The deadweight loss of Bakra Eid

The gift giving season which is Christmas is just around the corner, and once again billions of dollars are going to waste:

in general, people spend a lot more on presents than they're worth to those who receive them, a phenomenon called "the deadweight loss of Christmas." A deadweight loss is created when you spend eighty dollars to give me a sweater that I would spend only sixty-five dollars to buy myself.

The full paper The deadweight loss of Christmas - is a short, and interesting read.

While economists estimate that up to a third of the value of gifts exchanged at Christmas is lost, as the receivers value the gifts lower than what the giver bought them for, Bakra Eid is a bit like Christmas where everyone buys and receives the same gift - meat!

While there are other, non-economic benefits to the production and giving of the traditional Bakra Eid gifts, as an economic activity Bakra Eid is more akin to the Titanic, with all the hard work and effort required to save up a 100 billion rupees wrecked, with a few hardy survivors gobbling down their gifts, and the vast majority seeing all their hard earned cash slaughtered, with a few choice pieces of meat left at the end.

Zardari: We don't need no Education

Atanu Dey has been writing about the importance of education in the third world - it's basically the only way to to rise out of poverty, a point which Nicholas Kristof made recently:

Quick, what's the source of America's greatness?

Is it a tradition of market-friendly capitalism? The diligence of its people? The cornucopia of natural resources? Great presidents?

No, a fair amount of evidence suggests that the crucial factor is our school system -- which, for most of our history, was the best in the world but has foundered over the last few decades.

Pakistan just turned it's back on this whole education thing by appointing Senator Mir Hazar Khan Bijarani as Minister for Education. This is someone for who an arrest warrant was issued by the Supreme court of Pakistan, for ordering a family to hand over five minor girls for marriage to a family to compensate for a murder in Jacobabad.

President Obama

The following comments from Reddit sum up the world's feelings:

Dear Rest of The World

We didn't fuck it up

Signed,

America

The reply:

Dear America,

Congrats!

Regards, Rest of the World

Naomi Klein - The Shock Doctrine

This book is a must read for countries like Pakistan, which have already gone through multiple rounds of "shock therapy" at the hands of the IMF, and are just about to sign on the dotted line for yet another one.

The book doesn't rail against capitalism, rather it rails against the extreme right-wing ideologues who wormed their way into economic seats of power in the US, and into the IMF and the World Bank. The problem with neoconservatives is that they live in a bubble full of right wing fantasies, and never condensed to step out into the real world and see how far their neo-liberal fantasies had diverged from the real world.

What looks good on paper often pans out different in the real world, especially in corrupt societies like Pakistan - and this is one factor which the IMF never seems to account for properly. In a poor country like Pakistan, regressive taxes like Central Excise Duty on services and sales tax on everything (even drinking water!) are highly regressive, and with Pakistan's highly corrupt taxation system just give more of an incentive to people to stay further out of the tax net. It's a vicious cycle... but read the book for criticisms of the IMF and their achievements in the developing world.

In THE SHOCK DOCTRINE, Naomi Klein explodes the myth that the global free market triumphed democratically. Exposing the thinking, the money trail and the puppet strings behind the world-changing crises and wars of the last four decades, The Shock Doctrine is the gripping story of how America's "free market" policies have come to dominate the world-- through the exploitation of disaster-shocked people and countries. #

Pakistan is about to make a deal with the IMF..

The great Pakistani stock broker bailout

The Karachi stock exchange crashed all the way from 16000 to 9000 - and in the process bankrupted a lot of stockbrokers and other large players. Taking note of this severe crisis, the govt. rushed in to save the day, for stock brokers don't loose money in this country! First, the govt. changed the rules of the game - not once, not twice but thrice!

In Pakistan, stock brokers make money by borrowing from banks and using that borrowed money to play with the stock market. By law, they have to return that money along with interest in X days, while retaining all the profit. This being Pakistan, now that the value of the stocks bought on borrowed money has fallen below the amount of their loans, the stock brokers have conveniently changed the time they need to pay it back to a full year - and arm twisted the govt. to throw money at the stock market by buying shares at higher than market prices so the stock brokers can cash out and let the govt. bear the losses.

