Power to the poor

WHO would have thought that reading a book about GNP, growth, profit and loss and micro-credit could bring a lump to your throat!

But the writer in question here, also known as the poor man’s banker, is far from dealing in sentimental absurdities and is coolly ratiocinatory in his extrapolation as to why it is necessary to give power to the poor before it’s too late ... and how to bring this miracle about.

Professor Muhammad Yunus who was awarded the 2006 Nobel Peace Prize entertains no quixotic vision of a world in which the rich will be sent to the gallows and the workers will unite and start running a thoroughly moralistic and egalitarian society. On the contrary, he says the world’s future lies in capitalism and in little else. In other words, it’s time for today’s movers and shakers to get their act together on more realistic lines or hit the road to perdition.

By creating a world without poverty, Prof Yunus holds, the rich will be ensuring a safer world in their own interest and will not be doing anyone a favour by investing in non-profit-making ventures. The reward will not be tangible ownership of stock market shares for some but a better-fed world and peace for all. The contrary will be nothing else but a state of permanent war, against each other and against the terrorists, a scenario to grasp whose quiddity one hardly needs imagination as it is already an everyday reality.

This happier future Yunus qualifies as ‘new capitalism’. But who has the power to lead us to this utopia? Like a good logician he begins by a process of elimination. Governments cannot deliver as they are stymied by the monster named bureaucracy. The NGOs can scarcely do better, first because their motivation has to do with obscure, semi-religious notions of charity and compassion, and second because they depend entirely upon donors who in their turn have a limit to their resources and can turn off the faucet when those resources, and consequently their patience, run out.

That leaves us with multilateral organisations like the World Bank and the International Monetary Fund. But the problem is, to put it frankly, the multilaterals are funded by rich countries with an end to helping poor countries alleviate poverty; and for this they count on the governments in the target area to do the job. Aha, here lies the rub! The whole affair comes to a crazed dog chasing its own tail! We have already seen governments are pathetically dependent upon bureaucracies who are not only painfully slow but are also invariably corrupt in the Third World.

The solution, hence, lies not in bestowing handouts to the needy but in empowering them. The poor, says Yunus, are like a bonsai plant. Give the seed a paltry, six-inch flowerpot to grow in, and it will rise as a ludicrous caricature of its own self, the tall and stalwart tree it otherwise would have been had it been allowed to flourish in a proper, healthy, generous soil.

The poor man’s banker had never thought of being a banker at all. He was educated and trained as a professor of economics and had begun his career in that capacity in his home country, Bangladesh, 30 years ago. It didn’t take him long to realise that the lofty theories he was teaching in the classroom had little to do with the harsh realities beyond its four walls. His genius lies in challenging, then upsetting, a basic banking law in force ever since money-lending has existed. That is, in order to get credit you need to show something in hand. In other words, no collateral, no loan!

That was the injunction Yunus rebelled against and shattered by handing out his first mini-microcredit sum of $27 to a group of basket-weaving women, door-to-door peddlers and, surprisingly, beggars. He neither asked for an interest nor did he set a date for repayment, but made it very clear to his impoverished borrowers that this was no charity but a loan. The message from this prodigious pioneer had nothing to do with the much in vogue plangent nonsense concerning victims, rights, injustice, guilt, redemption, penitence, contrition and self-flagellation.

He simply seemed to say: ‘I am lending you this sum to help you get out of your difficulties. If you honour your pledge, maybe we can work together some more to create a better, happier world for all of us.’ To his surprise, everyone paid back, even the beggars. Soon after, in 1983, he founded the Grameen Bank that today handles 25 companies, funds and trusts. The group has helped hundreds of thousands of poor Bangladeshis lift themselves out of poverty through interest-free loans and this includes thousands among the young who were able to acquire high school-, college- and even university-level education. Grameen is helping 138 anti-poverty projects in 37 countries with a funding nearing some $22m.

The basic thing, Yunus says, is to readjust our vision of poverty and of the poor who have been looked upon since the dawn of civilisation as a social liability. Policies and institutions have been weaved around that treacherous concept through centuries. Once we free ourselves of this fallacy, things become easier to understand.

Think hard, he is saying, why is it that we fail to recognise the capacity of the poor to contribute productively to society? It is because poverty deprives some of us of the power to control capital; in other words, to retain the genuine fruit of labour, to benefit from it and to make society benefit from it. Only by empowering the poor will we be creating a world free of the meaningless squabbles that bring so much misery, death and destruction to humanity today. Not very clear? Skip a couple of McDonald’s lunches with your buddies and you’ll save enough money to buy Creating a World without Poverty: Social Business & the Future of Capitalism published by PublicAffairs. It’s worth it!

