By Humayun Gauhar
Times present are acute uncertainty. Pakistan is certainly in trouble, but the world is in even more trouble. We are all in it together. So what ‘Happy New Year’ is everyone going on about? 2011 was far from happy and this one promises to be unhappier. The omens are dire. We claim that the Mayans think the world will end on December 13. Let’s see. But this much I do know: the convulsing Leviathan will start showing its new skin. Then we will know.
With so much to say, I can only make some points, but briefly.
2011 finally exposed the death of economics, something that had happened decades ago. A new economic philosophy will only emerge after the bones of the old one are interred.
The damage that Harold Laski’s half-baked socialist teachings in the LSE did to the Third World was matched by the damage that Keynes’ sodden capitalist teachings in Cambridge did to the First World. To be fair, it was rapacious Wall Street bankers who did away with Keynes’s inbuilt caution and misapplied his monetarist supply-side economics after they took over the global economy in 1981 when Reagan became president. They conjured fake wealth and illusory wellbeing by reckless spending, irresponsible borrowing and mindless consumption. That roller coaster ride has ended.
The bitter fruits of dropping the Gold Standard in 1971 and adopting a piece of paper without a shred of intrinsic value as the global reserve and trading currency are on display. Every world currency is without value. It has been the greatest gold swindle in the world, the most impressive con job.
Now the dollar is mighty no more. Actually, it never was. A new reserve currency will have to be found, but how? China could bring the Yuan closer to floatation, but it might meet the same fate as the dollar. Or it could launch a Global Reserve Currency this year or the next, but how? What will the GRC be based on? Hot air and promises again, just like the dollar?
Returning to the Gold Standard will raise the metal’s demand so much that its price would become prohibitive, even for governments. It’s a non-starter. Gold, in any case, is just a metal, no different from paper when you come to think of it. It has intrinsic value because it is finite. If it could be mass-produced its ‘intrinsic’ value would disappear. WANTED: An alchemist.
Talk of computer credits to replace paper currency has resurfaced. That is where the future of money lies if the world wants to move forward, provided ‘credits’ are international and their computerized databank is unassailable. It’s still not going to be easy giving international value to labour, services and goods and making the formula acceptable to all. Yes, if we want to move backwards, we could return to barter, countertrade and recognition of one another’s currencies for bilateral trading. Nothing wrong with that: Pakistan already has done this with China and Turkey.
This year, or soon thereafter, China will have to become the largest donor to the IMF, if it is interested. Then it will be within its rights to demand that it be relocated to Beijing. America will certainly balk; even print more dollars to pay the IMF to keep it in America, which is no solution. Then what? A new Chinese IMF?
Most of our exports, and of almost everyone else, are to America, Japan and Europe. When their imports diminish for lack of money and forced austerity, where will we export? Increasing domestic demand amongst a very poor people is easier said than done. It’s a pipedream unless you bring prices within reach, which we just don’t have the capacity to do being import-driven with imported inflation. Yes, we still have the capacity to commit suicide and start credit-based borrowing ourselves. We tried it in the last government and only created graveyards of cars and home appliances, turning banks into real estate funeral parlours.
Japan’s earthquake, Tsunami and nuclear accident revealed that it is over-borrowed without a hope of reprieve.
The Euro is done. Its collapse will likely become formal this year. It was always a non-starter, what with 17 fathers, none with enough fiscal and monetary authority to keep it out of trouble. The future of the European project seems dark. The EU could begin to unravel. Depends on how long it takes Germany to fail in this third attempt to extend its hegemony over Europe, economically this time, not militarily as in the first two, by acting bailer-out-in-chief with France behind its coattails. With German and French banks in dire trouble, what pipedream are they conjuring up?
The UK is bankrupt. The British must learn to live with their diminished status. They are a clever people and should be able to reconcile to loss of empire. If they do they can ensure that their country never becomes totally irrelevant.
As to the USA, the politest way one can put it is that they are up the creek without a paddle, except for the illusion that unnecessary wars can still end recession. The delusion that this is a recession, not a depression, will soon disappear. The danger is the illusion that having got out of Iraq they can again open a second front against Iran to prevent it from extending its hegemony over Iraq. Oil will pierce the ceiling and not only destroy the sole superpower but also the world. Such destruction, no matter on whom, and this will be on us all, is terrible, for all are human and not to be blamed for the circumstances of their birth. But perhaps this is the price mankind has to pay when a monster destroys itself. We have seen it again and again with no guarantee that the world will necessarily be a better place afterwards. This time, I wonder if there is any world left at all, a world worth living in. What…did I hear someone say ‘Israel’? What is that?
As to beloved Pakistan, never without crisis, it continues to thrive in Wonderland, while in reality its painful evolutionary experience grinds on towards fortune or failure that only a short time will tell. It would be uncharacteristic if it were not in crisis.
2011 started with Raymond Davis and ended with President Zardari asserting his political, physical and mental health. Only days earlier, while Pakistan’s chattering classes were on tenterhooks about their president’s health North Korea’s President Kim Jong Il died. Our president returned home. One hoped that some semblance of normalcy would return, but no way, because Pakistan cannot function without crises.
Betwixt came Abbotabad, Mehran, Salala, the ‘Memo’, NRO, break with America and international donors, the military-civilian cleft and much more, not least world class pontificating, chattering and rumour mongering. Oh, yes, towards the end came a seeming silver lining in the gloaming, the arrival of prodigal son Imran Khan.
The bottom line is: no one knows what, why and how, least of all our wiseacres of whom there is no dearth. Meantime, we just keep asking stupid questions with obvious answers while passing the buck to all and sundry, not looking for our own culpability –
“The fault, dear Brutus, is not in our stars,
But in ourselves, that we are underlings.”
Keep dreaming. Happy nightmare.