What’s behind global inflation and where are we headed?

The year 1996 saw the publication of Roger Bootle’s provocatively titled book The Death of Inflation, which argued that inflation was no more the threat it used to be and fixation with keeping prices low can hamper growth unnecessarily. The book is a compelling read. Yet, the challenges brought about by the pandemic may be in conflict with the optimism in it, as reflected in Bootle’s own columns and interview.

COVID19 did not just catch the global health infrastructure off guard, but wreaked havoc on the world economy as well, particularly in terms of ushering in an era of intractable inflation. Here’s a look at how the infection jumped from person to person, eventually subduing the economy, and throwing demand and supply into a nagging imbalance.

The demand side: The virus and the price of your groceries

Faced with sudden outbreaks, panicking governments the world over were left with no choice but to swallow the bitter pill of lockdowns. It was clear that there was no alternative, at least in the short run. The policy helped control the contagion, but not without business closures and job losses. This, in turn, raised a natural question: how to help the common person muddle through the crisis with the economy at a standstill?

Almost all economists favored economic stimulus—financial help from the government channelled through the fiscal and/or monetary policies—but answers to how, how much, when, and where varied drastically.

Most governments around the world offered one kind of stimulus or another. Yet some countries with the highest stimuli—say, Canada, Germany, Spain, or the United Kingdom—are now experiencing record inflation.

Inflation in the United States, the country with perhaps the largest stimulus packages, has hit a 40-year high, with prices this March being 8.5% higher than March last year. This has meant the average household having to spend nearly $327 more per month than they used to, a year ago.

After all, if one gets up one fine morning and finds a serendipitous check at their doorstep, which literally happened in the U.S., sooner or later, they are going to go shopping, i.e., demand increases. But the neighborhood grocer has limited items, i.e., supply remains the same. More people running after scarce goods made the prices rise, as it does. This effect was worse in service industries, where some businesses even had to pack up.

Arguably, the stimulus packages, while helping the economies recover, perhaps also created conditions for high inflation by encouraging consumption. While stimuli may be more conspicuous in the advanced economies, almost all economies offered some kind of stimulus, swelling their fiscal deficits, as governments increased spending to make up for the fall in economic activity.

The supply side: The rising costs of production

Yet, to fault the economic stimulus for inflation would be somewhat simplistic. Many economists expected such inflation to be transitory—short-lived—after all. Transitory, it could have been, if it hadn’t been for the surge in the price of oil.

Note that COVID19 had initially caused inflation because of the sky-rocketing costs of shipping, supply chain disruptions, erratic demand, and international business desynchronization due to asynchronous outbreaks. Economic activity had plummeted, sending oil demand—and its price—into a free fall.

One of the reasons the oil price fell is that oil supply is relatively “inelastic” in the short run. That is to say, oil companies cannot cut down on oil production suddenly. These are giant enterprises with fixed, long-term costs. As demand vanished due to the virus—and supply could not suddenly be scaled back immediately—oil flushed markets, and oil price fell drastically.

This should have made everything cheaper. But as economies recovered, often with a sharp, V-shaped recovery, thanks to the vaccines, the demand for oil rebounded phenomenally. So much so that even though the world economy still has not fully recovered from the pandemic, oil demand may have already surpassed its pre-pandemic levels.

The resurgence in oil demand—with limited supply available—made the prices skyrocket, from a record low of minus $40 per barrel at the start of the pandemic to around $120 per barrel now.

Yet of course, this rise is not without the added conundrum of Putin’s war on Ukraine. Supply disruptions due to the war, with the added effect of sanctions, and now an embargo, have worsened the spike in energy, both oil and gas, prices, given the fact that Russia is among the top three producers of crude oil, and the second largest producer of natural gas in the world.

In addition, uncertainty brought by the war has affected investment and financial markets the world over. Stock markets have been bearish. Businesses are having to look for alternative trading partners. These factors, along with higher oil prices, are making costs of businesses soar, leading to “cost-push inflation”—higher prices arising from higher costs of production.

The outlook is not good as yet

Together, resurgence in demand after quick initial recovery, and a fall in global supply due to higher costs of production, have translated into an indomitable surge in prices the world over. Turkey has seen prices rise by 70% between April 2022 and April last year.

The corresponding figure for Argentina stands at 58%, and for Venezuela, Sudan, and Lebanon, at over 200%. While inflation in these countries may not be attributable exclusively to the above stated factors, as these economies were already stuck in macroeconomic blues—sometimes trying their luck with unorthodox policies—the pandemic and war have complicated things considerably. Even in advanced economies, the IMF estimates a 38-year high record inflation for the current year.

Average incomes, in turn, will grow only modestly this year, as reflected in the world GDP forecasts being revised over and over again. While growth in the oil-exporting Gulf economies forms an exception, as they are benefiting from higher energy prices, even those will not be immune to food inflation, considering 85% of their food comes from imports.

But the outlook for the developing economies is particularly concerning. They are facing capital flight as investors opt for higher return in the advanced economies, where interest rates are rising, pushing the indebted countries closer to default. This will further pressure stressed currencies, worsening inflation, with more countries having to knock the IMF’s door, sooner or later. Calls for international financial institutions to take a more helpful role to help the distressed countries are, understandably, increasing.

Likewise, devising a careful policy at the national level may be crucial to people’s livelihoods. It may be argued that governments need to prioritize fighting inflation over showcasing economic growth. A blind pursuit of growth would lead to higher demand and translate almost inevitably into more inflation.

As for the micro level of managing a household, it may be just prudent to adapt our spending patterns to the disheartening reality of deep-seated inflation, and perhaps spare a few bucks to help those in distress. Inflation isn’t dead, as yet. But the world needs a healing touch, now perhaps, more than ever.

(Published first on Politics Today, June 6, 2022)

‘Else equal, a dismal economist at the helm is better for an economy than a smart CEO

THOMAS Carlyle, in his essay Occasional Discourse on the Negro Question, argued that the idea of abolition of slavery was incompatible with high productivity. It was in this essay that he referred to economics as an abject, distressing, and a dismal science; a reference clichéd since.

One may differ over the dismal nature of economics, not least because of Carlyle’s bizarre, racist arguments. But, economists, to be honest, are somewhat distressing and dismal. You can tell if you’ve actually met one. Imagine a CEO on the other hand, and spontaneously the image of a dynamic, enterprising individual with a healthy risk appetite comes to mind.

No prizes for guessing that Imran Khan himself is more of the latter kind. Whether it in cricket and welfare previously, or is in his position as prime minister now, he prefers leaps of faith over prudence. Naturally, he can relate with the grittier CEO kind better.

Of course, Dr Abdul Hafeez Sheikh was the dismal kind — a somewhat paternalistic economist. One may visualise Dr Sheikh telling a restless Khan Sahib week after week that there was no route to his much-promised land in the immediate future with an irritating consistency, worsened by a stoic face.

On the other hand, Shaukat Tarin, like Asad Umer, is the enterprising kind. How could such corporate giants, with their verve and experience, have failed in economic management?

