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Wednesday November 30, 2022

A state of dread

November 15, 2022

Following the ideas of Keynes, some Keynesian economists make a sharp distinction between risk and fundamental uncertainty. Risk refers to the probabilistic character of the world and our ability to articulate our probabilistic view of that world. So for example, it is not certain what the weather is going to be in the future but we can make statements about what the chance of rain is.

Then there is fundamental uncertainty, a state in which according to Keynes “we simply do not know” and we are unable to articulate our view of the future in terms of probabilities and chance. We felt this kind of uncertainty when borders began to close like falling dominoes at the start of the pandemic. We felt it when Imran Khan refused to accept the vote of no-confidence which went against him and we felt it yet again when news broke that he had been shot.

In a complex social system, fundamental uncertainty and the anxiety that comes with it can only be quelled, but they never go away. Variations in how this anxiety is felt and corresponding variations in spending are part of the cyclical character of modern economies. In depressions, this state of uncertainty remains heightened and the anxiety keeps consumption and investment expenditures, which together form demand and drive the economy, low.

“But this is politics”, I hear you say. “This is political uncertainty”. There is political uncertainty, yes. But make no mistake: this is a vicious economic contest where various actors are making competing claims to economic resources. The parties making these claims are many: the industrialists and traders, the feudal lords and the real-estate tycoons, the salary earners and the urban middle class, the bankers and financiers. Then there are the political parties who will oppose or support these interests, in a variety of real life permutations. For example, see the very public and blunt warning given to the federal minister of finance by the MQMP’s Amin ul Haque (the present federal IT minister) over lack of cooperation and relief to the IT sector in his remarks at the launch of an IT park in Karachi on November 2, 2022. Over this economic contest looms the shadow of a state of uncertainty which preys on the public and its consciousness.

This naked contest for power over the command of real resources (the public’s labour, mobility and energy) is taking place, ironically, in the name of public interest and it is taking place without any ground rules. It’s not that the constitution has been thrown out the window. The constitution was already lying on the window sill, withered, neglected and covered in mould. It simply got tipped over as a fight broke out in the room: a push, a shove, a wild hook, and whoops! There it goes! Nobody even noticed. Nor do they care. It was the rulebook after all and the brawling boys wanted to throw punches anyway rather than follow the rules. What’s that? The book got tipped over the edge and fell out the window? Good riddance!

Since the contest is taking place without ground rules, we should not be surprised or caught off guard if it brings the country to its knees. We are stuck in a crisis equilibrium since at least the start of the calendar year, if not longer. People who have little will consume what they can and what they must. But those who have much, the leisure class, continue to spend and consume in order to amuse themselves to the point of numbness as they watch the brawl. Investors hold on to their capital dearly and move around the brawl to avoid getting knocked over in the process. If they can find an escape route out of the room, even better.

The pathologies of our economic system – well represented by the phenomenon of the appreciating money value of cars even as their physical value depreciates with use – which wishes to be a society of contract but cannot rid itself of its image and reality as a society of obligation and reciprocity, are too many. As an economist, one sometimes doesn’t know where to begin unpacking the mess and untangling the so many rotten threads of this story.

I do believe that the constitution is a good place to begin. But a rulebook and verbal commitments to follow it can only do so much because they are the bare minimum. It takes years to recover from socio-economic trauma, if individuals and societies ever do. Psychiatrist Dr Bessel van der Kolk, in the prologue to his classic book on trauma, ‘The Body Keeps the Score’, writes that “Trauma, by definition, is unbearable and intolerable.” The many compounded traumas which the Pakistani body politic keeps the score of and bears witness to are intolerable and unbearable. Cricket matches, nationalist slogans and false pride will be little consolation. This economist is filled with dread – and is certainly not alone. You think getting an economy out of a depression is tough? Try getting it out of the clutches of a state of dread.

The writer is an economist. He tweets @khand154

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