Seeking a new economic model

Published: November 5, 2013
The writer is Executive Editor of The Express Tribune

The writer is Executive Editor of The Express Tribune

Our economy is trapped in a failed model, thanks largely to our ruling elite’s penchant for dole and its continued refusal to pay its legitimate national dues. All attempts to un-trap the economy through the IMF formula, conditioned on macroeconomic stability, have failed miserably. The Fund conditions retard growth, push down jobs, push up inflation, and end up further deteriorating the balance of payments position and ballooning fiscal deficits, demanding more foreign and domestic loans. The following passage from a thought-provoking paper gives an idea of the futility of continuing to adhere to the economic model developed on the basis of the so-called Washington Consensus:

“Sovereign debt crises are essentially political crises: unable to inspire and too weak to guide, democratic leaders can no longer ask for sacrifice today to build a better tomorrow. Unable to mobilise popular support, elected leaders are vulnerable to the pressures of vested interest groups. Trapped between the demands of financial markets and multinational corporations for lesser liabilities and the expectations of their citizens for a better life, democratic leaders have few options but to postpone financing problems into the future. Lacking an alternative vision, as well as political room to manoeuvre, democratic leaders hide behind TINA (‘There is no alternative!’). At the same time, public debates over the grand direction for society have degenerated into a media circus. In other words, elected leaders no longer have the strength to lead their disillusioned constituents onto a new path. Decision-making has been delegated to unelected technocrats. The experts in these commissions, committees and counsels, however, are easy prey for lobbyists and pundits. In the crisis, representative democracy is even openly sidelined, either by forcing the hand of stubborn parliaments or by installing unelected technocrats at the head of governments, who execute the unpopular conditions imposed by financial markets.”

Next, the paper “The Economy of Tomorrow — How to produce socially just, sustainable and green dynamic growth for a Good Society” by Marc Saxer, the resident director (Thailand) of a German NGO, Friedrich-Ebert-Stiftung, asks: Why did political elites capitulate to the markets? Why did societies accept the cruelties of neoliberal reform without much complaint? Why did people stop fighting for a better future? His own answer to these questions: without the epic fight against an external enemy, sobered by its own excesses and follies, the West lost its revolutionary horizon. God declared dead, the communist paradise disenchanted and the state impotent, all hopes were put into the market. His prescription: without any utopian promise of a better future, the very idea of progress becomes meaningless. Without a vision for a Good Society, people do not come together to form a new community. Without a utopian dream for a better tomorrow, people will not fight to overcome their present-day challenges. ‘The audacity of hope’ is the necessary first step to put the subject back to its central role and mobilise the people for ‘change’.

In Mr Saxer’s opinion, China, South Korea, India, Thailand, Malaysia, Indonesia, Taiwan, Singapore, Hong Kong and Vietnam achieved their successes by ignoring the Washington Consensus and following a model based on what he describes as the Beijing Consensus, which, he says, flowed from the Japanese model. He maintains that obsession with GDP growth leads to great ecological and social distortions and needs to be replaced with a qualitative growth paradigm. “Growth, if measured in GDP or holistic benchmarks, is not an end in itself, but a means to tackle these challenges and produce a better society. The fundamental function of the economy is to produce the conditions for a Good Society with full capabilities for all … In the neoliberal model, economic dynamism grows out of the incentives set by inequality and competition (greed is good). Free markets are believed to drive innovation and productivity, while competition over resources strengthens efficiency. However, three decades of supply-side economics have produced only moderate productivity gains. At the same time, ‘shareholder-value capitalism’ has widened the social divide to a level last experienced before the Great Depression … All citizens (therefore) must have access to education, health care and credit, and must be able to start an enterprise or make best use of their talent. The market must benefit the people, not the other way around.”

Published in The Express Tribune, November 6th, 2013.

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Reader Comments (12)

  • shiraz
    Nov 6, 2013 - 12:30AM

    A new Empire from the East on the horizon,the old one in the West-steadily receding.


  • Nadir
    Nov 6, 2013 - 1:30AM

    Indeed, Beijing Consensus, massive state subsidies, corruption, regulatory capture and total disregard for the enviornment. What do we get: Beijing where the air you breath is literally unbreathable.


