(1/n) There is often a lot of emphasis on social security in political discourse around 'riasat-e-madina' in #Pakistan. But in the few books I hav ever picked up, the bigger story is always about development of trade networks & of financial instruments required for achieving this
(2/n) To an extent that George Saliba's whole thesis on the downfall of Islamic civilisation is centred around the diversion of east-west trade away from the traditional trade networks passing through Islamic lands.
(3/n) Arguing further tht it was the wealth creation frm trade which allowed Muslim elites to finance the scientific enterprise. And once traditional trade routes lost their appeal to newfound shipping routes, both wealth creation and, consequently, scientific enterprise declined
(4/n) So any serious discussion on drawing lessons from 'riasat e madina' should also consider the state's role in developing trade linkages plus the freedom and security it granted its inhabitants to trade both within and across borders.
(1/n) While there is a general upward trend in food prices in #Pakistan, there is also a lot of heterogeneity is how prices of key food items have changed across cities. This points to a mix of local, national and global factors underlying the upsurge in food prices recently.
(2/n) For example, average wheat flour price has increased by almost 5% in Punjab since May but the increase is much higher in Sindh, KP & Balochistan.
(3/n) In contrast, average onion prices have increased most in Punjab, Islamabad & Sindh but fallen significantly in Balochistan (due to imports from Iran?). Prices in KP have also increased but by less than half of the increase in Punjab, Isb & Sindh.
(1/n) To ans questions raised in comments to my earlier post, let me explain y I hav a serious issue with this graph. Note that the graph DEFINES that anyone earning more than $300 per month belongs to middle class. This is exactly wat is wrong with it. Y?
(2/n) In short, bec purchasing power of $ has continued to change over time. Let's start frm 2014. Recall that while exchange rate remained almost fixed between 2014-18, domestic prices kept increasing by more than increase in world prices. Result: real exchange rate appreciated.
(3/n) Now the graph. A person earning $300 in 2014 does not hav same purchasing power as one earning $300 in 2017. In fact, one earning $300 in 2017 is poorer than one earning $300 in 2014. Y? Bec, due to overvaluation in exch rate, $1 buys u less in 2017 than wat it did in 2014.
(Comment: 1/n) More than that, I will argue that the biggest disservice our govt does is not letting unproductive businesses go bust. There r guaranteed returns/prices, trade restrictions & plethora of (bad) regulations making sure that the economy remains more of the same.
(2/n) This then means that we keep using our resources to produce same goods/services rather than allowing them to get reallocated to more productive activities. See an earlier thread for more detailed discussion
(3/n) It is not hard to appreciate why govts are often reluctant to let businesses to go bust even if they are unproductive. Doing so makes people temporarily unemployed and give leeway to opposition to blame the govt for not doing anything about this.
(1/n) It turns out year-on-year credit growth is -ve in real terms. (Real) Outstanding credit in Aug-20 is 9.23% lower compared to Aug-19 & 9.47% lower compared to Aug-18. Now one can argue tht 2018 is not an appropriate benchmark since this was the year of debt fuelled growth.
(2/n) If u buy this argument then relevant benchmark is probably FY17/16. The picture improves considerably. But note that total credit in Aug-20 is still 2.57% lower than wat it was in Aug-17. There is still more to the story: distance frm pre-crisis trend is likely much bigger.
(3/n) But there r few positives as well. First, total credit (real terms) to export sector has continued to increase over this period. It stood 14.92% higher in Aug-20 than what it was in Aug-18. This confirms that the economy has rebalanced towards exports during last two years.
(Thread: 1/n) Everyone in #Pakistan talks about elite capture but what does it even mean? After all, even good policy decisions leave behind "a roll of victims sufficient to give sound policy a bad name" - Hicks, 1939. tribune.com.pk/story/2264602/…
(2/n) In other words, there will always be people complaining about any policy decision ever taken. How then does the electorate know if policy decisions are being taken keeping in view society’s interests as a whole rather than the elites’?
(3/n) I argue tht elite capture can be identified by assessing credibility of decision makin processes. Since an imp part of decision-making r institutions, their nature, culture of meritocracy & autonomy with which they operate shud be central to any discussion on elite capture.
(Comment: 1/6) Deficits r not always bad but can be catastrophic if markets lose faith in ur repayment capacity. Unlike India & Bangladesh, growth episodes in #Pakistan (2004-08 & 2015-18) came at expense of falling Exports-GDP. High CAD was unsustainable! dawn.com/news/1567888
(2/6) Fiscal deficits r often less of a problem at least on their own. But persistent fiscal deficits can often lead to CAD (i.e. twin deficit hypothesis) & debt monetisation or infl tax (i.e. fiscal dominance). These implications can again increase likelihood of currency crisis.
(3/6) So yes, deficits are not bad if these come together with increase (or potential increase) in your repayment capacity. But can turn out to be catastrophic if not so. Unfortunately, Pakistan falls in the latter category.