Who engineers the political economy?

A former finance minister, an economist with the longest experience of dealing with the IMF in Pakistan’s familiar trigger-happy dollar crises, lands in Karachi. A self-appointed spokesperson of the miltablishment reveals that economists are being interviewed to head a soon-to-be installed caretaker set-up. As if to highlight the magnitude of the economic crisis, the grapevine also reports that only economists and technocrats would take positions in the set-up that would last as long as it takes to overcome the crisis. It seems two birds have been killed with one stone. The evangelist Khan was democratically thrown out for his economic incompetence by looking the other way, his covert and overt protestations notwithstanding. The replacement — the entire old guard of politics — now faces the loudest evangelist music out in the field, with no rear-guard cover. While the captain spreads the chaos leading to uncertainty, the courts have made their own contribution to neutrality by opining in his favour. Whether it contradicted its own earlier decision is another matter. In the meantime, the ‘experienced’ political eleven dithers to act when it must to stem the economic rot reflected in the galloping dollar and essential prices. At a time when there is an un-heard of consensus in the entire chattering class that government should fulfil the IMF’s prior conditions to withdraw subsidies on petrol and electricity, the alliance is happy to live with the landmine laid by the captain by continuing vaguely funded subsidies. Removal of these subsidies, together with immediate negotiations with the IMF by a real rather than a disguised finance minister, would have immediately signalled to the markets the clarity of policy direction. In the fifth week of crisis, the heightening of duties on luxuries and inessential items is too little, too late.

Is it neutrality at its best? Not really. The best is still to come. As the ditherers keep dithering and fall in the trap, the best will arrive in the form of economic caretakers — a government consisting of economists and all brands of technocrats who will be neutral in the sense that their decisions are not polluted by political costs. To deal with the possible IMF objection to doing business with a constitutionally restrained government, the caretakers will be granted a longer lease of life through the judicial opinion. The main task before the regime will be to address the growing vulnerability of the national security state in two areas. First, debt servicing per capita doubled from $31 in FY17 to $62 in FY20. It slightly declined to $59 in FY21, but is likely to more than double in the current year. Second, the percentage of the federal tax receipts devoted to current defence expenditure steadily increased from 52.4 in FY17 to 55.9 and 68.5 in the following two years, but it declined to 66.3 in FY20 and then plunged to 52.5 in FY21. In the first nine months of current year, it has fallen further to 49. Obviously, a government functioning under a financial emergency will neither have the time nor the money to alleviate the suffering of the large mass of the population.

Bangladesh’s technocratic experiment of 2007-09 keeps haunting. “For this narrative to resurface frequently,” wrote Talat Masood in this paper on October 14, 2014, “demonstrates that we have either very short memories or that there are powerful vested forces that are determined to sabotage democracy to advance their personal agenda.” Remember Keynes saying: “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.”

Published in The Express Tribune, May 20^th, 2022.

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