The writer is Executive Editor of The Express Tribune
“Trade and market liberalisation were two key components of a broader policy framework, known as the Washington Consensus — a consensus forged between the IMF (located on 19th Street), the World Bank (on 18th Street) and the US Treasury (on 15th Street) — on what constituted the set of policies that would promote development. It emphasised downscaling of government, deregulation, and rapid liberalisation and privatisation. By the early years of the millennium, confidence in the Washington Consensus was fraying and a post Washington Consensus was emerging. The Washington Consensus had, for instance, paid too little attention to issues of equity, employment and competition, to pacing and sequencing of reforms, or to how privatisation was conducted. There is, by now, also a consensus that it focused too much on just an increase in GDP, not on other things that affect living standards and focused too little on sustainability — on whether growth could be sustained economically, socially, politically, or environmentally.”
Excerpt from the book titled Making Globalisation Work by Joseph Stiglitz.
We have been trying for too long now, but without any success, to become an Asian Tiger by adopting the “one-size-fit-all” formula put together by the Washington Consensus. All that this formula has done for us, so far, is to turn us into an Asian basket case. The Asian Tigers, before they acquired the nickname, did relentlessly pursue the GDP growth formula but not the way the Consensus had suggested. There was no downsizing of the government in any of these countries; also, no deregulation or rapid liberalisation and privatisation took place. They just opened up to the US and Japanese investment and lower-tech fabrications that were being dismantled by the business houses in those countries in the process of graduating to higher-tech manufacturing and sophisticated service industries. Goods produced in the sweat shops of the emerging Asian Tigers at throwaway costs, compared with that of producing the same in the US and Japan, where the wages had gone through the roof, were then imported freely by the investing countries. Extending a helping hand to this process were the strictly state-controlled public sector banks in the recipient countries, which in the next phase, facilitated the emergence of huge vertical and horizontal monopolies in the private sector. Meanwhile, since the US had set up military bases in most of these energy-deficient countries, they could afford to finance their escalating oil import bills from their huge export earnings and also spare enough resources to develop their social and physical infrastructure.
And what were we doing during all these years? Enjoying “free lunches”, destroying our agriculture, preventing tax culture from taking root, raising high tariff walls to encourage import substitution, promoting smuggling, and turning the country into a security state at the cost of education, health and food security. As a result, today we are not only the world’s most famous beggars but also the most isolated country.
No country appears any more to be in the mood to shore up our economy with its taxpayers’ money. It is, therefore, time that we must all start paying our national dues from our taxable incomes no matter what the source. But even before that, we must take care of the ongoing terrorism. It is only when normalcy would return to the country that local and foreign investors would be willing to invest in Pakistan. And finally, we should try our best to turn the Free Terror Area into a Free Trade Area by creating economic linkages between India, Pakistan and Afghanistan. Let us start this process by first granting MFN status to India immediately and then follow up quickly by allowing transit trade facility to India through Pakistan to Afghanistan and ahead. This would enable Pakistan, located right at the crossroads of a busy trade route extending from Casablanca to Oramchi on the one hand, and on the other from East Asia to the Middle East, to become a roaring trans-shipment economy, exporting value-added raw materials and intermediaries imported at reasonably reduced duties. Let us use this comparative advantage by adopting warehouse economy by letting the rupee float to realistic levels. Then alone can we become an Asian Tiger and not by taking the IMF route. Otherwise, as Maynard Keynes said: “In the long run we are all dead”.
Published in The Express Tribune, May 22nd, 2013.
COMMENTS (17)
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@Jasmine: You disagree with the Executive Editor's opinion, shows that there is hope for the people of Pakistan, not to follow the path which would lead to darkness and poverty. Has the Editor no recogniton of the history? Does he want to trade with the country which legaly allows the labour camps made up of slaves, which the Indian Labour Minister has called "bonded Labour". The new Afghan Government would prefer a corridor towards hot waters for their trade to the world. Pakistan is an agriculture land and can easily develope their agriculture backed industry for organic and dairy products for export to the European Union which happens to be the largest economy in the world, while India builds up their service call centres an export its man power and continues to struggle with poverty stricken population. No thanks, to the advice of the wiseman for alliance of one poor with another poor. .