The writer is a journalist based in Paris.

A parallel universe

MOST people around the world greeted the Aug 18 resignation of Pervez Musharraf with a sigh of relief. But there were some who did not, including several good friends of mine. More than one is wishing that Musharraf would return.

One wrote to me, “Musharraf will be back and this time he will come with the help of the people.” I was dumbfounded.

My friends must live in a parallel universe. They greeted his coup of 1999, ignored the one-sided nature of his presidential referendum, accepted the rigged general elections of 2002, were not bothered that he reneged on his promise to remove his uniform in 2004 and, most importantly, they did not hold him responsible for leaving behind the worst political mess in the nation’s history.

Now that he has departed from centre-stage, they are down with a serious case of ‘post-Musharraf blues’. Their shock and anger has gotten the better of them. How else could they be hoping for the messianic return of a person who, despite being an absolute ruler for nine long years, failed to transform the political fundamentals of the nation?

The day he quit office, the political clock reverted back in time to Oct 12, 1999. If the nation has limited political choices today, it is because Musharraf aligned himself with the religious parties and stifled the growth of new secular leadership.

Musharraf’s supporters are upset that his replacement is likely to be Asif Zardari. When Benazir Bhutto was assassinated in December, Zardari effectively accused Musharraf of being responsible for her death.

In their eyes, Zardari’s threat to impeach Musharraf was the ultimate betrayal. After all, it was Musharraf who had allowed him back into the country and given him a new political life through the National Reconciliation Ordinance which pardoned him for all his known and unknown transgressions.

These hardcore Musharraf loyalists are now taking their anger out on the lawyers, the judges and the politicians who inspired the civil revolt that brought the dictator down. In their eyes, it is not just the chief justice of the Supreme Court who was corrupt. It was the entire political and judicial apparatus of the country.

By default, they seem to be arguing that the only institution that deserves to rule is the military. Such a longing is doomed to be a self-fulfilling prophecy. If the military continues to seize power every time there is a political crisis, how will effective civilian institutions develop?

They conveniently gloss over the harm done to the country by generals from Ayub onwards. General Jehangir Karamat is quoted in Shuja Nawaz’s book, Crossed Swords, as saying that the army has not ruled the country any better than the civilians.

So what is the point of dredging up the same old anti-democratic arguments? For the umpteenth time, we are being told that democracy does not deliver good news in Pakistan, that it is a weak reed on which to set the edifice of the state.

But there is a good reason why democracy has not worked in Pakistan. The military controls the civilians and not the other way around. The classic example of what happens when this principle is violated is Central America. Between 1948 and 1982, two-thirds of the 47 governments in Guatemala, El Salvador, Honduras and Nicaragua came to power through a coup.

Those supporting a return to military rule are wrong on five counts:

— Just because past politicians have failed to deliver political stability and economic progress does not mean that all future politicians will fail. Democratic processes, when they are allowed to function without military interference, do ultimately produce strong civilian institutions and competent rulers.

— Feudalism is not a barrier to democracy. If that was true, no country would be a democracy today since all were feudal at one point. The empowerment of the people brings an end to feudalism.

— Being Muslim does not equate to being anti-democratic. Indonesia, Malaysia, Mali and Turkey are democratic countries.

— The Indian example shows clearly that ‘strong men’ are not a precondition for democracy and slays the myth that law and order, education, and economic development have to precede democracy.

— Military rule is not necessary to hold a multi-ethnic state together. Indeed, half of Pakistan was lost due to the excesses of its military rulers.

It is important to note that elections are a necessary but insufficient condition for a successful democracy. They have often been used by dictatorial regimes (both civilian and military) to create the illusion of democracy. Authoritarian rulers often impose restrictions on who can stand for election, limit the laws that can be brought before parliament, encourage unfair voting practices and engage in the falsification of results.

Now that Pakistan has begun its third transition from dictatorial to democratic rule, it is time to build a political culture in which a ‘loyal opposition’ can exist. And right now, this responsibility falls most notably on the shoulders of Asif Ali Zardari.

All sides in a democracy need to share a common commitment to civil discourse. If an incumbent loses power, he or she must accept the judgment of the voters and transfer power peacefully to the winners.

The losers should be assured that their defeat does not equate to loss of life or liberty and that they can continue to participate in public life. Their loyalty to the state should not be questioned if they criticise the government of the day.

In the new set-up, the parliament must be sovereign since it is the voice of the people. It should have the power to approve the government’s budget including the defence budget.

The judiciary should be independent and have the power to declare military coups as unconstitutional. It should equally have the power to strike down laws passed by parliament that contradict the constitution and to rein in any executive that exceeds its authority.

