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Conflict economics

A paranoid style of thinking is entrenching itself in our country, and a bizarre reading of our economic challenges and destiny lies at the root of it.

Over the last couple of days, while our airwaves have been full of talk about the bombings of the Hazaras, we’ve heard some fairly strange conversations taking place in the public domain.

For one, there is a line doing the rounds which begins by asking whether or not there is a connection between the Quetta bombings on the one hand, and Pakistan advancing matters with the Iranians on the gas pipeline, and the Chinese regarding Gwadar port, on the other.

In one TV programme, we saw senior-level politicians, including one who has served as minister petroleum, actually seriously discussing this line in connection with the Quetta bombings!

Another line argues that Pakistan’s enemies are trying to pin us down by sponsoring instability in the west, which begs a simple question: how on earth are anybody’s interests served by instability in Pakistan?

One answer to this question was provided by another TV fellow, a formerly highly rated anchor who fell on bad days, who was seen speculating on air about the “trillions of dollars” of mineral riches that lie buried beneath the soil in Afghanistan, and how “all wars in our day and age are about the economy, aren’t they?”

This was his final thought for the viewer before signing off on a programme that was supposed to be about the growing wave of violence against Pakistan’s Shia minority.

Another highly rated anchor, in his trademark breathless style, superimposed the arrival of David Cameron in India at the head of a large delegation of investors, with the growing violence in Pakistan to produce a rather stunning contrast between what is happening in the two countries.

This was useful until he started talking about the hidden enemies of Pakistan who want to see the country divided, and were targeting the security forces in particular. Security and prosperity were clumsily woven together in a short narrative burst and left the viewer wondering what the real intention of the anchor was all along.

The paranoia is growing, and I fear that the more confusing things become and the more unsettled the state of affairs, the more space paranoid analysts have to splash their insanity upon.

It’s useful to bear in mind, through the rubble and wreckage of the moment, that there are deep economic dysfunctions that are driving this country towards an increasingly anarchic state of affairs. But it’s also useful to have a clear idea of what those dysfunctions really are.

For one, our economic difficulties stem largely from not having taken certain critical decisions over the last two decades. Time has not yet run out, but before those decisions can be taken the problems need to first be seen in their proper light.

We’re not the only country in the world struggling with an energy crisis. Nor are we the only ones with a sharply rising debt burden. We’re also not the only one stuck on the road to tax reform.

Restructuring vast sectors of the economy, restraining expenditures and raising revenues, especially in times of recession, are difficult decisions to implement anywhere.

These problems need not cripple us the way they have, and in many cases, the way forward has been known for a very long time.

Complicating the picture for Pakistan is the power exerted by a hidden economy. We have an economy that has amongst the largest currency in circulation to bank deposit ratios in the world, meaning much of our cash never sees the inside of a bank, but circulates forever outside the jurisdiction of the monetary authorities of the country.

And a further complication is the presence of a large conflict economy along the western borderlands which is impervious to the policy instruments that operate east of the Indus.

Evidence of this conflict economy, and its true scale, reveals itself in patches here and there in the official data releases, but you don’t see it anywhere in the larger macroeconomic data.

So the weight of history, combined with a growing undocumented economy, is providing fertile ground for militant groups and organisations to strike roots in the country that makes them resilient and able to sprout up again after an “operation” to eliminate them.

This is the economic story we need to understand very urgently, because without draining this swamp of an undocumented economy we’ll at best be swatting the militants away from time to time only to watch them grow back all over again.

In a sense, two stories can be seen to blend with each other here, like the confluence of two mighty rivers. One is the steady emergence of an economic space that lies completely beyond the reach of the state, although it interacts intimately with large formal-sector players of the settled economy.

The other mighty river is of course the emergence of a large militant nexus that is threatening our future with increasing ferocity every day. And when these two mighty stories merge, they create a powerful momentum towards an anarchic economic state of affairs, which becomes self-perpetuating.

Every tool at our disposal needs to be used to fight this growing menace. It is good to see some awakening in our society against the menace of extremism, but this popular awakening will mean nothing, and the operations launched in the troubled areas will amount to nothing, if they are not backed up by a set of reforms to put our economy on a sustainable footing.

Key to this is increasing visibility of individual transactions. In short, rebuilding the capillaries of the state is crucial to fighting this war.

The writer is a Karachi-based journalist covering business and economic policy.

khurram.husain@gmail.com Twitter: @khurramhusain

Khurram Husain, "Conflict economics," Dawn. 2013-02-21.