Recapturing Pakistan from its elites

The government is facing multiple crises including galloping food inflation, rising poverty and Covid-19

Daud Khan December 07, 2020
Daud Khan is a retired UN staff member based in Rome. He has degrees in economics from LSE and Oxford, where he was a Rhodes scholar

It is a matter of continuing debate about why Pakistan has been underperforming in relation to other Asian countries. In our opinion, the key reason is our inability to implement the reforms and changes needed in the face of a dynamic and fast evolving national, regional and international context. Reforms and changes that would take us towards a more market-oriented and internationally competitive economy; where public resources are spent on ensuring essential infrastructure and public goods, services such as health and education for all, and on safety nets to the poor and vulnerable; and where laws and regulations safeguard basic human and social rights, equitable access to national resources, and protection for property and investments — both national and international.

This inaction is not due to any lack of knowledge about what needs to be done. There is plenty of regional and international experience stretching back several decades about what works and what does not. Clearly, not all successful experiences from other countries are applicable to Pakistan. Experience also shows that a good reform is not a blueprint set in stone that can be inexorably rolled out over a number of years. Rather, it is a process requiring constant oversight, evaluation, updating and frequent mid-course corrections. These experiences have been studied by Pakistani and international thinkers, and based on this shelves full of strategies and policies prepared by the best available experts. These spell out very well the major reforms and investments needed, along with processes and procedures that would ensure the necessary oversight and flexibility. Many of these policies, strategies and programmes have gone through a rigorous consultation process with stakeholders and several have been “approved” by the different levels of government. Sadly, despite the fact that we know what to do, very little actually gets done. Our problem is not of knowledge but of implementation.

So what is the problem? In our view the inability to move forward has much to do with “elite capture” — a political economy term used to describe a situation where rich and powerful elites hold the reins of power and do not allow any change that would threaten their wealth and control. We have a sugar mafia that keeps out cheap imports and effectively forces us to produce our own sugar, an expensive and environmentally harmful crop for Pakistan; a water-tanker mafia which does not allow improvements in the piped water supply in cities such as Karachi; and a land mafia that grabs plots set aside for parks, public amenities or environmental purposes. The list goes on and on. Each situation creates its own mafia and the result is total inaction on many fronts.

The situation is currently so bad that we cannot even deal with the most urgent and glaring of problems. These include closing down or selling off loss-making state-owned enterprises which are a massive and continuous drain on scarce public money; getting rid of inefficient subsidies such as the wheat procurement programme; or improving the quality of projects in our annual development plans where most investments of public money cater to the needs of bigwigs or to prop up inefficient government bureaucracies.

This situation is not unique to Pakistan. Time and time again, countries have ended up in a situation of economic stagnation and glaring inequality where social tensions rise rapidly. In many cases these have exploded into protests, revolutionary movements and civil war. These turbulent movements have often been marked turning points in history, leading to new developmental pathways. But such wrenching changes come at a high cost. While movements such as the French, the Russian and Chinese revolutions did lead to epochal changes, but only after years of social and political turmoil. More recently the experience of the Arab Spring shows how the outcome of such movements is not pre-determined and can lead to disillusionment and anger.

In Pakistan, we have already seen the consequences of unequal access to resources and distorted growth. During the 1950s and 1960s we followed a highly skewed trajectory of growth with certain regions and social classes left behind. All this was justified with phrases such as “we cannot redistribute poverty”, “first growth then equity” and “functional inequality”. The consequence was the growth of Bhutto-ism (I hesitate to call it socialism), the nationalisation and subsequent mismanagement of banks, industries and schools, and the breakup of the country. These events set us back a decade if not more.

In electing PTI, the people of Pakistan voted for change. PTI’s appeal to voters, especially young ones, was that it would reform a system that was inefficient and unjust. To a large extent it has lost its way. The realities of managing power, the difficult compromises made with electables who demanded their pound of flesh, and the ongoing problems of putting together a competent team continue to plague the government.

Unfortunately the alternative is hardly attractive. The new leaders of the PML-N and the PPP are working very hard to distance themselves from their predecessors and pose as champions of reform and change. However, during their tenure they did little to address underlying issues. On the contrary, they and their cronies were probably major beneficiaries of all that was going on. It is unlikely that the new generation has changed their colours. For example, recently the government took some steps to reduce the cost on the exchequer of the Pakistan Steel Mill which has produced nothing in years yet costs the taxpayer billions. The government finally decided to lay off about half the workers giving them generous severance packages. However, instead of endorsing the move, or at least keeping silent, Bilawal Bhutto termed it economic murder and promised to return each and every one back to work!!

Is there hope then? The government is facing multiple crises including galloping food inflation, rising poverty and a second round of the Covid-19 crisis. Although sad and unfortunate, these crises have also created political space for some bold actions. This is similar in some sense to the balance of payments crisis of a couple of years back when the government was forced to take on the IMF package, and with it a series of much-needed reforms. Will the PTI government also take this opportunity? Can it move on at least some of the changes and reforms that have been banished to the back burner for decades?

Published in The Express Tribune, December 8th, 2020.

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