Saturday, October 12, 2013

At What Cost! Fazle Hasan of IBA and our Computation of Economic Costs

At What Cost! Fazle Hasan of IBA and our Computation of Economic Costs

Fazle Hasan in his office 1981
Mr Fazle Hasan (1939-2006) was teaching us Financial Management in 1986 at IBA. During each class session, the discussion would invariably turn towards his oft repeated dictum "At What Cost". This was the major theme of his course. He wanted us to take stock of the long term costs of our decisions and to be able to estimate and recognize the costs of the faulty political decisions that have led us to this sorry state.

The discussion in Fazle Hasan's class would often turn towards the Zia regime's policy of supporting the Jehadi culture in Afghanistan at the expense of the promotion of gun culture and drug culture in Pakistan. Both of these issues were increasingly becoming serious, especially in Karachi. Drug culture had already become a major problem and people were taking out processions against the source of drugs in Sohrab Goth, Karachi. Remember that this was the time when a year before (March 1985) marked the meteoric rise of violence in Karachi with the death of Bushra Zaidi in a road accident followed by torching of scores of buses and vehicles. The ethnic violence that erupted then has not been contained uptil now and the problem continues to become larger and larger with increasing intensity. Fazle Hasan emphasized that these are the costs we are paying for our faulty decisions.

I did not have the capacity, then, to see the issues in the long term and would often get into animated discussions with Fazle Hasan Sb in his class about Zia's policy. Fazle Hasan sb pointed out as an example that no where in the world Public transport is given totally in the hands of the private sector. He used to mention that this is not even the case in the biggest promoter of capitalism, USA where public transport in the cities is managed and subsidized by the government (this I witnessed later when I went to USA). However, we in Pakistan are unique in letting the subsidized government transport sector to wither away through negligence, nepotism and for purchasing support of the mafias to consolidate dicatatorial rule. SRTC (Sind Road Transport Corporation) and PRTC (Punjab Road Transport Corporation) that used to have a regular service into the eighties were made to self-destruct. Karachi Circular Railway was made to disapper and Pakistan Railway was put on its way to destruction, just to benefit the transport dons. It was the breakdown of the public transport system and the excesses of the private transport that created the environment for the violence after the death of Bushra Zaidi which had not been contained as yet.
Fazle Hasan Lecturing

Mr Fazle Hasan, who died a few years ago, would always argue against the show of statistics that things were better in Ayub Khan's era but became worse later, or continuing his line of reasoning today, things were better in Musharraf's era and had later become worse.

His continuous refrain to such arguments about the relative calm of Ayub era or early Zia era would always be the following words: "At What Cost"!
  1. What was the "economic cost" of the progress during Musharraf time?
  2. What was the "economic cost" of the progress during Zia's time?
  3. What was the "economic cost" of the progress during Ayub's time?
The cost of the progress during Ayub's time was the loss of East Pakistan, loss of the two rivers (chenab and sutlej) and deterioration of civil institutions that led to the emergence of two of his blue-eyed boys (Bhutto and Yahya and their shenanigans) ....


The cost of the progress during Zia's regime was the guns culture, jehadi culture, drugs culture, rise of militant political party gangs and violence in Karachi and the culture of getting the loans written-off by the banks and of course further weakening of the civil institutions .....
The cost of the progress during Musharraf's regime was the loss of Kashmir policy, loss of our terriotorial autonomy (drone attacks and rampage by Raymond Davises and their ilk), suicide attacks in Pakistan by the products of USA-Zia's policy, new vulnerability from the western borders, and of course the destruction of whatever remained of our civil institutions. Also note that indiscriminate import of ACs and cars due to the liberal loans has led to the energy crisis we are currently in and for which the credit must go to Musharraf regime's policy of consumer loans by banks.....
The question we must ask for any public policy initiative using the words of Fazle Hasan: "At What Cost".