Indeed, the monetary side of the economy is a somewhat obscure world that lies behind the simpler fiscal side. A policy that is good for raising taxes and building infrastructure — the fiscal side — may lead to higher prices for the common person — a monetary effect — which adversely affects people’s standard of living.

Much like a greenhouse, which otherwise is meant to keep plants warm, can get overheated with the entrapment of too much heat and light, economists say the economy is ‘overheated’ if there is too much inflation. If fiscal policy is like sowing seeds in a greenhouse, the monetary policy is about maintaining its temperature.

According to conventional economic wisdom, you can’t outgrow inflation. That is, a government’s effort to spend more to achieve a higher GDP growth is doomed to failure in times of already high inflation. The government may hope to achieve prosperity with industrial growth, but a stimulus to the economy — say, incentives to spur investment — will almost certainly lead to even higher inflation. And the inflation, unfortunately, comes before the fruit of policy on the fiscal side ie before growth.

The central bank advises policymakers in such circumstances that they’re going to burn the plants in their frantic desire for faster growth. A higher policy rate is one of the bitter pills central banks have to cool the economy, much like opening the windows of a greenhouse.

When Tarin was brought in, the economy was recovering. Government was boasting about the growth it had achieved the previous year (ironically under the Sheikh-Reza Baqir duo). But inflation was still on an upward trajectory. It still needed time to be tamed. In fact, it was suggested that Tarin had been brought in to control inflation.

But Tarin, gauging his boss’s pulse, aimed at instant growth, which was a recipe for worsening inflation. He spared no opportunity to criticise the State Bank for maintaining a ‘high interest rate’, which in his view, had been hurting growth as well as the parity of the rupee somehow. Thus, with much fanfare, Tarin presented a growth budget.

This clearly pressured the State Bank and it tried to accommodate the government’s growth stance, not raising the interest rate for 15 months. With a low interest rate and lesser spreads, the short-term foreign in­­vestors have an incentive to pull their (controversial, hot) money out of the economy. Deprecia­tion in turn affects even the longer-term investors, worsened by a rising current account deficit (even higher without the serendipitous remittances) and higher energy prices, which put downward pressure on the currency.

Now, undergoing a change of heart, Tarin Sahib favoured a higher interest rate in an interview and hoped, the State Bank had learned from high inflation and the rupee’s depreciation. Thus, faced with raging inflation, his enthusiasm for lower interest rates and higher growth, his rallying cry a few months back, has all but disappeared. One really wonders who actually needs to learn what.

What, nevertheless, clear is that because businesses don’t have a parallel, elusive monetary side, even the smartest people from the corporate world have a hard time appreciating that investing can indeed be counterproductive for an economy, for example, when overheated. Economists, for their part, can be thick in their own way, a subject for another day. Yet, sometimes an economy in need just needs an economist, even if a dismal one.

(Published in Dawn, December 25th, 2021)

AQ Khan: The Scientist Who Escaped Assassins, Built a Nuclear Bomb, and “Ate Grass”

Just two years after the December 1971 war between Pakistan and India, on May 18, 1974, India detonated a nuclear device, confirming it possessed the A-bomb.

Pakistan had already lost a significant part of its land in that war. East Pakistan, which had already been undergoing a civil war, had emerged as the independent state of Bangladesh with help from India. With the war lost, and the country now divided, the timing of the Indian nuclear test could not have been worse.

Prime Minister Zulfikar Ali Bhutto was under intense pressure to counter what was perceived as a threat to the very sovereignty of Pakistan. Just a few years back, in 1965, in an interview, Bhutto had said that if India built a nuclear bomb, “we will eat grass, even go hungry, but we will get one of our own.”

Sensing what was being cooked next door, he had already directed work on Pakistan’s nuclear program to be initiated and research had already begun in 1972. But it was progressing very slowly, and the prime minister’s restlessness was growing with each passing day. Now, India’s test had come to confirm his worst fears.

Like serendipity, a letter from a hardly known young scientist working in Amsterdam, Dr. Abdul Qadeer Khan, arrived, in which he offered his services to provide guidance for Pakistan’s nuclear program – Mossad officials would later regret having failed to assassinate him in time.

Dr. Khan, was immediately invited for a meeting by PM Bhutto. Upon his arrival in December 1974, he was surprised to learn that Pakistan’s nuclear program had already set about. What he did not like, however, was that the scientists were relying on the plutonium route. He sharply criticized this approach and explained the viability of the uranium enrichment route to Bhutto. Upon Bhutto’s request, he spelled out the action plan for highly enriched uranium to the scientists of the Pakistan Atomic Energy Commission (PAEC).

One year after the first meeting, when Khan came to his home country for his annual vacation, and happened to visit the site, he was dismayed with the pace of progress. The scientists already working in the PAEC were no lightweights and perhaps had little reason to be receptive towards the views of someone they saw – more or less – as a holidaymaker, coming from Amsterdam for vacation and telling them what to do. The distance bomb-learning program was not working.

But Khan’s frustration over the inefficiency of the program resulted in a reaction he did not expect: Bhutto invited Khan to leave his job, settle in Pakistan, and lead the program. Khan, who was well settled in his new home abroad, which he liked very much, and who also had a wife from the Netherlands, initially expressed hesitance.

Yet, this represented an opportunity to make his country a nuclear power. Just a year back, following the Indian nuclear tests, he was frantically trying to reach the prime minister, writing him letters, one after another. In his estimation, armed with an atomic bomb, India’s next target, after East Pakistan, would have been the Punjab and Kashmir.

Not only did Khan’s word reach Bhutto, but he was offered to lead an independent arm of the program and protect his country. With his wife reassuring him of her full support, which was his concern, he saw no reason to turn down the offer.

Dr. Khan’s expertise and Pakistan’s nuclear program

While Pakistan’s civilian nuclear program had already begun in the 1950s, and a nuclear power plant in Karachi had started functioning in 1972, Pakistan’s military nuclear program got a strong impetus only upon Khan’s arrival.

The program headed by the PAEC continued; however, Khan had differences with the scientists there as he was only inclined to take the uranium enrichment route, which was his area of expertise. In 1976, he was given the charge of a new setup, the Engineering Research Laboratories, which he developed from scratch. The company was later renamed by the succeeding president, General Muhammad Zia-ul-Haq, as “Abdul Qadeer Khan Research Laboratories (KRL)” in recognition of his services.

Khan had studied metallurgy in Germany, materials engineering in the Netherlands, and obtained a doctorate from the Catholic University of Louvain, Belgium. Just after his doctorate, he had joined the company Verenigde Machinefabrieken Stork-Werkspoor (VMF) in the Netherlands, which had a big portfolio of heavy machinery, including nuclear plants-related equipment.

Khan got posted by VMF as a consultant at Urenco, a uranium enrichment company, which used to provide enriched uranium to power plants in Germany, the Netherlands, the UK, and the United States. According to Khan, the company was facing problems with designing gas centrifuges, and being an expert in materials, he was one of the engineers posted to this top secret facility.

