A Level Economics 30: Profit

Difference between Normal and Abnormal Profits:

Normal Profits: Normal profits, also known as zero economic profits, refer to the minimum level of profits necessary to keep a business operating in the long run.
Normal profits are the amount of profit that covers all costs, including both explicit costs (such as wages, rent, and materials) and implicit costs (opportunity costs of using the resources).
When a firm earns normal profits, it means it is earning a return that is just sufficient to keep the owners or shareholders satisfied and willing to continue investing in the business.
In this case, the firm is neither making above-average profits nor incurring losses. It is essentially covering all costs and earning a reasonable return on investment.

Abnormal Profits: Abnormal profits, also known as economic profits or supernormal profits, occur when a firm earns more than the normal level of profits.
Abnormal profits represent a situation where a business is earning revenue that exceeds both explicit and implicit costs.
In other words, abnormal profits are above and beyond what is required to cover all costs and provide a normal return on investment.
Abnormal profits indicate that the firm has a competitive advantage, such as unique products, innovative processes, or significant market power, allowing it to generate higher revenues and outperform its competitors.

Example: Let's consider a hypothetical bakery. In a competitive market, several bakeries are operating, and each bakery is earning normal profits. They are covering their explicit costs (wages, ingredients, rent) and implicit costs (such as the opportunity cost of the owner's time and capital invested) while earning a reasonable return.

However, one particular bakery introduces a new and highly popular line of pastries that quickly becomes a favorite among customers. Due to the high demand for these pastries, this bakery starts generating significantly higher revenue compared to its competitors. As a result, it earns abnormal profits.

The bakery's abnormal profits indicate that it is earning more than the minimum necessary to cover all costs and provide a normal return. This exceptional performance could be attributed to its unique product offering or its ability to capture a significant market share. The abnormal profits act as an incentive for the bakery to continue investing in its business and potentially expand operations.Difference between Accounting Profit and Economic Profit:

Accounting Profit: Accounting profit refers to the profit calculated using traditional accounting methods. It is the revenue generated minus explicit costs, such as wages, rent, materials, and other operating expenses.
Accounting profit does not consider implicit costs, which are the opportunity costs associated with using the resources, including the owner's time and capital invested.
Accounting profit provides a financial measure of a firm's performance according to the accepted accounting principles and is primarily used for financial reporting and tax purposes.

Economic Profit: Economic profit is a broader measure of profit that considers both explicit and implicit costs, providing a more comprehensive view of a firm's profitability.
Economic profit subtracts both explicit and implicit costs from total revenue to calculate the true economic benefit or return on investment.
Implicit costs include the opportunity costs of resources, such as the foregone earnings from alternative uses of capital or the owner's time.
Economic profit represents the net benefit of using resources in a particular business venture compared to their next best alternative use.

Example: Let's say an entrepreneur starts a business and calculates an accounting profit of $100,000 per year. This profit is derived by subtracting explicit costs, such as $300,000 in operating expenses (wages, rent, materials), from total revenue of $400,000.

However, when considering economic profit, the entrepreneur realizes that the implicit costs of the business are significant. They estimate that if they were not running their own business, they could earn an annual salary of $80,000 in a similar industry. This opportunity cost of their time and potential earnings is an implicit cost that must be factored in.

Therefore, the economic profit would be calculated as total revenue ($400,000) minus both explicit costs ($300,000) and implicit costs ($80,000), resulting in an economic profit of $20,000.

In this example, the accounting profit is $100,000, reflecting the revenue left after deducting explicit costs. However, when considering the implicit costs or the opportunity cost of the entrepreneur's time, the economic profit becomes $20,000, indicating the true net benefit of running the business compared to the next best alternative use of resources.

