William Rees-Mogg
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General Musharraf has declared martial law in Pakistan. Chuck Prince is being pressed to resign as chief executive of Citigroup, the world’s largest bank, apparently because of losses on sub-prime mortgages. The oil price has risen to $96 a barrel; the gold price has risen above $800 an ounce. That is the world in a nutshell, an international crisis, a credit crisis, an energy crisis and a dollar crisis.
On Saturday, as well as watching Arsenal’s enthralling match against Manchester United, I listened with care to General Musharraf’s justification of his decision to impose a state of emergency. In the past, I have always been impressed by his soldierly calm in a crisis. On this occasion he obviously wanted to scare his audience, particularly his English-speaking audience. He certainly scared me, because I thought that he had scared himself.
The President’s argument is that Pakistan is descending into chaos, that militant extremists are everywhere, ready to take over, that only the Army can stop them, and only he can hold the Army together. He professes to be a democrat in principle, but does not believe that democracy can resolve the immediate situation. He thinks an early change of his regime would be national suicide.
The general international view, supported both by the United States and our own Government, is that the problems of Pakistan can be solved only inside a constitutional framework, which should move towards democracy. However, this opens up a dilemma. If one accepts that Musharraf himself cannot overcome Pakistan’s crisis, then one is left with the need to find a sufficiently powerful alternative. Can any of the democratic leaders, such as Benazir Bhutto, succeed where Musharraf is failing? Has Pakistan reached the stage of being ungovernable?
Pakistan remains an important, pivotal country. It is an essential bastion of the American position in the Middle East. Without Pakistan as an ally, it is hard to see how the US could maintain its position in Afghanistan. General Musharraf is pro-Western. One of the worst possible alternatives would be an antiWestern Islamic regime. The alliance with Pakistan has enabled the US to protect the southern flank of the oil-rich countries of the Gulf. The West depends upon a stable regime in Pakistan.
There are arguments about the causes of the rise in the oil price. There is the conventional view, which serves some political purposes, that the high oil price is speculative, partly caused by fear of an extension of the war in the Middle East.
This is a relatively optimistic view, since the oil price could be expected to drop if the threat of war, including war with Iran, became more remote.
The pessimistic view is that the oil price increase has been caused by a real shortage, because of the growth in demand from China. In that case the oil shortage is likely to become more acute; a further rise could cause a global recession. In either case, it would be a disaster if the United States lost a position of influence with the Arab oil-producing countries. Trouble in Pakistan means trouble for the oil market.
In the 1970s the Opec countries were in a position to control the oil price; they used their power to raise the price to levels that caused significant recession in the West. The Arab oil countries were the main beneficiaries; money flowed to them, resulting in a global shortage of funds that proved particularly damaging to Third World countries.
Undoubtedly, the big Western banks have made some very unwise banking decisions in recent years. The sub-prime crisis has made leading bankers look stupid or, at best, reckless. Quite suddenly, in August, there was an unforeseen credit crunch, apparently caused by the low quality of mortgage loans and the reluctance of banks to lend to each other.
If one looks back to the 1970s one can see that unexpected rises in the oil price caused more than one similar credit crunch. Perhaps that is happening again; if so, the banks not only have to cope with falling housing markets and the liquidation of sub-prime mortgages, but also with recycling oil dollars.
If the political situation in the Middle East were to get worse, the oil price would go higher and the global shortage of funds would become more serious. The same pressures that have threatened Musharraf’s position have undermined Chuck Prince’s position in Citigroup. We are not in a local Pakistan crisis, but in a global crisis that happens to include Pakistan.
At the same time, the dollar has been devalued against most currencies, and against gold. The Bush Administration has been responsible for the large US deficits on external account. The dollar price of gold has approximately trebled since President Bush came to office.
That is partly a reflection of the rise in the oil price, but it is also a vote of no confidence in the dollar, in the policies of the Administration, and in the policies of Alan Greenspan as Chairman of the Federal Reserve Board. One can never trust a central banker who would not rather face a recession than fund an inflation. Compared with his predecessor, Paul Volcker, Greenspan is an inflationist, and the devaluation of the dollar is his legacy.
In analysing a crisis of this kind, one should always bear in mind that nothing difficult happens unless there is a real pressure for it to happen. General Musharraf would not have instituted the state of emergency if there had been no Islamic militants.