Thus, Khan brought with him his experience and expertise in designing gas centrifuge technologies for uranium enrichment, which represented perhaps the most critical part in developing weapons-grade nuclear technology. He started working at a rapid pace to build the facility, and to develop and acquire materials and technologies, as fast as possible, without being detected.

Khan was a scientist, a metallurgist, and a nuclear-program architect, but at the same time, he was at the center of a secret network, having to strike deals to procure whatever was required from wherever at minimum cost and in the shortest time. Sometimes, this might have meant defense cooperation with other countries. In any case, the work progressed swiftly, and by the 1980s, Pakistan had achieved the capability for nuclear explosion.

Interestingly, the PAEC and the KRL, both complemented each other, but in many ways emerged as competitors too. Both claimed to have reached the potential to make a bomb in the 1980s using their own routes.

When India mobilized its forces in 1987 and started some of the biggest war exercises since WWII, Pakistani General Zia-ul-Haq landed in India to “watch a test match.” At the airport, he briefly met Indian Prime Minister Rajiv Gandhi and warned him with a chilling equanimity, “Mr Rajiv, you want to attack Pakistan, do it. But keep in mind that this world will forget Hulagu Khan and Genghis Khan and will remember only Zia-ul-Haq and Rajiv Gandhi, because this will not be a conventional war but a nuclear war…”

With that threat, the war was averted. And Israel’s plans to strike KRL plants with India’s help, had fallen flat too.

The nuclear tests and Khan’s legacy

It was not until 1998 that Pakistan came to the fore with the bomb. When India performed its tests on May 11 and 13, 1998, Pakistan decided to go ahead with its own merely 17 days later. Pakistan conducted its nuclear explosions in an unpopulated, granite mountain range in Balochistan Province, under the name “Chaghi-I” on May 28, 1998 and “Chaghi-II” on May 30, 1998.

Before this, some had doubted Pakistan’s nuclear capability altogether. But the speed of Pakistani reaction came as a surprise even to those who believed it was in possession of an atomic bomb. Independent sources, based on seismic activity, confirmed that Pakistan had indeed conducted nuclear tests.

oday, the country is estimated to have a stockpile of nearly 165 nuclear warheads compared to India’s 156. Moreover, the KRL, in competition with the PAEC, operates a booming missiles program, in addition to other defense equipment.

Meanwhile, Khan became the target of Western media and governments quite early. In 1983, he was sentenced in absentia for trying to steal enrichment secrets from the Netherlands. He denied the charges, citing that the information he used to build the centrifuges was available in various sources which did not need any classified access. His conviction was overturned in 1986.

In 2004, Khan was accused of smuggling nuclear secrets and operating a nuclear black market. Pakistan, which is not a signatory to the Treaty of the Non-Proliferation of Nuclear Weapons (NPT), and hence not bound by its terms, assured the international community of cooperation to avoid a backlash and possible sanctions.

To the nation’s surprise, the country’s hero appeared on national television and expressed regret over his actions, extending an unconditional apology. He confessed to having supplied gas centrifuge components to Iran, Libya, and North Korea. Immediately, he was put under house arrest to prevent further proliferation.

His house arrest ended in 2009, when a court found the house arrest orders to be illegal; however, his freedom to move remained severely restricted and he was kept under watch until his death on October 10, 2021, a few weeks after he had recovered from COVID19.

As for the allegations, it is a story shrouded in mystery. Some of the alleged evidence implicating members of the nuclear black market network, was destroyed – not by Pakistan, but by the United States. Many of the suppliers that Khan was accused of collaborating with were from countries which were signatories to the NPT, making their actions even more questionable.

The deeper you delve into finding the so-called truth of this story, the deeper you’re sucked into a labyrinth of very paradoxical questions. Add to this, the fact that Khan retracted his earlier confessions and repeatedly suggested that he had made those statements under duress.

Nevertheless, one thing that does emerge clearly from his life’s work is that Dr. Abdul Qadeer Khan probably had little respect for the lopsided international treaties that safeguard the world’s nuclear weapon and missile cartels. It is little wonder that he was termed “at least as dangerous as Osama bin Laden” by the frustrated CIA director George Tenet.

In Pakistan, Dr. Khan continues to be a revered figure, especially among middle-aged and senior Pakistanis who have a memory of full-blown hostilities between India and Pakistan. In the words of one professor, who wished not to be named, “he ate grass, so that we [Pakistanis] don’t have to.”

Of gun ownership, psychological health, and being American

The next mass shooting in America is expected to happen in less than 13 hours. That is what 457 incidents by 29th of August, 2021 translates to. This is horrifying.

Yet, as dramatic as it may seem, a graver threat to America comes from the mass shootings that are to likely in the longer run. The momentum that these attacks are building, and have been building on, has largely been ignored, but represents a much grimmer menace.

The underlying causes of mass shootings have become so saturated within the society that they cannot be distinctly identified anymore. Because they’re elusive, institutions and policies that perpetuate such proclivities are even harder to pinpoint and galvanize support against.

When the focus should be on building a better society for future generations, we don’t seem being able to agree on even how to save lives today.

Gun-ownership levels set the US apart

The substance of even more immediate policy gets lost, more or less, along partisan lines. Republicans, who overwhelmingly support lax gun-ownership laws, tend to put the onus on mental health. Former President Trump had gone so far as to say, “Mental illness and hatred pull the trigger, not the gun.”

But consider this. The US is estimated to have the largest number of firearms per person in the world. Even more remarkable is how much the US figure at 120.5 per 100 exceeds even the 2^nd highest country in the list, Yemen at 52.8 per 100, which is a country in the midst of civil strife and war. 

Roughly, every 4 in a 100,000 people die in America from gun violence. That makes a US citizen a 100 times likelier to die from gun violence, than a British – the rate in UK being 0.04 per 100,000.

Yet, even as the frequency and intensity of the shootings have been on the rise over the last few decades, people’s attitudes towards gun-ownership, on average, are still changing only very slowly. According to a Pew survey, as recent as 2019 (latest), 80% of Republican voters said it was more important to protect gun owners’ rights than to rein in gun ownership.

It takes a lot of effort and at least some pretence to say that there would have been as many killings in America if Americans had fewer guns on average. Unrestrained gun-ownership is elephant in the room.

Lagging behind on psychological well-being

Still, gun-ownership is not the only explanation for mass shootings, even if most democrats would be inclined to believe so. Mental health, which the more left-leaning voices cautiously avoid blaming – on rather passionate grounds that it could stigmatize those facing psychological challenges – is nevertheless associated with violence, and America’s situation here is again concerning.

According to a survey of 11 high-income countries by the Commonwealth Fund, every fourth American is diagnosed with a psychological health condition. Moreover, almost half of the respondents reported they had experienced emotional distress due to neighborhood safety concerns, or not having enough money for housing and/or food – an alarming statistic, considering America is the most resourceful country in the world by overall GDP levels.