A Level Economics 27: The Rational Actor Assumption

The assumption of the rational actor is a fundamental concept in economics, which assumes that individuals, firms, and other economic agents make decisions based on rationality, self-interest, and the pursuit of maximizing their utility or profits. While this assumption has its merits, it is also widely acknowledged to be a flawed assumption. Here's an explanation of the assumption, its limitations, and its impact on economic models:

1. Assumption of the Rational Actor:

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   • Rational Decision-Making: The assumption of the rational actor posits that individuals have well-defined preferences and make consistent choices based on logical reasoning. They gather and process information efficiently, weigh the costs and benefits of different options, and choose the option that maximizes their utility or profits.
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   • Self-Interest: Rational actors are assumed to act in their own self-interest, seeking to maximize their personal satisfaction or financial gains. This assumption implies that individuals are motivated by their own well-being and do not engage in purely altruistic behavior.

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3. Limitations and Flaws of the Rational Actor Assumption:

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   • Limited Information and Cognitive Biases: In reality, individuals often have limited information, bounded rationality, and cognitive biases that affect their decision-making. They may rely on heuristics, shortcuts, or imperfect information, leading to decisions that may deviate from the ideal rational behavior.
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   • Emotional Factors: Emotional and psychological factors can significantly influence decision-making, including factors like risk aversion, loss aversion, social influences, and emotional biases. These factors are not fully captured by the assumption of the rational actor.
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   • Time and Resource Constraints: Individuals may face time constraints and limited cognitive resources, preventing them from fully analyzing all available options. They may resort to satisficing (seeking satisfactory solutions) rather than optimizing choices due to practical limitations.
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   • Social and Cultural Influences: Social norms, cultural values, and external influences can shape decision-making, leading individuals to make choices that may not align with strict self-interest or rationality. Factors such as peer pressure, conformity, and social expectations can impact decision-making processes.

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5. Impact on Economic Models: The assumption of the rational actor has been foundational in constructing economic models and theories. However, recognizing its flaws and limitations has led to the development of alternative frameworks that incorporate behavioral economics and more realistic assumptions about decision-making. Some of the impacts include:

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   • Behavioral Economics: Behavioral economics integrates psychological insights and deviations from rational behavior into economic models. It acknowledges that individuals' decisions are influenced by cognitive biases, emotions, and social factors. This has led to a better understanding of real-world decision-making and more accurate predictions of economic outcomes.
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   • Realistic Modeling: Economic models are now being constructed to incorporate more nuanced assumptions, considering imperfect information, bounded rationality, and decision-making under uncertainty. This enables a more accurate representation of how individuals and firms actually make decisions.
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   • Policy Implications: Recognizing the limitations of the rational actor assumption has influenced policy discussions and interventions. Policies are designed to account for behavioral biases, such as implementing nudges or defaults that help individuals make better decisions aligned with their long-term interests.

In conclusion, while the assumption of the rational actor has been useful for building economic models, it is flawed due to the inherent complexities of human decision-making. Recognizing these limitations and incorporating insights from behavioral economics has led to more realistic economic models and a deeper understanding of how individuals and firms behave in real-world situations.

Economics Essay 99: Costs, Revenues, Profit and Shutdown

 Explain the factors a profit-maximising firm will take into account when deciding whether to shut down or to carry on operating, both in the short run and in the long run.

A profit-maximizing firm will consider several factors when deciding whether to shut down or continue operating in the short run and long run. These factors include:

Short Run:

1. Total Revenue and Total Cost: The firm will compare its total revenue with total variable costs to determine if it can cover its variable costs. If total revenue is insufficient to cover variable costs, it may choose to shut down in the short run as it would minimize losses by avoiding fixed costs.
2. Price and Average Variable Cost: The firm will compare the market price of the product with its average variable cost. If the price is below the average variable cost, the firm will likely shut down in the short run.
3. Market Conditions: The firm will consider the demand and supply conditions in the market. If the market demand is low, leading to low prices and insufficient sales, it may choose to shut down temporarily until market conditions improve.

