Daily Times

Neo here is not the fictional character from Matrix who can stop bullets with a wave of his hand, although perhaps that is exactly what we need; here it means new or young as in ancient Greek. For the record, we did not invent the neo economy; rather it was thrust upon Pakistan by those from whom we borrowed money. However, as time passes, their – our creditors – end game becomes more and more curious, and, in fact, perhaps nerve-racking. When they have completely conquered the markets, marginalised local industry and acquired national assets in satisfaction of their debt, which will probably still remain unpaid and at colossal levels, what will be the next demand. Okay, as usual jumping the gun here.

Economic theories are like a fad, remember the socialism fad of the 1970s, when, in line with global happenings, the government nationalised everything, and effectively destroyed private wealth. But the ‘Empire’, private wealth, stuck back in the 1980s when economic think tanks started publicising and promoting free markets, and everybody started privatising. Remember the famous quote that intellectuals still love to throw around: “The business of the government is not business.” And then the Empire, having taken back control from their home governments, wanted to conquer the world, and promptly their obedient think tanks dreamt up globalisation. The key message was that it multiplied consumer choices, and made everybody richer because of huge markets and what not.

Obviously developing countries were genuinely, and rightly sceptical about the benefits of globalisation, since history made it pretty obvious that the ranks of developed nations had practised protectionism, currency regulations and mercantilism to get where they are now. Promptly, multilateral agencies came into the fore.

A senior foreign expert analyst from the Multilateral agency: Listen developing country, don’t you need money to import oil or buy bombs to fight your neighbour? Then first relax your currency regulations, enforce copyrights and most importantly open your borders for trade. And don’t worry once we confirm that you have followed these directions, but let’s call them reforms for good optics, you will be labelled an emerging economy and then more people will want to lend to you, and you can buy more oil and, well, defence equipment, since we need to be politically correct about that too”,

A worried developing nation: Fantastic, but how will we pay back all that money?

Senior foreign expert analyst: Well, you really aren’t in a position to question the leading economic theory, which stipulates that unregulated flow of currency ensures that money flows upward and outward from the third world, with a probability of trickling back downward and inward in the unforeseeable future, with this outward flow increasing liquidity in the first world debt markets, which in turn spurs investment in productions facilities, rightfully owned by those controlling money supply, which facilities depend upon free movement of raw materials from developing countries, obviously at a compensation determined with the charitable objective of providing just enough funds considered necessary for subsistence of the poor masses of the exporting nations, and thereafter followed by free movement of finished goods into the same developing countries for the purposes of alleviating the consumer choice and quality of living for a selected class within the developing nations at a price sufficient to make it worthwhile for the producers and the investors, who are willing to provide this global service subject to the condition that imports be protected by copyrights so as to ensure these are not replicated in the importing country which act could potentially hamper the free flow of raw materials, finished goods and currency and in fact result in global confusion and bankruptcy of a number of economies.

An even more worried developing nation: Brilliant… I think. Except, could you explain unforeseeable…and the question was how we will ever pay back… and what did you just say, by the way?

Senior foreign expert analyst: Economic theories postulated by the leading international economists developed under strict scientific principles and complicated mathematical models, which no ordinary mortal can generally understand, can only be tested and proven under stricter conditions which are the precedent assumptions for the underlying models of the respective and related theories, and since these assumptions need therefore to be kept constant at all times to prove the model and hence the theory, which is impossible and improbable in the real world, therefore the theories themselves remain unquestionable “And do you want the money or not?”.

The rest is history.

But things are changing now since those who pushed for globalisation have now started realising that somehow the benefits are not accruing to them the way they were supposed to. The mêlée of economic theories, which remained unfathomable, did not work out the way they were supposed to in the real world since currency valuations impacted trade and cheaper imports resulted in exporting jobs abroad even from the west. The reason Mr Trump, the leading republican candidate, now talks about slapping high tariffs on Chinese goods. What was good for the goose does not work for the gander when the shoe is on the other foot. A study, published in The Economist finds that, “In the short run America’s gains from trade with China are minuscule. The heavy cost of those dependent on industries exposed to Chinese imports offset most of the benefit to consumers…”

And The Economist is not the only one to publish views that US economy died when middle class jobs were offshored and the financial system was deregulated. Pertinently, workers are consumers as well, and accordingly, losing job means losing consumers and hence economic growth. The exporting country, on the other hand, not even increases jobs it also gets more consumers. Unbridled imports are a double whammy. In our case, the question is that if imports result in exporting jobs and consumption abroad, then what exactly are we importing and should we? Considering that our industry cannot compete with China at all, and pretty soon with unquestioned access to the length and breadth of Pakistan, a downside of the famed CPEC, there is a strong probability of Chinese imports flooding our markets, we probably need to listen to Mr Trump’s rhetoric.

Even if inflation is down, low wages and increasing unemployment will invariably impact consumption. Perhaps it is time to ignore leading ideologies and focus on specifics, deciding what is good for employment and welfare of the masses rather than focusing on inflation and financialisation of the economy. Belief in free markets does not mean driving off a cliff; if breaks need to be applied once in a while, so be it! Let’s get a Neo to fight the Matrix.

The writer is a chartered accountant based in Islamabad, and can be reached at syed.bakhtiyarkazmi@gmail.com