Chuck Prince would not contemplate resignation unless the bank had lost a great deal of money. The oil price would not be more than $90 a barrel if there were no shortage and no threat of war. Gold would not be above $800 an ounce if people trusted the dollar. Real events force painful decisions to be made.

William Rees-Mogg has had a distinguished career with The Times and The Sunday Times. He was Deputy Editor of The Sunday Times before becoming Editor of The Times in 1967, a position he held until 1981. He was made a life peer in 1988. Since 1992 he has been a columnist for The Times, writing on a variety of issues. He has also been chairman of the Broadcast Standards Council and British Arts Council
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Ahs Winnipeg Canada. Excellent point you've made. I like your analysis on PK. Well done.
Nikhil Khan, London, UK
Bush reads Musharaf wrong. Pakistan has never been an ally of United States. Only Musharaf befriends Bush. Bush is a hated figure in Pakistan.
Ahmad Sirajudin, Kuala Terengganu, Malaysia
Thankx for the excellent article. Finally someone nailed the issue on the head. It is undeniable, least to say that peace in Pakistan means peace in Asia. I regret the fact that Pakistan has allied itself so close to the the US. Looking at history, we can see that countries that allied closely to the US have always met a worse fate, be it Colombia, or else. I think Pakistan needs to move its policy away from the US, and focus on building contacts with China, India and Europe, beginning right now!
As for democracy, how can Bhutto even run for office a third time, if thats democracy, then ill stick to a coup for now. Maybe Pakistan needs a political solution like Britain, where the feudal lords sit in the upper house of Parliament and the commoners in the lower house, since its impossible that we will ever rid ourselves of feudals in Pakistan now.
Ahs, Winnipeg, Canada
"If one accepts that Musharraf himself cannot overcome Pakistanâs crisis, then one is left with the need to find a sufficiently powerful alternative. Can any of the democratic leaders, such as Benazir Bhutto, succeed where Musharraf is failing?"
Yes ofcourse, the west needs to understand that extremism and military dictatorship are interdependant. And it would be not wrong to say that extremism is a result of dictatorship, expecially in the case of Pakistan, where extremists are infact the product of military, and were used by them for certain purposes in the past, but now they are not together any longer and their confrontation is making each other stronger day by day.
So in this situation only a democratic government can dilute these both extremes.
Haris Asghar, Oslo, Norway
Democracrcy for the Feudals by the Feudals, this is the real story of democracy in Pakistan. When will the west understand this. The common man in pakistan wants stability and economic benefits , it does not matter who rules, but who delivers these two ingredients. Whatever progress has been achieved on these two fronts since the creation of pakistan, has been under the military rules of Ayub and Musharaf. Demoritically elected leaders have given Bangladesh ,Unstability and chaos. The people of pakistan have short memories.God bless us.
saleem, karachi, pakistan
DemocRACY doesn't work - example - Scotland rules England !
Marty, London, England
I agree with the views expressed by Ayesha Saeed from London. Everybody in US and UK have jumped on the band wagon , demanding democaracy in Pakistan. Do they really believe there was democaracy whin Bhutto or Nawaz Sharif were in power? They looted the country and served to benefit their 'supporters'. The man on the street suffered.
How can you have a democaracy in a country basically governed by feudal landlords where over 70% of the population is illitrate? The so called democratic countries have never produced a maifesto , the poor population of pakistan votes for the feudal leaders who control their destiny.
There has been massive improvement in Pakistan since Musharraf took over in Pakistan - far more was achieved for the people of Pakistan in the last 9 years then the previous decade by the corrupt democratic parties of Bhotto and Nawaz Sharif
A M Khan, Huddersfield, England
You do not seem to know Pakistan at all. Islamists did not fare higher that 10% (their maximum) at any election. Pakistani electors massively elect secular parties, such as Pakistan Peoples Party or the Muslim League. Elections would not be the trouble, the trouble is the fact that everyone seems to choose by them, and people are caught between international and domestic interests. Even Islamist parties there have higher respect for democracy than many may consider.
So the choice is not between the military and the extremists.
Naima, Madrid, Spain
There is a reason for the particular crisis in Pakistan. Musharraf's alliance with the US has caused the army to become too powerful, rich and distanced from the nature of the people it is supposed to protect. There have been major crises since politics began, the problem with Pakistan is that the western democracies are supporting a military dictator for their own financial gain and security. How can a man that destroyed Paks democracy, be welcomed as a 'friend to democracy' by the western powers. He even went on a book tour in the US!!!