Long Run:

1. Total Revenue and Total Cost: In the long run, the firm will assess its total revenue and total cost, including both variable and fixed costs. It will consider whether it can generate enough revenue to cover both variable and fixed costs and still make a profit.
2. Market Conditions and Industry Competition: The firm will evaluate the long-term market conditions and competitive landscape. If the market is highly competitive and the firm is unable to compete effectively, it may consider shutting down or exiting the industry.
3. Investment Opportunities: The firm will assess alternative investment opportunities in different industries or markets. If there are more profitable investment options available elsewhere, it may choose to exit the current industry and allocate its resources to the more promising opportunities.
4. Business Sustainability: The firm will consider its ability to sustain its operations in the long run. Factors such as technological advancements, changes in consumer preferences, and regulatory changes can influence the firm's decision to continue operating or exit the market.

It is important to note that the decision to shut down or continue operating is based on the firm's objective of maximizing profit. In some cases, firms may choose to continue operating even if they are incurring losses in the short run if they believe that the long-run prospects are favorable, such as anticipated changes in market conditions or economies of scale that can be achieved over time.

Ultimately, the decision to shut down or continue operating is influenced by a complex interplay of market dynamics, cost structures, competitive forces, and the firm's strategic considerations.

Economics Essay 63: Objectives of Firms

 Explain why firms may not aim to maximise profit and instead pursue other objectives.

Profit maximization is an economic concept that suggests firms aim to maximize their profits in order to achieve optimal financial performance. In a purely economic perspective, profit maximization occurs when a firm produces at a level where marginal revenue equals marginal cost (MR = MC). At this point, the firm is maximizing its net income or profit.

However, in reality, firms may pursue objectives other than profit maximization due to various reasons:

1. Market Share: Firms may prioritize gaining a larger market share over short-term profit maximization. By capturing a larger market share, firms can benefit from economies of scale, increased market power, and enhanced competitive positioning. This strategic approach aims to secure long-term profitability and market dominance.

2. Long-Term Sustainability: Firms may prioritize long-term sustainability and growth over immediate profit maximization. Investing in research and development, innovation, and expanding product lines or markets can contribute to long-term success. While these investments may initially reduce profits, they are aimed at maintaining competitiveness, adapting to changing market conditions, and ensuring future profitability.

3. Stakeholder Considerations: Firms often consider the interests of stakeholders such as employees, customers, suppliers, and the local community. Meeting stakeholder expectations may require investments in employee welfare, customer satisfaction, responsible sourcing practices, and community engagement. These actions can build trust, enhance reputation, and contribute to long-term success, even if they involve short-term costs that reduce immediate profit levels.

4. Non-Financial Goals: Some firms have non-financial goals beyond profit maximization. For example, non-profit organizations and social enterprises prioritize fulfilling social or environmental missions rather than generating financial returns. Their objectives may include addressing social issues, promoting sustainability, or supporting specific causes.

5. Managerial Objectives: Managers within firms may have personal goals and motivations that differ from profit maximization. They may seek to maximize their own salaries, bonuses, or job security. Additionally, managers may prioritize personal growth, reputation building, or the pursuit of non-financial rewards, which may influence the firm's decision-making.

6. Legal and Regulatory Constraints: Firms must operate within legal and regulatory frameworks, which can impose constraints on profit maximization. These regulations can include minimum wage laws, environmental regulations, consumer protection laws, and antitrust regulations. Compliance with these regulations may require firms to make trade-offs between profit maximization and other objectives.

In summary, while profit maximization is a fundamental economic concept, firms often consider a range of factors beyond pure financial gains. Market share, long-term sustainability, stakeholder considerations, non-financial goals, managerial objectives, and legal constraints can all influence firms' decision-making processes, leading them to pursue objectives other than strict profit maximization.

Fallacies of Capitalism 9 : The Entrepreneurial Genius Fallacy

 The Entrepreneurial Genius Fallacy

The "entrepreneurial genius" fallacy is aptly described by economist Mariana Mazzucato, who notes that it "overlooks the vital role of collective efforts, public infrastructure, and social support in fostering innovation and economic growth." While entrepreneurs undoubtedly contribute to economic progress, their success is intricately intertwined with broader societal factors.