Even with this state of psychological health, and one of the highest rates of suicide among the industrialized countries, the US compares unfavorably to other high-income countries on the number of professionals working in mental health.

Thus, the problem is way bigger than the precious little legislation in some states on ‘background checks’ for assault weapons manages to capture.

Which one is it?

In a world of complex interactions, a witch-hunt for the absolute fundamental determinant of violence is as naive as it is useless. What is incontrovertible, nevertheless, is that gun ownership levels in the US are not normal for a normal country – and shrugging it off as a byproduct of a sacrosanct ‘gun-culture’ could turn out to be yet dearer in future. Mental health issues, too, are at an alarmingly high level without the required infrastructure for support.

Both of these are problematic. Both need immediate redressal to bring them more in line with a level befitting a country with such massive resources as those of the US.

Yet, it’s already quite late. Gun-ownership may be restricted, but the guns people already have – including assault weapons – cannot be taken away. Mental health may be invested in, but it will be a challenge to pull the society out of such pervasive challenges to psychological well-being at large.

What’s worse, gun ownership and mental health could be interacting in far more complex ways than any research has been able to discern so far. In short, measures taken even today will take a long time to have any effect.

Where do the shootings originate?

But even such measures would be essentially dealing with only the somewhat superficial mechanics of the problem. The underlying causes of mass shootings cannot be identified without reconsidering the contours of social justice in the American society today.

Why is it that the wellbeing in one of the richest countries in the world has not kept pace with economic growth, even as corporations have thrived? While the common person struggles to survive, politicians are in a state of disconnect, essentially being a hostage to groups that enthroned them. It is the special interests who determine who is to get what from the pie, sprinkling peanuts of micro-choices here and there to delude the masses into an illusion of liberty, and even the lure of ‘Americanism’.

There is nothing American about settling for a mass shooting everyday. There is no liberty in not being able to choose to live. If anything, there is an incentive for those who design the frame of our choices to conflate constructed, imaginary ideals with ‘identity’.

If the corporate world can make assault weapons a part of consumption culture, and go so far as to conflate arms-ownership with national pride, elevating guns to becoming a definitive symbol of the American ‘identity’, undoing this formidable milieu is going to take a strong will and a perspicacious strategy as well.

Given the deep-set polarization in American politics today, breaking the categories will take long. Reimagining justice seems, unfortunately, quite distant. 

A distressed, hate-filled mass shooter is planning his attack somewhere, meanwhile. He knows he is short on time.

(This article first appeared here, on Politics Today).

ISTANBUL CANAL IS A 45-KILOMETER LONG WATERWAY TO TRAVEL BACK IN TIME & LIBERATE THE STRAITS

Bosphorus may be a strait for the world – a choke point in global waters – but for the people of Istanbul, the beautiful waterway represents the city’s soul. No matter how taxed you are, once you get onto a ferry to get to the other half of city, on the facing continent, you are taken over by the fulfilling experience of nature at its best – and its purest.

Interestingly, the enchanting strait is no less magical when it comes to what it could be leveraged for in international politics. There is a reason why the ancient Byzantium, former Constantinople, and the modern day Istanbul,  remained such a coveted city for global powers throughout most known history.

Today, Bosphorus represents Russia’s gateway to Europe through the crucial warm water ports in the Black Sea, which can be used around the year. The right to passage gives Russia significant influence in the Mediterranean, thanks to its Black Sea fleet. Similarly, vessels coming to Russia – and other Black Sea states – have to navigate through the busy strait at the heart of Istanbul.

As nice as this may seem to Turkey, it has also put it into a difficult position amidst the power struggle between Russia and the US, among others. In case of hostilities, both heavyweights know that the assent of Turkey in the straits could be a game-changer.

It was because of such sensitive nature of the straits – and the threat to Turkey from the expanding fascist Italy then – that the world powers had reached the Montreux Convention in 1936, which governs the rules of the game in the Bosphorus and the Dardanelles straits.

At that time, the treaty had given control of these erstwhile internationally-governed waters to Turkey under certain terms. It limits the number, and kind, of warships that can pass through, and the duration for which they can remain in the Black Sea, while providing a free, toll-free, passageway to civilian ships at the same time, in times of peace.

Now, something is happening in Istanbul which could bring 1936 back.

The canal and the craziness

Istanbul Canal, a flagship project of the Turkish government, is planned to be an artificial, 45 kilometers long waterway, on the European side of Istanbul, which will run roughly parallel to the Bosphorus. The foundation stone for the first of the 6 planned bridges was laid on 26^th June, 2021. Erdogan has called it his ‘crazy but magnificent’ project.  

Istanbul Canal is expected to significantly reduce the congestion in Bosphorus, which is currently one of the busiest waterways in the world with the average waiting time of about 14 hours for normal vessels, but which sometimes can get much longer.

As the Bosphorus is an S-shaped strait with extremely sharp turns and has about 45,000 ships crossing it annually, the congestion in such difficult waters has resulted in some severe accidents in recent decades, with incidents of fire that lasted a month in 1979, a 20,000 tonnes of oil spillage in 1994, and near-misses, such as of the ship River Elbe which almost crashed into a waterfront mansion on the 1^st of April, 2021.

Even so, not everyone is convinced about the worth of the project. The canal is estimated to cost a whopping $15 billion. Moreover, the initial estimate has been criticised for underestimating the potential cost and overestimating the revenues, projected to reach around $8 billion a year.

In addition to being expensive, it has been criticised for its potentially adverse impact on environment. Dissidents argue that it could potentially displace thousands and level hundreds of hectares of forest.

Moreover, it could impact sea life as well. The Black Sea is 50cm higher than the Marmara sea, and the difference in salinity of the two seas, may result in a change in composition of the latter.

Experts point out that the flow of cellular organisms into Marmara will result in a higher demand of oxygen, and thus create a breeding ground for bacteria and other organisms which create a sulphurous gas which smells like rotten eggs – and could spread in Istanbul. There are fears that it could severely affect sea life in the Marmara Sea as well.

The upside, according to the government

Yet, for the government the benefits of the project outweigh the costs. For one, it argues that the Bosphorus would become cleaner with lesser waste water from ships, lesser traffic, and safer for the people of the city. Similarly, the damage to the forest area is planned to be compensated with green archaeological parks lining up the coast of the new canal.

Moreover, the government expects the canal to provide a sizeable stimulus to the economy of Istanbul, a city that houses about a fifth of the the total population and is responsible for about a 3^rd of country’s total value production – or the GDP.

Add to this the fact that the canal will provide a big impetus to construction –  the sector that accounts for 8% of the economy directly, and about 30% when all the linked industries are considered.

The banks of the canal will have earthquake-resistant, residential developments expected to house about 500,000 people. The prospect of the canal has already meteorically increased the value of those lands, which along with other canal-related investments, is seen as a source of foreign currency providing support to the frail Turkish Lira.

