Approximately 3 to 4 years ago, sitting with a few friends at Bantas, I made a prediction, which practice, by the way, I generally shun, that by 2050, the world would have reverted to Monarchy, and democracy will have been buried. The obvious related effect would be the simultaneous demise of Neo-liberalism, and the rise of mercantilism; incontestably a happy moment for the last mercantilist on the planet (Me).
Obviously, everyone had a great laugh that evening, until they realised I was not joking; after which my said to be delusional blubbering was attributed to one too many diet Coke (To clarify I have not received any lifafa from Coke, yet!). Nonetheless, being a believer of the maxim, put your money where your mouth is, I proceeded to take a bet; albeit with the obvious proviso that recovery will be dependent on being alive by 2050!
Approximately three to four months ago, and again at Bantas, I was regretful that I had perhaps been too conservative when I said 2050; considering that today, more than half the planet was already being ruled by dictators, elected or otherwise, 2030 now seems a more realistic deadline for democracy becoming a side mention in the history of the world. In my defence, not being a technology buff, whilst making that prediction, I was unable to factor in the ability of social media to cause havoc and chaos.
Today, we live in a world where every Tom, Chang and Papu believes, mostly curtsy Google, that he, or she, is a know it all on every subject ever invented, especially economics; and unfortunately has the tools to easily broadcast his or her views, theoretically globally, with a simple click of the button, whether anyone else likes it or not. The bigger problem is that everyone not only believe they know it all, they also believe that their version is the right version and those who disagree are simply idiots. Finally, spurred on by a media over enthusiastic about freedom of speech, everyone believes that they are free and have rights, and their rights should be the priority of the government that they voted into power, and nothing else.
Democracy, I pity thee!
To explain why, we need to understand that every decision of the State will invariably have financial implications, at multiple levels, and that in each and every case, the end result of any decision by the State is zero sum; meaning whilst a segment of society will gain, another segment of the society will lose, with the net impact being zero.
The best example for this perhaps is reducing taxes on the rich and their corporations. I for one have not come across any evidence-based research proving that when you reduce taxes on the rich and their corporations, they end up paying more taxes. On the other hand, every time the State makes the rich richer by reducing taxes on them, the rest of the populace has to pay more taxes through sales taxes, and other indirect regressive taxes, for the State to maintain and improve the Tax to GDP ratio. The rich win and everyone else losses.
Another example is infrastructure projects like the Metro and Bus Rapid Transit projects, whether orange or purple. Every time, the State spends money on such projects, it has less money to spend on canal lining; necessary to minimize losses due to seepage, for protecting areas prone to water logging, to increase discharge capacity of the canals, and improving of power generation. So while certain segments of the urban population gain by being able to get to work cheaper, the entire agriculture sector loses.
Finally, another example is when interest rates are raised, irrespective of whether or not it controls inflation, or performs other wondrous acts; what a higher interest rate does do is make those who have sufficient wealth to place in bank accounts richer, and increases the monthly mortgage cost of the poor who had to borrow to fulfill their dreams of home ownership. And perhaps this example also can be used to demonstrate multiple effects -every time interest rates go up, the cost of borrowing for the State goes up, and while the banks make more profits, the rest of the population, excluding the rich, has to pay more taxes to enable the State to pay this higher interest. Which makes you wonder!
Nonetheless, thanks to the social media, now every loser of a decision by the State has a medium to protest and also the ability to easily organize a sit in. Essentially, the State cannot make everyone happy all the time, since every time the State takes any decision someone loses. Accordingly, there will always increasingly be more protests and dharnas, consequently crippling the State's ability to take the right decisions or any decision. The only solution that I can dream up is a Strongman; which is why I pity democracy, and neo-liberalism.
Pretty soon I will not be the only mercantilist!
Dear readers, I again apologize for my habit of digressing from the topic; albeit for the record it is not easy to dream up a new topic every week and I seriously respect those who write a daily column.
Strongman definitely would have been a more appropriate title for this column. The original plan today, was to attack neo-liberalism and the inability of its cult members to tolerate any criticism directed against their precious policy model, even when it is taking a beating across the world; from my earlier writings it should be clear that I am a strong opponent of the free markets and perhaps one of its most vocal critic in this country.
I believe the extent to which markets should be free is inversely proportionate to the stage of development of a nation.
But not to worry; given my passion, there is every likelihood of eventually mounting an attack on neoliberal policies. So in the near future, look for an article titled strongman; after all we cannot have two articles titled intolerance!
(The writer is a chartered accountant based in Islamabad. Email: syed.bakhtiyarkazmi@gmail.com)