  • madhu
    Nov 6, 2013 - 2:05AM

    dear Sir, You have such well-qualified writers and analysts. then why so much of street slangers on the web-site.
    Pakistan can be a great country. The 180 million pakistanis are very hard-working and intelligent. But unfortunately they have been let down by their govt which spends far too much on defence, and debt-servicing. I would suggest that a strong lobby of businessmen and academicians should seriously start planning how to reunite all the SAARC countries in an EU style of union. Imagine if india, pakistan and bangladesh become ONE- under a triumvirate of leaders- millions of pakistans and indians will visit each other”s countries and trade will boom- no visas between the countries. The combined nations could have excellent relations with china, russia, usa, etc. The kashmir problem will be solved automatically. The nations will have a NATO style of defence for all the SAARC states. Common currency, common visa-free travel. Trillions of dollars of GDP. The 1.7 billion people will all be above the poverty line. The defence budget could be halved and the 20 billion dollars thus saved could be used for education and health-care. This is my fervent dream. All the saarc states will have their current national identities- like france, germany all are independent but at least they are not trying to pull each other down. THINK MY FRIENDS.


  • Sexton Blake
    Nov 6, 2013 - 5:18AM

    Dear madhu,
    Are you crazy? What you are suggesting is sensible and would solve problems, and I cannot think of one government in the world which is trying to do that. All that we have is politicians who are little people, and their job is to please the invisible big guys. All the politicians do is strut around congratulating the military on doing a great job and pretending the peoples welfare is their greatest concern. Hardly any politician has any business sense or the ability to control money, although they make sure that they themselves are well looked after. Anyway, keep up the good work. We need more good articles like yours..


  • Proletarian
    Nov 6, 2013 - 9:20AM

    You forgot the part where the socialist/state-capitalist Chinese got the USA in debt to them which means that China is the only country in the world making real money and all other wealth is Chinese dole.


  • Feroz
    Nov 6, 2013 - 5:38PM

    The Chinese lend the money, the Americans buy their low priced junk. The same Dollars China earns from its exports to the US, it has to park in American debt. The Americans thus buy Chinese goods and hold onto their Dollars too — all that China has is IOU’s that cannot be cashed. The Chinese can teach the Americans many lessons, not Banking though.


  • Galuru Ben
    Nov 6, 2013 - 6:30PM

    Perhaps before choosing the Washington consensus or the Beijing consensus, Pakistan would do well to first understand North Korea’s 1960 Songun (or Security First) policy to understand where it is right now. Unfortunately, Songun doesn’t provide a roadmap as it is still going strong in North Korea, but the results are for all to see.

    @madhu: Wishful thinking as it is more likely that India, Bangladesh and perhaps Nepal, Afghanistan and Sri Lanka will join in something like the EU before Pakistan is ready for one.


  • zaman ali
    Nov 6, 2013 - 8:20PM

    west has the moral high ground, one doesn’t see asylum seekers heading towards the rich countries of asia, they are all heading towards the west, even though west isn’t perfect but it’s still better than asia with regards to human rights,equality and justice.


  • unbelievable
    Nov 6, 2013 - 9:51PM

    Editor has been consistent in his belief that Pakistan’s deal with the IMF is responsible for the poor state of the Pakistan economy. However when you boil it down almost all of the IMF provisions are things that the rest of the World takes for granted – spread the tax base, tax the rich, eliminate subsidies you can’t afford, privatize businesses the govt has demonstrated it can’t run successfully, cut spending, and quit borrowing and printing currency. In short – take basic steps that will enable you to eventually support yourself.
    I would argue that Pakistan has yet to actually implement the vast majority of the IMF loan provisions – making it tough to hold the IMF responsible for anything. Suggest you actually raise/collect taxes, cut spending, and actually sell the govt owned businesses rather than talk about it. Living within your means isn’t going to be popular – but that’s life.


  • meekal ahmed
    Nov 6, 2013 - 9:54PM

    Challenging observations, Sir,

    Nothing prevents us, meaning Pakistan’s many talented economists and sector specialists, from coming up with their own plan.

    The question that should be asked is why, when they have done that in the past (you may recall the Panel of Economists which produced a first-class, home-grown program a while ago), the political establishment rejected it.

    The answer to the question should be pretty self-evident.


  • meekal ahmed
    Nov 7, 2013 - 1:37AM


    What you are stating is a matter of fact, not conjecture.

    Except for the PRGF during the Mush years, when we claimed not only to have implemented the program but snubbed the IMF by not even drawing the final installment, we have never implemented a multi-year IMF-financed program.

    All of them have been abandoned mid-stream, leaving the economy in limbo, with half-implemented reforms (which are then quickly rolled back).

    So at the next program (and there always is a next program), we start from scratch all over again.


  • antanu
    Nov 7, 2013 - 11:27PM

    pakistan can be a great economic power if it elects honest leaders and its people are ready sacrifice the luxuary of life for five years without taking any outside aid.use its own resources…and grow.


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