy price for being liberated. Present estimates by study groups put the number of Iraqi dead at 100,000 which seems to be a lot of collateral damage and the final assault on Fallujah is being readied, waiting the end of polling day.

In the final analysis it is the American people who will decide the direction they want their country to take. Last week I wrote that it would have to re-discover itself. It will have to re-define its political moral system. So long as there was the real fear that Al Qaeda might strike again and this fear was nourished and nurtured, security became the paramount issue. It was almost as if the United States was expecting an invasion by land, sea and air. Bush became a war-president and he relished the role.

Eternal vigilance may be the price of liberty. So far only the Middle East types and this includes Pakistanis have seen their privacy invaded and their civil liberties thrown in the dustbin. Indeed the trials and tribulations of the Pakistanis have been much worse because they are Muslims while many Arab Americans are Christians and pose a lesser risk.

Civil liberties once suspended have a way of remaining suspended. This is a personal opinion but the security of a country cannot be guaranteed through fear; people cannot live their lives waiting for the other shoe to fall. Democracy is America's greatest strength, not its military. It is democracy that has to be protected. And Guantanamo is a poor advertisement.

If the rest of the world envies the United States it is not because of its wealth. It is because it is a country that stands on the edifice of the rule of law. Once this edifice begins to erode then the United States will lose its uniqueness and its military might will not mean much.

Primacy of textbook revision

OF late, textbook and curriculum reform has become a controversial issue in the country. This is one thing that the government urgently needs to address but often meets strong resistance from certain sections of society - not only the religious, conservative elements but a section of the ruling PML itself.

The former education minister, Zobaida Jalal, had to face the wrath of the obscurantists and extremists over this issue. During her time as education minister, just about everyone and anyone of significance was trying to get into the fray. The religious affairs minister (as he often does) was busy issuing statements that went against what the government seemed to be saying over the matter by contending that no change at all would be made in the textbooks.

In fact, it was all quite confusing: the education minister trying to defend in parliament changes that were made or were about to be made in the textbooks; the prime minister saying that no changes that went against the spirit of Islam would be tolerated and constituting a committee; the Punjab chief minister saying that no changes contrary to the Constitution of the country would be made; and heads of the various MMA component parties declaring that they would not rest until the government reversed its decision on the matter.

While all this was going on, a lot of unpleasant things were said against Ms Jalal and a lot of invective was thrown at her. To add fuel to an already overheated situation, accusations were made that all this was being done at the behest of Washington, since it was providing about $100 million in aid of education sector reforms in Pakistan, and curriculum revision was part of these reforms.

Now we have a new education minister, former ISI chief Lt-Gen (r) Jehangir Ashraf Qazi. According to a report a few days ago, he told a meeting in Islamabad that curriculum revision was an important matter and that its aim would be to ensure that the country's textbook's were "error free". If they were really to be error free then we probably would need to have, in most cases, new books with entirely different content. Also, it is not yet clear from his remarks whether the ministry intends to resume textbook revision in addition to revising curriculums although these two cannot be separated from each other.

Whatever intentions of the government, one thing is clear: textbook revision is necessary and this fits in perfectly with President Musharraf's vision of 'enlightened moderation' and of making Pakistan a progressive state.

Of course, he has to match his words with his actions by actually taking some concrete measures.

Purging our textbooks of the material that promotes hatred and intolerance is important for two very cogent reasons. One, the way the textbooks are structured and written, especially the ones on Pakistan studies and history, they tend to disseminate historical inaccuracies and misrepresentations which in turn breed intolerance and bigotry. It would be quite fair to say that the students who use these books are being fed with lies and propaganda into believing the official state-appropriated version of Pakistan's history.

Historical events are included only selectively, one primary criterion being whether they were Islamic or not. Major events which happened as a result of bad government policies or because of lack of democracy or good governance are excluded and the students are unable to identify the reasons for failure of a particular policy.

