How the Taliban is having a chilling effect on the Pakistani election

As the country gears up for its first ever democratic transition, the secular liberal parties have been threatened into silence.

One of the first things to strike any foreign observer of Pakistan’s political scene is the sheer scale of public gatherings. In a highly politicised population of 180 million, protests and campaign rallies can easily attract people in their tens – if not hundreds – of thousands.

But as the country gears up for its first ever democratic transition, with the election date set for 11 May, the campaign has been tense and one-sided. The reason? The ramped up threat from the Tehreek-e-Taliban Pakistan (TTP) and associated extremist groups.

In a 24 hour period this week, there were nine bomb blasts in three different provinces. Karachi, Pakistan’s economic hub, situated in the province of Sindh, was targeted, as was neighbouring Balochistan, and several places in the northern province of Khyber-Pakhtunkhwa. More than 75 people have been injured and at least 11 killed.

This is far from being the start of the violence. Since the election campaign kicked off in March, 28 people have been killed in 14 separate attacks. The TTP claimed responsibility for five of those, and the remainder are most likely the work of associated groups.

The biggest targets are the liberal, secular parties that are outspoken in their criticism of the Taliban. Before the campaign got underway, the TTP announced that they would target politicians from the leading coalition – the Pakistan People’s Party, the Awami National Party (ANP) and the Muttahida Qaumi Movement (MQM) – warning voters to stay away from their rallies. They have made good on their threat.

The ANP, which is predominantly made up of Pashtuns, the same ethnic group that the Taliban is drawn from, has been relentlessly targeted. Ruling the provincial government in Khyber-Pakhtunkhwa, the party represents the secular tradition in the TTP’s heartlands, and has been one of the loudest voices against extremist violence. According to the ANP, 750 members have been killed by the Taliban in the last five years. During this campaign alone, there have been at least six attacks on the party. The MQM’s election camp, too, was one of the targets in the recent 24 hours of bloodshed.

These attacks on party offices, supporters, and candidates, are having a serious effect on the way the campaign is playing out. Those huge scale rallies are a key characteristic of Pakistani politics – but they also leave leaders incredibly vulnerable to attack.

The outgoing PPP, which saw its leader Benazir Bhutto assassinated in the 2008 election campaign, is breaking with tradition by not holding any major rallies at all. Instead, its election campaign is focusing on videos, social media, pamphlets, and smaller gatherings. The ANP, too, is being forced to keep its campaigning on a small scale and frequently at a distance. For some politicians, such as the ANP’s Mian Iftikhar Hussain, who has been vociferous in his criticism of the Taliban, is it too dangerous to even visit their home constituencies, so campaigning is being done over the phone.

Of course, this is expected to have a knock on effect. On 4 April, the anniversary of the hanging of Zulfikar Ali Bhutto, the PPP was supposed to kick off their election campaign with a major rally at the Bhutto mausoleum in Larkana. At the last minute, it was cancelled and replaced with a closed gathering, leaving many supporters – who have a deeply emotional connection to the Bhutto dynasty – feeling angry and betrayed. If politicians do not dare to set foot in their constituencies, how can they convince the electorate they care?

This is not to say that no big-scale campaigning is happening at all. Far from it, the PPP’s main rivals, Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) and current frontrunner Nawaz Sharif’s Pakistan Muslim League Nawaz (PML-N) are both engaged in a frenetic round of rallies, frequently drawing tens of thousands of people out. Critics point to the fact that both parties occupy a centre-right, socially conservative space, and that neither leader has condemned the Taliban by name. For the most part, both prefer to stay away from the subject of terrorism at their rallies, in what some have painted as a cynical bid to stay safe.

Further to the right, hard line Islamic parties have also been free to campaign. One striking contrast was last Tuesday, when a suicide bomber blew himself up outside a meeting of the ANP in the north-western city of Peshawar, killing 16 people. Hours before, a candidate from one of the Islamic parties, Jamiat Ulema-e-Islam, campaigned freely in the same city. Maulana Jalil Jan, who has questioned whether the Taliban are terrorists and said that attacks in Pakistan are an attempt by foreign powers to “malign religious leaders”, walked around the city without guards.

Traditionally, religious parties rarely get more than about 5 per cent of the vote, but there’s a chance that could change, since rightist parties are disproportionately free to campaign.

While many, particularly in the ANP, have decried this chilling effect as “pre-poll rigging”, it is worth remembering that there was already a strong anti-incumbent feeling. The PPP, and other outgoing parties, are struggling to defend their time in power, with allegations of corruption and incompetence as the country’s economy flounders, the security situation continues to spiral, and the energy crisis deepens.

Yet there is a limited amount they can do to fight against this perception given the safety risks. There is no doubt that the backdrop of violence is having an impact on how parties campaign. A big political assassination has been prevented so far – though many are waiting with bated breath. It’s also likely that the security situation will impact voter turnout on 11 May. With half the polling stations in mega-city Karachi declared sensitive, as well as many in other areas, it’s questionable how many people will take the risk of going out to cast their vote. The TTP may not be fielding candidates in the election, but that certainly does not mean it is not playing a part.

Supporters of Pakistan's Islamist party Jamiat Ulema-e-Islam Fazl (JUI-F) hold flags during an election meeting in Quetta on April 25, 2013. Photograph: Getty Images

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?