The political economy of confrontation

Published: September 25, 2011
The writer is distinguished professor of economics at Beaconhouse National University in Lahore

The writer is distinguished professor of economics at Beaconhouse National University in Lahore

One of the most difficult initiatives for individuals, as much as states, is to change their policy framework in the face of unpalatable facts. Yet, in a moment of crisis, survival sometimes depends on reformulating policy. Such a moment is at hand for Pakistan. During the US Senate hearings on September 22, Secretary of Defence Leon Panetta and Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, made crystal clear the situation that Pakistan is now faced with, in the sphere of national security: there should be no surprise if the US takes military action against the Haqqani network. The way the government of Pakistan, together with the military establishment, responds to this situation will shape Pakistan’s future economic, political and security architecture. Let us briefly examine the context in which hard choices will now have to be made.

Pakistan, of course, has promptly issued a denial that any link exists between the military and the Haqqani network. However, US actions are likely to flow from their perceptions and not those of the Pakistan government. Three key elements of the US view of the matter emerged during the Senate hearings. The US is convinced that: (i) The Haqqani network is a “veritable arm of Pakistan’s Inter Services Intelligence…” as Admiral Mullen was reported to have said. (ii) The Haqqani network, with ISI support planned and successfully executed the September 13 attack on the US embassy in Kabul and at ISAF headquarters. (iii) The US regards the Haqqani network, based in Waziristan, as the “foremost threat to the US and coalition forces in Afghanistan” as Senator Carl Levin is reported to have observed.

The US military strategy holds that they reserve the right to take action against non-state terrorist organisations located in any country if, such organisations pose a threat to US security. In view of this military doctrine and the conception that the Haqqani network constitutes a “foremost threat”, US military action in North Waziristan is a distinct possibility.

Equally important, given the stated US position that the Haqqani terrorist group is linked to Pakistan’s military apparatus, the US could well mount a graduated set of pressures on Pakistan across the whole spectrum: economic, political and military. It may, therefore, be helpful to consider the economic and political consequences of what many believe is Pakistan’s policy of strategic ambiguity, in its war against terrorism: running with the hare and hunting with the hounds.

Pakistan’s economy is in the grip of stagflation with a protracted recession combined with double-digit inflation. Over one-third of the population is living below the poverty line and the majority is deprived of basic services. The situation has been worsened with the floods in Sindh.

If Pakistan chooses the path of confrontation with the US, it could mean stoppage of aid from the western world in general as it closes ranks to pressurise Pakistan. This could mean a loss of about $4.78 billion annually in foreign assistance, with distress repatriation of capital abroad. This could bring Pakistan’s reserves position (currently at $12.9 billion) to a crisis situation whereby, inflation could feed off exchange rate depreciation, quickly bringing tripple-digit inflation rates to an already distressed population. The balance of payments crisis could paralyse the economy with critical shortages of key commodities such as fuel, cooking oil, fertiliser and hence, food.

Pakistan is already under stress due to widespread violence by various Taliban groups and ethnic violence in the key port of Karachi. The economic collapse that could result from conflict with the West may intensify this stress to a critical level. The sovereignty of the state within its geographic domain could be seriously eroded, resulting from large scale disorder. It is time to change the paradigm of security policy and recognise that selective support for the Taliban is not only counter-productive for Pakistan’s internal security but could also bring the country into a catastrophic conflict with the western world.

Published in The Express Tribune, September 26th,  2011.

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Reader Comments (24)

  • Wellwisher
    Sep 25, 2011 - 10:07PM

    A realistic assessment Will the authorities take note of it?


  • Sajjad Ashraf
    Sep 25, 2011 - 11:31PM

    Doctor Sahib – respectfully, I do not agree with your conclusion. Based on your thesis we should continue to give in. Then there is no end to it. In fact this perpetual surrender has brought us to this depth. Honorable nations buckle up and muster resources to fight imperialist powers. How many fronts can the US open?


  • faraz
    Sep 25, 2011 - 11:37PM

    People don’t understand the crucial link between economy and foreign policy; they love hollow rhetoric like qaumi ghairat, ankhon mei ankhein dal ke daikhna, mun tor gawab dena etc.


  • khan
    Sep 26, 2011 - 12:02AM

    “The economic collapse that could result from conflict with the West may intensify this stress to a critical level. The sovereignty of the state within its geographic domain could be seriously eroded, resulting from large scale disorder.”

    That is the reality facing us in a nutshell.

    Does the ‘ghairat brigade’ have enough commonsense to realise the repercussions? Sadly I very much doubt it. As usual I expect all we will get is mindless jingoism and repeated claptrap as we sink into the mire.Recommend

  • Zalim Singh
    Sep 26, 2011 - 12:12AM

    @ Dr Akmal Hussain

    pl follow Haq’s musings. He seems to have different perspective than yours.


