 This is part two of a talk on the current economic crisis in Pakistan and its solutions. In part one we analyzed the problem and presented the solution. In this part two we explained why almost no one is presenting this solution and problem and instead they are presenting very complex diagnosis and solutions which will not actually work. So one of the basic problems is that there are false economic theories being taught all around the world which misdiagnose our problems and correspondingly give us the wrong solutions to them. So even though as we discussed in part one the problem is simple and the solutions are simple no one is seeing it and no one is saying it because economic theory blindfolds our eyes and make us look in the wrong direction for solutions. We cannot understand economic theory without understanding the history which led to the creation of this economic theory. This modern economic theory which teaches us how we can improve how we can grow how we can become have more wealth as a nation was put together in 1995 or so after a set of circumstances which led to the collapse of Russia and this led to American view China was not in the field competing for global power at that time. So China thought Americans thought that this is now our century for the next hundred years we will rule the world and they took together a path to do this and this path was in the form of economic policies designed to enslave the rest of the world to American domination. Prior to the fall of Russia the Americans could not do this because there was a competing power and they had to appeal to persuade others not to follow the Russian path because the Russian and China communist evolution had been amazingly successful in bringing two peasant societies into the industrial age and had created astonishing progress. So it was a very viable alternative paradigm but after the fall of Russia the American way became the only way. So a set of policies was created which was called the Washington consensus it was a one-size-fits-all this is the policy that would be followed by all developing nations to grow. Now this is a bit strange because obviously the development strategy for Peru would be different from the one from Nigeria and that would be different from the one from Pakistan but no all of these policies were the same because they were not catering to our interests they were catering to the interests of the big corporations which were running the USA and they were all designed with only one end in mind how to allow corporations to come into our countries put in foreign direct investment and make money from it and take it back out. So one part of it was to cripple the government because the government could interfere throughout the world the government tended to interfere to protect the people from the bad effects of imperialism they would put up tariffs and barriers to prevent foreigners from coming in and exploiting their people. So the government had to be broken down this is done by fiscal adjustment making the budget of the government so small that it cannot do anything deregulation means that allowing people to do whatever they want in the private sector privatization means taking big government firms and making them private normally these would be bought up by foreigners or those with wealth and removal of subsidies basically social services are providing food to the people this makes them dependent and much more easy to exploit at the same time there are certain things that foreign is needed they wanted the stable exchange rate so that they could trade their dollars for rupees make their profits and bring them back if the foreign exchange rate is not too stable then it becomes difficult to move money in and out similarly they wanted to remove barriers to foreign investment so they they promoted the idea that foreign direct investment is the key to growth they introduced trade liberalization and rule of law property rights means that basically the foreigners should be able to invest and then get their money back nobody should seize their property so anyway all of these rules the Washington consensus was designed to ensure maximum profits for the corporation not to max and not to ensure maximum growth for our nation but this was sold as the set of policies which will create the maximum of economic growth for us these policies were implemented around the globe in by the World Bank in the 1990s and in the early in the early part of this century 2000 World Bank wrote a report on assessing the outcome and they themselves viewed understood that these policies have been complete failures John Williams and who is the author of these policies also admitted that these policies have failed around the globe they were tried implemented and they did not produce any worthwhile results but instead of rejecting these policies and saying that these are wrong and we should do something else he came up with an additional point 10 points that okay these 10 points did not work we need to actually have 20 points in order to make it work and obviously another 10 years later we're going to need the 30 points because these are not going to work either unfortunately all around the globe people serious economists are are thinking about and implementing these policies as the remedy for our poverty and as the means for growth the key thing to understand about economics is that it is not a set of policy designed to help us understand how the world works it is designed to deceive us about what we need to do and it works very well because economic pundits in Pakistan are all talking about basically Washington consensus policies as the means to get out of our current crisis so economic theory is designed to deceive us to lead us to the wrong understanding of what the problem is and to waste our efforts in in trying to achieve these solutions which will not work even if they can be achieved one of the most interesting examples to prove what I am saying about economic theory being a deception is the East Asian miracle this book has been written by World Bank itself and it starts out it opens with the paragraph which says that these Asian countries did everything against the rules they broke every rule of the Washington consensus and they achieved miraculous growth so then why is the World Bank saying this well this is very interesting this book is very subtle it says that even though these government broke the rules and they did not follow the Washington consensus and other governments should not follow their example that there were some special circumstances in East Asia which allowed this failure to succeed and also that their success is really not due to not not because they broke the rules but because they followed the sound stable policies of the Washington consensus and even though they broke the rules they still managed to achieve miraculous growth so this is a stupid lesson but this is the main lesson and the goal of this book was to make sure that nobody tries to follow their example so we can conclude this part two as follows the colonization never actually ended the white colonizers were replaced by the brown bureaucrats and they continue to exploit the country there's a two pronged mechanism for this exploitation the rich and powerful receive foreign aid which enables them to stay in power against the interests and the desires of the masses and the intellectuals are force-fed false economic theories which makes them not able to recognize the real sources of the problem and waste their effort and energy in fighting phantom enemies so this is the end of part two so stepping out of the framework of this talk for a moment we are some larger conclusions which we can draw and the larger conclusions is that economic theory cannot be understood outside of the historical context in which this theory has been created and modern economics textbooks and the way of teaching economics completely ignores history and that makes it impossible to understand economics and that's part of the game to keep us blind to what's really going on economics cannot actually be understood without politics without the power struggles without the fact that the people in power shape the knowledge that we have about this world and they shape it in such a way as to keep them in power so our minds are being manipulated for the purpose of the existing power structures and unless we learn to recognize this we cannot break free of these chains and one of the crucial drivers of history crucial drivers economics is the class struggle the struggle between the rich and the poor and this is not mentioned at all in economics so again economics serves to deceive us about what the real problems are what the real issues are and how we can solve them