Alongside all this, the government claims the project will reimburse itself. Currently Turkey is able to collect no taxes from vessels crossing the Bosphorus, as per the Montreux Convention. With the canal, however, the authorities expect a new source of revenue. With a reduced waiting time for ships with the new waterway, an increased traffic is expected in Turkish waters too. According to – somewhat optimistic – government estimates, 54,900 ships could sail through the canal in 2026, and the figure will rise to 68,000 in 2039.

One canal to rule them all

Yet, something besides the economy or the environment may be the central motivation for the project. Analysts believe that the canal will lend more leverage to Turkey on the Bosphorus.

On the face of it, it seems paradoxical to expect Istanbul canal to increase the importance of the already-existing strait. But Turkey could negotiate the terms of the Montreux Convention as they apply to the new canal, and that can hardly happen without some form of renegotiation about the rules that govern the Bosphorus and the Dardanelles straits.

Thus, what in Erdogan’s own words is his ‘crazy but magnificent’, is indeed expensive. But if it works, and with astute moves on the political chessboard, it may give more weight to Turkey in the region.

Irked by recognition of Turkey’s right to block free passage through Bosphorus and the Dardanelles whenever Turkey suspected a threat, Stalin lamented that, “The result [of Montreux Convention] was that a small state [Turkey] supported by Great Britain held a great state by the throat and gave it no outlet.”

Turkey, being central to NATO, is not dependent on Britain anymore. At the same time, Putin seeks good relations with Turkey, given its ability to control the straits with direct as well as indirect measures – such as marking which ships are dangerous, and establishing the protocol on how they can pass.

Thus, a politically more powerful Turkey, than what Stalin had been complaining about, sits at the centre of Asia and Europe as well as between Russia and US-NATO. The new canal will tighten that hold.

(Earlier version of this article was published in the Daily Sabah and may be accessed here)

Coffee Extinction Is Nature’s Way of Telling Us: “Heal the World, Now!”

We have not known coffee for very long. Most accounts take us only as back as the 15th century, when it was first used by the mystics of Yemen. Yet, coffee somehow got the lion’s share of blame in many conspiracies around the world. Attempts were made with varying level of success by those who valued order over thrill to get it banned in the Ottoman Empire, Persia, Sweden, and Italy.

Now, the sublime beans seem to have had more than their due share of trouble, and are calling it a day.

Scientists have warned that 60% of the species of coffee are at risk of extinction. Out of 124 known types of coffee species, we actually use just two for our beverage: Coffea Arabica and Coffea robusta. But Arabica, the most popular one, is in trouble too.

Most of the species facing the risk of extinction are not used for making coffee. But even those must be conserved, scientists say, for cross-breeding and production of more resilient new varieties, which are sensitive to climatic threats.

While coffee will not disappear anytime soon, the quantum of the problem is significant. Ethiopia, the original source of the enigmatic beans, is still the largest African exporter of coffee. But 60% of the land that is used for coffee production there will become unsuitable by the end of this century.

A very nice-tasting species of coffee, the Coffea stenophylla, was seen in December 2018 for the first time since 1954. This was only a single plant, in an area that itself, scientists reported, was threatened by human encroachment and deforestation.

Rising global demand

According to experts, while global coffee demand is expected to double by 2050, at least half of the land used for coffee production may become unsuitable by then.

Even though a higher demand may support price in the short to medium run, we will actually be pushing the planetary boundaries in the longer run beyond what the Earth can sustain.

In the absence of appropriate support mechanisms, a higher demand will lead to a greater environmental stress, that is worsened by a warmer planet. Challenges to coffee production may increase in scope, as well as intensity, over time. The need to strengthen and augment the coffee ecosystem is urgent.

Anatomy of environmental stress

Human-induced climate change, diseases and pests, and deforestation are some of the reasons why certain species of coffee are already under threat.

Take Costa Rica, for example, where farmers are leaving coffee plantation in favor of orange production due to erratic weather, and more storms and droughts. This has meant an increase in the cost of the production of coffee. On the other hand, farmers find oranges to be more resilient in the face of climatic threats. This must be a difficult decision in a country where people feel a deep connection between Coffea and who they are.

But the damage from climate change does not stop here. As a result of the hotter climate and increasing rainfall levels, fungi such as the coffee leaf rust (Hemileia vastatrix) and pests like the coffee berry borer (Hypothenemus hampei) are appearing in areas that were previously free of them.

Meanwhile, growers in other areas, like Australia, which represents a potential substitute area to the more conventional centers of coffee production, lament less-than-usual rainfall, due to changing weather patterns.

Even if rainfall were optimal, Australian coffee is less environmentally stressed otherwise, and therefore, has 10-15% lesser caffeine. Caffeine production being a defense mechanism, a less stressful environment means less caffeine.

It, therefore, seems like there is also an optimal level of stress at which nature thrives. However, instead of respecting such subtleties and the intricate forces of balance in our world, we revel in the excesses that we cheer as the era of mass consumption.

Danger to livelihoods

As we see these problems from a distance, we may be tempted to conclude that there is still enough time to act and that appropriate measures will probably prevent something as extreme as coffee disappearing from the planet.

Yet, for those whose livelihoods depend on coffee, the question is rather irrelevant. For them, the coffee either stays feasible, or has to be replaced by some other crop as soon as possible. The falling prices of coffee worldwide have made things even more difficult, especially for smaller farmers.

Already 40% of coffee farmers are estimated to be living below the poverty line. Small farmers owning less than 5 hectares (12 acres) of land account for two-thirds of global coffee supply. They are not only poor to begin with but cannot compete with big producers in mechanization, automation, or cost-effectiveness.

Compare the small producers, with the big producers of Brazil, for example, which accounts for a third of global coffee production. Owing to greater sophistication, big Brazilian producers can produce more at a lower cost.

This is bad news for smaller farmers. When the overall production in the world is high – sometimes driven solely by Brazil – the price falls. This, again, effects small farmers disproportionately, who are producing at very low profit margins already. When the prices are too low, it is not unusual for them to have to sell below cost.

At the end of the day, poorer farmers may end up producing lower quality beans, at a higher relative cost, and not being able to incorporate more sustainable agricultural practices, like soil enrichment.

The result is that these farmers are trying to switch to other crops where they can. But switching to other crops is not a costless process, and may not always be a success. The disturbances from climate change and an erratic pricing system, have resulted in psychological health problems in poor farmers ranging from anxiety and depression to suicide.

Healing the world

The indifference of the world to the raging inequalities is heartbreaking. As we grab a $5 cup of coffee, on the go, we should think about the farmer who must have worked for 48 hours to make the same amount of money.

At the very least the world needs a mechanism to ensure a fair price to the coffee farmers, as their already challenged livelihoods are disrupted by the environmental footprint of the richer world. The richest 10% in the world account for more than 50% of global carbon emissions, after all.

So, where are we right now?

