What don’t our politicos get?… Shahzad Chaudhry

A lot. But here is a bit as a starter. All the provincial governments are in and some of the cabinets are in place, but the first order of business was a pressing concern or at least that is how it was meant to be projected to somehow make relief to the common man the absolute first thing that government heads wanted to get done, seen and known. Especially with Ramazan around the corner. So, there was this flurry of Ramazan packages by the provinces and the Centre to be dished out as rulers first sign of benevolence.

The packages would cost tens of billions of rupees to the exchequer proudly announced by each chief minister the prime minister, ever a chief minister with a passion to administer than govern, not to be left behind in this matchless act of magnanimity to the common man. Surely, the chief ministers would have been adequately briefed on the state of finances which we are told is precarious. Yet nothing comes in the way of a good chief minister to show his/her love of the common man, not to talk of the stupendous blessings from Allah Almighty that he or she earns for a noble cause in a noble month when all acts of good are rewarded in multiples. The issue is that this act done, and the goodness banked, the next month begins with a yawning deficit in the treasury. The next eleven months are then spent finding money to fill the gap or living in deprivation.

The trouble with this kind of executive benevolence is that the market is much smarter and usually without a soul. One can appeal to the sense of goodness in a human though they too in business are ruthless but market is a dynamic and responds to triggers that are based on a simple yet far-deeper-in-effect factors like demand and supply. What this act of great benevolence in the shape of Ramazan packages does is it adds money to the market disturbing the demand equation while supply continues at its normal rate since source is seasonal and production finite.

The Punjab government and the central government have gone about on a shopping spree of the same commodities that a common man not targeted in this noble exercise also needs far more so in Ramazan since he and his family culturally resort to same staples. The KP government thought better more likely to avoid pilferage and corruption in the supply chain deciding instead to give away cash. It too only adds to demand. With demand exponentially high, fueled by mass purchases by the government, prices rose within days. The relief package once consumed means that the same targeted segment must now go back for same staples to the same market at rates far too steep than they will ever afford. Sociologists can say more on habituating people to hand-outs and then hoping they will turn into vibrant citizens enabling growth and production.

A simple lesson in economics and ab initio primer in administration would help the magnanimous leadership make far better choices bringing sustainable ease to the common man. But who has time in this race for reckless populism, or taking a chance on God who may just not wait long enough to reward noble acts, of economic sense. Intellectual pause or reflection is a pipedream. Economics runs on principles that we need to learn quick in positions of eminence and leadership. Principles of the market stand the test of time and trump sentiment and some dreamy-eyed vision of leadership that we wish to emulate.

When President Biden chose the way of the stimulus to bring both relief and trigger economic activity the latter based on considered economic sense it had a fallout of inflation and rising interest rates that American economy is still trying to grapple with. Even goodness has a cost which will pain sometime far longer than the peace it may bring. Inflation and supply chain disruptions around Black Swan events prove how economic principles govern outcomes not nobility in intent. Learning from the world at large is an essential part of being a good leader in a greatly indebted and impoverished economy. It helps make sensible decisions. Ensuring supply through creative policy prescription and countering hoarding and profiting through effective administration inhibits market manipulation which delivers greatly more sustainable and economically favourable consequences.

As governments get made across the country there is another economic activity in the making which can cause governments undue alarm in due course and untold pain to the people. Around 240 million plus Pakistanis need 28 million tons of wheat annually. We will harvest around 29 million this year instead of the expected 32 million tons for various reasons. This may be just enough to meet our annual needs of the staple. The carry-over stock from previous years is the cushion which must be refreshed and restocked to meet emergent needs. The central government decided a payout price of Rs3,900 per 40kg to the farmers as it committed provincial governments to make annual purchases of their allocated quota.

While most responsibility for buying wheat lies with Punjab which will follow price schedule announced by the central government, Sindh is already delinquent on both it lags badly in the schedule to purchase its share and has raised the purchase price to Rs4,000 per 40kg. This makes anyone in Punjab more willing to sell in Sindh setting into motion the illegal trade of trans-frontier smuggling and illicit hoarding. Balochistan, in the meanwhile has increased its purchase price in contravention of the central direction to Rs4,300 per 40kg. This sets into motion a cycle of illicit wheat trade from Punjab to Sindh and Balochistan. It needs no imagination to understand why Balochistan would like most wheat to flow into the province when other provinces are far more desperate to keep wheat stocks for their six to ten times larger populations instead. Trans-border trade into Iran and Afghanistan of the precious staple enables price manipulation through contrived shortages which can be met with the same wheat now smuggled back to be sold at much higher price. This needs immediate attention of governments still struggling to find their feet. It is same with sugar.

There is just so much more to do than populist, photo-op driven, ill-considered and ill-thought measures. Economics is a lot more about facts on ground which need clear-eyed implementation of laws and understanding of triggers and consequences. Effective control by efficient administration leaves an assuaging and abiding sense of well-being than short-term populism. Phantoms of gimmickry remain just that and in time betray emptiness and lack of commitment. Governance is sacred which needs to be known, learnt, respected and implemented. The old and the devious will not learn; can the new in the administration cause a change?

Courtesy The Express Tribune