We need to compute dispassionately the economic costs in various categories. Unfortunately we think only in the short term and are thus blinded by the sparkle of the illusion that is in front of us. We are no different from the truck drivers still plying on the highways with Ayub's Picture at the back. We just look at the transitory fix-up of a few years in a dictatorial regime and conclude that things were good during this time. We do not try to estimate that during that time the cost of the artificial calm or the artificial progress indicator is at the expense of systemic problems that are brushed under the carpet. Problems that are not going to go away. They are going to rear their ugly head the moment the iron-hand is removed. When all power gets concentrated in the center in the hands of a few, the institutions are robbed of their resilience, their capacity to run independently, their ability to make decisions in a decentralized manner, promptly and quickly. Hence, these interludes of dictatorial calm are immediately succeeded by the reality hitting us with the brute force of what happens when the institutions break down. Reality of the loss of East Pakistan, loss of water resources, loss of energy resources, loss of autonomy, loss of financial discipline, and above all loss of leadership that gets crucial training as it rises from the local level to the provincial level and then to the federal level over decades.

I recently saw the graph of the rise of violence after the Musharraf era with the caption "A Picture is Worth a Thousand Words" . This picture can be interpreted differently also. The Musharraf era provided an artificial calm by buying out the criminals and gangsters that led to the destruction of institutions rendering them unable to function without the centralized command of the army once the democracy came back. Actually, a report recently released and submitted in the court indicated that over 8000 criminals were inducted in Police, mostly in the Musharraf era that destroyed whatever remained of our police structure.

You see, we find a similar trend when we artificially progressed in the 1960s. The corruption involving buying out of the opposition and the resulting nepotism destroyed the civil institutions leading to the breakup of Pakistan. Same thing happened during the Zia era. To perpetuate his rule he boughtout the politicians by loan write-offs, "plot-ocracy" and promoted the land and guns and drug mafia under the chimera of strategic depth. Immediately, after his rule ended, we saw an escalation of violence all nurtured during his era.

Same thing happened during Musharraf era. His U-turn decision taken on a single call destroyed whatever remained of our autonomy. We sacrificed our Kashmir cause, our Afghan strategic depth just on a single call, our autonomy, our airspace, our strategic assests, our nuclear program, above all the prestige of our army that became known as mercenaries.

Building of institutions of police, bureaucracy, courts all requires an evolutionary process. This process has always been short circuited by dictators leading to the destruction of each and every institution around us. Police suffered at the expense of military perks and previliges when all resources were diverted to it. Just compare the police housing with army housing, see the government housing in Islamabad and elsewhere and compare it with DHA housing and I rest my case. This is pure and simple usurption of public resources for the benefit of the few.

See Also:

23 comments:

  1. Received via email from Hafizullah Irfan who was at IBA around 1996-99:
    Thanks Dr. Irfan for forwarding this blog post. Just yesterday, I was talking to some one here in Singapore and highlighted another famous saying of Late Fazle Hasan "Always apply your own factors to get the face value". I usually apply this rule and always get benefit out of this.
    Had made me less emotional but more realistic.

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  2. Dr. Irfan,
    Just a small correction, I used incorrect words in my email. Although the message is the same but for the record, correct words from Late Fazle Hasan are "Don't take things at their Face Value always apply your own Discount Rate".
    One useful philosophy of LIFE, learnt from concept of Finance.

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    1. Dear Dr Irfan
      Different societies/ regions /nations in different times have passed through different times and different evolutionary stages. National Psyche have evolved over time.The best part of Pakistan is that during the last decade it has passed through a very bad time which may last for more years. We have shown a resilence of a brave nature and in my view are passing through a serious change in our social and political structure, I hope and pray something good comes out of it. Our national social contract has simply become redundant. Regards Jalal

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  3. I also remember Fazle Hasan's emphasis on long term thinking. He would often use humor and sarcasm to drive his point home. One day he wrote "Plan ahead" on the board in such large letters that he ran out of space and had to write "ead" in very small size on the right margin of the board. He would also sarcastically say "in the long term we are all dead".