As Nobel laureate Paul Romer eloquently emphasizes, "Economic growth occurs whenever people take resources and rearrange them in ways that make them more valuable." While entrepreneurs play a role in resource rearrangement, it is the collective investment in public infrastructure that enables them to thrive. Bridges and roads, as urbanist Jane Jacobs highlights, "are public goods that create more value than they consume," providing the vital arteries for commerce and enabling entrepreneurs to transport goods, connect with customers, and access markets.

The "entrepreneurial genius" fallacy disregards the indispensable role of knowledge and education, as emphasized by economist Joseph Stiglitz. He reminds us that "innovation doesn't happen in a vacuum" but requires a well-educated and skilled workforce. Entrepreneurs may provide vision and ideas, but it is the collective efforts of educators, researchers, and institutions that provide the foundation of knowledge and skills. The great innovations, as echoed by inventor Thomas Edison, are often the result of "one percent inspiration and ninety-nine percent perspiration" of countless individuals working collectively.

Moreover, a thriving entrepreneurial ecosystem is a testament to the power of collective support. As entrepreneur Reid Hoffman observes, "No one ever makes a billion dollars. You take a billion dollars." Entrepreneurship flourishes within supportive environments that provide access to capital, mentorship, and networking opportunities. These ecosystems involve various actors and institutions, as innovation scholar Carlota Perez suggests, forming "a collaborative and symbiotic space" that fuels entrepreneurial success.

Lastly, the significance of social safety nets in fostering entrepreneurship cannot be overstated. As economist Joseph Schumpeter asserts, "Entrepreneurial capitalism is not only the most efficient but also the most just form of economic organization precisely because it offers greater scope to human freedom than any other." Robust social support systems ensure individuals can take calculated risks and pursue entrepreneurship without fear of falling through the cracks. Nobel laureate Amartya Sen underscores this, stating, "The extent of entrepreneurship depends on the extent of the social opportunities that people have reason to choose."

In conclusion, recognizing the fallacy of the "entrepreneurial genius" narrative involves appreciating the contributions of collective efforts, public infrastructure, and social support in fostering innovation and economic growth. Entrepreneurs, as catalysts, rely on the foundation built by society as a whole. As economist Robert Reich eloquently sums it up, "Success is not the measure of one's worth; it's the measure of how many shoulders one stands on."

Are CEOs with MBAs good for business?

 Daron Acemoglu in The FT

Every year, tens of thousands of aspiring young moguls enrol at business school for an MBA, hoping to climb the corporate hierarchy. They are following predecessors who now run many leading companies, from Alphabet, Amazon and Apple to Microsoft and Walmart. 

And the aim of faculty and administrators remains what Harvard Business School’s first dean, Edwin Gay, expressed in 1908: “To train people to make a decent profit, decently”. 

Better knowledge and training can make leaders more innovative and productive, raising the returns to all stakeholders. Better managed businesses can more effectively achieve whatever objectives they set, including helping to tackle the myriad challenges society faces. 

But has the MBA actually achieved these goals? Our recent research suggests a much less encouraging picture. Using detailed data on companies and workers from the US and Denmark, we looked at the effects when a chief executive with an MBA or undergraduate business degree takes over from one without such qualifications. 

We found no evidence that CEOs with such degrees increase sales, productivity, investment or exports relative to the levels the company achieved before. 

The biggest shift when a chief executive with a business degree takes charge is a decline in wages and the share of revenues going to labour, even in countries with different cultures. In the US, wages under business-degree holding CEOs were 6 per cent lower than they would otherwise have been after five years, and labour’s share of revenues was down five percentage points. In Denmark, the figures were respectively 3 per cent and 3 percentage points. 

We found no evidence that these were companies with declining sales and appointed leaders with business degrees to rescue them. The patterns are similar when new MBA managers are appointed following the death or retirement of a previous CEO. Nor was there any indication that by reducing wage growth, chief executives with business education were creating more retained earnings to fund investment, which is no higher in their companies. 

It may even be that, by ignoring broader stakeholders, such managers damage long-term profitability. For example, we found that higher-skilled employees were more likely to leave after the relative wage declines. 

