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Should Pakistan surrender? Delusions of grandeur have allowed China to pounce

A Pakistani policeman in Lahore Arif (Ali/AFP via Getty Images)

A Pakistani policeman in Lahore Arif (Ali/AFP via Getty Images)


June 26, 2023   5 mins

Pakistan is in a mess. Controlled by an increasingly unpopular military, the nation is teetering on the brink of default. By July, the country’s foreign exchange reserves are set to fall below $3 billion, barely sufficient to cover a month’s worth of imports. An “Economic Revival Plan” was unveiled last Tuesday, but rather than a genuine attempt at fiscal reform, it appears to be a vehicle for the army to further subsume the civilian government. There was, only a few weeks before, a 16% hike in the defence budget.

Pakistan needs friends, but they are in short supply. Since Partition in August 1947, the Government has fabricated a national identity hinged around despising India. Delusions of grandeur followed — and now they are starting to shatter.

The secession of Pakistan’s eastern wing in 1971 after war with India should have been a rude awakening. It should also have binned the narrative that India is trying to annex its territory, since New Delhi facilitated the transition of East Pakistan to an independent Bangladesh, instead of gulping it down as war spoil. The creation of Bangladesh should also have disabused Pakistan of the farcical notion that adherence to Islam can forge a single national identity — if indeed that weren’t obvious from the presence of two separate Muslim-majority states along Pakistan’s western border.

Instead, under Zulfikar Ali Bhutto, who led the country post-1971, Pakistan Islamised the constitution, propelled jihadist groups towards Afghanistan in search of more geopolitical influence, and invited investment of freshly-minted Arab petrodollars. Since then, Pakistan’s leaders have enabled the establishment of Taliban rule in Afghanistan, the Talibanisation of Pakistan itself, and the radical Islamisation of Kashmir, as well as multiple jihadist attacks on India. Yet even after decades of jihadism backfiring on Pakistan, the country’s leaders still won’t rethink their extreme, religionist narrative on India. Incumbent Foreign Minister Bilawal Bhutto-Zardari doesn’t hesitate to use Islamist rhetoric in discussing Kashmir; Imran Khan confidently urges Indian Muslims to pick up arms against the state.

The trouble is that Islamist policies created Pakistan, rather than the other way around. Hostility towards India, therefore, is not temporary opportunism on the part of Islamists, but the consequence of centuries-old political and theological narratives. Once the British Raj took over, the Muslim elite of India became increasingly apprehensive about the possibility of eventually living in a Hindu majority nation, and struggled for religionist separation. This became the ideological raison d’ĂȘtre of Pakistan, in the form of the Two Nation Theory: “Muslims and Hindus are two separate nations that cannot live together.” For the past 76 years, “Muslim” Pakistan let this narrative direct its relations with “Hindu” India.

Today, the nations’ differences are most obvious in the economic realm: Pakistan and India have foreign reserves of $3 billion and $600 billion respectively. While pointing this out might have been met with accusations of treason in Pakistan until a couple of years ago, recent events have led to the beginning of a massive rethink. After Imran Khan’s government became the latest to be ousted by the military’s machinations last year, anti-army sentiments have been simmering. But even more critically, the extent of Pakistan’s ongoing fiscal crisis has made people question the army’s grandiose rhetoric, including the gross impracticality of any ambitions for Kashmir, given the economic strides India is making. Pakistan is missing out on at least $37 billion worth of potential trade with India annually, owing to its obstinate fixation with self-inflating Islam-centric narratives.

With the already limited trade with India largely frozen since the border skirmishes of 2019, Pakistan has instead looked to China. The $62 billion China Pakistan Economic Corridor (CPEC) is Beijing’s biggest-ever overseas investment. Part of the Belt and Road Initiative, CPEC was supposed to be a fiscal lifeline, but it has instead metamorphosed into a debt trap, owing to skewed agreements predominantly dictated by Beijing. CPEC is starting to seem more like a neocolonial venture, a front for the Chinese takeover of Pakistan, which is leading to human rights abuses and mass appropriation of resources. The Chinese stranglehold has left Islamabad with little choice but to continually express gratitude to Beijing over partial loans to pay import bills issued mostly, of course, by China.

