March 20, 2017
By Gillian Tett

Debate has been frenzied this week about how fast the US Federal Reserve plans to raise interest rates. But as investors look forward, it is also a good time to glance back and ask why rates have been so low this decade. Conventional wisdom usually blames two factors: first, central banks such as the Fed have deliberately pushed down policy rates with startling quantitative easing experiments; second, rates have been depressed by the curse of “secular stagnation”, the phrase coined by Harvard economist Lawrence Summers. More specifically, Mr Summers and others argue that the global economy is suffering from a stark structural...


By Web Desk

Theresa May’s government has made a bad mistake. Philip Hammond, chancellor, has dropped an increase in national insurance contributions for the self-employed, as proposed in the Spring Budget. This is a case of short-term expediency trumping long-term sensible policy. Conservatives pride themselves on being the party of the entrepreneur. The tax increase appeared to send the opposite message, while breaking an electoral commitment to boot. The retreat, coming one week after the Budget, is one of the most abject in recent memory. Raising Class 4 NICs by 2 per cent was a progressive measure that would have resulted in a fairer tax...


By Huw van Steenis

During the financial crisis I found that mugging up on economic history, particularly from emerging markets, was often more helpful than talking to conventional policymakers hooked on their fair-weather economic models. The rise of economic nationalism and the threat to globalisation means I find myself using emerging market parallels again. I cannot help wondering if investing in western markets may become more like investing in emerging markets. Emerging markets require an intense focus on country risks and political economy. Investors in the west have long been able to ignore political risk and focus on sectors’ or individual...


By Martin Wolf

The Marshall Plan is rightly regarded as among the most successful pieces of economic diplomacy in history. Yet it was not the money that mattered most. It was rather that it allowed war-battered western Europe to move away from mutually impoverishing bilateralism in trade. It did so by removing the dollar shortage that drove the emphasis on bilateral clearing. Institutionally, it did so by creating the European payments union within the Organisation for European Economic Co-operation. This led to convertibility on the current account and so to the world of liberal multilateral trade that we all now take for granted. The economic...


By Ihtasham Ul Haque

INSIGHT The fragile economy is threatening sustainable and inclusive growth and is becoming a bigger challenge for the next budget due to the yawning over $20 billion trade gap, tumbling foreign exchange reserves, falling home remittances, and declining revenues. The current political discourse is likely to get murkier in the wake of the decision on Panama leaks scandal, and tall claims of economic turnaround are losing credibility. This is making the job of the federal planners to work out fresh budgetary proposals for 2017-18 far more complicated. The projected five percent plus gross domestic product (GDP) growth rate in 2016-17...


By G Farid Khan Marwat

DEVELOPMENT The ultimate goal of development is to alleviate poverty and improve the standards of living of the people. For sustainable growth and development, investment in human capital is imperative and essential. Developed nations and international development agencies provide aid for the development of underdeveloped and poor nations across the globe having low Human Development Indices and poor growth. Some nations have been successful in utilising aid for indigenous development of those countries while others failed badly due to multiple factors, including poor commitment and corrupt practices in the institutions. Critics point to...


By Mansoor Ahmad

GOVERNANCE Lopsided institutional performance in Pakistan under different chiefs shows that institutional weaknesses are mainly due to flawed selection of human resource. Ten years back, Competition Commission of Pakistan (CCP) was delivering and currently Water and Power Development Authority (Wapda) is on the move. The basic structure of all institutions remains the same, but their performance has always been subjected to the commitment and dedication shown by people who head them. When Khalid Mirza was the chairman of the CCP, it penalised businesses heavily for anti-competitive policies. When the businesses took refuge of stay...


By Peter Apps

COMMENT March 2017 is an uncomfortable time to be a European. Almost wherever you look, traditional certainties are unraveling in the face of a perfect storm of crises. This week Britain will trigger Article 50, firing the starting gun on its departure from the European Union. A second referendum on Scottish independence will likely follow, with speculation growing that Northern Ireland might now be more open to leaving the UK and joining with the Irish Republic. In Holland, right-winger Geert Wilders and his Freedom Party may get the largest share of the vote in the general election, even though the collaboration of more mainstream Dutch...


By Zeeshan Haider

FOCUS After a lot of sabre-rattling and muscle-flexing, Narendra Modi’s government is returning to the negotiating table to discuss water-sharing disputes with Pakistan. It is quite interesting to see the Indian water officials and experts sit across the table with their Pakistani counterparts to discuss the Indus Water Treaty (IWT) which Modi, incensed over Uri attack, had threatened to scrap. Under the 1960 water sharing accord, it is mandatory that officials and experts of both countries meet once in a year to discuss and resolve issues relating to implementation of the pact. The meeting between the water commissioners and...