This is not about following a program of promoting peace and democracy by the US, but a dangerous paradox of self interest over principle - and considering morality has been the main excuse used for invasions and regime change for centuries, the US administration are only concerned in how they are going to 'spin' their support for such an enemy of peace.
Tragically, Citibank own Pakistan now, those living there had better get used to it
Lee Okugbeni, Enfield, Middlesex
Pakistan's situation is not a delighful sight, however,,, i get shivers down the spine when i see western media, supporting and declaring people like Ms Bhutto, and Mr Sharif, who questionbly came to power as result of general elections, as the beacons of democracy.......but have looted the coutry boynd belief. Also not forgetting the two terms , they each had as PM's.
In musharaf's 9 years on the whole the media had the most exposure, economy flourised and country developed.....
Although, we have crisis right now due to the insurgency of the taliban islamists in pakistan,,,,,i have full faith in Mussharaf's capability to take the country to the next elections.
Pls bear with us before you are quick to critisize last 3 days, but forgetting the last 9 years.
Ayesha Saeed, London, UK
Now let me see.
For the last few years the U.S. was buying goods from the rest of the world, paying in dollars and then turning around and exchanging those dollars for I.O.U.'s.
And people are now surprised that the dollar is going down???
Those countries, China, Japan and others that were playing that fool's game are now left holding the bag!
Alain, Montreal, Canada
I have read most arguments. Everyone seems to ignore the fact that Musharraf as a result of this emergency Mr. Musharraf is cracking down on liberal elements in society and he has sacked judges who were dispensing justice at the cost of offending Mr Musharraf. His government''s senseless policies have given the extremists free reign in certain parts of the country. What we see in Pakistan is his doing more than anyone elses. The west should stop worrying about terrorism and support their own ideals in Pakistan. Give moderate Pakistanis a chance and see the results. Mr. Musharraf should be tried for treason and punished according to the law.
Farrukh Omar, Houston, TX, USA
The real factor here is that if Musharraf loses power, it could be fatal disaster for the West. Dictator or not, he stands between us and the Muslim extremists who will inherit Pakistan's nuclear arsenal. It is unthinkable and inevitable that World War III would begin almost immediately. Thinks about it... Iraq and Iran are babies compared to this. This is Armegeddon.
Tom Gorham, Westmont, IL
So, fix the problem in Pakistan and all is well?
I don't think so.
Roger, Brisbane, Australia
Pakistan would seem to have become a focal hot spot in the world s political crust. It can erupt any time; I shouldn t say to order, but perhaps I would. There is no necessary particular rationale behind this turbulence. The nature of the country is such that the excuse can be either an appeal for democracy or a crackdown because of an excess of it.
Henry Percy, London, UK
Perhaps Imran Khan would make a good president. He could encourage the hot-heads to play cricket instead of throwing bombs at each other. That would be a good result except for its effect on world cricket. A rejuvenated and well-practised pakistan 11 might prove a match for even mighty Australia.
Adrian Gilbert, Tonbridge,
The true disaster is that the United States ever had influence in the Arab oil producing countries. If it never had, the world economy would have found a way to meet its energy needs without relying on dictatorships in this unstable reason.
Oliver Chettle, Bedford,
Democracy in Pakistan.
Both major parties that is Ms. Bhutto & Nawaz Shareef
are autocrets, they do not have democracy in their own parties. No elections are held to choos the leader of the party. How, then they will uphold the democracy in their country.
SZA
sza, Nuneaton, England
The main point that the west as a whole and westerners in general can't seem to understand is that democracy is desired by all but desirable for none.
The most important issue for Pakistanis is not democracy - it's corruption. Even this article mentions that Benazir may be able to offer a solution to the current crisis; what everyone forgets is that she is probably one of the most corrupt leaders in history - having amassed a fortune of almost $1.5 billion.She almost bankrupted Pakistan.
Musharraf sahib really is the only leader who can control the politics of Pakistan and keep corruption under as much control as possible - why else do you think the lawyers et al (who are the main cause for this emergency alongside the terrorists) are "going on strike". The state of emergency declared by Musharraf sahib really is the only way to keep Pakistan's development on an upward path. If democracy maks the mistake of allowing Bhutto or heaven forbid Sharif into power, growth will be hurt.
Hassan Azam , Banbury,Oxfordshire, England
That's not a minor issue. Having said this both Greenspan and Bernanke are happy to detroy the dollar. Also the trouble began well before the current crisis in Pakistan.