However, shareholders gain from the appointment of a CEO with a business degree — at least in the short term. Share prices increase, and we see more share repurchases in the US and higher dividends in the US and Denmark. Business-educated managers are also paid more. 

The reason for the relative decline in workers’ wages and shareholders’ gain is clear. Companies run by CEOs without a business degree share increases in revenues or profits with their workforce — typically one-fifth of higher value-added. This ceases when a business-educated leader takes over. The wage impact is greater in concentrated industries. 

It is impossible to know for sure why business-educated leaders have these effects, but our work provides clues. One reason could be the legacy of the economist Milton Friedman’s doctrine from 1970, which stated that “the social responsibility of business is to increase its profits”. 

The idea that good managers raise profits is common in business schools and economics departments. Many courses advocate “lean corporations” or “re-engineering businesses” using digital tools to cut costs. It is possible that these ideas encourage leaders to take a tougher stance and ensure higher corporate profits are not shared with employees. 

Another factor may be that the majority of business degree students interact closely with each other and often have little contact with blue-collar and clerical workers. As CEOs, they may not see the viewpoint of the rank-and-file or consider workers as stakeholders. 

So is the current business school system broken? Not necessarily. First, only a small fraction of students become chief executives. Many work in other managerial positions, where their training may have very different implications. 

Second, the majority of the chief executives in our sample received their degree before 2000. Business schools today may have evolved, but there are not enough CEOs with more recent degrees to judge the effects. Indeed, schools do appear to have changed rapidly this century. Many now have ethics courses and prepare their students for diverse careers, including in government service and non-profit organisations. Many students learn about corporate environmental and governance responsibilities. 

Being aware of what managers with business degrees used to do is an important step in reflecting on how we can build better programmes. 

Third, and most importantly, there is nothing hard-wired about business degrees. What MBAs mean and achieve will change, often prompted by students themselves. If they demand an experience that is richer than the Friedman doctrine and that prepares them for today’s societal challenges, most schools will adapt. 

The change will have to start with what is taught in business schools, but it cannot stop there. The whole business school experience may need to be rethought, including how students socialise, form networks and gain experience. It will also have to involve a broader discussion of the social responsibilities of corporations and their business leaders.

Usury, Interest and Islamic Banking

Pervez Hoodbhoy in The Dawn

FINANCE Minister Ishaq Dar has taken on the ungodly, un-Islamic, interest-charging banks of Pakistan. Your days are numbered, he thunders, because our government will implement the Federal Shariat Court’s ruling to end bank interest by Dec 31, 2027. On his orders, appeals challenging the FSC judgement made by the State Bank and National Bank will be withdrawn.

Some will applaud Mr Dar’s new-found religious zeal; others will find this crass opportunism. With national elections around the corner — and with PML-N’s arch-rival Imran Khan having pushed politics rightward — this smells of one-upmanship. Every politician in the government or opposition, clean or corrupt, wants to prove his sainthood.

But most readers will simply yawn — they’ve heard it before. Way back in 1991, the FSC had ordered Pakistan’s economy to dump interest within 12 months. Nothing happened. So recycling an order from 30 years later is no big deal.

Let’s imagine that Dar wins. Rewards or penalties for him in the Hereafter cannot, of course, be known. But this will not end ideological bickering on what interest-free banking actually is. Its two versions, soft and hard, are totally incompatible opposites. 

In the first, at the end of a stipulated period the depositor expects — and receives — a sum exceeding his initial deposit. In another country, the excess is known as interest but in Pakistan they call it profit.

The depositor is clueless about wheeling-dealings inside board rooms and management offices. Nevertheless, heavy use of Arabic words and absence of ‘interest’ gives an Islamic veneer to the bank.

The hard version is uncompromising. In 2014, the top ulema of the Fiqhi Majlis declared that so-called Islamic banking merely re-labels interest as profit and so is hiyal (legalistic trickery).

They point to the explicit Quranic injunction: “Allah has permitted trade and has forbidden interest” (2:275). ‘Forbidden’, they say, is not negotiating low or middle or high. Forbidden means zero — haram is haram and interest is usury.

