Concentric circles of dread

WE are back in the doghouse yet again. Has there ever been a time ever since we opened our eyes on August 14, 1947 when we have not found ourselves in the crib of a controversy?

The only red associated with our independence was not the colour of the rose petals that should have been showered but the colour of the blood that flowed from the massacre of unwilling migrants.

We hurriedly — some say, necessarily — allied ourselves with the United States then and again repeatedly thereafter without a second look at the consequences of such a fealty, nor at other countries that might have provided our foreign policy with other legs to balance upon.

Over the past 62 years we have witnessed political mayhem and madness, militarism and militancy, mediocrity in leadership and mendaciousness in our governance. Whenever we thought we had reached rock bottom, we discovered that the bottom is itself layered, like a millefeuille into a thousand slices. How much further do we have to fall before we crawl back towards our potential?

The latest spate of terrorist attacks in Mumbai has disturbed the mechanical equilibrium of India’s commercial capital, a city that prides itself on being the brain of India to New Delhi’s brawn. It survives not because it is there, like Kolkata, but because it possesses an unquenchable determination to survive. It is Karachi during the riots, London during the wartime blitz.

It is precisely because of its fragile vulnerability — hundreds of foreign visitors, millions commuting in and out of Mumbai on caterpillar trains everyday, trillions being made every hour at business bourses — that it represents such a tempting and visible target. It is like the unguarded refinery tanks in Karachi’s Keamari terminal were at the onset of the 1971 war. Every Karachiite alive at the time will recall the two Indian planes that flew across the mudflats of Korangi and then bombed the petroleum tanks, igniting a blaze that illuminated a blacked-out Karachi.

But that was wartime. Come to think of it, there has never been a declaration of war between India and Pakistan. We fought in 1965 and in 1971 without such diplomatic niceties. The present assaults in Mumbai are qualitatively different. They are not acts of war; they are acts intended to provoke war.

The very selection of the targets — the two most famous and luxurious hotels in Mumbai (watering holes for the limitlessly rich and ineffably famous), a railway station crowded with plebeian commuters, a hospital for helpless mothers and innocent children, and a Jewish centre with an expatriate rabbi — make one wonder whether such an attack could have been state-sponsored terrorism? Would any government, even a dyslexic Pakistani government, have the capacity to plan such a focused attack, or dare to undertake such a misadventure, cognisant of its consequences? After the lesson of Kargil, would any thinking government want to receive such extra coaching?

Think about it for a moment. The Pakistan Army is stretched to uncomfortable limits in Fata and the NWFP and hardly needs the additional strain of defending another front on our country’s ragged borders.

Our government has just received a shot in the arm from the IMF that has provided fiscal respite until we sink into a predictable relapse. The trends in the economy show a downward slide rather than an upward incline. Would any government dare risk losing such a life-saving lifeline?

The Pakistani public is neither prepared nor equipped for a war against India. Where are the civil defence units that can mobilise our men and convert them into trained combatants? Switzerland which has not fought a war in 500 years keeps its male population perpetually trained as a military reserve. Who has the evacuation plans ready for our women and children, and where are the centres to which they will be taken swiftly and safely, beyond harm’s way?

Who is the Pakistani Yudhishtra who would dare risk everything — the future of the peace process, the future of Indo-Pak relations themselves, the future of 170 million essentially peace-loving people, in security and with neighbours, the future of the very state of Pakistan itself — on such a foolhardy gamble?

Anyone who has walked in the last footsteps Mahatma Gandhi took in the grounds of Birla House, anyone who has stood at the spot where Mrs Gandhi fell in crumpled heap of a once-starched sari in the garden of her Safdarjang Road residence, anyone who has seen in a glass showcase all that was left — a pair of empty joggers — of Rajiv Gandhi after that suicide bomb attack (a macabre first) in Sriperumbudur (Tamil Nadu), anyone who has stood on Shahrah-i-Quaid-i-Azam in Karachi where Benazir Bhutto almost lost her life and on the busy road in Rawalpindi where she finally did, anyone aware of these mute cenotaphs of sacrifice must know that terrorism is an explosive weapon whose shards hurt and wound each one of us, regardless of whether we are Indians or Pakistanis.

Patriots on both sides of the border know that they too are being held hostage, as surely as the victims in the Taj and the Oberoi were, by terrorists whose perverted dogma knows no theology except nihilism and hate.

It was once asked by someone of a senior functionary in the ISI what, if he was his counterpart in RAW, would he fear most from the ISI. He responded: the very fact that RAW fears us is a measure of our success. One wishes that the terrorists who jeopardise our lives daily were as afraid of both the ISI and RAW. Meanwhile, over a billion people who do not know enough about each to hate each other with conviction are condemned to move within concentric circles of dread.

www.fsaijazuddin.pk

The Hurriyat’s crisis

NOT till Dec 28 when the votes are counted will we know whether the plans by some in New Delhi to install Farooq Abdullah and later his son, Omar, in power in Kashmir have succeeded.