The Fair Trade movement is said to be helping farmers with a “fair” price. But even they admit that a price higher than what they are able to offer would be more desirable. Starbucks claims to procure 99% of its coffee “ethically,” where they have data going down to the name of the farmer who they bought the beans from along with the price (which they do not disclose publicly).

Others call for the key role of greater transparency in paying farmers, with some companies even mentioning the price they paid the farmer for the coffee clearly on the package. While these measures are worthy of recognition, they are more like first aid to a broken system that perhaps needs a much more drastic solution.

As for the search for more resilient strains, big investments are needed from governments and coffee companies. Many such trials for “future-friendly” coffees are already underway.

Yet arguably, the coffee’s endangerment is part of a bigger problem. The world leaders need to take responsibility for global environmental problems and devise an enforceable and credible mechanism to punish deviances.

Human-induced global warming is perhaps the central threat endangering coffee’s diversity. Extinction, in this perspective, is nature’s way of telling us, that all is not well. Manic consumption, obsession with profits, the disregard for the environment, and the inequalities plaguing our world actually have a cost. If it continues, nature is telling us, it will not continue.

As I sip my coffee and write from the comfort of my cozy room, climate change seems somewhat distant. The coffee farmer, who provided the beans for my coffee, meanwhile fights a battle for survival – her crop was ravaged by an unexpected storm.

(First published in Politics Today, here)

Life in the Holy Land amidst war: the view from an American SUV

It’s a beautiful Sunday morning. Michael, who lives in Washington, D.C., is going on a picnic with his family. He checks his phone to catch up on the news. There is something about 67 children killed in Gaza during the previous week. He scrolls over the news.

Having read mainstream U.S. media, he thinks, it’s the Palestinians who are destabilizing Israel. There is a “clash” that began with the Palestinian people needlessly insisting to pray at some mosque, as was shown in the headlines. They have been attacking the police officials with stones, and escalating the conflict so much so as to fire rockets into civilian areas.

They may be occupied, but resisting even an illegal occupation with violence is not justified. “Hurry up, folks, we’re getting late,” he exclaims, starting his SUV, as if to take refuge from the voice within, pushing him to make a moral choice.

***

Somewhere in Gaza, Daoud is feeling completely helpless. A building in his neighborhood in Khan Yunis, was struck an hour back. He is confused whether to take his family out and hide somewhere, or to stay inside the building. Going out with his newborn is dangerous. “How long can we stay outside?” he asks, Iman, his wife, rhetorically. “What if a shrapnel injures Sarah (his newborn) and where will we hide?” he wonders. “The bombs can drop any moment, anywhere.”

While they’re discussing, their building is shaken by a huge explosion. It’s a shockwave from another strike that was aimed at the foundation of the building next to theirs. They look at the collapsing building from their shattered windows in horror. That building had a child playing on the balcony.

Even with the risks, Daoud decides to stay in his home, thinking that dying together, in one go, will probably still the lesser of two evils. One of his two sons, whom he has handed over to his brother, gives him hope that his generation may survive. But the rubble of the fallen building in front is also haunting him. What if his nephew, entrusted to him by his brother in exchange, dies with them?

***

Benjamin lives in Tel Aviv, the capital of Israel. Although most of the rockets are intercepted, one reached his neighborhood, injuring one person critically. He remains anxious throughout the night. The sirens can go off anytime. But unlike the Palestinians, he has a shelter to hide.

To him, Palestinians are at the center of all episodes of hostilities. Jews deserve to live in peace in their God-sanctioned lands, he tells himself, and Israel should do whatever it takes to ensure this. The sirens are blaring again. “When will this violence end!” he yells.

***

Since his expulsion from his real home in Acre, when the Zionist militias targeted Palestinian residents in the aftermath of the 1948 war, Ibrahim has lived in the Sheikh Jarrah neighborhood in East Jerusalem, where his family fled during the Nakba. The Jordanian authorities, which had control of the West Bank then, agreed to give his family the ownership of the house they settled in. But then, another war broke out in 1967, and Jordan lost control of the territory, which was also occupied by Israel.

Ibrahim is in an Israeli prison, after being held on charges of rioting. He cannot understand how an Israeli court could order the eviction of his family from their house, and is worried how his family will manage. “As an occupied territory, how can an Israeli court have jurisdiction,” he asks himself. “How can the Israeli state expel them on the basis of a ‘legal’ order?” he wonders.

***

Miriam was raised in Lod, a mixed city of Israeli Jews and “Arab Israelis”, i.e., the Palestinians in Israel. Though the two communities were socially distant, she has at least one childhood friend who is Palestinian. She is upset about the “riots”, “the conflict”, and “the disproportionate use of force by Israel.”

Miriam’s great-grandfather lost his life in the Holocaust. When Miriam was young, her grandmother used to tell her about the tragic experiences of those times. She looks at the state with suspicion now. To her, the Israeli state is led by right-wing hateful politics, and politicians vilify and persecute Palestinians to their benefit.

She is trying to find words to offer condolences to her Palestinian friend, who lost her brother to a mob of Israeli violence in the city the other day.

***

Michael’s back from the picnic. His children are jumping on his bed, as he urges them to sit down. He’s scrolling his Twitter feed. Every other post seems to be about massive destruction in Gaza. Biden, whom Michael voted for, has declared support for Israel’s right to self-defense, despite the fact that more than 248 Palestinians have been killed in Gaza, most of them civilians, including 67 children.

He comes across a picture of a man running with his daughter, who is probably dead, in his hands. Michael’s eyes fall upon his own daughter who is still jumping on the bed carelessly. His eyes are now filled with tears. He wonders how could so many families and children be hit in error by the Israeli military, known for its pinpoint targeting capabilities.

He wants to retweet an opinion article by Bernie Sanders criticizing America’s backing of Israel, but stops short of it. It could affect his apolitical image on social media and his work.

Before putting down his phone, he tweets a quote by Dag Hammarskjöld instead: “Never, for the sake of peace and quiet, deny your own convictions.”

Michael’s conscience is somewhat lighter now. He mumbles to his wife that Hamas’s rockets killed 13 Israelis in a week before going to sleep.

—

(First published in Politics Today, here)

Understanding Policy Rate

LET’S say, I am a fruit vendor, and the only one in the village. There is only one kilogramme of apples left in my shop. I am about to go home. A person comes to my shop and I sell the apples for Rs100.

The next day something weird happens. A smuggler’s briefcase splits open, and money starts dropping to the ground from his plane all over the village. It’s evening again, and again I am left with just 1kg — but today, there are many buyers. I sell the apples for Rs200.

Here, apples are the total production. The money that the buyer had in the first instance, Rs100, is the money supply. When you increase the money supply — notes falling from the plane — it leads to higher prices, because of higher demand. Economists call this inflation. Note that the total number of apples — GDP or production — does not increase.

One of the better known instruments for dropping money from the plane is lowering the policy rate. Simply put, it is the benchmark rate set by the central bank at which loans would be given. When this is lower, the commercial banks also charge a lower rate for lending.