The influential Maulana Taqi Usmani, among others, takes this position. Bangladesh’s finance minister Dr Abul Muhith is blunter. He says Islamic banking deceives Muslims and is ‘all fraud’.

Early Muslim scholars thought similarly and had equated interest with usury. Since banks rely on income, banking in Muslim lands was absent until very recently. This impeded industrialisation, leaving Muslim countries far behind Europe. Eventually, realising that global trade and commerce are impossible without these Western innovations, Turkish and Egyptian rulers soft-pedalled religious restrictions.

The very first bank in a Muslim country was the Imperial Ottoman Bank (1856) followed by the Egyptian Arab Land Bank (1880).Pragmatic rulers first sought muftis willing to rubber-stamp European-style banking. Else they found those who could invent new definitions or rules.

Pakistan is doing similarly. Commercial banks repackage global financial products with some changed conditions. After a board of clerics chosen by the bank approves a product, it is advertised as Sharia-compliant.

This sanctifies credit cards, derivative products, cross-currency swaps, equity swaps, adjustable mortgages, etc. Are Bitcoin and cryptocurrency halal or haram? Believe whichever you prefer; muftis abound on either side.

One central fact, however, cannot be hidden. Commercial banks in a capitalist economy are profit-making businesses for their owners and shareholders. For this to happen, customers must be drawn into owning more cars, bigger houses, and fancy stuff. If fish could somehow pay, banks would be advertising deals for underwater TVs with 60-inch plasma screens.

Hence a much larger question: is it morally right for a bank to encourage conspicuous consumption amidst an ocean of poverty? The poorest and richest Pakistanis are denizens of different worlds that are poles apart in literacy levels, health outcomes, and living standards.

Urban slums reeking in misery stand in stark contrast to DHAs for the ultra-rich or those just out of uniform. When banks — Sharia-compliant or otherwise — persuade people to borrow more and consume more, does it signify devotion to God?

The answer, of course, should be an emphatic ‘no’. Indeed, the larger FSC judgement states that Pakistan as an Islamic state must have “an equitable economic system free from exploitations and speculations”. But what on earth does riba have to do with present-day inequities of wealth? Even as it flaunts religious symbols, Pakistan’s rapacious elite enriches itself through state capture.

According to the 2021 UNDP report, insider dealings yielded a staggering $17.4bn in the form of subsidies to the military, corporate sector, property developers, feudal landlords, and the political class.

Even this enormous figure pales before the vast wealth of Pakistan’s real estate, estimated at around $300-400 billion. Much of this came from kicking peasants off the lands they once tilled. Land reforms promised by Ayub Khan and Zulfikar Ali Bhutto never happened.

The FSC drove the final nail in the coffin in March 1990. Decreeing that land reform violates Islamic principles, it asserted the absolute right of a Muslim to limitless wealth. This flatly contradicts its own ruling on creating “an equitable economic system”.

Mr Dar’s victory will open another question: how is Pakistan to deal with the outside world after Jan 1, 2028? The FSC judgement is explicit: “the government is directed to adopt Sharia-compliant modes in the future while borrowing either from domestic or from foreign sources.”

Realistically, can Pakistan actually choose who to borrow from? For a country teetering at the edge of default, the answer is no. FSC’s religious scholars optimistically say, “China is also willing to utilise the Islamic mode of financing for CPEC projects”. But do they know how intensely China dislikes Islamic symbols? And that it is deliberately erasing the Islamic identity of Uighur Muslims?

To conclude: Mr Dar’s jihad to eliminate bank interest is a bid to distract from the grimness of the present economic landscape and the damning inequities therein. In fairness to him, fixing fundamental problems such as the small tax base, high indirect taxation, and heavy consumption of imported luxury items is beyond his pay scale. But such posturing could further embolden those — such as the fast rising TTP —who seek to dismantle Pakistan and recreate it as a theocratic state. As such it is a step backward.

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Stunted imagination - Is there no alternative to Pakistan joining the IMF program?