Paul, London, UK
Once upon a time the world had a dearth of manufacturing capapilities. The nations that possessed the infrastructure, culture, and intellectual heritage necessary to take raw materials and trun them into an automobile or a TV or a life-saving drug were able to set their own prices. With the spread of technology and the relentless march fo progress, however, those shortages have largely disappeared. Now what's in short supply are natural resources: clean air, clean water, oil, natural gas, metals, etc. People we once considered hopelessly backward are now evicting Western powers and demanding ever-higher prices for their natural resources. The balance of power has turned. Some may see that as a cause to celebrate. i think we're entering a dark period in human history, when intelligence, industry, and civilization wane in importance and brute force reasserts itself. It appears that David Riccardo was right after all.
Lawrence Lanum, New York, New York
According to previous reporting in this newspaper, other well informed newsprint, and oil industry analysis there is no shortage of oil. The shortage is in the distribution and processing of oil. The oil industry itself anticipates this problem existing until circa 2014 when new facilities should come available.
Part of the Afghanistan/Pakistan problem is the wish for a pipeline from the central Asian oilfields to the Indian ocean to ease the distribution problem to India, and China in particular.
James, Norwich, uk
well well, we need to understand the root cause, if USA had not invaded IRAQ, had not make an alloy with Pakistan against Russia to support WAR against invader in Afghanistan and many more.....the situation could have been different in Many parts of the world including USA itself. The world would be at peace. Rising price of the OIL is sad but reality, we have to accept it, its a cash cow for Arab countries...in the same way western countries use Technology as a cash cow. whoever possesses some that other needs, he benefits from his assets. OIL and Gold price rises on demand, currently, just an after thought why not hold India for using gold domestically at rising trend? or why not ask China to save Oil and go Green?
Leeban, Milan, Italy
A minor correction. Ben S. Bernanke is Chairman of the Federal Reserve
Dale, Winston-Salem, NC, USA
pakistan is sitting with 150 readymade n bombs. what will happen if it goes to terrorists hands,whole world will be threatened.
ambi, chennai, india
"Has Pakistan reached the stage of being ungovernable?"
Due to internal contradictions and high level Islamic extremism, partly yes!
As Pakistan is the heart of global Islamic terrorism and the presumed US "ally", naturally a crisis has global ramifications.
Considering all the factors and possible alternatives, Gen. Musharraf is the best bet and best among the bad lot!
Regards,
Krishna R. Kumar, Udupi, India
Yes, Pakistan's crisis is indeed a global crisis. But, I am very surprised at the conspicuous absence of any comment about the possible effects of this crisis on India?!?!
Ashu, Farminton Hills, USA
Your instincts are razor-sharp old boy. The recent assassination attempt on Benazir's life clearly touched a raw nerve somewhere. I suspect that apart from the scale of the attacks, guarantees given did not appear to amount to very much.
Pakistan is by now default the new front line on the WoT simply because, not only because of it's stockpile of nuclear weapons but because Muslims in neighbouring India are becoming more vociferous about what role they want Islam to play, in their country.
Godfrey of Acre, Aleppo,
"In analysing a crisis of this kind, one should always bear in mind that nothing difficult happens unless there is a real pressure for it to happen"... and "Real events force painful decisions to be made."
Buddhists have a saying, "This being, that arises."
Everything has a cause!
Steve Lee, Wilmington, NC, USA
He has been in power for eight years and todays chaos is the reslut of that.To say who after Musharraf is to admit that he has done so much good during eight years of dictatorship.If not him then who else? This is a logic used to find a reason to support him.When he grabbed power,where did he come from.I know Pakistan and if you give power to anybody,the institutions will fall in line and sycophants will prise him to heavens,although he might be illiterate or worse,as that is the hitory of Pakistan.Mushrraf is the creator of present terrorism by not taling actionwhen it was a small deal,just to scare the west and now it is too big for him.He miscalculates so often that he should be labled as poor leader,the devil you know is not a ggod idea for the west.He will be pushed out and west has put all their eggs in one basket.
zaman, hamden, usa
"General Musharraf would not have instituted the state of emergency if there had been no Islamic militants."
This is complete nonsense and reflects the British government's line of reasoning.
Nawab Raza Khan Advocate, Islamabad,
is gen. musharaf acting or reacting?if he is reacting then we should be worried,and if he is acting then we as an international community should be reacting.
tahir mahmood, bradford, uk