Rex Minor
manufacturing sector is the key for development.This requires energy at a competitive rate which is a scarce material at present. Terrorist activities have created an anti investment environment and also flight of capital. Energy solution and resolving extremism . both will consume tenure of Nawaz Shariff . He can not afford to confront with army and Taliban / TTP even for normalization of trade with neighbouring India ,silent support of army will be required to avoid a wide spread sponsored effort giving false reasons against trade with India ..Good governance is one area for him to perform which will require tax reforms( removal of various exemptions and broad basing) tightening of subsidies .and many more. Tough time is awaiting NS .
Providing land route to Afghanistan from India won't benefit Pakistan. We need to concentrate on manufacturing rather than becoming a commuter nation of truck drivers. Sorry, I am not convinced by this article.
Trade liberalisation and Washington Consensus, or an alternative model for that matter are for countries and governments serious in improving the lot of their people. Analysing Pakistan in this context is totally irrelevant and utter waste of time. Civilian governments or those by dictators had just one thing in mind; acquiring power that empowers the looting of state coffers, luxurious living and privileges at state's expanse. Bureaucracy has been destroyed by crony placements of high officials tasked with providing management for promoting, administering and enhancing of corruption. Law and order was deliberately corrupted by the powerful so that they could remain beyond accountability and the reach of the law.
Pakistan instead of using its location to its advantage like a skilled Sculptor, used it like a hangman's noose to suffocate itself. For a country to progress and prosper the first article in its Charter of existence should be "welfare of the people". Hatred for another country cannot be the anchor around which sound policies can be framed. The last paragraph has excellent suggestions made by the Author, who is listening though ?
My guess is that NS will not mess with the khakis' gravy train, even though he would be tempted to do so. The only way he can do this is by delivering a good performance in spite of the military burden on our economy, then win the next election as a popular leader. In the second term he can go for the jugular, just as in Turkey. I realize there are a lot of ifs and buts in the previous sentences.
for too long pakistanis have boasted their missiles and bombs alas bangladesh raced ahead of them only by their sewing machines
@Pakistani Ostrich: Nawaz may WANT to do what you suggest, but after what happened when he tried to remove Mush the last time, will he dare to confront the army and bring it under civilian control? I would not expect that. Though I will cheer if he succeeds in doing just that because it will benefit both India and Pakistan.
A lot commonsense but is anyone listening ?
This op-ed is like throwing cold water on a sleeping person! Only problem with your solution is that the khakis won't have justification for lapping up more than 1/3 of national budget and their gravy train will get derailed. I hope you do remember, the feat generals had when the kerry-lugar bill that directly wanted to fund the awaam by passing the khakis, was tabled? I am hoping that Nawaz has learned his lesson and reigns in the khakis, just like in any civilized country, but one never knows!
@Rule of Law: Don't hold your breath.
For too long our economy and our Planning Commission has been allowed to be run by men who are on payroll of International Financial institutions, having no stakes in this country. Just look at the manner in which smuggled cars were allowed tobe imported into this country. There is powerful lobby in this country which facilitates massive flight of capital within the bureaucracy and State Bank ofPakistan.
Well written OpEd. I like the concept of turning the Free Terror Area to Free Trade Area. Apart from economic benefits, such an option , if pursued will also help Pakistan's social sector as some of the budget directed to defense can be redirected o health, education and infrastructure.
Pakistan is back to the road of becoming Asian Tiger.
This man talks sense . Trade liberalization and by allowing neighborhood countries to route , Pak can develop a regional economy along the route . If the route extends upto middle east and central asia by India, Pak gov can negotiate to use those road facilities. Prosperous Afghanistan and central asia will be a boon for Pakistan , not only economically ,but also due to reduced terrorism.