Ramazan Mubarak, Dear Readers. As the nation continues to battle it out with the coronavirus, the experts warn that the Virus War will be entering a critical phase by the time this article is published. May Allah SWT protect our nation and give strength and courage to the health team at the forefront of the Virus Wars, Aameen.
Kudos to those who risk exposure to the virus simply to save other humans - indeed they are better people. Unity, faith, and discipline; we will endure.
On a different note, coming up with column titles every week is rather frustrating; especially when each time you think you have come up with something amazing, a Google search bursts your bubble - Hollywood beats you to that one too!
Oh well, back to the drawing board!
For those who are new to this column, the raison d'être is to jovially irritate everyone who believes that free markets, neoliberalism, capitalism, the Washington Consensus, Consumer choice, and this devil by whatever other name called, is the way forward for Pakistan or any developing country for that matter.
Welcome to the lair of the last mercantilist! Spend within your means, the bullion must come home!
But here is the twist. Now that the Virus Wars, beyond the tragic loss of human lives, continue to ravage the world economy, essentially annihilating free trade, and is fast moving towards reversing the tide of globalisation, the neoliberals in power and their supporters seem to be strutting; as if it was because of their policies that Current Account Deficit (CAD) for March 2020 is only US$ 6 million!
It is not because of the baker that CAD is down to US$ 6 million, it is not because of the butcher that the trade deficit is declining, and it is definitely not the doing of the brewer that interest rates are down and rupee is appreciating. All of that happened because people are locked down and are therefore not consuming.
Neoliberals are a funny lot; forced to always defend their fanciful fictitious motto - the market did it - in fact even when the butler did it, the market was the catalyst.
Whenever this column proposed policies to balance imports, exports and workers' remittance, arguing that there is no point in having trade agreements which result in imports twice the size of exports, and argued for protectionism for import substitution manufacturing, the neoliberals had their knickers in a knot. None of them appreciated the proposal to reduce consumption of motor spirit by increasing prices, and the critique of hot money was actively frowned upon. Now when all of that has come to pass - the market did it!
Nope, the market and market-based policies had nothing to do with it, and the quicker we accept that the better off we will be.
About roughly seven weeks ago, in my column titled "Lucky economy", the underlying theme was that economically we have survived against all odds on the back of sheer luck. Notwithstanding that we paid a very heavy price for being lucky every time, "if you do go with the lucky forever view, then there is hardly any reason to worry about policy or get into any economic analysis, just get a lucky guy on the top, which too is luck, and sit back and wait for luck to work".
Except this time around, perhaps, we need to be different; rather than simply relying on luck, we need to work at change: because all the evidence is against luck holding out forever.
It is great news that our external debt obligations have been deferred for one year, and let's keep our fingers crossed for a substantial debt write off. As a net importer, cheap oil is always good news. But we have been down this path before, we did get aid before, and oil prices did collapse before. Each time, to call a spade a spade, we made no efforts to build on our luck; we always simply partied away the breathing space the economy fortuitously gained.
Admittedly, the economic devastation because of the Virus War is not yet completely evident - most businesses may never recover, retail business may become totally different, workers' remittances may take a significant drop, exports could dry out, and unemployment could get worse - but this time around, let's at least plan ahead.
Consumption is down, people are expected to remain on an austerity drive for the foreseeable future, and consumer choice is not on the agenda anymore. The public sector will invariably have to take the lead in creating jobs. This, perhaps, is an appropriate time to adopt mercantilist policies. This time around let us ignore the neoliberals and go for good old fashioned planned industrialization and technology-based agriculture supported by protectionist policies.
The cycle of blaming the previous government for economic collapse, kneeling to the creditors whilst waiting to get lucky, thereafter claiming victory and partying the good times away, and hence leaving a mess for next time, needs to be broken - simply because this cycle is driven by political expediency and purely dependent on luck; minus luck it would have collapsed a while ago.
And the maximum luck you can get is nine lives!
(The writer is a chartered accountant based in Islamabad. Email: [email protected]. The views expressed in this article are personal. The views are not necessarily those of the newspaper)
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