Thus, if you wanted to buy a bike, but the bank was charging an interest rate of 20 per cent. You might have been dismayed. But then the benchmark — policy — rate falls to, say, 2pc. You rush to the bank and borrow money to get the bike.

But here is the catch. When you reach the bike company, they tell you that the price of the bike has increased significantly. You ask why. They tell you there are so many people who want a bike now, and they have limited bikes. The prices go up.

Thus, a fall in policy rate leads to increased prices. It does notmake people richer. People have more money, but the goods became more expensive too.

Governments, businesses, and the ‘more patriotic’ economists, almost always support a lower policy rate. They want ‘indigenous’ growth, instead of borrowing from external sources or relying on foreign investment.

Lowering the policy rate can indeed lead to growth in the short run, as they argue. If the economy is in recession, there is idle capacity in the factories. When you lower the policy rate, not only does the demand increase, but also the production. The factories will utilise their idle capacity and make more bikes to catch up with the increased demand. More people want bikes, but there are also more bikes now. Welfare increases.

But in an overheated economy, with high consumption and inflation, and no idle capacity in the factories, the opposite is true. Lowering the policy rate, does not result in more production — as factories are working to their maximum potential already — it results in greater inflation. Having more money, more people want a bike, but the factories have already reached their limit.

Thus, the economic activity generated by the lower policy rate may be illusory, translating to higher inflation, rather than higher production. Perhaps all spells of hyperinflation in history began because governments myopically kept raising the money supply in the hope of more and more growth.

Also, demand-side decisions are simpler. A lower policy rate almost automatically leads to increased demand. But supply-side decisions are complex. Investors and businesses will likely not invest in a bad policy environment or during hard times such as a pandemic. Thus, a lower policy rate may translate into more demand but not a higher aggregate supply.

The point here is not to advocate a higher or a lower policy rate, but to advise caution. Beware of a person — an economist, a journalist or business tycoon — who comes on television to declare an exact figure for the policy rate off the cuff.

The State Bank did a decent job in stabilising the economy, res­toring confidence, stea­d­ying the rupee, and bringing down core inflation. Had Covid-19 not struck, the budget for fiscal year 2020-2021 would have been expansionary. The PTI could well have showcased growth.

But things did not go as planned, and the government wanted to do something rather quick. The high food inflation right now is perhaps a consequence of the authorities taking the sugar millers, flour millers, the middlemen, the retailers, and many other groups head-on without doing their homework. In essence, it is an issue of governance, and again the State Bank cannot be blamed for not being able to dent inflation. It brought core inflation down significantly.

In short, the State Bank raised the policy rate when the economy was overheated and prices were soaring. It brought it down to support the economy when the pandemic struck. But determining the optimal policy rate is a complex decision. It involves intricate models, simulations, and calculations, even if with some judgement. That is what the State Bank is there for. Let it work.

(First published in Dawn, here).

Of coffee, conspiracies, and the Sufis

That familiar aroma with the mystical quality of being able to pull you out from a spell with the most devious and captivating of fragrances, has a profound history. If it weren’t for the Sufis, the coffee beans could still have been limited to Ethiopia, or Yemen at best. Still, when the magical beans were actually passed on to our mundane world, they mostly ended up being in the wrong place at the wrong time.

Consider this.

The increased socialisation that came with the coffee culture did not just make the coffeehouses – kahvehane – a fertile ground for ideas, but also a cradle of conspiracies.

Coffee was new to the world, and so was the coffee culture. Istanbul got its first  coffeehouse by 1555, and by 1570, Istanbul already had 600. 

The growth was indeed magical. But so was the charm of the new coffee culture. The aroma was an invitation to think, reflect and question. 

People started to spend significant time in what were socially more acceptable alternatives to taverns in an overwhelmingly Muslim society. Musicians played music, storytellers told stories, some played games, some gossiped, but the mutinous plotted conspiracies too.

Among others, the coffeehouses had caught Janissaries’ fancy, who started to go there often. As the coffee culture came to be associated with free and somewhat rebellious thinking, the Janissaries’ frequenting them was not something the Sultan could have ignored.

Back in the 14th century, the Janissary corps was commissioned as special guard to the Sultan in the Ottoman Empire. But it had grown in influence over time, and now represented a threat to the Sultan himself.

Sultan Murad IV (r. 1623-40) who remembered the execution of his brother, Osman II, by the Janissaries in a rebellion, banned coffeehouses in 1633, on the pretext that they had often been the source of disastrous fires. 

Historians, however, have pointed out that the real aim of the law was the threat of a rather metaphorical fire – namely, another rebellion. Some, on the other hand, contend that it was for religious reasons as the Sultan did not like these places of idleness and indulgence.

Whatever the rationale, this was not the first ban on coffeehouses in the Empire, but did stand out for its harshness. The coffeehouses in Istanbul were demolished and the violators of the ban, who were found having coffee – and even tobacco, a rather thornier issue for religious reasons – were punished with death.

The coffeehouses in Istanbul were still closed after over a decade of Sultan Murad IV’s death in 1640, lying “as desolate as the heart of the ignorant”, in the words of Katib Celebi.

With the passage of time, however, the laws got relaxed. Who was to stop the coffee, after all? The aroma of the dark brew returned to the streets of Istanbul and the coffee culture thrived for the next few centuries.

But over time, more and more coffeehouses came to be owned by the Janissaries themselves. So when the reformist and headstrong Sultan, Mahmud II (r. 1808-1939) took the daring step of dismantling the Janissary corps, coffeehouses were again shuttered. Not only did the state want to sever this source of income for many of them, but also feared they could become the launching pads for a reorganisation and resurgence of the troublesome corps. 

As the Janissary threat waned, coffeehouses started to reopen, never to be closed in the Empire again. But this time, the state had learned a lesson. It was just a matter of time until the palace would use coffeehouses to their advantage.

Beginning in Sultan Abdul Mecid’s reign (1839-1861), informants of the palace spread everywhere keeping an eye on what, besides coffee, was actually brewing in the coffeehouses. Thus, in a significant turn of events, the erstwhile hotbed of conspiracies got transformed into an apparatus to keep a check on the public’s pulse. 

Because of a virtually omnipresent intelligence, and with the dawn of the printing press, these cafes morphed into powerhouses for sharing of news, views, and satire. Criticism of the state did not go beyond satire. An artful narrator would read the newspapers and magazines out loud to those who could not, or simply did not want, to read. Thus, conversations in coffeehouses now began to become relatively more grounded. 

No wonder, when coffee from the Empire reached the West, the coffeehouses came to be known there as ‘penny universities’. Whether in Istanbul or London, the coffeehouses served as places for educated exchange in the midst of an inspiring aroma.

Coffee in Turkey today

Hardly anyone narrates legends anymore, or reads the newspaper to others – at least in urban Turkey today. But the tradition of small talk over coffee – or relatively recently, çay – lives on. In Istanbul, for one, alongside the chic private cafes that adorn its beautiful land- and seascape, the government-sanctioned Kiraathane – literally places of learning – with their dedicated libraries, offer opportunity for socialisation and learning at once. 

