Daily Times

Economic dependence of developing countries on developed countries, and international financial institutions, is not just coincidental but is largely a result of a particular cultural mindset based on geography, colour, caste, creed, religion, norms, ethos and customs. Humans, since their coming into being, have always been living in groups, tribes, factions, undivided families, ethnic diaspora, differentiated geographical entities, counties, villages, towns, cities, countries and even continents. This division can inflate beyond the narrow confines of the earth in case life is found on other planets. Such divisions, as humans feel, give them social identity and identity is a source of strength and power.

In other words, there has always been an identity crisis throughout the human history and its main reason is the human desire for the acquisition of unlimited power by hook or by crook. In search of this power, many European countries colonized the weak countries in the past, looted their resources and strengthened their own economies. In order to understand the human lust for power, it is pivotal to dig the human psychology that inherently loves identity through social fragmentation and cultural division. In this regard, Professor Daniel Kahneman argues that humans naturally ignore the challenges and inflate the benefits associated with their desires. His hypothesis about the human psychology was appreciated worldwide ultimately resulting in the award of the 2002 Noble Prize in economics for him. This suggests that the human desire for power gives rise to socioeconomic divisions in which some groups win while the others lose. That means someone’s loss is someone’s gain and this is what Pareto Optimality Principle roughly suggests.

In economics, the developed and developing world has been divided into ‘the North’ and ‘the South’ respectively. Another division may be observed from the frequent use of the notions of first world, second world and third world countries. The North-South divide of the world is widely based on various socioeconomic and political factors. The so-called global North consists of the developed countries, such as the United States, Canada, European countries, and developed countries of the Asia-Pacific region. The global South, on the contrast, is composed of developing and least developed countries. Here an interesting aspect of the global economic division is that the entry into the global North is not just restricted to the above mentioned countries because of their geographical location. It is rather the attainment of certain socioeconomic and political thresholds that enable a particular country to enter in this elite global club. China’s sudden rise, for example, is increasingly pushing it to disassociate itself from the global South. That means, China’s de facto entry into the global North is in the offing. It further suggests that powerful economies mostly make collusive arrangements with each other rather than opting for confrontation unless they are overpowered by conflicting long term strategic priorities.

Pakistan’s predominant ideology has, so far, not accepted the superiority of the Occident. As a result, the country is facing tough times about its perception by the international financial institutions such as the FATF

With this background, it is not difficult to understand why it is so important for Pakistan not to fall in the Financial Action Task Force’s (FATF) notorious grey list. It is because of the overlapping interests and collusive alliance of the global North, with an altogether different socioeconomic/political identity, that is in direct conflict with Pakistan’s socioeconomic and political priorities. The haunting grey list, on the contrary, is not important for many countries close to the socioeconomic priorities trajectory of the global North. Our earlier articles “Taxing crypto assets” (Daily Times, Nov 11, 2018) and “Handling FATF” (Daily Times, Nov 4, 2018) suggest pursuing robust technical and administrative interventions for meeting the FATF’s requirements. The suggestions are not primarily meant to make a blind compliance of the FATF’s directions but to strategically move Pakistan closer to the priorities trajectory of the global North of which China will soon be a part. Similarly in international conflicts, such as Afghanistan, the soldiers’ causalities from the global North and the global South can’t be equated. The death of a soldier from the United States, for example, is not deemed to be equal to that of an Afghan soldier or citizen. The professional competence of Pakistan’s armed forces cobbled with nuclear capability, however, has impeded the forces of the global North to treat it like Afghanistan.

This suggests that even death can’t equate the global North and South in international conflicts and economic priorities. This is a deep rooted ideological divide based on the perception of specific cultural, economic and political views held by the global North about the global South. Professor Edward Said specifically demarcates this division between the West and the East by coining the notion of ‘Orientalism’. His work is a kind socioeconomic discourse that explains how most countries from the global North got developed through the politics of fragmentation and the policies of division. In this regard, the Mediterranean Sea can be treated as the dividing line. The developed ‘Occident’ lives on its Western side while the underdeveloped ‘Orient’ lives on its Eastern side. Therefore, the world is witnessing a never ending tug of war between Occidentalism and Orientalism.