None of this is meant to say that democracy is a panacea. There is no dearth of bad civilian leaders in Pakistan. Nor is there any dearth of bad military leaders. But they can be voted out of office in a democracy and that is reason enough to stick with democracy.

The writer is author of Musharraf’s Pakistan, Bush’s America and the Middle East (Vanguard, 2008).

Is the oil shock over?

IS it over? Was that the oil shock? Can we relax, sit back and expect our energy bills and prices at the pumps to tumble? It is true that the price of oil is down. In early July, the price peaked at $147 a barrel.

On Friday, it hit $106. A fall of almost 30 per cent in two months suggests the old rule that “nothing cures high prices like high prices” may finally be working in the oil market.

Americans used less in their cars over the summer: demand in the US fell by 800,000 barrels a day in the first half of this year, the largest decline for 26 years. In the UK, Ryanair is grounding more planes this winter. The global economy is slowing — even China, the biggest source of new demand, may soon be feeling colder breezes. But what’s this? Leading members of Opec, the Organisation of Petroleum Exporting Countries, want to reduce oil supplies to keep the price high.

The 13 members of the cartel meet in Vienna this week and Iran and Venezuela have made their position clear. “Oil supply must be well proportioned with demand, and control over Opec’s excess oil supply is an issue that must be discussed,” said Gholam Hossein Nozari, Iran’s oil minister, last week. Translation: he doesn’t want to see the price fall below $100. To many in the West, the stance will seem outrageous. The UK prime minister, Gordon Brown, was furious with Opec in May, when the price was $135 a barrel. “It is, as people will recognise, a scandal that 40 per cent of the oil is controlled by Opec, that their decisions can restrict the supply of oil to the rest of the world, and that at a time when oil is desperately needed and supply needs to expand that Opec can withhold supply from the market,” he said.

Brown sounded like a buttoned-up version of the property tycoon Donald Trump, whose regular rants against Opec have entertained viewers of US financial television channels in the past year.

A decade ago, the West’s view of Opec was different. The organisation, having enjoyed its heyday in the 1970s, was regarded as a spent force. Its summits in hotels in Vienna and Geneva were dismissed as squabbles over who had been cheating on quotas by over-producing — usually Venezuela or Nigeria. After 25 years of trying to control the oil market, Opec seemed doomed — damned by internal indiscipline and the success of the West in finding alternative supplies of oil.

Its nadir was 1998, when Opec was persuaded to increase production quotas. The timing was awful. The Asian currency crisis slowed the region’s Tiger economies and the price of oil fell to close to $10 a barrel. The following year, the Economist magazine famously predicted the price could be heading to $5. The world was “drowning in oil”. Opec seemed irrelevant and powerless.

Then the boom started. The 1990s were revealed as a decade of under-investment, not only by Opec but by non-Opec producers, including the big oil companies. New fields hadn’t been discovered. Refining capacity hadn’t been built. Shell had over-stated its reserves. Existing oil fields were depleting faster than expected, especially in Mexico and the North Sea. China and India began to industrialise and to subsidise oil for their own citizens. Demand was accelerating and supply was struggling to keep up.

The ability of the US to bully Saudi Arabia, Opec’s most important member, into increasing production quickly came under question. The Saudis guard closely their data on the oil reserves and production capability. Why? “Peak oil” theorists argue it’s because the big reserves aren’t as big as advertised.

Even President George Bush seemed to endorse the thought in January this year. “If they don’t have a lot of additional oil to put on the market, it is hard to ask somebody to do something they may not be able to do,” he said.

In the autumn of 2006, with the price having fallen from $75 to $60 a barrel, Opec demonstrated it was willing to use its newly restored influence over prices. It briefly reduced its production quotas, a signal that it was prepared to defend a price of $60 a barrel. With barely a blip along the way, the price climbed to that record of $147 this July.

Was that Opec alone? Was it the combination of growth in China and India and the western oil companies’ inability to increase production? Was it the weakness of the dollar, creating an incentive for producers to leave their appreciating asset in the ground rather than turn it into a depreciating currency? Was it a classic investment bubble, fuelled by the growth of financial speculation in the futures market? Probably some or all of the above. Either way, the approach of $100 is a critical test of Opec’s current mood and power.

In the old days, the Saudis were the voice of restraint. After the oil shock of the 1970s, the Saudi oil minister Ahmed Yamani urged fellow members to be cautious, arguing that high prices would lead to a reduction in demand and cause the West to become more fuel-efficient.

“Could the price go below $100, to $90 or even $80?,” asks Mike Wagstaff, chief executive of Venture Production, a North Sea oil and gas producer. “Well, yes, it could but I can’t see it going much lower than that. Opec has shown itself to be a much more disciplined organisation over the past seven or eight years.”