You can teleport yourself into a book to 400 BC, over a cup of çay or  kahve to bring your imagination to life. The origins of the Kiraathane can be traced back, again, to Sultan Suleyman the Magnificent (1494-1566) who ordered special books for coffeehouses – so that people didn’t waste time.

In addition to the traditional cafes serving the emblematic Turk Kahvesi – recognised as Intangible Cultural Heritage by UNESCO – Turkey has over 500 branches of Starbucks, which makes the country second only to the United Kingdom within Europe. 

With a rich history of its own Turk Kahvesi, such a large number of the foreign coffee cafés is somewhat remarkable, not least because the Turk Kahvesi is one of the most authentic tastes in the coffee-verse.

According to experts, one explanation for the exceptional success of Starbucks in Turkey may be its ability to capitalise on the already established coffee culture in the country and target the new generation. For the hipper young people in Turkey now, the instant European alternatives to the Turk Kahvesi are chic, quicker to prepare, and suit their taste buds perhaps equally well.

In search of its soul

The obligations of express-paced modern life have reduced coffee to a kind of fast food. This, for coffee, and for us, the lovers of the beverage, is indeed heartbreaking. While speed may be valuable, coffee seeks a deeper meaning – thanks to its mystical roots.

The most frequently used reference to the history of coffee is ‘Mocha’ – yes, that smooth creamy delight with a dash of chocolate we all love. But did you know that Mocha, originally was, and remains, a port in Yemen, that was at the heart of the early coffee trade?

It is in Yemen that the extraordinary beans were first brought from Ethiopia, just across the Red Sea, a few miles away from the Port of Mocha, from where they eventually got popularised. Like much else that is connected with love and compassion, it is the Sufis that are credited to have sprung life into this hitherto undiscovered treasure, opening the gates of the blessed aroma to the world around the 15th century.

While tracing the name of the person responsible for the eventual popularisation of coffee is difficult, the feat is sometimes attributed to Shaykh Ali ibn Umar al-Shadhili. No wonder, coffee is sometimes referred to as the Shadhiliye in Algeria to this day.

But, another account connects coffee to Abu Bakar al-Aydarus, a pious Sufi Shaikh and poet, who is even said to have written a poem eulogising coffee. He recommended the beverage to his followers. The entrancing aroma with the unifying quality of being able to awaken the head and heart at once, facilitated the Dhikr – remembrance for tryst between the soul and the spirit, as such.

Whosoever got to coffee first, what is largely agreed by historians is the role of the Sufis in the eventual diffusion of the enlivening aroma into the mundane world.

So the next time you decide to treat yourself with a rich cup of coffee, take a break from the outside world and let its blissful elan take over. The mystical connection of the beans may be your gateway to the sea of love and tranquil within yourself. From a deep silence, I can hear an echoing chant, “What you seek, is seeking you.”

(First published on the TRT World Digital, here)

Ad-hoc Policymaking

ASSUME a policy is ‘bad’ to begin with. Implemented consistently, it will likely get some groups to favour it, and some stakeholders to trust it. Thus, counter-intuitively, even if a policy starts with a weak basis, it may become a success over time; thanks to the thrust from its politico-economic dividends to various interest groups. Though not ideal, the economy gets the impetus it needs. Sometimes, this is unavoidable.

Contrast this with a neatly crafted policy, with fairness at its core, which may even be revolutionary in spirit. Try to change everything at once, and it is bound to become erratic. Ultimately, the desire to build an overnight paradise results in failure brought about by the exuberance of good intentions.

Policy inconsistency is perhaps the reason for Pakistan’s abysmal development record. While our South Asian peers focused on human development, and building better institutions, we have been obsessed with the illusion of growth.

Autocratic governments in Pakistan did catalyse growth, and even accelerated human development in some respects. Yet, at the same time they wreaked havoc on institutional development. Thus Pakistan had bouts of dictator-led growth, but without a trajectory ever taking hold. It was growth without deeper groundwork or an ecosystem to carry the momentum.

Whether in the 1960s, 1980s, or the 2000s, the aim remained to legitimise the regime on the basis of growth, which was in turn helped by aid, and assent for international financial flows from the US. In the 1960s and 1980s, we were partners in the Cold War, and in the 2000s, in the embarrassment that was called the ‘War on Terror’.

Institutions and the capacity for independent thinking and developing indigenous solutions were largely irrelevant for these times. The focus remained on enforcement of the reveries of the person at the helm. The democratic times, in the precious few windows they were permitted, were only nominally democratic. Political governments were weak and remained on edge.

But there was also an opportunity for politicians in, what Oscar Wilde would call feigning the ‘charm of weakness’. Political governments were absolved of responsibility. While dictatorships did derail the establishment of institutions, a political byproduct of this was the facility of conveniently accusing the military for essentially every issue that got out of the politicians’ hands.

Thus, the unrelenting interruptions of democratic governments by autocratic regimes created problems that extended into relatively democratic times. In terms of economics, unless someone is naive enough to calculate the average of erratic values, Pakistan, unlike other South Asian countries, did not develop a long-term growth trend.

What about the shorter run? The time horizon of five years for a country like Pakistan was always daunting. Each government faced a trade-off between long-term reforms that could benefit the country and short-term spen­­ding on flashy projects that would charm the voters.

No rational politician would choose the former. Even if someone did take the plunge, longer-term projects and reforms were sabotaged by the governments that followed to prevent the initiator from gaining political mileage.

So things turned out to be even more testing in the shorter run.

Enter Khan. Pressed by his ambition and grand promises on one hand, and limited time and resources on the other, what transpired was a terribly mercurial policy. Ministries in a constant state of flux, bureaucracy in perpetual rotation, a new adversary provoked every dawn — it has been chaos.

The latest is the fate of the IMF-programme which hangs in the balance with Shaukat Tarin, a Fund-sceptic, chosen to head finance. If his interviews are any indication of his thou­g­­ht process, there is confusion on the monetary vis-à-vis fiscal functions of the economy. His sol­ution begins with lowering the policy rate, goes to bringing down inflation simultaneously, and proceeds seamlessly into the blessed land of economic growth. How this will be seen by the clear-headed State Bank chief Dr Reza Baqir and the IMF is anybody’s guess.

To revert, when the economy was already under stress due to the double curse of stagnation and inflation (stagflation), the government created a new crisis. The confidence that was just developing from the improvement in exports, an increase in remittances and the strengthening of the rupee (one of the best-performing currencies in 2021) reflected in the successful issuance of the Eurobonds, received a fresh blow — not from Brutus but from Caesar himself.

Khan Sahib, thanks to his illustrious cricketing past, still seems to cherish his aggressiveness and unpredictability. But what he considers daring and bold, the markets see as unthoughtful and erratic. Ad hoc and inconsistent policymaking in the shorter and longer term needs to change for good, if a real change there is to be. 

(Originally published in the Dawn Op-Ed pages; may be accessed here)