Pakistan and the evolving global system

Let me get some numbers out of the way before discussing the state of the globe as seen by several well-informed experts, the International Monetary Fund, the World Bank and other development institutions. I will discuss how global developments my affect the Pakistani economy, its political system and its social situation. Of the world’s two largest economies, Pakistan is more affected by China, one of the country’s four neighbours and the one with which it has developed strong economic ties. With a GDP of $2,332 trillion, the US in 2021 was by far the world’s largest economy. It was followed by China that has overtaken Japan to become the second largest world economy. China had a GDP of $17.73 trillion. While the size of the Chinese GDP was 76% that of the US, it has a much larger population which means that its GDP per capita is less than one sixth of America’s. The current global situation is marked by intense rivalry between Washington and Beijing. While it is unlikely that there will be an open conflict between the two superpowers, there is no doubt that we are seeing the return of the “cold war” that defined the global situation from 1945 to 1991. Before reflecting the options available to policymakers in Islamabad, I will look at the country’s economic situation and draw a parallel between it and Bangladesh that was once a part of Pakistan.

Pakistan, measured in terms of the country’s 2021 GDP, was the world’s 43^rd largest economy while it had the world’s fifth largest population. What would probably surprise most readers of this column is how far ahead Bangladesh has gone compared to Pakistan. It now has the world’s 33^rd largest economy, ten places ahead of Pakistan. Its recent rate of GDP growth has been three times the rate of Pakistan. The story was different in 1971 when the Bengalis fought a civil war with Pakistan and, with India helping, they gained independence. The citizens of what was then the province of East Pakistan correctly believed that by using some of their resources, West Pakistan had moved way ahead, leaving the eastern wing of the country much behind. This led to great grievance among Pakistan’s Bengali citizens. That prompted Shaikh Mujibur Rehman to advance what he called the “six-point plan”. The plan was essentially a call for independence. While Zulfikar Ali Bhutto had been the most responsible politician for the outbreak of the civil war in Pakistan’s eastern wing, on becoming prime minister of the remaining Pakistan, he recognised Bangladesh as an independent state.

Upon achieving independence, the world treated the new country as a basket case. That is no longer the case. Good governance, political stability and taking advantage of knowledge of the changing structure of the global economy, Bangladesh is now way ahead of Pakistan. Its 2021 per capita income was estimated at $2,450 — 63% higher than that of Pakistan.

There are several reasons for Bangladesh’s considerably better performance than that of Pakistan. Two of these need to be underscored so that Pakistan’s current policymakers can draw some lessons from the experience of what was once regarded as a poor brother. One, Bangladesh has empowered its women to become major players in the country’s economy. Most of the workers and some of the managers in the country’s vibrant garment industry are women. With incomes higher than that of the urban male workforce, women have social and economic independence. They can now make decisions that lay previously with men such as determining the appropriate size of the family. Working women want smaller families with the result that the rate of human fertility in Bangladesh is the lowest compared to most parts of South Asia. Bangladesh’s population is increasing at a rate much lower than that of Pakistan.

The second reason for Bangladesh’s much better economic and social performance than that of Pakistan is that it has given much greater attention to the world outside its borders. Not only has it captured a significant part of the world’s garment industry, but it has also now positioned itself to take advantage of the changes taking place in the location of global supply chains. With wages having risen rapidly in China as a result of high rates of economic growth, the country is now looking at sources from where it can obtain parts and components it needs for its large capital-intensive industries. It has turned to labour surplus and low-wage suppliers. These are mostly in East Asia and India. Pakistan has not been included in this chain.

The point for making this comparison with Bangladesh is to underscore how poorly Pakistan has performed in the last half century when it acquired its current shape. If I go by the analysis of Matin Wolf in his latest book The Crisis of Democracy and Capitalism, Pakistan is not alone in facing the crisis it is currently dealing with. According to Steven Pearlstein who reviewed the book for The Washington Post, “among business and financial journalists, there has never been a doubt that Martin Wolf is at the top of our heap. Over a career that now spans 35 years, there is nobody better read, or better sourced or more insightful than the longtime economic commentator for the Financial Times.” Wolf correctly reads the current global situation. His conclusion applies well to Pakistan’s current crisis. “The corruption, injustice, and lies of elites are powerful solvents that tie citizens together, inevitably replacing patriotism with deepening cynicism,” he writes. “Without decent and competent elites, democracy will perish.”

Bangladesh’s performance since it gained independence in 1971 and Martin Wolf’s conclusions in his recent book point to the importance of the many fronts on which Pakistan needs to move in order to gain the ground it has been losing. To begin with, it should focus on public policies that provide women economic independence and improve the quality of their lives. Parties that dominate the political system must be more representative of the people they represent and are meant to serve than be beholden to one or two families. The Pakistani system should move beyond dynastic politics to the one that is more inclusive. The country’s policymakers must inform themselves well about the changes that are occurring in the global economic and political systems. Today, Pakistan lives in virtual isolation, increasingly distant from the world outside its borders. It should work towards greater global integration. There is much to do. At the top of its priorities should be the achievement of political stability.

Published in The Express Tribune, April 17^th, 2023.

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