The perceptions of the Orient in the West are, therefore, characterized by underdevelopment and backwardness. This perception makes the Orient inferior in the eyes of the Occident. As a result, the Occident is not ready to equate the causalities of the citizens of the global North with that of the citizens of the global South. The treatment given to developing countries, similarly, is also based on this deep rooted divide perceiving the Orient as inferior. The concepts and practices of providing humanitarian and economic aid to developing countries, by the developed countries, are also meant to subjugate them ethically, psychologically and economically. The developing countries should, therefore, not accept hard cash from developed countries for long periods of time in the name of aid or bailout packages. They should instead optimize their efforts to increase economic growth through knowledge, innovation and indigenous entrepreneurship. This is the best way to handle and tackle the economic Occidentalism practiced by the global North.

When economic growth rate accelerates in Pakistan, for instance, it is an act that moves the country closer to the priorities trajectory of the global North. As mentioned earlier, the entry to global North is open to all countries depending on the overlapping of their socioeconomic, political and cultural development. The United Arab Emirates (UAE), for example, has recently been noted as the world’s second safest country to visit. It is because the UAE has taken major socioeconomic steps, arguably against its cultural norms, thus moving close to the socioeconomic threshold set by the global North. Its economic success and willingness to accept the Western supremacy are the main reasons for earning the title as one of the top safest countries in the world.

Pakistan’s predominant ideology has, so far, not accepted the superiority of the Occident. As a result, the country is facing tough times about its perception by the international financial institutions such as the FATF. Strategically, Pakistan must stop the policy of continuously seeking aid and hard cash from the global North. This practice will strengthen the Western perception about Pakistan as an economically backward state despite being a nuclear power. While dealing with the money laundering issues, the word ‘terror financing’ has been derived from the notion ‘war on terror’ and replaced with the earlier used term ‘illicit financing’. The move further strengthens the Western perception about Pakistan. There is, therefore, a need to ideologically understand that there is no alternative of hard earned money. There is also a dire need to get convinced that economic hardships and even failures are not bad. It is all about how a country perceives them through its policies. Another need is to inculcate problem solving approach in our policies with minimum dependence on external sources. That means knowledge, practical wisdom, innovation and indigenous entrepreneurship are the modes and means that can help Pakistan attain long run economic growth. In other words, long term economic growth has to be generated endogenously from within. In this context, seeking technical help from China can be helpful in bringing about a culture of self-reliance, sensible imitation, and innovation. It is because China is historically not part of the Occidental thought. Therefore, both countries can find common ideological grounds to move forward as a regional alliance in this particular context.

As far as FATF’s recommendations are concerned, it is convincing to argue that the practice of e-integration of Pakistan’s financial institutions is itself an exercise of capacity building and learning by doing. The disadvantageous aspect of the FATF’s requirements, as observed by some political analysts, is that undue pressure is being exerted on Pakistan reflecting double standards of the West. However, the advantage is that Pakistan, under the FATF pressure, can proactively pursue the badly needed integration of financial institutions enabling them to share data with each other. Smartly injected IT interventions can, however, prevent the misuse of data and their unnecessary sharing internationally. If done successfully, the e-integration of financial institutions and data sharing will also improve Pakistan’s ease of doing business indicators instrumental in accelerating long term indigenous economic growth. Achieving long term economic growth through advanced knowledge and indigenous efforts is the only way to counter the traditional Occidental thought that has, so far, treated Pakistan with distrust and disdain.

The writer is Additional Commissioner, FBR, holding PhD in Economic Planning from Massey University, New Zealand. The views expressed are his own. He can be reached at babarchohan21@gmail.com

Published in Daily Times, November 16^th 2018.