For Pakistan, which has persistently chosen to alienate all its neighbours, the only rational way forward would be to actively work towards regional cooperation — beginning with the subcontinent’s largest country. The longer Pakistan takes to come to this conclusion, the harder it will be. Today, better ties with India aren’t something that Pakistan can simply ask for; Islamabad would need to offer some incentive. It would have to right those wrongs that leaders in Pakistan have openly confessed to: the provocation of wars, the facilitation of India-bound jihadist groups such as the JeM or the Lashkar-e-Taiba, which orchestrated, among others, the 2008 Mumbai attacks. Gaining India’s trust will be very, very difficult.

Moreover, Pakistan will face internal resistance from the jihadist superstructure it has buttressed for years. Every time there are ostensible steps towards initiation of peace with India, that structure responds with a coordinated manoeuvre. After the 2001 Agra Summit, there was an attack on the Indian Parliament; after Narendra Modi’s visit to Pakistan in 2015, there was the Pathankot raid. If Pakistan is to develop strong, productive ties in the region, it must stop supporting jihadist outfits of any variety. Pakistan will also have to start acknowledging the simple reality that the Indian subcontinent has a shared history spanning millennia — and hence overlapping cultures, languages, and customs. Finally, Pakistan’s economy would have to reinvent itself as growth-oriented, rather than heavily militarised and reliant on foreign aid. These steps could usher in a future of better politico-economic collaboration — and put an end to the submissive, extractive alliance with China.

Unfortunately, the supposed peaceniks in Pakistan have instead been fixated on their own anti-India agenda. For them, the recent surge in Hindutva nationalism driven by Delhi, and the targeting of Muslims, vindicates Pakistan’s separation. They tend to gloss over the fact that religious minorities are disproportionately looking to leave Pakistan for India, while Indian Muslims aren’t exactly queueing up to move in the other direction. They ignore, too, the fact that, despite Hindutva ambitions to reconvert disputed mosques into Hindu temples, there are over 300,000 mosques in India, with numerous under construction or renovation. By contrast, not a single Hindu temple has been constructed over the past 76 years in Pakistan.

Even leaving aside the possibility that the increasing marginalisation of Indian Muslims could be a side-effect of Pakistan’s creation, a country founded and sustained on Muslim nationalism has little grounds to criticise Hindu nationalism. And besides, all this bickering over whose nationalism is more toxic, and whose treatment of Kashmir is worse, pales into insignificance when one considers the glaring difference in the two nations’ global standing.

More than anything else, the success of Pakistan’s “bleed India with a thousand cuts” policy can be gauged by the volumes of blood the country has shed of its own people. More than 80,000 Pakistanis are direct victims of jihadist attacks. But where glorification of death in the name of “martyrdom” has belittled the colossal loss of life, Pakistan’s rapidly emptying coffers might leave the nation with no choice but to surrender — especially with Saudi Arabia pulling the plug on jihadi funding. The still-rising defence budget suggests that the Pakistan army is refusing to let go of its delusions of grandeur. It is only a matter of time, though, before it caves. At the end of the day, governments need money to run a country, and for that they need allies. A nation cannot live on stories alone.


Kunwar Khuldune Shahid is a journalist based in Lahore.
khuldune

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Stephen Walsh
Stephen Walsh
11 months ago

Brave article. Given the potential of its people, Pakistan is arguably the most unsuccessful independent state anywhere, ever. This is what makes it so dangerous.

Charles Stanhope
Charles Stanhope
11 months ago
Reply to  Stephen Walsh

I would have thought South Africa better deserves that accolade.
We should also NOT forget that Pakistani has a ‘Bomb’ (of sorts.)

Before I forget, Mr Walsh I trust you have now seen the BBC TV documentary’Once upon a time Northen Ireland’ and have noted that so called ‘Bloody Sunday’ was also described by others as ‘Good Sunday’.
I look forward to your abject apology, in the very unlikely event that you have the moral fibre to give one.

ps. Another contender might be the Kerrygold Republic*. Having achieved Independence after centuries of struggle in 1922 following a rather nasty little war, it then abjectly surrendered itself to the EU in 1973.
51 years of freedom! Brilliant! Talk about a ‘mess of pottage’’! **

(*Sometimes known as the Irish Republic.)
(**Genesis. 25: 29-34.)

Last edited 11 months ago by Charles Stanhope
Stephen Walsh
Stephen Walsh
11 months ago

I replied to you yesterday, but comments on the Covid Inquiry article were deleted by Unherd.

Last edited 11 months ago by Stephen Walsh
Charles Stanhope
Charles Stanhope
11 months ago
Reply to  Stephen Walsh

Thank you indeed!
That wretched Censor 
..again!