A case in point is the almost cursory treatment in most Pakistan Studies and history textbooks of the separation of East Pakistan in 1971. While the people of that province are accused of nourishing unpatriotic tendencies from the outset, hegemonic role of West Pakistan and its political leaders, and the atrocities committed there, go uncriticized. All this is against the grain of good and accurate historiography.

The universally accepted definition of history is that there should be a strong element of historical continuity, rather than selectivity, and that facts and events should be accurately represented and that things should not be excluded or included on the basis of religion or a particular ideology.

The textbooks always show non-Muslims, especially Hindus, in bad (read anti-Pakistan) light. Does this mean that members of the majority community can never act in ways that harm their country? Recent history tells us that it is the majority community which probably causes more harm to Pakistan than any of its minorities.

And what about the fact that over a million Hindus have been living in Sindh, since pre-partition days? Are they all anti-Pakistan as well and are their loyalties in doubt? The answer to both would be yes, if one were to believe the authors of our Pakistan Studies and history textbooks.

By indulging in this constant 'leapfrogging', jumping from one period, ruler, culture or civilization to another, our textbooks greatly overplay certain events/civilizations/periods while practically ignoring the role and contributions of others.

When religion and faith are made the criterion for inclusion or exclusion of an event or period that occurred in the past, then what we have is not a history but an ideology. Should our schools be teaching young impressionable minds twisted and warped accounts of the past? The answer to both would have to be a resounding 'no', if we want Pakistani society to move forward.

The second point is an extension of the first. While textbooks revision does not have an overt foreign policy dimension it does have the potential to do something that the government has been striving for quite some time now: how to improve its image abroad. The president, and now the reformist-minded prime minister, repeatedly acknowledge this and say that the country suffers from a serious image problem - and this is something that those who have an objective view of things will agree with. So how do we get rid of this image?

Of course, this will take a long time and cannot be done overnight. To tackle it through increased security and better intelligence and by spending more on law and order is only a short-term option. This the government has to do. However, what it needs to do in the long run is something that has to do with checking the increasing level of intolerance and hatred in society.

Those who think that only the extremists are the practitioners of such vices are wrong. The sectarian terrorists and the suicide bombers are the ones who act on such perverted notions, but there are many more who subscribe to such views - those who believe in sects and look down upon those belonging to other sects. There is a growing tendency to bring religion into just about everything, and when that begins to happen in ordinary discourse that can assume dangerous proportions because no room is left for debate or discussion.

Regrettably, this begins at quite an early age and children are conditioned to it when they see it happening in their textbooks. English or Urdu language books have several lessons related to religion and those on Pakistan studies or history are filled with references to our Islamic past.

Pakistani history is equated with the history of Islam in the subcontinent, but not since 1947 which might make some sense, but with the arrival of Mohammad Bin Qasim in 712 AD.

This kind of historically inaccurate material also has a strong subliminal effect on the students many of whom, as they grow up, end up having little if any tolerance for other faiths and cultures. To make matters worse, policies of some western countries, notably America, only feed into the psyche and thinking built up by exposure to such textbooks.

So, it is in our national interest to purge our textbooks of this kind of material. There is no need to have several chapters on religion in English or Urdu books.

The material used in Pakistan studies and in history textbooks needs to be thoroughly revised to make the former more cognizant of the contributions and role of non-Muslim communities and cultures in Pakistan.

Once the revision issue is settled and assuming that the undesirable material is taken out, the government then needs to take a closer look at the monopoly enjoyed by the provincial textbook boards. The provincial education ministries should invite, through public advertisements, education experts from the private sector to contribute to textbook development. Similarly, as far as actual printing is concerned, publishers from the private sector should also be allowed to bid for printing contracts.

Government bureaucrats should not have the sole say in who gets these contracts and instead a committee comprising the education minister, secretaries and reputed academics should be established to run this process and award contracts on merit.

Preferably, a single publisher (as happens now in the case of the government-owned textbook boards) should not be given a contract but several should be chosen so that there is an element of diversity in the textbooks. Finally, schools should be given enough leeway to choose between the textbooks on offer.