Aasim Sajjad Akhtar in The Dawn

FOR weeks extending into months, Pakistan’s intellectual and political mainstream has insisted that there is no option but to revive the IMF loan programme. The frank admission made by members of the treasury benches in parliament that this is an ‘IMF budget’ that the country had to take on simply confirms what is purportedly unchallenged common sense: there is no alternative (TINA).

The acronym TINA came into widespread circulation in the late 1990s when virtually one-size-fits-all IMF- and World Bank-dictated economic policies were foisted upon much of Latin America, Africa and Asia. Until the end of the Cold War, the state acted at least to some extent in favour of labour by regulating capital, but generations that have come of age after the mid-1990s have been made to believe that there is now only one workable economic model — neoliberalism.

Make no mistake: TINA was a concerted ideological project that continues to this day, despite the fact that neoliberal economic fantasies peddled by a globalised class of profiteers and states have deepened inequality, led to dispossession of working masses from jobs, housing and life itself, and wreaked havoc on the natural environment.

TINA is based around the fact that we do not export enough to cover our imports, while our revenues are perpetually less than our expenditures, and so we need loans to get by. Insofar as ‘structural reform’ entails increasing our exports, global creditors like the IMF ‘encourage’ local producers to become outsourcing partners of MNCs by treating workers like serfs. When it comes to reducing expenditures, they never flinch when our oligarchic rulers slash pro-poor subsidies, health, education and other social sector spending.

By the TINA metric, the US should take more IMF loans and adopt conditionalities than any other country. In 2021 alone, the US fiscal deficit was almost $3 trillion. But Washington will never go to the IMF and beg for loans and then take on policy conditionalities accordingly because the dollar is the world’s reserve currency and the rest of us fund its deficit. In short, ‘structural reform’ is essentially a rinse-and-repeat political slogan that serves the interests of global investors, firms and the most powerful states.

TINA fiction continues to thrive in Pakistan because our political and economic imagination has been stunted by ‘experts’ who claim to be acting on the basis of ‘objective’ economic facts which, in fact, are largely ideological. None of the explicitly political players in this nauseatingly repetitive story is interested in putting the brakes on unrestrained capital accumulation and the pillage of what remains of the commons.

In our case, all parties who have held the reins of government in recent times, and of course their khaki patrons, prefer to engage in blame games against one another rather than offer substantive visions of an alternative economic order.

The IMF pretends to be politically uninterested and offer what it claims only to be ‘technocratic’ solutions. All donors — including the Chinese whose ‘Beijing Consensus’ is often described as a direct challenge to the ‘Washington Consensus’ — demand ‘structural reforms’ to suit them whilst claiming they have no political interests of their own.

Progressive movements in Latin America offer a clear counterfactual: there are meaningful alternatives to neoliberal orthodoxy that can repeal at least some of the privileges of financial oligarchs and state elites and thus meet the needs of the mass of people, whilst also making some concessions to future generations. Even in North America and Western Europe, where progressive discourses have made a comeback, TINA slogans are increasingly passé and redistribution is back on the agenda.

Yet Western states and multilateral donors continue to outsource neoliberal orthodoxy to Asia and Africa, even as the contradictions of our prevailing political-economic order become acute. We are supposed not to link the growing intensity of earthquakes, forest fires, cyclones and floods to the no-holds-barred accumulation regime that links domestic and global profiteers alike.

We are supposed not to ask too many difficult questions about the hundreds of millions of pounds that have been given back to real estate moguls like Malik Riaz through the collusion of Pakistani and Western officialdom. We are supposed to take for granted that only Russian oligarchs are bad, while all others are to be cheered on in the interests of ‘nation’ and its ‘development’.

News that the IMF programme was being restored was swiftly followed by Chinese and Saudi guarantees. Is this cause for celebration? Our ruling class, khakis at the helm, do not want young people to imagine politics as anything more than dole-outs, profiteering and hateful rhetoric. But the unbridled power of oligarchs, home and abroad, will not remain unchallenged forever.

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