He also argues that “the reality is that the West can’t afford the price to go much below $100 because people need to fund investment.” His point is that the industry’s costs have risen as oil has become harder to find and to produce. A deep-water rig used for drilling in the deep waters off Brazil or west Africa costs $600,000 to $700,000 a day to hire; three or four years ago, the price was $200,000 to $350,000. Analysts at the investment bank Goldman Sachs calculate that the marginal cost of production, a critical figure for all commodities, now lies between $80 and $90 a barrel.

Hugo Navarro of Capital Economics expects to see a classic fudge from Opec next week. He thinks official quotas will be left unchanged but actual production will be quietly cut in the coming months. He argues that Saudi Arabia is sensitive to western public opinion and doesn’t want to be seen to be putting pressure on prices at a time when global growth is slowing.

At the same, he says, the cartel has good reason to try to reduce output: “The last time Opec significantly increased production to stave off a global economic slowdown in the late 1990s, the results were a disaster for the cartel.” Even so, he thinks, attempts to support a price floor of $100 will be unsuccessful — Capital Economics sees prices fall to $90 in a year.

Most other forecasters are more bullish, but even Goldman Sachs, which coined the phrase “super spike” more than three years ago, said on Friday oil was “nearing a critical inflection point”. It still expects $130 a barrel for the fourth quarter of this year, and $140 in 2009, but attaches a big qualification: “In the event that a global recession and hard landing in China does materialise, spot crude oil prices would likely fall well below $100 per barrel.”

— The Guardian, London

The road to nowhere

MANY years ago, during a job interview with a relatively small firm in the Silicon Valley, the interviewer wanted to impress upon me the possibilities of the Internet.

He asked me the usual questions about my background and work experience, and told me that one day people from Pakistan would attend universities right there in California without leaving Pakistan. Medical procedures would be performed on patients in Pakistan without the surgeon ever leaving California.

Commercial industry was budding with Netscape announcing the advent of a popular ‘browser’. A few years later Al Gore made the famous gaffe of inventing the Internet; but there was no denying the arrival of the Information Highway. The virtual road ran right through our homes and offices, and today, an Internet outage at home, is nothing short of a crisis for my children.

For those who follow the IT industry, buzzwords abound: ‘infostructure’, ‘broadband’, ‘wireless loops’, ‘fibre optics’ and ‘satellite communications’ to list just a few. The present administration announced that every town with a population of over 10,000 inhabitants would be served with a fibre optic connection.

The previous government too invested in and implemented initiatives such as broadband technology — the always ‘on’ Internet connection. Let us give credit where it is due, remarkable achievements have been made; for once we are not left trailing the pack.

But we are not seeing the wood for the trees. At the end of the day, it is the ministry of education which holds the key. If a person cannot read, a web address is meaningless to him. If a person does not complete high school, vocational training to support a high-tech industry is useless for him. If a person does not attend university, the pursuit of a career in computer science technology is doubtful.

We delude ourselves if we think that our country is rich in human resource. It is rich in human resource only if the population is educated. A poorly educated population is a mismanaged resource.

The official statistics, released by the education ministry, show roughly 17m children in primary schools, which include mosque schools and private institutions.

The total number of middle school students enrolled in the public and private sector is 5.2m with 2.1m high school students. A decade old census undertaken by the Population Census Organisation (PCO) shows a nation of 132m with 40 per cent of the population under 15 years of age. More than half the people live in rural areas, where four out of five women are illiterate.

There is an underlying urgency which elevates inaction to a criminal status. I will dare to say that children who do not become literate (defined as being able to read a newspaper and write a simple letter in any language) will never become literate as adults.

We are failing at effectively grappling with educating our children, and programmes targeted at illiterate adults are virtually non-existent. These citizens will have fewer opportunities, the burdens of everyday life growing more and more unbearable.

The prospects for the educated include more than their fair share of challenges, but for the illiterate, life is nothing more than a series of struggles and constraints.

Education cannot just be on the government’s agenda, it needs to be on the forefront of the government’s agenda. The enormity of the challenges is undeniable. We will not find a reasonable person, no matter what his level of literacy, who will argue against every child receiving primary education, modernising the curriculum, training the workforce, and encouraging research and broadening horizons. The fight is intimidating, but to lose will be to lose everything.

The words of that recruiter still ring in my ears, and I am hopeful that one day our children will live in better circumstances facilitated by technology. In the meanwhile, the austere reality is that until we educate our masses, the Internet for them will be a road to nowhere.

khakwani@ymail.com