Economic Consequences

In its editorial of Wednesday, ‘Change of tone‘, Daily Times makes an important point that is not getting enough attention in the latest round of anti-American fist-waving. What is the economic impact of this behaviour?

The cost of the downward spiral in US-Pakistan relations has already sent shock waves through the economy. The stock exchange plunged amidst fears of a breakdown in relations, the rupee floated to around 90 to the dollar, partly because of the ‘dollarisation’ currently underway amidst fears for the future. These negative signals should give pause to all stakeholders to reconsider their fiercest belligerence against the US. We may not like much of what Washington does or even how it does it. But it is not only the US that has constraints so long as it is engaged in Afghanistan. We too have considerations to weigh, first and foremost the struggling economy and the future of a rescue sans US aid and goodwill.

Leaving aside for the moment the unquestionable foolishness of thinking we can defeat an American attack^*, we need to consider what impact this anti-American drum beat is already having on our nation.

Yes, Hamid Gul and Ansar Abbasi are crowing about ‘national unity’ behind hating America; and Imran Khan calls for officials to refuse US aid from his sprawling Bani Gala mansion; and self-appointed patriots blog from their AC apartments in Dubai about how cutting ties with the Americans will magically revive the Mughal Empire.

But let’s set aside fantasy fiction and for a moment. Even if Pakistan refuses the billions in aid provided by the US, what about the $5 billion in trade between the US and Pakistan? Are we ready to give that up as well? What about the $1.8 billion in remittances that were received from Pakistanis working in America? Do we expect American companies to look kindly on Pakistani job applicants if we declare war on them? American aid might be ‘peanuts’, but a billion here, a billion there – pretty soon you’re talking about real money!

I know, I know. The cost of war greatly outweighs the meager sum we receive from the Americans. The security situation in Pakistan now is scaring away investors. Who is going to invest in Pakistan once the Americans are gone? Oh, yes, China. But actually, China only accounted for 4.4 per cent of exports last year compared to America’s 15.9 per cent. And even though American aid to Pakistan is ‘peanuts’, Chinese aid amounts to only 3 per cent of those peanuts. Just shells, really.

I know that we are all frustrated. We’re sick of the bloody war and would like an easy solution with a clear villain to blame. But the situation is much more complex than that, and we need to be realistic about the consequences of our actions. The Daily Times is spot on:

Emotion may be cathartic, but it is rarely a good substitute for calm, considered policy, especially in the delicate position Pakistan is placed in, and the fact that the country the gung-ho amongst us want to take on is the sole superpower in today’s world. Not only should the current furore be cooled, diplomatic efforts must find ways to continue to enjoy, if not the goodwill and friendship, at least the tolerance of the US. Any other path will damage Pakistan immeasurably.

If you want to know the alternative, just look at how Afghanistan ended up.

^*Spare me the comparisons of an American-Pakistani stand-off to Battle of Badr, please. I know my history, and I also know that the kafirs in 7th century Arabia did not have F-117A Nighthawk stealth aircraft armed with GBU-27 laser guided bunker buster bombs and submarine launched inter-continental ballistic missiles.