Charles Stanhope
Charles Stanhope
11 months ago
Reply to  Stephen Walsh

Hallelujah!

Our discussion has been restored,
but unfortunately your reply completely avoided the issue.

Your exact words at the start of this were:-
“I don’t think anyone could possibly refer to that horrible day as Good Sunday”.
To which I replied yes, people actually DO refer to it as Good Sunday, and that BBC documentary I mentioned actually records that very fact does it not?

So, why don’t you acknowledge it?

Last edited 11 months ago by Charles Stanhope
Charles Stanhope
Charles Stanhope
11 months ago
Reply to  Stephen Walsh

Thank you indeed!
That wretched Censor 
..again!

Charles Stanhope
Charles Stanhope
11 months ago
Reply to  Stephen Walsh

Hallelujah!

Our discussion has been restored,
but unfortunately your reply completely avoided the issue.

Your exact words at the start of this were:-
“I don’t think anyone could possibly refer to that horrible day as Good Sunday”.
To which I replied yes, people actually DO refer to it as Good Sunday, and that BBC documentary I mentioned actually records that very fact does it not?

So, why don’t you acknowledge it?

Last edited 11 months ago by Charles Stanhope
Stephen Walsh
Stephen Walsh
11 months ago

I replied to you yesterday, but comments on the Covid Inquiry article were deleted by Unherd.

Last edited 11 months ago by Stephen Walsh
Steve Murray
Steve Murray
11 months ago
Reply to  Stephen Walsh

I agree about its potential. Whilst working in healthcare, i had the pleasure to work alongside a great many Pakistanis (either direct immigrants or of recent Pakistani immigrant origin) and they were among the most able, intelligent and disciplined colleagues one could wish for.
Why on earth is a nation with such human potential given to economic malaise? I’ll leave others to speculate on that – but also just to add that the flip side includes the grooming gangs of predominantly Pakistani origin, active local to where i live (i.e. still active). There’s something worthy of much greater study by psychologists going on here, except it’s something that almost certainly won’t be happening in our current cultural climate.

Last edited 11 months ago by Steve Murray
Ethniciodo Rodenydo
Ethniciodo Rodenydo
11 months ago
Reply to  Steve Murray

Like many countries Pakistan has a small middleclass sitting on a timebomb of less intelligent mob minded masses

Niels Georg Bach Christensen
Niels Georg Bach Christensen
11 months ago
Reply to  Steve Murray

Funny though. The middle class pakistanis born in or originated from the country, seems to be among the most double talking islamists in Denmark. And they defend their home country.

Charles Hedges
Charles Hedges
11 months ago
Reply to  Steve Murray

Most of the military during Empire was based near the Khyber Pass and many Pakistanis make very good soldiers. A third of the Army was Muslim. There is little commercial activity in West Pakistan, East Pakistan, today Bengal is very fertile and provided most of the taxes. At Indpendence, the Hindus and Sikhs moved to India which meant most of the middle class – Engineers, Doctors, Lawyers, Business People etc left. The old aristocratic land owning classes based in India stayed there. In provinces such as Sindh one had a minute land owning literate class and a vast illiterate class of farm labourers.
Basically the only competent organisation in Pakistan was The Armed Forces which also provided a meritocratic route for social advancement. However, in 1973 Zia al Huq started a policy of increasing Islamic influences within Pakistan.
The inability of the Pakistan Government to provide basic education and healthcare has resulted in suppport for Islamic Parties.
Paistan is very close to Saudi Arabia and the USSR invasion of Afghnaistan resulted in a Wahabi strand of Islam replacing a Sufi strand in much of the country, hence the Taliban.

Ethniciodo Rodenydo
Ethniciodo Rodenydo
11 months ago
Reply to  Steve Murray

Like many countries Pakistan has a small middleclass sitting on a timebomb of less intelligent mob minded masses

Niels Georg Bach Christensen
Niels Georg Bach Christensen
11 months ago
Reply to  Steve Murray

Funny though. The middle class pakistanis born in or originated from the country, seems to be among the most double talking islamists in Denmark. And they defend their home country.