But the first three of the seven phases of the elections have sent two clear messages which neither the Unionists nor the separatists will like. One is that the voters sought change in governance while retaining their commitment to azadi. No one contests this. The other is that the electorate has snubbed the leaders of the All Parties Hurriyat Conference (APHC). On Sept 12 Mirwaiz Umar Farooq warned the Unionists “to fear the wrath of the people”. Their wrath might be visited on the APHC unless it puts its own house in order soon enough.

It has consistently overplayed its hand by making tall claims. The APHC cannot deliver peace because it does not control the militants. It was piqued and felt left out when the Hizbul Mujahideen declared a ceasefire on July 24, 2000 and began parleys with the Government of India. The fragile unity between the leaders came apart in 2003.

The present surge in its fortunes is due entirely to popular resentment at the state government’s order of May 26, 2008 on the transfer of land to the Amarnath Shrine Board. It is the people who led the APHC always, not the other way around. To the Mirwaiz goes the credit for reaching out to the faction headed by Syed Ali Shah Geelani and inviting him “to lead this resistance” to the order.

On June 16 a coordination committee of six members was set up “to evolve a joint mechanism for attaining the right to self-determination through plebiscite or, alternatively, through tripartite talks”. It would review “the 1993 Constitution of the APHC and implement it with amendments, if necessary”. Geelani agreed, “We have reached the conclusion that we will unite”. The United Jihad Council, headed by the Hizb leader Syed Salahuddin, welcomed the move. He has been pleading with them to unite. Nearly six months later this coordination committee continues still to coordinate. Unity is not in sight.

Popular upsurge in the Valley was compared to that in 1990. On July 3 Geelani declared “Our struggle would be peaceful. We neither need the gun of the mujahideen now, nor the support of Pakistan or its media.”

Meanwhile, Jammu erupted in protests organised by the RSS. The economic blockade it imposed on the Valley revived the demand for the reopening of the road to Rawalpindi. On Aug 11 nearly 100,000 persons began to march from Sopore towards the LoC. It was supported by Kashmir’s Chamber of Commerce, Fruit Growers and Traders’ Federation and the PDP led by Mehbooba Mufti. The People’s League’s leader Shaikh Abdul Aziz fell to a bullet. The next day mobs secured release from house arrest of the Mirwaiz and Geelani.

The agitation was at its peak. Tens of thousands assembled in Pampore on Aug 16 to pay their respects to the slain leader. A rally in Srinagar on Aug 22 drew a mammoth crowd. Syed Salahuddin made an important announcement on Aug 23 — the UJC had “decided that in view of the present unarmed people’s movement, no militant action will be conducted”. It would “silence the guns”.

But if on Oct 9 the Mirwaiz stipulated terms for talks with New Delhi, the next day the coordination committee insisted on “tripartite talks only”. The only thing that united them was boycott of the polls. Geelani’s letter to the Unionists parties on Nov 11 was not a muezzin’s call to the faithful to assemble in joint prayer. It was a taunt to the heretics to return to the fold.

Geelani Sahib inspires respect but his refusal to reckon with the realities is the despair of friends and a relief to foes. He does not compromise with colleagues and fails to provide leadership. Little does he or the APHC realise that their accord on peaceful agitation poses an unanswerable challenge to their adversaries and opens avenues for settlement; provided that they accept that India and Pakistan will not jettison the broad consensus already achieved in the back channel and will implement any accord within the limits set by their respective constitutions. Only the ignorant perceive those limits as being restrictive. They allow self-rule that will be the envy of the rest of South Asia.

On July 11 Pakistan’s Foreign Minister Shah Mahmood Qureshi made a statesmanlike offer: “We have to look out of the box. We have to look at innovative ways of resolution (of the Kashmir issue).”

The APHC betrays the people by imprisoning itself in the old battered box of 1993. Consider this suggestion out of the box: “An autonomous region with the other side being a party to it could address the issue in such a way that India can sort of live with that, Pakistan can also live with that too, and Kashmiris can also get something they have been aspiring for. So we should be ready to discuss all the options and, as I have said earlier, autonomous identity for Kashmir could be the solution.” It was said by the Mirwaiz in a press interview published on Oct 10, 2002. This is azadi, real and achievable.

The APHC must unite, eschewing ego clashes, adopt a strategy of peaceful popular mobilisation without the hartals, and meet the people’s needs. It has to establish its credentials as a responsible and credible interlocutor in the peace process. The time for slogans and chants about the UN resolutions is over. The time has come for a constructive detailed elaboration of the consensus on the famous four points and the draft of a constitutional framework that would give it legal effect. The alternative is stark — irrelevance and rejection by the young. Their cry for azadi deserves a sound response.