Depending on how you add up the various billions the govt. has already thrown at the stockbrokers, the total amount has already reached 150 to 200 billion rupees. The law changes alone are worth many billions - without them the entire stockbroker industry was effectively bankrupt.

In a surprise twist to the tale, a few govt. organizations have grown a backbone, and refused to just hand over govt. money over:

Four of the federal organizations have expressed their reservations on provision of a fund amounting to Rs20 billion to Karachi Stock Exchange (KSE) for pulling the share market out of the prevailing crisis.

According to sources, the Federal Government directed the State Life, National Bank, National Investment Trust and Employees Old Age Benefit Institution to extend Rs20 billion to KSE.

The federal bodies are of the view that the fund created with the money of the poor, pensioners, insurance holders and others should not be provided to KSE.

These bodies have already extended Rs5 billion to KSE in a bid to support the market.

Kudos to the above for resisting this blatant transfer of money. In the long run, the stocks might even make money, but pension money should never be gambled, even if there is a good chance of winning.

Information poverty

Google: The right information at the right time in the hands of people has enormous power.

Despite hundreds of millions of dollars spent each year on providing basic public services like primary education, health, water, and sanitation to poor communities, poverty in much of Sub-Saharan Africa persists. Where does this money go, who gets it, and what are the results of the resources invested? That's where we find a big black hole of information and a lack of basic accountability. How do inputs (dollars spent) turn into outputs (schools, clinics, and wells), and, more importantly, how do outputs translate into results (literate and healthy children, clean water, etc.)?

We simply don't know the answers to most of these basic questions. But what if we could? What if a mother could find out how much money was budgeted for her daughter's school each year and how much of it was received? What if she and other parents could report how often teachers are absent from school or whether health clinics have the medicines they are supposed to carry? What if citizens could access and report on basic information to determine value for money as tax payers?

The work of The Social Development Network (SODNET) in Kenya is illustrative. They are developing a simple budget-tracking tool that allows citizens to track the allocation, use, and ultimate result of government funds earmarked for infrastructure projects in their districts. The tool is intended to create transparency in the use of tax revenues and answer the simple question: Are resources reaching their intended beneficiaries? Using tools like maps, they are able to overlay information that begins to tell a compelling story.

While the rest of the world is poised on a cliff, the Pakistan economy has already fallen off

Rumors stalk the crumbling land, each one trying to lay claim to a bigger piece of the explanation as to what's happening in the country.

From the rumors it looks like the country has had it. Shaukat Tareen and the State bank governor has flown off to foreign lands to beg for money, a govt. spokesman is on TV claiming that Pakistan is not bankrupt - meaning it is, striking fear left right and center. Some of the rumors stories floating around:

• The country is bankrupt. This is not a rumor, as the govt. has confirmed it.
• The rupee is over valued, and despite crashing, the govt. says it's still overvalued.
• A number of large corporate groups are near bankruptcy
• A few of the large stockbrokers are bankrupt
• Exports are falling, and thus unemployment is increasing
• Foreign capital is flying out of Pakistan
• You can't remit money officially from Pakistan
• Mutual funds aren't letting investors take out money

What's going to happen? Will the usual bailout show up in time? Of course it will, but in the meantime the country is just about economically dead.

You know your country is fucked when....

The BBC reports that Pakistanis flee into Afghanistan:

The UN says 20,000 people have fled Pakistan's tribal area of Bajaur for Afghanistan amid fighting between troops and militants in recent months.

The UN's refugee agency says almost 4,000 families have crossed north-west into Afghanistan's Kunar province.

The army began a sustained campaign against militants in Bajaur nearly two months ago.

Some 300,000 others have fled east within Pakistan in recent weeks with many of them living in temporary camps.

Why Pakistan Will Implode

An article emailed to me by an American friend who spent a couple of years in Karachi. Written before the fall of Musharraf, it's posted in it's entirety below, a non-journalistic, bleak look at Pakistan:

Tarun Khanna: Billions of Entrepreneurs

Interesting book on how business is done in India and China, though not as good as the reviews on Amazon make it out to be. It seems overly directed towards the western reader who doesn't have much knowledge of the two countries, and hasn't read much else about them.