Charles Hedges
Charles Hedges
11 months ago
Reply to  Steve Murray

Most of the military during Empire was based near the Khyber Pass and many Pakistanis make very good soldiers. A third of the Army was Muslim. There is little commercial activity in West Pakistan, East Pakistan, today Bengal is very fertile and provided most of the taxes. At Indpendence, the Hindus and Sikhs moved to India which meant most of the middle class – Engineers, Doctors, Lawyers, Business People etc left. The old aristocratic land owning classes based in India stayed there. In provinces such as Sindh one had a minute land owning literate class and a vast illiterate class of farm labourers.
Basically the only competent organisation in Pakistan was The Armed Forces which also provided a meritocratic route for social advancement. However, in 1973 Zia al Huq started a policy of increasing Islamic influences within Pakistan.
The inability of the Pakistan Government to provide basic education and healthcare has resulted in suppport for Islamic Parties.
Paistan is very close to Saudi Arabia and the USSR invasion of Afghnaistan resulted in a Wahabi strand of Islam replacing a Sufi strand in much of the country, hence the Taliban.

ITX God
ITX God
11 months ago
Reply to  Stephen Walsh

A very uninformed article that lives in the 70s. None of Pakistans internal politics revolves around India. The religious parties have a handful of seats out of 800 or so. The Author seems to not have visited the country in the last 30 years and is clearly very ignorant.

Victor T
Victor T
11 months ago
Reply to  Stephen Walsh

The problems started with the creation of the State itself. Two things that were there at the beginning have metamorphosed into the intractable problems now. The first was the establishment doctrine itself. Was Pakistan supposed to be nominally secular or Islamist? If it was going to be a Muslim state; the islamists had a valid argument that then Sharia should be the law of the land. Jinnah himself was secular, but his early death prevented that viewpoint to prevail. Second is the lack of civilian control of the Army, and the pyramidal structure of the Army Brass. By not breaking up the command structure; it allowed the head of the army to accumulate too much concentrated power. If I recall, people of Pakistan welcomed the Army coup of 1956 because the civilian government was a pathetic shambles. “suna hai ki Pakistan may Mashallah ho gaya” was a popular refrain at that time.

The islamization of the polity started by Bhutto was given rocket fuel by Zia; and I don’t see how Pakistan can revert back from that. Add to that, there is no way in hell the Army is going to give up its control now without bloodshed or a civil war.

And as the author states; how can India-Pakistan relationship get better after the 2008 Mumbai terrorist attacks that were coordinated by the ISI in real time?

Charles Stanhope
Charles Stanhope
11 months ago
Reply to  Stephen Walsh

I would have thought South Africa better deserves that accolade.
We should also NOT forget that Pakistani has a ‘Bomb’ (of sorts.)

Before I forget, Mr Walsh I trust you have now seen the BBC TV documentary’Once upon a time Northen Ireland’ and have noted that so called ‘Bloody Sunday’ was also described by others as ‘Good Sunday’.
I look forward to your abject apology, in the very unlikely event that you have the moral fibre to give one.

ps. Another contender might be the Kerrygold Republic*. Having achieved Independence after centuries of struggle in 1922 following a rather nasty little war, it then abjectly surrendered itself to the EU in 1973.
51 years of freedom! Brilliant! Talk about a ‘mess of pottage’’! **

(*Sometimes known as the Irish Republic.)
(**Genesis. 25: 29-34.)

Last edited 11 months ago by Charles Stanhope
Steve Murray
Steve Murray
11 months ago
Reply to  Stephen Walsh

I agree about its potential. Whilst working in healthcare, i had the pleasure to work alongside a great many Pakistanis (either direct immigrants or of recent Pakistani immigrant origin) and they were among the most able, intelligent and disciplined colleagues one could wish for.
Why on earth is a nation with such human potential given to economic malaise? I’ll leave others to speculate on that – but also just to add that the flip side includes the grooming gangs of predominantly Pakistani origin, active local to where i live (i.e. still active). There’s something worthy of much greater study by psychologists going on here, except it’s something that almost certainly won’t be happening in our current cultural climate.

Last edited 11 months ago by Steve Murray
ITX God
ITX God
11 months ago
Reply to  Stephen Walsh

A very uninformed article that lives in the 70s. None of Pakistans internal politics revolves around India. The religious parties have a handful of seats out of 800 or so. The Author seems to not have visited the country in the last 30 years and is clearly very ignorant.

Victor T
Victor T
11 months ago
Reply to  Stephen Walsh

The problems started with the creation of the State itself. Two things that were there at the beginning have metamorphosed into the intractable problems now. The first was the establishment doctrine itself. Was Pakistan supposed to be nominally secular or Islamist? If it was going to be a Muslim state; the islamists had a valid argument that then Sharia should be the law of the land. Jinnah himself was secular, but his early death prevented that viewpoint to prevail. Second is the lack of civilian control of the Army, and the pyramidal structure of the Army Brass. By not breaking up the command structure; it allowed the head of the army to accumulate too much concentrated power. If I recall, people of Pakistan welcomed the Army coup of 1956 because the civilian government was a pathetic shambles. “suna hai ki Pakistan may Mashallah ho gaya” was a popular refrain at that time.