  • Meekal Ahmed
    Sep 26, 2011 - 12:53AM

    You last para. is telling.

    Reserves are a shade under $18 billion and not what you state but that could be a typographic error. However, as experience teaches us, a shock can have cascading, self-reinforcing effects such as those you mention.

    A strange time to be booting out the IMF. But come to think of it since there was no way the government could have either re-started the old SBA or negotiate a new program, what they did was make what was implicit, explicit.

    How they will managed with your scenario coming to pass I do not know.


  • andleeb
    Sep 26, 2011 - 12:59AM

    Pakistanis are courageous people with pride. We will eat grass, as Bhutto once said, but we will never give in to American pressure. We do not need America, America needs us and will dance to our tune.


  • Aamir
    Sep 26, 2011 - 1:59AM

    @Sajjad Ashraf

    US can open another front in Pakistan since it closed the front in Iraq. Pakistan on the other hand cannot open another front with US, alongwith its current fronts against India, domestic terrorists, Baloch insurgents and Afghanistan.


  • vineet
    Sep 26, 2011 - 2:08AM

    @Sajjad Ashraf
    I respect your sentiment but aren’t you a fighting a wrong fight?
    I agree that Pakistan needs to stand on its feet and need to firmly tell American’s to back off.
    But just think about what have you chosen to stand up to America for??
    To preserve murderous Haqqani network and Taliban??
    Do you really want to harbor these kind of organisations?
    Does Pakistani kawm need to sacrifice their economy, internal peace and risk a potential war with US just to defend some vague generals notion of strategic depth?
    I think if Pakistan wants to stand up to US they should stand up for real causes like Drone attacks which kill civilians or Raymond Davis episode.

    Standing up for Taliban (which will burn you back to middle ages later) risking massive damage to Pakistani kawm just for some vague notion of strategic depth is madness in my opinion.
    Think of a moment by supporting Haqqani network what damage you are doing to peace in Afghanistan and your brothers there. No reason Afghans hate you to core.

    Just a humble neighbor


  • abbas from the US
    Sep 26, 2011 - 3:31AM

    So anyone here making comments happen to be in that 1/3rd category of people living below the poverty line. Or is it all right for the ecomomically well off without the worry of the next meal to lead the charge of asserting the ecomic independence that the Pakistani elite would prefer since it does not need to feel the pain associated with this action


  • punjabi
    Sep 26, 2011 - 5:41AM

    @andleeb: lol have they danced to ur tune untill now,remember osama operation,remember drones.plzzzz stop this crazy rhetoric.


  • Sep 26, 2011 - 6:24AM

    The doomsday scenario painted by the author is only possible if the Americans decide to do some heavy and frightfully expensive airlifting of the logistics to maintain their combat units in Afghanistan; which of course is largely dependent on the Pakistani land route today. There is no point in jingoistic chest thumping; the fact is that leave alone Pakistan, even the Chinese can’t take on the US military might. A much cheaper and sensible option for Pakistan is to sever ties with the Taliban and work for a peaceful settlement of the Afghan problem.


  • Mirza
    Sep 26, 2011 - 7:05AM

    @andleeb: After that rhetoric of eating grass, what happened to ZAB? PPP is not going to make the same mistake again and again. The PPP knows that the US has enough power to get the first elected PM of Pakistan to be hanged by its own army. The US has invested a lot in Pakistani army and they want to get their money’s worth. It is a fact that most of the high value targets (terrorists) were caught from Pakistani cities and not Afghanistan. The US wants to close the safe havens of terrorists in Pakistan, and if our army would not do it, somebody else would definitely do it. Are these terrorists or Haqqanis so valuable for Pakistan to risk a war with the West? Ruing our economy and not control terrorism in Pakistan?


  • harkol
    Sep 26, 2011 - 8:45AM

    In 1991, India reached a point of no-return where Indian govt. had no choice but to reform its economy. Such reforms was forced down its throat by multi-lateral agencies and even foreign lenders. 20 years later, Indian economy has grown 4 times larger, and India is reclaiming its position as one of the largest economies in the world (if not the largest, which it was for almost 1800 years of Christ era).

    Pakistan, being part of erstwhile India, has the same strengths, if only it can reform its politics, society and economy. Instead of focusing on low-productive confrontational strategies, involving itself in religious politics, if it focused and reformed its economy, it’ll be able to quadruple its economy in 2 decades.

    If it won’t do that, it’ll break up in to multiple pieces, as people fed up with lack of cohesion will look for smaller cohesive nations.

    In the end, it’ll all be about economy, not military, not religion and certainly not politics.


