An Odd Bet

A couple summers ago, when I was driving cross country, I stopped by for a night to stay with my friend Jarred, who is a medical student at the University of West Virginia. I hadn't seen Jarred since I left for Russia, but in my first two years of college, Jarred was one of the people I always enjoyed the most, due to his cynicsm, sense of adventure and dark sense of humor. Jarred had spent a summer in Africa getting himself into all kinds of trouble, just as I spent a year in Russia. There he acquired a deep interest in infectious diseases. While I met him, Jarred was had just started on a gap year in his medical studies to get a masters in infections diseases at UVW. To no one's suprise after the requisite catching up and a few beers to boot our conversation took a bit of an apocalypic turn. Jarred and I made a bet. I bet Jarred that there would be a nuclear war involving Pakistan, before the next major epidemic of some infectious disease, a la the Spanish influenza epidemic following WWI. Today, I think I am one step closer to winning that bet.

To be completely honest, I don't know very much about Pakistan. I am certainly no scholar of the Indian Subcontinent. I had a Pakistani roommate for about 3 months in Oklahoma and he gave me a bit of a superficial glimpse into Pakistani society. Apparently, Pakistan is only one of two nations on Earth created on the basis of faith, nationality be damned, the other being Israel. As a result, Pakistan is a very ethnically diverse nation, with a number of indigeonous tribes competing for power, as well as the recent immigrants from India proper. War Nerd at the exile provides a brief history of the country here. Then there is the poverty issue. Despite a lot of economic promise, Pakistan remains a pretty poor country. In October 2007, the IMF estimated that the country's per capita income will likely stand at around $2,600 in 2008, 128th in the world, that is assuming all hell doesn't break loose. However, like in all emerging markets, even this meager wealth is not evenly distributed, resulting in a substantial uneducated and impoverished segment of the population and a small, wealthy minority. As a result, despite Pakistan's recent economic growth, there were even rice riots in the streets earlier this year as food prices surged.

As if this alone wasn't a formula for instability, Pakistan also finds itself in a unique position in the world given the geopolitical backdrop in the world surrounding it. There seems to be strong division in Pakistan about which direction to take the country in. On the one hand, you have a pro-Western wealthy minority that has signficantly benefited from the nation's recent economic growth. On the other hand, you have a mass of devout, conservative Muslims who would reject Western values and place greater sympathy in more Islamist circles. Quite naturally, Pakistan has a history of bloody coups and power struggles, like the one that brought Musharraf to power. For years America supported Musharraf, a typical third world dictator, in order to keep the more violently Islamist elements of Pakistani society in check. America's recent adventures into Iraq and Afghanistan have only served to widen the chasm between these two groups. Pakistan's recent elections clearly highlight the division in the country. While at the end of the day Pakistanis elected the pro-Western Zardari it was by no means a bloodless affair and the divisions in Pakistani society still remain. The country is a powder keg just looking for a spark, and this financial crisis just might provide it. Oh, and I forgot to mention the scariest part: THEY HAVE NUCLEAR WEAPONS. Not to mention the fact that they've had three wars with India since independence and the issue of Kashmir is still not resolved.

Despite Iceland's recent headlings in the news, it seems like Pakistan's woes have somehow sneaked by the Western media. Pakistan is neck and neck with Iceland in the race to see which sovereign defaults first, having recently had its ratings slashed by S&P to CCC, only a few levels above default. Living in a country that defaulted on its foreign debt 10 years ago, I realize there is nothing as economically destructive as a default. The currency plunges, wealth people had been accumulating for years is instantly worth nothing, banks don't lend, can't lend and go bankrupt, inflation runs rampant and the general economy goes into a nose-dive. On top of all this, Pakistan's current financial woes are at least partially the result of a knock-on effect, stemming from the US's financial crisis. There could be no better way to discredit the Western-leaning politicians, just as Russia's liberals were completely and utterly discredited by 1998, leaving the most militant Islamist voices as the most trustworthy in the society.

Unfortunately, it seems like the odds have just swung in my favor.