Pulling back from the brink

Individuals are never indispensible no matter however powerful, astute and credible they may be! They are prone to many internal weaknesses (psychological and physical) and external influences that make them redundant at some point in time and even dangerous. Institutions, on the other hand, have relatively longer life and are considered more credible, predictable and effective in confronting big challenges. They too have certain problems, such as structural inertia and path dependency, but they are in general far better in addressing complex problems than individuals. We in Pakistan, unfortunately, have strong individuals and weak institutions that had led to the situation we are in today.

Let me quote and draw on some of the best minds in Economics to make a case for reversing the downward spiral in Pakistan. KJ Arrow, Nobel laureate in Economics (1972), says, “the openness of a society, its willingness to permit creative destruction, and the rule of law appear to be decisive for economic development.” According to GS Becker, Nobel laureate in economics (1992), “an open pluralistic political system with competition for political office and the right economic institutions lie at the heart of economic progress and stability.”

Peter Diamond, Nobel laureate in economics (2010), suggests that inclusive political institutions with economic orientation lead to sustained prosperity. Niall Ferguson, author of The Ascent of Money, makes even a stronger case in support of manmade institutions (political and economic). He contends that it is manmade institutions, and not the natural endowments, geography or faith of the people, that determine whether a country is rich or poor. Many countries have made tremendous progress with rule of law, openness and development of human capital.

No one could have perhaps better reflected on the Pakistani conundrum than Simon Johnson (Professor at MIT Sloan) when he says, “countries rise when they put in place the right pro-growth political institutions and they fail — often spectacularly — when those institutions ossify or fail to adapt. Powerful people always and everywhere seek to grab complete control over the government, undermining broader social progress for their own greed. Keep those people in check with effective democracy or watch your nation fail.” The use of arbitrary power, in the absence of check and balance, creates conditions for rent seeking and elite capture.

The World Development Report (1997) proposes a strong institutional framework as the foundation for inclusive and sustainable economic development. It suggests that the primary responsibility of leaders is to develop institutions that have the ability to enforce rule of law and that are inclusive, accountable and transparent. The report presents a state reform framework strategy: First, focus the state’s activities to match its capabilities; and second, look for ways to improve the state’s capability by re-invigorating public institutions. There can never be quick fix solutions to systemic problems.

The prevailing state of affairs — political, social and economic — in Pakistan is disappointing and disturbing. The so-called leaders, who come in different shapes and sizes, are busy hoodwinking the public with hollow slogans. They have different but effective cards to play with. They can flout the law, malign institutions and even challenge the state as and when the circumstances so require. And they would constantly remind and fool the public about their sacrifices for this country including but not limited to self-exiles, assassinations, and lingering in prison for years.

State failure is man-made and not predestined for some nations. States do not fail or fall primarily because they are poor in natural endowments or have no military prowess in terms of sophisticated arms and disciplined army to ensure their defence. They fail when the system of governance is so fragile and discriminatory that people lose faith in the government and start looking for alternative mechanisms to protect themselves and their properties from being thrown to the wolves. It is time for all stakeholders, especially the political leadership, to transcend their partisan interests and pull the country from the brink by building robust institutions.

Published in The Express Tribune, March 18^th, 2023.

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