  • Ali Hassan
    Sep 26, 2011 - 1:20PM

    I agree but we need now to stop depending on the West for our economy. If we’ll continue doing so, we will be no more than puppets in the hands of western world. Today it may be one issue, but we all know that the US demands will never be lessened. It’s time to utilize the country’s own assets to their full potential, but again who will do that? May ALLAH (S.W.T) do what is best for Pakistan and may the youth not repeat the mistakes committed by the elders. Recommend

  • Feroz
    Sep 26, 2011 - 1:31PM

    Readers feel that Pakistan should manage without Aid so what are we discussing ? If there is no money there are no Toys for the Boys. Eating grass is the option suggested by many of the Rulers, though I doubt they consume any vegetables themselves. Like always strategy and policy are framed that benefits flow to the rulers but hardships are reserved for the slaves.
    Clarity of thought for sure !Recommend

  • Baqar
    Sep 26, 2011 - 2:33PM

    I am certainly not from ghairat brigade, but ghairat brigade has a point. Wat more bad can happen? already we have double digit inflation, high levels of poverty, humongous debts and wat not…lets break the shackles and take independent position for once in our history. Our rich might not be able to drive land cruisers as they do now, but the survival instinct of the working class will certainly help us develop the footprints of economy that will be inherently indigenous. Moreover, Pakistan is a country that can produce the food stuff for its entire population, we dont have to worry abt food security, oil is our problem, well for that Iran is more reliable than Saudis (in the wake of confrontation with the US). Above all if its our destiny to suffer pain then why do suffer it on US consent why not our own? Atleast it will bring long term benefits of sort.


  • Irfan Husain
    Sep 26, 2011 - 7:18PM

    Excellent, clear-headed analysis.


  • Doctor
    Sep 26, 2011 - 7:59PM

    @ Author – very well put.

    @ Sajjad – how are we agreeing with the US? The US and the rest of the world wants the Pakistani Armed Forces to stop supporting proxies and terrorists. Pakistan has not lived up to that at all. Pakistan is like a 5 year old that thinks it can fool the adults and keeps playing the same game and getting caught. The adults aren’t giving Pakistan a free pass anymore. Game’s up – time to grow up, come clean, and mature.

    @ Baqar – but the Ghariat Brigade just doesn’t get how much worse things can get. Terrorism is increasing across Pakistan. Hordes of wealthy and well educated Pakistanis are running away from Pakistan as quickly as they can. Soon Pakistan will be left with just the corrupt government and Armed Forces who will have a smaller and smaller economic base. Then what will happen? Massive civilian unrest? More terrorism? More violence. And no, Pakistan does not have enough food to feed everyone – imports are required.Recommend

  • Baqar
    Sep 26, 2011 - 9:23PM

    @Doctor– I respect your POV but i still believe in this country….my point is let the unrest come…let the people come on the road. The day people like us will step on the road with the intent of saving Pakistan and ultimately ourselves, that day this country will change and the scenario m talking about cannot come until things hit the bottom low. Things will hit bottom low when US aid will stop completely.

    P.S. I agree Pakistan doesnot have enough food for everyone, that is because we only cultivate on a part of our cultivable land. If worst comes in the wake of sanctions Pakistan can produce amply for entire population.


  • shaq
    Sep 27, 2011 - 2:12AM

    Well doctor sahib is right but will the army, isi and people listen. I doubt it


  • Abhi
    Sep 27, 2011 - 1:06PM

    If you really want to give credit of boost in Indian economy to so called reforms then Pakistan cannot do much as it is already reformed (its economy is more open than Indian economy).
    The economic reforms are just one part of growth story, social reforms with emphasis on education from the time of independence are major reason for boom.


  • Riaz
    Sep 28, 2011 - 1:37PM

    The nation would rather do anything than bowing again and again in front of the unreliable ally, the US. Better to die than beg.


  • harkol
    Sep 28, 2011 - 2:24PM


    You misread my post. I wasn’t talking about ‘openness’ of the economy. I was talking about need to respond to challenges through reform and set your ship on course for economic growth. Pakistan may have lesser regulation, but it also has un-viable tax collection, High budgetary allocations for defense, and near debt trap borrowings etc. My point was – what matters most to citizenry is their economic well being. Other emotive issues sound good in short run, but invariably the focus will return to economics.

    Education is indeed part of an major economic activity. But, one must realize that the sheer power of large human resource can attract investments, even if they are semi-educated. Cost of labor in China is already about 50% more than India. Indian labor costs are bound to become expensive too. So, if only Pakistan focused on growth, rather than territorial ambitions, it can easily become a hub for blue collar manufacturing (if not white collar work).

    Should Pakistan not resolve these issues within a decade, it’ll see portions of it wanting to break away, hoping for better economic future.


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