Paying a heavy price

PRESIDENT Asif Ali Zardari, in an exclusive interview to Wall Street Journal, reportedly requested a 100 billion dollar aid package from the West. The raison d'etre of this request: if the US can spend 10 billion dollars a month in Iraq where there is little danger of an al Qaeda resurgence - the US acknowledged antagonist in its war on terror - then there is reason to spend all that much more in Pakistan to ensure that al Qaeda operatives hiding in the inaccessible regions along the Pak-Afghan border are dealt with appropriately, a claim made repeatedly by senior Pentagon and Bush administration officials. There is no doubt that Pakistan has been engaged in a fight on behalf of the West since 1979 when Soviet tanks rumbled onto the streets of Kabul sending the Pentagon into the jitter. The outcome of our involvement was catastrophic ranging from the proliferation of kalashnikovs in our streets as well as the drug culture that caused severe socio-economic issues that the country continues to grapple with today. Afghanistan post-Taliban is again in the grip of a civil war and it is Pakistan that is, again, paying a heavy price in terms of loss of life, directly through US attacks on our tribal areas as well as the collateral damage due to our military's ongoing operation in that part of the country; increasing number of displaced persons as well as loss of property and, what is also disturbing, the reappearance of the dreaded polio amongst children in the tribal areas who could not be vaccinated due to the insurgency there. Political analysts also allege that Afghanistan in 1979 and 2001 provided two of our military dictators' legitimacy in the eyes of an international community that had initially refused to accept Zia-ul-Haq and Pervez Musharraf as legitimate leaders of Pakistan. Thus given the scale and extent of our problems attributable to our fighting proxy wars on behalf of the US the request for 100 billion dollars does not appear to be outlandish.
President Zardari's argument is simple: the US cannot afford to let the government fail, and the prospect of a nuclear armed Pakistan losing the fight to al-Qaeda as untenable to the West was raised by the interviewer. Many in Pakistan would challenge such logic; after all nuclear armed Pakistan is able to defend its nuclear weaponry from a bunch of terrorists hiding along the Pak-Afghan border. Be that as it may, it is highly improbable that assistance amounting to 100 billion dollars would ever find its way into Pakistan's treasury within the year as a loan, leave alone as a grant as requested by President Zardari. Past precedence shows that even after the massive earthquake of October 2005 - horrific images of which were beamed world-wide resulting in mounting public pressure on Western governments to extend all possible assistance to the government of Pakistan to cope with the crisis - the world, including multilaterals, pledged 6.2 billion dollars. And Pakistan learned at that time that pledges simply cannot be equated with actual disbursements. In addition, the Western countries are extending assistance to Pakistan not only through the Paris Consortium but also bilaterally.

Pandemonium in the markets

THOSE US Republicans who questioned the wisdom of the President Bush’s $700-billion financial bailout package may be right after all. Quite apart from the questionable ethics of rescuing bankers from the consequences of their own greed and incompetence, they questioned whether such a move would restore confidence to the market and stabilize it. How long, they wondered, would it be before it again collapsed? They did not have to wait long to find out. A weekend is what it took. Last Friday, it was all smiles in Washington, on Wall Street and in stock exchanges around the world as the US House of Representatives did a U-turn, voted the bill through and sent it to President Bush to sign. But by Monday, pandemonium had again broken out in the markets. Analysts said that the chaos was because the Europeans had not come up with a rescue package of their own but the facts do not support that. Shares on Asian and the New York markets did not plunge on Monday purely because of fears about recession in Europe; they plunged because of fears about recession at home — the result of a banking system that was finally seen to be in gridlock. There is good reason for the market angst. With panicking banks having stopped lending both to each other and to business, the financial wheels needed to facilitate international trade are also in danger of grinding to a halt. In Japan, the situation is acute; local companies need dollars to purchase goods, but cannot get them because US banks will not lend them to their banks. Yet, yesterday, markets in Europe were more stable as investors snapped up bargains, although banking shares were still on the down.
This frenzied down-up, down-up activity on the markets plus the message to governments from the banking industry that the $700-billion bailout is not enough to resolve the crisis and that they will have to come up with much more (seen in the UK yesterday when top bankers berated the finance minister for not coming up with a rescue plan to their liking) is dangerous — not merely because of the damage it is doing to economies. There is an even bigger danger. The chaos and the behavior of investors and financiers, not least their seemingly insatiable demands for money from governments, threatens the very nature of the free-market system. Belief in that system is being eroded and that is very worrying. As it is, bankers and financiers, acting like villainous, greedy cuckoos, screaming for ever more food, have made themselves the most despised people on earth. Meanwhile, governments are being forced to effectively nationalize banks and institutions in order to save people’s jobs, homes, pensions and investments and central banks are having to take over the banks’ role as a lender to keep businesses up and running. In Iceland such is the scale of the crisis that the government is talking of the country itself facing bankruptcy. The consequence of all this is that people and governments may start to believe that the private sector has proved to be incapable of running the world’s financial systems and that these should therefore be left to the state sector instead. That is a very bad idea. What is needed in the world’s economic life support systems is transparency, not state control. Twenty years ago, communism came tumbling down under the weight of its own incompetence and malevolence and state-controlled economies were shown to be an unworkable disaster. That remains true. The failures of deregulation should not encourage anyone to think that state control is the answer to the present crisis.

—Arab News