Pakistan waiting for Hobbes: Life in a new state of nature

For 75 years, we convinced ourselves that international law, free trade and global institutions had civilized the conduct of nations. But watching the return of raw power politics, territorial grabs and economic warfare, it is evident that underneath the thin veneer of modernity, global affairs remain what Thomas Hobbes called life in a state of nature— “nasty, brutish, and short.”

On the economic front, many are concerned about the future prospects of King dollar. In the old world, the US dollar’s dominance was largely as a function of the strength of US institutions like meritocracy and checks and balance, for example. In the emerging new world, the US dollar’s thronewill not depend on the quality of its central bankers or on the soundness of its fiscal policy. It will squarely rest on the unparalleled military might of the US. In a sense, now the US dollar can be thought of as a fiat currency with a fighter-jet guarantee. We will now no longer accept it not because of a shared belief in its intrinsic value, but because there is no credible alternative backed by such overwhelming force.

This distinction is not academic. Rather, it is the defining feature of our current moment. For a brief period, we in the global south were allowed to believe in the fairy tale of free markets and the invisible hand. We were told that a McDonald’s in every capital city was a bulwark against war. This was the mantra sold to us, internalized by our policymakers, and repeated in our institutions. It worked well as long as the West was the sole manufacturer of the world’s goods. But, ever since China joined the fray, the true nature of power was revealed. The same economists who preached deregulation are now clamoring for industrial policy. The free traders are now the tariff-wielders. What this points out is that the narrative established by the West’s economic policymakers was never neutral; it was merely a veil for a specific set of interests.

And how should Pakistan navigate in the crosscurrents of this tectonic shift? For starters, the country is now perilously close to the edge. This recent energy shock has revealed the carefully curated “stability” as a mirage. Pakistan’s policymakers claim that they are managing this crisis through the price mechanism: increase petrol prices, let the demand curve do its work. 

However, the problem is that fuel is an inelastic good. Like for bread and water, the price and quantity inverse relationship does not hold, especially as Pakistan has little or no public transportation. In the short to the medium term, people will have no choice but to purchase fuel.

So, where is the hope? Perhaps it lies not in the sterile corridors of policymaking but in the raw energy of Pakistan’s youth.

-Dr. Aqdas Afzal

Roughly, $10 increase per barrel adds $2 billion to our annual import bill. With oil repeatedly hitting $120 a barrel, Pakistan is looking at a staggering hole in its finances. The solution, though unpalatable to some policymakers, is rationing. It is the only way to protect the economy from a freefall that will shatter the exchange rate, cripple industry, and trigger a food inflation tsunami via skyrocketing fertilizer costs. Despite Bangladesh, Australian and many other nations implementing fuel rationing, Pakistan’spolicymakers remain deadest against it in order to avoid the displeasure of international financial institutions, which, ironically, are now scrambling to come up with solutions.

In the constant din of experts pontificating about the present situation in the Strait of Hormuz some important facts have been forgotten. The calorie intake in Pakistan remains at its lowest level in six years, while poverty is rising and joblessness has become endemic. Against this dismal backdrop, an optimal policy response is to enhance the federal social safety net, that is to index the Benazir Income Support Program to inflation and provide a targeted subsidy through fuel cards to its clients, ensuring that BISP clients,who must travel to work can do so. 

So, where is the hope? Perhaps it lies not in the sterile corridors of policymaking but in the raw energy of Pakistan’s youth. They are hungrier, more intelligent, and more innovative than the previous generation ever was. They have fewer options: the West’s doors are closing, CSS is a lottery, and AI is devouring the freelance market. Their only path forward is to build small-scale enterprises that can form a new economic fabric. 

We are entering a world where the old rules have been discarded, and the new rules are being written by the powerful. For Pakistan, this means we must stop internalizing the colonial gaze that tells us we are incapable of managing our own affairs. We must reject the idea that the only legitimate policy is one approved by distant lenders. Our economy is fragile, but our people are not. 

- The writer completed his doctorate in economics on a Fulbright scholarship.

X: @AqdasAfzal