It was not all pure economics, though. Musharraf’s creative national accountants messed up the data to such an extent that now they themselves cannot read it properly. Fiscal year 2003-04; 2004-05, in which they achieved “historic GDP growth and poverty reduction”; and 2005-06 are full of idiosyncratic numbers. For instance, GDP growth in 2003-04 was an impressive 7.5 per cent. It was based on a more than doubling of growth in large scale manufacturing (18.1 per cent) in a single year! This was despite the fact that real total fixed investment declined by six per cent and investment in large-scale manufacturing by 4.6 per cent. With a decline of 2.2 percentage points of GDP in total fixed investment, growth could have come only from consumption! A Nobel Prize should have been awarded for this innovative formula of growth without investment. But wait, 2003-04 was adjusted to correct the base for the master stroke in 2004-05 when GDP growth resulting from creative accounting was shooting through the roof and into double digits. It was contained to nine per cent with great difficulty by showing a 13.5 per cent real increase in total fixed investment. Gross investment was jacked up by increasing, without any basis, the value of stocks by 7.3 per cent in real terms. Stocks do not change so rapidly. In 2003-07, this was changed with impunity.
In its composition, growth for 2004-05 had a number of maverick elements, the most disturbing being a growth of 42.9 per cent in finance and insurance, an indication of rapid ‘financialisation’ leading to premature deindustrialisation. Investment in Pakistan has never really recovered from the 1965 war. The peak reached in 1964-65 of around 25 per cent of GDP became the trough of 14 per cent by the time of the second war in 1971-72. There have been sporadic upsurges since but not a sustained path. The road to growth and poverty reduction is through investmentalism, not consumerism.
Published in The Express Tribune, November 11th, 2011.
COMMENTS (12)
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@Meekal Ahmed: I agree with you. I never and will never give any credit to Zia or Mahbub. They all (and whatever position they held) were opportunistsof the one kind or the other. Zia was perhaps the worst slap on the face of the nation and we are still paying the price and will pay for a longtime to come. Thanks for the correction.
@Max:
Zia/Mahboob-ul-Haq's unprecedented growth?
Mahbub was Deputy Chairman , Planning Commission and very briefly Finance Minister until Ghulam Ishaq Khan (the real master of the economy) had him for breakfast.
I never knew that growth in the Zia era was "unprecedented". It was in Ayub's time and let me assure all here who are too young to remember, there was no cooking the books then.
The growth in the Mush era remains an abiding mystery. Many are now coming out to speak against the fabulous data that were churned out each year.
I have my serious doubts about completing, for the first time in our history, the IMF's PRGF. How those targets were magically hit beats me. The only problem is that if an audit takes place we would have to return all the money we drew from the IMF since it would be shown to have been accessed under false pretences. That was be embarrassing the country so perhaps for that reason alone we should let it go.
@Adi: If you do not know what you are talking, better not say it. Hope you understand the difference between military rule and democratic aspirations.
PT,
As always, very interesting.
You forgot to mention is was consumption and IMPORT-intensive. I recall one year where imports jumped by an astonishing 45%!
To Adi above, yes, PT was relieved of his duties. But the question is, why?
The answer is simple: he stood his ground and refused to endorse or connive in this sham.
I put PT in the same category as other men of character: Salim Reza and Shahid Kardar. They stuck to their principals.
@John B: Yeah of course the government is trying to fix the exports...of what??? The foreign exchange they get as kickbacks for different deals They have killed the industry in their provincial wars. They have ruined all of the public service departments. Right now it is not a fight between dictatorial rue or democratic rule.... it is all about RULE and nothing else. Until the day we can sort out our leaders and leadership it does not matter in the least what policy and system and plan anyone has written on a paper or not for no one is interested in implementing anything.
@ John B The present government needs to focus on manufacturing;but, since ZA Bhutto's time the PPP has been manufacturing's enemy. Depending on farming exports, which a feudal led party cannot see beyond, is suicidal because the country is using tubewells and depleting acquifers. So have you heard of water recycling being discussed in Pakistan; how about water conservation like drip agriculture?
Musharaff era was pure capitalistic consumerism that liberalized the free flow of black money for the benefit of the rich and the poor felt happy to see the crumbs fall of the table, and were happy to get by through the sudden burst of money.
The SBP monetary policy report exactly supports the authors analysis. The growth in banks from the inflow of foreign capital did not focus on long term investments but rather was focused on fleecing the peoples savings through consumer loans, which artificially increased the demand of domestic output.
While domestic consumer demand is essential it should be coupled with new and increased domestic exports, which were blatantly lacking in Musharraf era, and the present Govt is trying to fix the problem which will take sometime.
@Chulbul Panday...no matter what the Dr sb says...the days of Musharraf were far better other regieme we saw since Ayub Khan..one could feel the change in the the air...where do we stand now?? Lets not forget this Dr. Sb was fired from the planning commission during Musharraf's time...so what do we expect from him?
The worst form of democracy is better than the best form of dictatorship.
When I read the title of the article, I thought the article would be about future growth of Pakistan and some thoughts on how to get there. Being from India, I am curious as to how Pakistan can come out of the current quagmire! Nonetheless, it was interesting reading how Musharraf Era growth was not exactly that.
I am amazed the way you applied Keynesianism to Musharraf’s ( I would prefer to call Shaukat Aziz) policies. Sir, Doctor Sahib, Maharaj, spurring growth was never an agenda of Musharraf/Aziz duet. Their agenda was to create a class of consumers (read clients) that may support the regime. If you think it was John Keynes’s theory at practice, then how about Ayub’s decade of growth, and Zia/Mahboob Haq’s unprecedented growth. Regrettably none of them were following Keynesian principles. I would think of Musharraf’s policies more an extension of monetarists’ half-baked cookies. I, however, agree with rest of your analysis.