The basic gist of the book is that India and China have two very different approaches to business, and both countries have to be dealt with very differently.

There are lots of examples in the book, but there is where Friedman is better, in his book The World is Flat. Both books have their flaws, but the hundered of examples and anecdotes in both of them make them a worthwhile read.

The gigantic house of cards, formerly known as Wall Street

Now, you'd be better off buying a copy of Nassim Taleb's The Black Swan and reading that, but here is the extremely simplified version of one aspect of the giant monolith which was the American financial house of cards:

Back in the days, we had these things called banks. They took in money from people, and lent it out to other people, who did something with that money and thus were able to pay it back with interest. Now, even back than, banking wasn't this simple, but this portion constituted a significant part of what banks did back then. Sure, they bought lots of stuff, and invested all over the place, but as JP Morgan, the most powerful banker ever, famously said, "If you can't draw it on a napkin with a crayon, don't buy it".

By and large, besides funding a war here and there, bankers stuck to the basics and made money hand over fist. Till such time they lost it all, which happened periodically, like the great depression in 1939, and Black Monday in 1987.

So this is the image which people have of things to this day - that banks take in deposits, give out loans, and make money on the interest paid on loans. Now, sure, banks and the other bank like institutions still do this, but this has been a small part of their business for the last couple of decades now. This is the part which is the toughest for people to grasp - that none of the large American banks are banks in the traditional sense of the word. Here someone might ask, if not banks, than what the hell are they?

The plain answer is that no one knows.

The short answer is that the American financial system is the greatest pyramid scheme ever, a house of cards stacked so high over the entire world that it's collapse is going to be wrecking havoc for years to come.

Pakistani Senator says burying alive three teenage girls and two women is part of "our tribal custom"

Today's doom and gloom newspaper report on Pakistan reminded me of General Napier's famous quote on the subcontinental custom of burning widows alive with their husband's body, back when the British banned it:

You say that it is your custom to burn widows. Very well. We also have a custom: when men burn a woman alive, we tie a rope around their necks and we hang them. Build your funeral pyre; beside it, my carpenters will build a gallows. You may follow your custom. And then we will follow ours.

The ban on burning women alive, often against their will, was challenged in both Indian and British courts, and I think General Napeir's quote best sums up what came of that.

A important legal aspect of the Sati law: The law now makes no distinction between passive observers to the act, and active promoters of the event; all are supposed to be held equally culpable.

Senator Sardar Israrullah Zehri, along with many other Senators are liable for murder - Sati was abolished in Pakistan back in 1829 under British colonial rule. Burying is not that much different from burning... the Sati laws is still on the books, since we inherited all the old colonial laws, and the Senator should be tried under it.

Older Entries

• News of the day: Asif Ali Zardari 'suffering from severe mental problems' - Posted 26 Aug 08 in Pakistan
• M. Asghar Khan: We've learnt nothing from history - Posted 26 Aug 08 in Books, Pakistan
• From Baghdad to London: Lessons from one thousand years of urbanisation in Europe and the Arab world - Posted 13 Aug 08 in Pakistan
• The ISI, once again in the news - Posted 01 Aug 08 in America, Pakistan
• Ahmed Rashid: Descent into Chaos - Posted 11 Jul 08 in America, Books, Pakistan
• From bad to worse - Posted 03 Jul 08 in Pakistan
• Micheal Pollan: In defense of Food - Posted 28 Jun 08 in Books
• Signs of a fast crumbling government - Posted 24 Jun 08 in Pakistan
• A Case of Exploding Mangoes - Posted 22 Jun 08 in Books, Pakistan
• Headline of the week: I'm not ready to be useless vegetable - Musharraf - Posted 08 Jun 08 in Pakistan
• Observations on a visit to a govt office in Karachi - Posted 22 May 08 in Pakistan
• Karachi's beaches: terminally ill, soon to perish - Posted 19 May 08 in Pakistan

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