One step forward, two steps backwards—every time we think that Pakistan’s economy is headed in the right direction, in comes the reversal followed invariably by a freefall, sending us even lower in terms of per capita, currency value, debt, deficits, inflation and above all enhanced poverty. So where could we be going wrong, especially in terms of a sound vision and long-term planning, because after all it cannot be a coincidence that this phenomenon happens every 3 to 4 years? After a very careful study of the very economic model that our economic managers have fancied to pursue over almost the last 5 decades, one finds that there are a number of policies or rather focus areas where, due to the peculiar structure of our economy; the very reality of our population/people DNA; and a unique national ethos, the entire governmental vision and long-term planning has been flawed or to say misdirected. Let us try and evaluate what these tend to be.
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Primacy of needs versus mere
corporatisation
Pakistan’s economy, like that of any non-communist country, is a market economy with the standard principles of profit-making and capital accumulation. The main difference being that in recent times (over the last 3/4 decades) all countries that have been able to successfully evolve as being stable and strong economies, for example, China, Czech Republic, Canada, Bangladesh, etc. have kept their primary goal the basic needs of the population and not profit or self-defeating industrialisation. A general definition of self-defeating industrialisation being one that in essence (or the way it is set-up) relies on promoting another country’s manufacturing, examples pertinent to Pakistan being: Automobiles, motorcycles, home appliances/electronics, pharmaceuticals, high-end FMCG, construction accessories, laminates, paper sack—the list goes on. What we need to do is to develop industrial plans based on the provision of the basic needs of the people and not to safeguard the interests of big corporations that profit at the expense of long-term national interest. While it is never too late, surely changing course here now entails resolve, short-term pain and patience.
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Concentrated focus as a policy
on operational stability
Time and again we have seen that countries who allow structural imbalances to take place: overproduction, shortages, over-accumulation of capital, concentration of wealth, monopolies, cartelisation, commodification and privatisation of public assets beyond a certain point (banking as a prime example), de-focus from public housing, healthcare and education, are invariably overtaken by the ones who instead ensure sustainable stability in all these key elements of an economy. This is precisely how today’s China has economically overtaken the US where while the US allowed these imbalances to happen in its production economy thereby stuttering during the 2008 financial crisis and as recently as during the Covid-19 period, China on the other hand continued to do well even in these challenging times, since despite being a modern day capitalist model, it very closely monitors and guards these aspects of the society’s interest in its economy.
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Unnaturally diluting public
ownership
This is the classic area where time and again China has demonstrated how effectively harnessing the potential of SOE (State Owned enterprises) can lead to prosperity, responsible growth cum equitable distribution of wealth. Banking and excessive capital formation in a few hands happen to be the two key areas that China continues to tightly control to ensure that larger public interest does not get compromised in any way. It still owns most financial institutions, which unlike in the rest of the world, have played a leading role in poverty eradication. Here in Pakistan also the economic managers need to re-evaluate the benchmarks of corporate success, especially when it comes to the SOEs. Quite a few times it is mainly about necessity and a trust in the State itself. For example, the mantra of mere profits and growth becomes meaningless when a country starts to run out of natural resources, or where growth is in effect a recipe for carbon. In conclusion, when managing or devising a vision for the SOEs for the long-term, essentially the arguments have to be about jobs, careers, supply-chain and keeping prices in check for the common man, not just for a couple of years, but consistently.
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Controlling inequality
In the modern day economic history on tackling inequality, China seems to have led in this field by miles. The US, on the contrary, has in fact been guilty of stoking inequality since the 80s by way of failing to manage the laissez faire model in a way that does not allow a small segment to flourish at the expense of the majority. Leading economists like Joseph Stiglitz, Piketty and others have been writing extensively about the 99 percent versus the 1 percent in the US. China in contrast works on the idea of treating ‘absolute rent’ as zero to ensure housing for the average person and its largely publicly owned healthcare and education outreach that calls for mandatory plus free education for at least nine years, are policies that have helped in developing quality human resource and increasing national productivity per se. Pakistan, throughout its history has ironically failed to invest adequately in human capital and this happens to be perhaps the biggest deficiency holding back its industrial future.
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Foreign policy and trade pacts
For any developing country’s economy to achieve its true potential, two things are very important: Peaceful borders and well-crafted trade deals that help domestic manufacturing rather than curtailing it. Good recent examples in this regard would be Malaysia, Thailand, Indonesia and of late, Bangladesh. Pakistan unfortunately, has not been so fortunate in this regard. While a peaceful environment may not totally be in our control, revisiting trade deals is an area where even today some serious work needs to be done.
To conclude, it would be fair to say for Pakistan to truly change its economic fortunes, it will have to revisit the economic model it has used over the last four to five decades. There is a need to recognise that the current system not only increasingly turns up massive imbalances, but also fails to address the public needs on housing, healthcare and education. On the political front, a seemingly democratic façade in reality functions like a large-scale sick enterprise riddled with corruption, inefficiency and mediocrity. The quicker the leadership looks around itself and simply emulates some recent neighbourhood success stories, the sooner it will be able to take the Pakistani economy out of its current impasse—importantly, this time, the inspiration needs to come from the East and not the West.a
Source: Published in The Nation