The islamization of the polity started by Bhutto was given rocket fuel by Zia; and I don’t see how Pakistan can revert back from that. Add to that, there is no way in hell the Army is going to give up its control now without bloodshed or a civil war.

And as the author states; how can India-Pakistan relationship get better after the 2008 Mumbai terrorist attacks that were coordinated by the ISI in real time?

Stephen Walsh
Stephen Walsh
11 months ago

Brave article. Given the potential of its people, Pakistan is arguably the most unsuccessful independent state anywhere, ever. This is what makes it so dangerous.

Mark V
Mark V
11 months ago

“CPEC was supposed to be a fiscal lifeline, but it has instead metamorphosed into a debt trap”
well duh

Last edited 11 months ago by Mark V
Syed Ahmed
Syed Ahmed
11 months ago
Reply to  Mark V

That was need of hour not a miracle cure.

Syed Ahmed
Syed Ahmed
11 months ago
Reply to  Mark V

That was need of hour not a miracle cure.

Mark V
Mark V
11 months ago

“CPEC was supposed to be a fiscal lifeline, but it has instead metamorphosed into a debt trap”
well duh

Last edited 11 months ago by Mark V
Hugh Bryant
Hugh Bryant
11 months ago

The cultural change needed for the modernization of Pakistan – eradication of its brutal misogyny, for example – will take generations.

Hugh Bryant
Hugh Bryant
11 months ago

The cultural change needed for the modernization of Pakistan – eradication of its brutal misogyny, for example – will take generations.

Vijay Kant
Vijay Kant
11 months ago

It is always the economy that separates religious fantasy from reality. The drying up of petrodollars will also see this fantasy come to its logical end in many middle eastern countries in the coming decades. Unfortunately, power hungry mullahs will not go quietly.

Pakistan’s current situation is just a trailer; the full movie is yet to be released!

Last edited 11 months ago by Vijay Kant
Simon Simple
Simon Simple
11 months ago
Reply to  Vijay Kant

Have Iran’s Mullah’s also given up funding Jihad?

Simon Simple
Simon Simple
11 months ago
Reply to  Vijay Kant

Have Iran’s Mullah’s also given up funding Jihad?

Vijay Kant
Vijay Kant
11 months ago

It is always the economy that separates religious fantasy from reality. The drying up of petrodollars will also see this fantasy come to its logical end in many middle eastern countries in the coming decades. Unfortunately, power hungry mullahs will not go quietly.

Pakistan’s current situation is just a trailer; the full movie is yet to be released!

Last edited 11 months ago by Vijay Kant
Milton Gibbon
Milton Gibbon
11 months ago

Why can’t Pakistan just accept its fate and split into its component entities? Far too many national boundaries within the state for it to ever function effectively. Perhaps a federation under the Islamic “umbrella” would be preferable so that differences could be fostered to everyone’s benefit – the cricket team developing along the West Indian midel for instance. It would have been interesting to have more of the article dedicated to Bangladesh’s relative success having undergone a horrific civil war which tore the country apart, unlike West Pakistan.

Jeff Butcher
Jeff Butcher
11 months ago
Reply to  Milton Gibbon

And yet it was the Pakistani Army that was responsible for a lot of the horror – between 200 – 400,000 raped and 300000 to 3 million murdered, depending on who you ask, one of the worst genocides since WW2.

ITX God
ITX God
11 months ago
Reply to  Jeff Butcher

Hi Jeff. Clearly you are an idiot. Or you would know that half of the victims were Biharis genocided by Bengalis. How does it make sense for you to use a grossly exaggerated figure of deaths from both sides and pin it on one side? Idiot or just disingenuous?

Jeff Butcher
Jeff Butcher
11 months ago
Reply to  ITX God

That’s not what I’ve read but yes, clearly I’m an idiot – happy now?

Jeff Butcher
Jeff Butcher
11 months ago
Reply to  ITX God

That’s not what I’ve read but yes, clearly I’m an idiot – happy now?

