Strange eco­nomics

The Pak Banker - - EDITORIAL -

ECO­NOMICS is strange, full of odd things that are rarely chal­lenged. It is a bit like re­li­gion that one is sup­posed to ac­cept without ask­ing any ques­tions.

When I was study­ing the sub­ject in col­lege, we were told that there were three fac­tors of pro­duc­tion - land, labour and cap­i­tal of which the first was fixed and the other two were mo­bile. In sim­ple terms, this meant that while your piece of land stayed where it was, your body and your money were not rooted in the same way.

Out of col­lege, one got to ap­pre­ci­ate the dif­fer­ence be­tween some­thing be­ing mo­bile and the same thing be­ing freely so. Thus, while labour and cap­i­tal are tech­ni­cally not fixed to one place, their move­ment can be re­stricted in any num­ber of ways.

The move­ment of cap­i­tal can be con­strained by bor­der con­trols and lim­its on con­vert­ibil­ity. There was a time when many coun­tries made it very oner­ous to con­vert lo­cal into for­eign cur­rency and to ex­port or im­port money. Brows­ing through my late fa­ther's files, I was struck how many let­ters he had to write, how many forms he had to fill, and how many trips he had to make to the State Bank to get the few pounds that were needed to fi­nance my year abroad dur­ing which I picked up all the myths about eco­nomics.

Here we see the pol­i­tics of power and pow­er­less­ness. Re­stric­tions on the move­ment of labour are much eas­ier to grasp. Much as I al­ways wanted to go to Goa to work, it was out of the ques­tion. An in­vi­ta­tion to teach at the IIM-Cal­cutta with­ered on the vine. Even an ac­cep­tance at a con­fer­ence in Ma­ni­pal was nixed by the Min­istry of Ex­ter­nal Af­fairs.

Coun­tries ex­er­cise strict con­trol on who they let in from other lands. Even within coun­tries there can be re­stric­tions on move­ment as there were for nonWhites in apartheid South Africa and as there still are in China with its in­ter­nal pass­port sys­tem known as hukou. Cities are so clean in China be­cause poor vil­lagers are not al­lowed to move there at will. In Pak­istan, there are many road­blocks re­quir­ing iden­ti­fi­ca­tion be­fore one is al­lowed en­try into the can­ton­ment ar­eas. I re­call a time when I was denied per­mis­sion to visit my an­ces­tral home in an­other city be­cause I did not have the req­ui­site NOC to en­ter the lo­cal­ity.

Now con­sider what has been hap­pen­ing over time. While con­straints on the move­ment of cap­i­tal have been pro­gres­sively re­laxed, those on that of labour have been pro­gres­sively tight­ened. There was a time when Euro­peans just picked up their bags and moved to Ar­gentina or Brazil and peo­ple like James Joyce and D.H. Lawrence de­cided they had had enough of the parochial­ism of their na­tive lands and would rather live in France or Italy or Ger­many.

Such free move­ment is no longer pos­si­ble with rulers like Trump fur­ther clos­ing their bor­ders to most out­siders es­pe­cially those from "----hole" coun­tries and Eng­land opt­ing for Brexit to keep out eastern Euro­peans. Mean­while, cap­i­tal is cir­cu­lat­ing around the world at hy­per speed, flow­ing in and out at will. Any­one at­tempt­ing to re­strict un­lim­ited trans­fers, like Mos­sadegh or Al­lende, is de­posed by the in­tel­li­gence agen­cies of coun­tries dis­pleased with such re­stric­tions.

Here we see the pol­i­tics of power and pow­er­less­ness. The small mi­nor­ity that owns the bulk of global cap­i­tal ex­er­cises its power via the In­ter­na­tional Mone­tary Fund, the World Bank, and the World Trade Or­gan­i­sa­tion to en­force rules that en­sure its cap­i­tal can roam freely in the pur­suit of profit.

Mean­while, the vast ma­jor­ity that owns noth­ing but its labour is pow­er­less to achieve the same mo­bil­ity for its hu­man cap­i­tal and is kept out if it tries by po­lice­men like Home-land Se­cu­rity. If that is in­deed the case how come a tiny mi­nor­ity that owns cap­i­tal al­ways gets what it wants and the vast ma­jor­ity with all its votes ends up empty-handed? Is it oneper­son-one vote or one-dol­lar-one vote?

I am sorry I made my fa­ther use his hard-earned money for me to learn all this rub­bish.

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