6 months ago

The bonfire of sensibilities

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Britain's war-time Prime Minister Winston Churchill was wont to brooding. Weighing heavily on his mind was the political shenanigans that pushed him from a nobody to the coveted position of the then Empire. He had been set up for failure. Except those that had so lined him up made a cardinal mistake. Churchill didn't brook failure. When faced up to it, he always found his way out of it. From infamy of a disastrous strategic mistake during the first Great War a daring escape from a prison camp catapulted him to fame. He had few qualms about mortgaging most of the empire in return for munitions and equipment that his staved troops required. The mortgager just happened to be the United States, Britain's great ally. That too, after President Roosevelt denied previous requests on grounds of an obfuscate treaty with Germany about not selling arms to parties in the conflict. Pearl harbour consigned all such treaties to the bin. Just as similar is the shredding of present day pacifism of Germany and Japan centring around the Russia-Ukraine conflict.

Britain paid dearly. It's mortgage payment that altered geo-politics and it's debt management was severely stretched for more than half a century after the war. Ukraine is as likely to pay a hefty price for the $50 billion aid taken so far, not to mention the $5.0 billion daily bill raked up over revenue losses for its produce. When it comes to pure math, the equations are hard to solve as Saudi Arabia found out after being saddled with the Desert Storm bills. That's one reason why apart from Antonio Guterres, no one has complained about the absurd, indeed vulgar profits of $48 billion the country raked in just one quarter of the year through energy sales. There's no complaining either that the Saudis refuse to ramp up oil production so as to relieve price burdens on the world. Having said so, there are softer tones emerging. Two sets of prices, one for the Western world and the other for the developing world may be forthcoming. Lest that be presumed as charitable let it not be missed that Russia has beaten them to the trick. The motherland is already selling oil at discounted prices to its staunch allies (read those that refused to condemn them in a Security Council resolution).

While that takes care of the pricing element leaving the sanction pushing the West to sort out its economic woes. The development, however, brings into play the fate of countries either bankrupt or fast heading that way. Economic integration induces disruption as well. Historically, the West made its money through plundering resources of the colonies, continued that through unfair trade exemplified by horrific trade imbalances and the direct and indirect arms sales that only supported internecine conflicts. There have been no apologies, not even acknowledgements about how warring factions in the Middle East, Asia or Africa got funding and weaponry. The Islamic State reduced to operating in cellular mode had sophisticated armaments at their display as did the Tamil Tigers and as do the Tigray rebels and Ethiopia's rival factions. The only outcry is over arming of the Houthi rebels by Iran, somehow legitimising Saudi Arabia's impunity in bombing Yemen.

For all the desperate appeals by UN agencies the impending famine in Sudan and the inhumane conditions in Afghanistan have drawn no sympathy. Money can be found for the war in Europe but not for a manmade disaster. On the contrary, overseas aid funds are being reduced by a growing list that includes Britain and Germany. Many such programmes had been earmarked for propping up self-sufficiency projects in the Indian sub-continent. It creates further pressure on hapless Pakistan, Sri Lanka and Bangladesh. Pakistan has been literally going around with a hat and has raised close to $10 billion in loans from friendly nations. Added to that is release of the rest of a $6.9 billion IMF tranche that had been suspended. How they will overcome the $20 billion loss resulting from half of the country being flooded is anyone's guess. Sri Lanka is somewhat relieved by a $1.9 billion IMF fund. That might ease immediate pressure but they have a $59 billion loan default to think of. In not so many words, Pakistan has removed fuel subsidies, super-taxes the super rich and promised hard nut approaches to revenue collections. Sri Lanka has agreed to similar terms including reversal of tax cuts.

Bangladesh has been prudently proactive in seeking IMF support. The roughly $4.0 billion it is seeking is more to balance budget and support SMEs hard hit by Covid economics. Exports in the past three months have been growing as have remittances. The IMF has more confidence in the country's ability to steer through uncertainty, especially with close, cold and hard focus on austerity and control.

Stranger events plague the world. In the middle of an economic morass, Japan has announced $30 billion dollars assistance to Africa. That's the tip of the iceberg for a continent where collective debt is at $550 billion and climbing. The Liz Trusses of the world must think twice before taking China head on in trade conflict. Let's not forget that the country that bought off Europe's largest share of debt holds some trump cards. Let it not be missed that in 1976 the UK went to the IMF with hat in hand. The country currently has the biggest budget deficit since World War II. Climate change is reminding us. The flooding in Pakistan is like hen's teeth but is happening. It has first flooded and then set the fires crackling in Europe and the U.S. The bonfires this time are of sensibilities.


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