ITX God
ITX God
11 months ago
Reply to  Jeff Butcher

Hi Jeff. Clearly you are an idiot. Or you would know that half of the victims were Biharis genocided by Bengalis. How does it make sense for you to use a grossly exaggerated figure of deaths from both sides and pin it on one side? Idiot or just disingenuous?

Jeff Butcher
Jeff Butcher
11 months ago
Reply to  Milton Gibbon

And yet it was the Pakistani Army that was responsible for a lot of the horror – between 200 – 400,000 raped and 300000 to 3 million murdered, depending on who you ask, one of the worst genocides since WW2.

Milton Gibbon
Milton Gibbon
11 months ago

Why can’t Pakistan just accept its fate and split into its component entities? Far too many national boundaries within the state for it to ever function effectively. Perhaps a federation under the Islamic “umbrella” would be preferable so that differences could be fostered to everyone’s benefit – the cricket team developing along the West Indian midel for instance. It would have been interesting to have more of the article dedicated to Bangladesh’s relative success having undergone a horrific civil war which tore the country apart, unlike West Pakistan.

Simon Neale
Simon Neale
11 months ago

Any word yet on Chinese grooming gangs?

mike otter
mike otter
11 months ago
Reply to  Simon Neale

Why bother to groom a dog if you’re going to skin and cook it?

mike otter
mike otter
11 months ago
Reply to  Simon Neale

Why bother to groom a dog if you’re going to skin and cook it?

Simon Neale
Simon Neale
11 months ago

Any word yet on Chinese grooming gangs?

Jacob Mason
Jacob Mason
11 months ago

As an American, I would like to add that the financing of Pakistan – largely of its military was carried out by the US during the cold war, largely due to the fact that Pakistan was willing to ally against the Soviets.

It seems likely to me that Pakistan’s current troubles are partly due to its necessary emergence from being a well-paid American ally for most of its early history.

Jacob Mason
Jacob Mason
11 months ago

As an American, I would like to add that the financing of Pakistan – largely of its military was carried out by the US during the cold war, largely due to the fact that Pakistan was willing to ally against the Soviets.

It seems likely to me that Pakistan’s current troubles are partly due to its necessary emergence from being a well-paid American ally for most of its early history.

Samuel Ross
Samuel Ross
11 months ago

Pakistan should humble itself before God and man. It needs its own Mahatma Ghandhi.

Vijay Kant
Vijay Kant
11 months ago
Reply to  Samuel Ross

We are ready to send our Gandhis to Pakistan!

Vijay Kant
Vijay Kant
11 months ago
Reply to  Samuel Ross

We are ready to send our Gandhis to Pakistan!

Samuel Ross
Samuel Ross
11 months ago

Pakistan should humble itself before God and man. It needs its own Mahatma Ghandhi.

Mark Smith
Mark Smith
11 months ago

Knowing next to nothing about international finance, I’ll say that it seems like foreign investment is more often a detriment than an advantage. One option is for the government to start a bunch of state-run projects with the new funds, but unless by virtue of improved organization or motivational power this leads to greater productive capacity in the country, all it will do is reallocate existing capacity to new ventures while fueling inflation. Generally speaking, internal spending will just weaken the currency. Alternatively, the funds can be used to buy external commodities and equipment, which hopefully can be used to jump-start some industries in the purchasing country. This seems better than the first option, but has the drawback of invigorating the economies of foreign countries (maybe the same ones that loaned the money). The route that this article says Pakistan is taking, buying foreign munitions, is maybe the worst, as it leads to no improvement in one’s own economy and makes one’s security dependent on possible future enemies. Of course all of these options beget debt and attendant interest as well.

Last edited 11 months ago by Mark Smith
Mark Smith
Mark Smith
11 months ago

Knowing next to nothing about international finance, I’ll say that it seems like foreign investment is more often a detriment than an advantage. One option is for the government to start a bunch of state-run projects with the new funds, but unless by virtue of improved organization or motivational power this leads to greater productive capacity in the country, all it will do is reallocate existing capacity to new ventures while fueling inflation. Generally speaking, internal spending will just weaken the currency. Alternatively, the funds can be used to buy external commodities and equipment, which hopefully can be used to jump-start some industries in the purchasing country. This seems better than the first option, but has the drawback of invigorating the economies of foreign countries (maybe the same ones that loaned the money). The route that this article says Pakistan is taking, buying foreign munitions, is maybe the worst, as it leads to no improvement in one’s own economy and makes one’s security dependent on possible future enemies. Of course all of these options beget debt and attendant interest as well.

Last edited 11 months ago by Mark Smith