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    1. Mr Fazle Hasan may be quoting from John Maynard Keynes "A Tract on Monetary Reform (1923)". The exact quote is:

      "But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again. "

      For a greater clarification of what Keynes meant, follow this post:
      http://www.simontaylorsblog.com/2013/05/05/the-true-meaning-of-in-the-long-run-we-are-all-dead/

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  4. I am really happy to see that we still have Pakistani people who are sincere with Pakistan and especially when I am looking that highly qualified doctors are making proper analysis of Pakistan situations... I am not much knowledge able as compared to doctors I am replying to... but I have an experience of life that Allah has blessed muslims with a simplest, perfect and honorable life style and I am sure that Late Mr. FAZLE HASAN was following same rules of Allah and delivering you the same knowledge in different understandable words.. I as a muslim Pakistani with small experience of my life.. I want to say that having knowledge and using it just for analysing and complaining others is not proper use of knowledge.. we should use it with proper simple but focussed efforts to put the innocent people on right direction... therefore... I request all you doctors that sitting in Singapore or other countries and only commenting is not enough for our country and our people... please let get together and do something real for our country, people and muslim brothers...

    I am always available for this assignment in way of Allah and looking forward same from your side...

    We can have more discussions on my email address mughalsaleh@yahoo.com

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    1. I think we can contribute in very many ways. There are so many things to do. The process is simple: (i) Identify the area about which we are passionate and which can be our hobby. See my post on the field of great scope that one should choose http://syedirfanhyder.blogspot.com/2013/05/which-field-with-great-scope-should-my.html (ii) Become the best in that field through strive for excellence. You will then see how can you transform the situation.

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  5. Dr Sahib, very nice article, I am glad to see students of my late father still remember his great words and great philosophy. And Dr Sahib indeed you are also one of the greatest teachers when I was with IBA. Thanks so much for such a nice article

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    1. Hi Mudasssir: Please email me your and Taha's id. feisal.rahimtoola@khi.iba.edu.pk

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  6. Fazl e Hasan in my view was a distorted individual who would resort to cheap and derogatory comments against certain individuals. Having spent 2 courses with him with little or no academic value - am surprised that to the honorable Doctor Sb "at what cost" is the biggest piece of wisdom that he feels was left over by the God-like elite Professors of IBA who would frequently resort to bullying to get their point and thought across. Sometimes I imagine at what cost did teachers like Naeem, Ejaz Mian, Inayat Din and Fazal e Hasan mess up our lives completely unnecessarily.

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    1. Zeeshan Khan, SFH was a truly hard working man. He was a rare breed having had a position in B. Com who went for overseas qualifications on his own expenses! I second him in his criticism of Ayub Khan. The issue of mohajir nationality was aggrivated by Ayub through his son Gohar. Licenses for industry was given selectively to his clan, family & friends and to perform a dollar's value addition, up to PKR 490, was spent locally! Efficiency was compromised to that extent!! And through the double mechanism of Bonus Vouchers and LICENSES, there were, in effect 177 parities to the US $ and other major currencies of the trade basket. I congratulate Dr. Irfan Hyder for this piece on his blog.

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    2. None of us are angels. We have our strengths and weaknesses. We should focus on the good deeds of the people, and learn from the mistakes of others. Life long learning occurs when we start reflecting on the good that we see and start emulating it, and analyze the mistakes others make and start avoiding them. This is wisdom. Much higher than the concern of knowledge which is making a judgement about right or wrong.

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    3. I have completed a number of courses from Late Fazle Hasan Saheb. I went to USA and settled there but I visited IBA, my alma mater every time I traveled Karachi. Most of the time my point of focus were Mr. Danishmand, Fazle Hasan, K. L. Spencer, Inayat N. Din, but never Dr. Wahab, the person who earned no respect. I found Mr. Fazle Hasan a very knowledgeable person on Financial Accounting, Cost Accounting, Managerial Accounting, Business Finance. Also in my opinion he was a thorough Gentleman, a person having good grasp on the subject he teaches, a cool teacher for the IBA students, problem resolver, a good manager in the sense to control the crowd. Honestly I miss him, he went too earlier.

