"Looking goof Billy Ray!" Louis, "Feeling good Louis!" Billy Ray-quotes from one of my favorite comedy movies of yester years, "Trading Places". With a very heavy heart, because of extenuating circumstances, the decision this week was to take a break from continuingly beating the crap out of neo-liberalism; which basically is a favorite pastime for the last mercantilist. Albeit, before moving on, cannot resist the urge to respond to a rather stupid view floated on Twitter; being a mercantilist does not in any manner suggest animosity towards the market itself or a single-minded support for public ownership as a panacea for all economic crisis. The mercantilist is all about a trade surplus and protectionism!
Will revert to the expose on neo-liberalism next week; whilst remaining painfully conscious that the discussion on the problem statement has also not been concluded yet. Oh well, some day and that day may never come!
The past couple of weeks have been all about the Government celebrating an economic recovery with the opposition rather rudely ridiculing these claims, and harping about the poor man suffering because of growing unemployment and spiraling food inflation.
Whilst, in a highly polarized and charged political environment, the rank and file obviously are not willing to give an inch to the opposing view, however it can easily be asserted that the laymen have no clue about how Moody, who is the protagonist for this latest altercation, ranks a country and what does B3 stable for five Pakistani banks means and what impact, if any, it has on the economy. But then, most all of us also did not understand the impact or the how and why, back when the previous Government celebrated upgrading of Pakistan to emerging markets by MSCI in 2017. And almost none are aware that we survived being downgraded to frontier market by the MSCI, twice in 2019.
Curiously, every time any Gora praises our economy we immediately start jumping with joy; I mean seriously why? Should we trust them so much too blindly rely on whatever they say? Are they really serious about the best interests of Pakistan?
I have previously many times pointed out that economics has sufficient indicators and ratios and what not to defend or oppose any economic scenario, hence for me the government clamming success because of a decreasing current account deficit and the completely contrary narrative of the opposition because of a falling GDP, is more humorous then confusing. On the other hand, I am confident that only a handful amongst the populace actually understand what is CAD or what is GDP and amongst the two indicators what is more critical and who is right.
Between CAD and GDP, my views are clear and published; trade deficit is the only indicator that a developing country needs to focus on, and that GDP is an impostor. The deficit on goods, services, primary income and workers' remittances has declined to USD 2,398 for the four month period ending 30 October 2019, compared with USD 6,443 for the same period. This is the only indicator that matters to the mercantilist, therefor celebrations are in order.
The fact that exports have increased and imports are down, is obviously a joyous moment for a mercantilist; irrespective of the simultaneous rising concern over ever increasing primary income debit. That FDI is a Trojan horse is being proven right.
On the stock market, my views are equally public and clear; it is a casino, a gambling den and definitely not any kind of barometer for the real economy. Hence for me it matters not where the index is. However, I do concede that perceptions matter, and if everyone else believes that the stock market has a useful purpose, than a rising index contributes significantly to looking good.
So should Pakistan be celebrating?
Let me answer that differently. Looking good is necessary to cross the first hurdle in a job interview, feeling good comes after; looking has to do with presentation alone and feeling has to do with the substance, and both are necessary. This analogy works for any nation's economy, it has to first look good to attract capital investment before it can start feeling good.
Pakistan is looking good, celebrations are in order.
This was exactly the same view I had back when in the previous IMF program the GDP started improving and the stock market index went off the charts; albeit grudgingly since a mercantilist can never reconcile to a rising trade deficit. But hey, looking good always comes first!
But once you achieve looking good, complacency becomes a huge problem; you forget that looking good is different than feeling good. Last time we looked good, couple of years later we were in a worse situation economically.
Even now as we look good, one must understand that as soon as you get into an IMF program, because of severe austerity measures and other conditions, you immediately start moving towards looking good. Exports may be up, but what did we export more? Basic raw produce, or was it value add; imports are down but why and for how long? The stock market index may be heating up, but at the end of the day it is just speculation. The free market narrative might be working for now, but will it continue working, or will it like every time in history, fail? As a mercantilist, I for one know the answer to that at least!
And let me assure you, looking good, getting dressed smartly is quicker, feeling good, having a command over the job requirements, require years of hard work and commitment.
So kudos everyone, "Looking good Pakistan"!
However, now let's start working hard towards feeling good, since without feeling good, not for very long can you keep looking good!
(The writer is a chartered accountant based in Islamabad. Email: [email protected])
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