The writer is a lawyer and an author.

Taking risk out of finance

THIS recession is terrifying because it’s assuming the character of an economic black hole. Property prices and economic activity slide, so that soon the problem becomes not the banks refusing to lend but the borrowers’ worries. That creates a further downward spiral. The banks become even more cautious. Unless this cycle is broken, the economy is sucked away.

Standard economics and standard policy responses are useless because gloom creates its own rationality. A herd effect created the bubble. Now a herd effect is creating the opposite. A solution requires finding economics and policies that break the bearish psychology. Step forward Robert Shiller, a softly spoken and mildly eccentric Yale professor, who specialises in studying the psychology of booms and busts. Financial markets, left to themselves he says, reliably mismanage risk. They get carried away in booms. And in busts there’s a collective hysteria in which all we see is risk, uncertainty and loss. Letting ‘financial markets work’, as happened in Britain and America from the 1980s to today, has been disastrous. Instead, we need to devise interventions that help the markets manage risk better, which they will not do of their own accord. This, he thinks, is practical Keynesianism. I agree.

He was in London last week, promoting his new book The Subprime Solution and between events he met the UK finance minister, the Governor of the Bank of England, the Secretary of State for Business and Regulatory Reform and even — for a few minutes — the prime minister. One reason for taking him seriously is that he’s the only prominent economist who can claim to have predicted today’s bust.

But his solutions are so non-standard and outside conventional thinking, and his manner so self-deprecating and academic, that it takes a while to get the radicalism of his message. Minds seemed to wander last week — and it took me a good few meetings before I understood.

If we are going to get banks to lend and borrowers to borrow, argues Shiller, we have got to reduce decisively the risks they confront. He starts with the mortgage market and the collapse in house prices because they are at the centre of this crisis. Mortgages, he thinks, always unfairly contained too much risk for ordinary borrowers. Now they are a disaster. Who in their right mind would pledge hard-earned savings as a deposit for a house in a falling property market and, on top, take responsibility for repaying a big mortgage over 25 years when they may lose their job? It is far too much risk and reflects an unfair balance of power between borrower and lender. A left-of-centre government should insist that mortgages are redesigned so they contain far less risk for ordinary borrowers.

His radical ‘Shiller’ mortgage has two components. The first is that repayments automatically adjust to the economic circumstances of the borrower over the life of the mortgage. Repayments rise in line with your growing income, but fall or stop if you lose your job.

At a stroke there are no more repossessions or fear of repossessions. In any case, banks hate repossessions because of the terrible PR and the irrationality of crystallising a loss on their mortgage books. For the borrower, a mortgage becomes less daunting.

The second component is that the borrower should be able to insure their down payment — and their housing equity — against loss. Shiller does not stop there. He thinks that the government should launch ‘livelihood insurance’, so that people can insure themselves against the risk of their wages being reduced. And he advocates a massive boost to the UK Citizens Advice Bureau network so there is an infrastructure of trusted advisers who can help citizens understand the case for better mortgages and insurance and take up the new financial packages.

These measures will help make the world safer for borrowers. The next step is to do the same for lenders.

I persuaded Robert Shiller to read the Crosby report on the British mortgage market released last week by the Treasury, along with the pre-budget report. In my view, it is one of the most alarming reports published by the Treasury in my working life.

James Crosby, deputy chair of the Financial Services Authority and former chief executive of HBOS, believes that without intervention in 2009, new net mortgage lending in Britain is very likely to fall below zero, spelling calamity for house prices and the wider economy.

Like Shiller, he thinks that essentially there is too much risk for the market. Every available penny of new savings has already been earmarked, leaving none left over for new mortgages. Lenders are shellshocked. Even if the banks were nationalised, they would face the same problem.

Crosby has a Shiller-style solution. The government must reduce the risks that are terrifying the mortgage markets. It should offer a GBP100bn guarantee so creating a GBP100bn flow of new credit to home buyers.

The UK finance minister, Alistair Darling, has promised to do something, but perhaps not this. Shiller, unsurprisingly, wholeheartedly backs Crosby. The two ideas together — Shiller mortgages and Crosby insurance — would break the gloom, take the risk out of the markets and bottom out the recession.

These principles could be extended to other areas of lending. The trouble is that it is not just ordinary borrowers who don’t understand finance. Neither do many bankers, committed to keeping their power and offering the same old mortgages where the borrower assumes all the risk. Nor do officials, who understand the pros and cons of measures like last week’s cut in Vat, but are outside their comfort zone when it comes to banks.

It can’t go on; the risk of a deep recession is too great. We need the state to take the risks out of finance.

— The Guardian, London