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  7. Financial Managemnet is one of the most interesting but a bit technical subject . Although I was an average student of my class but later on i realized that unfortunately i carried no or very less value from the time spent in the class as the discussions were mostly political and hardly 15% of the time was spent on the technicalities of the subject in hand ...

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    1. If you again re-read the post that was precisely what I thought at that time. Actually many of my class fellows also thought that my opposition to Fazle Hasan Sb's views in the class was taking a lot of time and was actually a wastage. However, what is financial management if not understanding the long term costs --- all the costs and all the benefits and making an informed judgement. I am currently reading a book by Henry Mintzberg "Managers and not MBAs" which actually talks about that MBAs of Stanford and Harvard (and like) are too much short term oriented, too much tools and techniques oriented, and have too little managerial direction. It is this inability to look at the bigger picture of human dimension and the environmental dimension and societal dimension that has led to the 2008 recession and the financial meltdown. May be this merits another post.

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  8. Dear Dr. Irfan
    Wonderful and thought provoking. But tgese humans have a tendency of forgetting all. Kehtay hain momin ail sorakh se do baar nahi dasa jaata...yahan to har 5/6 saal bad aisa hota haiy...

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    1. It is the responsibility of the educated to remember and keep on reminding. But, then the question is what does it mean to be well educated!

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  9. Hi Dr. Sahib,

    I had a brief chance of attending one of our course in 1995, i guess it was CAS (computer application to business) i liked your detailed oriented approach, however i believe at time web or computer didnt get due exposure in MBA curriculum. Therefore mostly the crowd didnt pay due heed. Plus the course image was plagued by another co-teacher (i shouldnt take his name here due to utter respect or anomyity) whose major emphasize was on military politics, religious sommersaults and not on CUMPOTER... Anyways.. your analysis are very much to the point, vivid and insightful.. however I do feel you shouldnt disregard the plethora of corruption, civil unrest, powerful play, debt overdebtness brought in by all our successive socalled democratic government.. So much as they actually paved the way for these military coups and dictators. With regards to Fazle Hasan.. i must say in those days during his FM class we thought this guy is really bitten hard by General Zia or his policies. There was less finance and more political manevuring, tete al tet in the class. We enjoy the class and leave home chatting by.. However, when there are grey hairlines on my temple, got due exposure of life, hit 40's and gained some "wisdom" I would say.. Fazle sahib was so right, hitted the bulls eye. his analysis, inferences, rationale or theories were so relevant, so thought provoking.. Whatever he said for current state or the coming times are exactly what we are witnessing today.. it has gone worst let leave the containment. May Allah subhanuttlah give Jannah to both Fazle Hasan and Dr. Matin Khan...

    Adnan Nayab
    TD Bank - Toronto, Canada

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    1. Given the ubiquitousness of www today, i.e its presence everywhere at all times, one forgets that it was only in 1995 that internet was fully opened for commercial traffic [See wikipedia]. Please also remember that even Microsoft, the IT giant, woke up to the reality of the web only in 1996 after the spectacular launch of Netscape. Microsoft had been blind-sided by the rise of Internet till 1996! No wonder web did not get exposure in my course in 1995 (although personally I have been using email/usenet since 1990).
      Can you imagine that in the Star Trek (original series in 1968) was showing the use of mobile phones as science fiction to be available some 200 years later, i.e. it would be a technology that may only be available in 2168!

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    2. Your comment about Fazle Hasan is dot on target. In 1986 when he was teaching that FM course, I was the one who would be arguing the most against Fazle Hasan sb's views about military intervention in Afghanistan. I erroneously thought that his views are just the political acrimony emanating from his (may be) socialist views against Muslim aspirations.

