Moral hazard on steroids

When political leaders of any stripe go beyond the limits set by constitutions and law, they are acting immorally.

It should not be a source of pride for Pakistanis that, despite all the other bad news competing for public attention, Pakistan is keeping pace. The Imran/Qadri march on, and occupation of, downtown Islamabad and the violence that ensued, has drawn frequent reports, and much comment and speculation. The specter of a destabilised Pakistan has loomed large in some of the pundits’ minds. More to the point, probably, many of these pundits fear that increased instability will again bring the country again, directly or indirectly, under the thumb of the military (and recent revelations that some former Army leaders may have inspired the march raise even more alarms.) These fears have galvanised anxiety among Washington’s ‘whither Pakistan’ pessimists who wonder once again whether an already weak state will become weaker and its ability govern will decline at an increasing rate. These are far-reaching questions, if perhaps a bit hyperbolic.

Of course, a more unstable Pakistan, or one more under control of the of the military, would increase concern for a successful denouement in Afghanistan after the drawdown of Nato forces, given the widespread perception, whether true or not,  that Pakistani policy toward Afghanistan after the drawdown is inscrutable at best or unreliable at worst. But more importantly, I suspect that worry about Pakistan derives from the firmly-held belief that it is a geopolitically strategic state in a geopolitically important region, and that instability, or worse control by hostile elements, would be deleterious to regional and Western interests.

The actions of the PTI and PAT lend weight to this worry. While I would think that the constitutional right to demonstrate peacefully against the current government for its failure to govern seriously over its 15 or so months in power is warranted, both Imran and Qadri seem to have as, their only objective, its unseating by means that are, at the very least, constitutionally questionable. If they are, indeed, just another kind of proxy for some retired and active generals (who may have grown up with the idea of using proxies to do their dirty work) then it has been a shameful, but deadly, farce and should finish their leaders as national political forces.

But the most worrisome aspect of this political bubble in Islamabad to my mind is that having again raised the specter of state failure, the current government will simply double down on the geopolitical significance of the country it governs. Using this significance to avoid hard choices has been the name of the game in Pakistan politics for perhaps 40 years. Civilian governments use it to live beyond their means, avoid economic reform, and share the economic rents that power brings. Military governments use it for those reasons, and to get away with their continual choking of real democracy. It is the same syndrome as the “too big to fail” mindset that gripped the major international banks which verged on failure in the 1980s and were rescued by the Western governments and international financial institutions, and repeated their folly (as did the governments and institutions of the West) when their financial systems crashed in 2008, and in the Eurozone crisis of 2010-2012.

I write here of the phenomenon called, generically, “moral hazard.” It is not new, having been discussed as far back as the 17^th century, and commonly used by economists from the 19^th century on to mean the (probably) unconscious incentive to go beyond prudent limits when it is clear that others will have to foot the bill. In the cases cited above, the taxpayers of Western developed countries picked up the tab for the banks’ excesses. Thus, there is no immorality in the modern use of the term ‘moral  hazard’ as the word ‘moral’ just implies stupidity — and greed. But in these countries there is redress through their democratic systems — dissatisfied taxpayers can vote in governments that will (and did) crack down on financial institutions.

But as one of my friends pointed out recently in another journal, moral hazard also goes beyond economics, to politics. When political leaders of any stripe go beyond the limits set by constitutions and law, when they take measures solely to ensure their perpetuation in office, or (in contrast) to get into office by short cuts, and when for the same reasons they override accountability and weaken instead of strengthening the institutions that promote and preserve democracy, they are acting immorally because they are acting consciously — while, at the same time, limiting the means of redress by crippling democracy.

Published in The Express Tribune, September 11^th, 2014.

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