To Devalue or Not to Devalue? -- That’s Not the Question - Asif Iftikhar

To Devalue or Not to Devalue? -- That’s Not the Question

 

Most of economics is simple common sense made difficult. Why? Because common sense entails real, concrete changes to solve lingering problems -- changes our kings and queen(s) are seldom willing to make -- and because the short term adjustments economists in our country so eagerly suggest often offer easy solutions for the short period of a monarch’s reign -- solutions which the sovereign wants people to think of as the outcome of his brilliant performance rather than as mere adjustments (even though people find the solutions short-lived after the king is replaced by another king through elections or a coup d’ etat). The result: unintelligible gobbledegook that paints an optimistic picture of a worsening situation and continued fiddling by the ruler with economic tools to afford him and his cohorts a prolonged binge of merry making.

But now the time has come when even short-term measures do not deliver -- not even short term solutions. Real change -- in the structure of the economy -- has become essential.

Boosting exports of a country by making goods exported cheaper to other countries through devaluation might be regarded, with a great stretch of one’s imagination, as an ‘export strategy’  -- as our rulers would like to present it -- when the devaluation is not entailed by a serious widening of the country’s trade gap. Since in Pakistan’s case, it is the inevitable outcome of continual depreciation of the rupee, it should be taken as an eye-opener rather than as a strategy to boost exports.

The demand for our imports and the demand for our exports are relatively inelastic -- that is the demand does not change much in response to a change in price. The result is higher cost of living (due to more expensive import of items as edible oil, tea, potatoes, etc.) and greater cost of production (due to the increase in the import of raw material and industrial inputs). Above all, the greatest expenditure of them all, debt servicing, which, as a snowball, is getting bigger and bigger, becomes more expensive as well.

Financial discipline and pragmatic and wise economic planning are the need of the hour. These things can be effective only with greater discipline in the daily lives of the affluent in our society and with a change in their basic priorities.

No more squandering of resources. No more stress on style rather than on substance. More investment in human resource capital. Greater emphasis on developing indigenous enterprise to build a truly pervasive industrial base -- and all those nice things we usually think of as mere moral precepts and which are actually very sound economics.

But all this requires sacrifice. Not by the poor. They are already ‘being sacrificed’. Sacrifice by the affluent. And most of all, by the rulers -- the kings and the queen(s) and the nobility. If they could genuinely be more interested in the development of the economy than in increasing their own fortune, we might be able to escape from the clutches of the international ‘money lenders’ whose ‘conditions’ the whole nation has to bear to afford our rulers the luxuries without which they can’t serve the poor.

Can our leaders change their priorities for the sake of our nation? Do they have the altruism, the will and the sagacity to do that?

Let’s take out our lamps in broad daylight to look for a ‘man’. Isn’t there even one among our leaders? That’s the question.

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With thanks to Monthly Renaissance

Written/Published: Oct 1996

Author:   Asif Iftikhar
Uploaded on : Sep 07, 2016
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