      As mentioned in the post, he was at that time trying to make us see the "long term" costs of such intervention. My other class fellows thought very similarly like you that he was wasting the time by talking politics and was not covering the course. Now about 25-28 years later, having seen the costs of that military "adventurism" accumulating, I am now forced to re-evaluate what is more relevant; cramming of the text books or relating the concepts to the real life issues. MBA program should not be about rote memorization of text book concepts, but the ability to apply the concepts to real life situations. Especially situations that are near and dear to us, situations that impact our lives, situations that would impact us thirty years from now, situations that would determine whether our children would be better off than us or not!

      Unfortunately this proclivity to value technique over essence, to value concepts cramming over people understanding, is the bane of MBA education world wide including that at Harvard, Standford or Chicago as put forth so forcefully by Henry Mitzberg in his book "Managers, Not MBAs"!

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  11. I live in USA, and this is my 35th year here. I joined IBA evening program in 1976 and completed PGD in 1980 - Almost a year was lost after 1977 election and it's aftermath. We were 59 students and only 12 from that batch completed PGD, other just dropped out or left because of it's lengthy procedure and strict commitment. The professors I encountered were Mr. Danishmand, Mr. Spencer (Late), Mr. Hashmi ( A Great - Great Teacher, Late), Mr. Inayat N. Din (I don't know where he is - A great Teacher) , Mr. A.G. Saeed, Mr. Fazle Hasan (Late - What a teacher), Mr. Itrat Rizvi, Dr. Wahab (An X- Rated Story Teller, Not a teacher, just a mediocre instructor), Mr. Najmul Hasan, Mr. Aziz (Left IBA when Bhutto Saheb declared Ahmadis as Non Muslims). Most of these were Great of All times. Total Devotion, Dedication, One to One Teacher - Student Relationship. What a days those were.

    I had an old Datsun Bluebird and Fazle Hasan used to live in Nazimabad. I used to live in North Nazimabad and I started offering him a ride. We used to talk on our way from IBA City Campus to his residence on all the topics, Shia - Sunni ( I, a Sunni, and he, an Asnai Ashri), Pakistani Politics, World Politics, IBA Politics, etc, but never ever about the grades. I tried my best not to get involved in grading, and he told me very, very clearly that I should not expect any return of my offer to a ride to his home. He was a great teacher, very friendly, very sympathetic, very fair. I missed him from the bottom of my heart. May Allah bless him in his eternal life. My car was old, and I always had a great concern as if the car was broken down then what would be the outcome. Would I push the car or Mr. Hasan would. Thanks God it never happened.

    I completed two courses from him, Financial Accounting, and Cost Accounting. It was a little bit challenging but very rewarding. The best thing was that he had time for his students to explain the tricks to master the subjects. I had other accounting courses such as Managerial Accounting, Industrial Accounting, Coast and Structural Analysis, Financial Business Analysis, Advance Cost Effective, Managerial Insight and Financial Resources Accounting which I completed here from US Universities, but there was none like Fazle Hasan Saheb, I encountered. I have to work very very hard to meet the requirements not because the subjects were difficult, but because the help was not there.

    After completing MBA and then Masters in Comp Science, I joined IBM, married to a doctor of Pakistani origin who was born in England, spent 4 to 5 years in Pakistan and then moved with her parents to Africa. There University of London installed, started and administered a Medical School in Zambia, Africa, and she graduated from there and moved to USA. Her next door neighbors in Zambia, Africa became our next door neighbors in Pakistan when they moved back from Africa to Karachi. And that became the reason of my marriage with my wife Rashida K. Rahman. However the amazing thing occurred when I was visiting Karachi, and also visited IBA as usual when Mr. Fazle Hasan asked me to deliverr certain documents to his relatives in America. And surprisingly his relatives were my wife's patients.

    I worked in IBM, Verizon (Largest Telecommunication Company in USA), Department of Justice (FBI's Computer Deptt), and still works there as a consultant. Have 3 grown ups children, One Daughter and Two sons, two of them are doctors, the spouse of one is doctor and other is unmarried. Only I and my daughter are not doctors. Have all amenities of life, more than my desires, but Pakistan and IBA - I still miss them greatly. No matter how bad Pakistan is, it is mine, and no matter how great USA is, it is still not mine.

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