The first year provided a golden opportunity for reforming the state apparatus to the PML-N government that assumed power on the promise of economic revival.
A central pillar of its economic agenda was that economic revival was only possible if the government did not remain in the business of doing business. The people actually voted in the party to get rid of inefficient public sector enterprises, resolve the energy crisis and create jobs. However, after more than a year, these goals remain distant dreams.
As the government succumbed to temporal gains over long-term reforms, it has so far failed in both economic revival and in ensuring energy security. The corrected growth figure of 3.3% suggests no improvement over one year whereas the galloping circular debt indicates the insurmountable energy crisis.
The PML-N actually traded off low hanging fruits against tough decisions. These fruits or temporal gains included currency appreciation, foreign reserves’ build-up, some Chinese investment and tamed inflation. The long-term and foregone economic reforms featured tax reforms, restructuring or privatisation of state-owned enterprises and creation of energy markets.
A dangerous consequence of giving up tough economic decisions is not only that there is no reform, indeed there is no respite from the prevalent crisis. If adopted with complete political will, and with reasonable predictability and transparency, the reforms can actually increase the popularity of a government, rather than undermining it. Good reforms help solve the problems of bad performance.
The new leadership has stayed obsessed with capital-intensive projects, without much-wanted focus on governance issues. This is not in accordance with its own Vision 2025 that calls for a shift to software, alluding to systems and human resources, instead of hardware, meaning physical infrastructure.
By not going after the economic reforms with full force, the government has not only disappointed its supporters but has also brought a bad reputation to reforms themselves. In a way, it has opened up political vacuum for the politics of welfare.
Welfare an anti-people agenda
The economic promises of the current protest movements converge on a single point: doling out welfare, which they build on while rejecting the economic policies of the PML-N calling them anti-people.
One group promises to give away goodies like roti, kapra aur makaan, while the other group claims to bring back the imaginary sums of $200 billion from Swiss banks and from this money, create jobs for Pakistanis. None still talks about the hard work required for bringing long-term economic reforms.
In other words, the failure of the government to initiate real economic reforms, which start from good governance, has not only discredited reforms, it has also created a constituency for state-led welfare agenda, without a half serious thinking about its financing.
In case of Pakistan, adopting such welfare agenda is in fact an anti-people measure. Financing of this largesse requires exorbitant resources which can only be obtained by loans, if not outright further taxation or printing money. All these measures – loans, taxation or printing money – mean taking away part of wealth which people have legitimately earned themselves.
A loan creates a liability for future generation, whereas tax or money-printing reduces the money available for meeting people’s current needs.
When you once made your people accustomed to welfare populism, they would always demand more of it. Obviously, resources will always be limited and hence ultimately the government fails to continue. At this point, not only economic growth stalls, but also the government and entire political system become threatened. Thus, bad economics is also bad politics.
Despite all odds, the PML-N will sail through the current impasse. However, what it must do in future is to faithfully implement its own promises and visions. Contrary to popular perception, implementation of economic reforms with transparency will help regain the legitimacy of the government. It must stick to its original promises instead of giving in to the welfare slogans.
Welfare populism ultimately destroys economy that should be well understood. It also destroys basic human values of pride, self-respect and hard work. Consider how Greek citizens have refused to respect any austerity measures. As welfare populism needs a large government, it gives rise to authoritarianism and tyranny. Thus, welfare populism also disrupts the bedrock of economy ie democracy.
The writer is the executive director of PRIME Institute, an economic policy think tank based in Islamabad
Published in The Express Tribune, September 1st, 2014.
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Support for economic reforms can be augmented, if simultaneous moves are made for political reforms. And NS regime could have initiated political reforms such as electoral process transparency, devolution through local bodies, restructuring police, tenure security to bureacracy, etc. However, NS's track record smacks of authoritarian style of governance, where strong government reigns on whimisical instinct & personal loyalty. It is not meant for deep reform agenda, but only cosmetic measure to ensure lessor political competition & populist manipulation of electorate.
The NS and allies has been in power for about last 31 years. What have they done to this nation that manifested in current economic, political, and social conditions of this society. this basic premises that if everything left on tyrant market forces, which only understand language of money and profit, then economic conditions will improve is faulty. There are some fundamental duties of state which they has to perform otherwise private economy will serve only those who can afford their services.
The corrupt and decadent feudal state of Pakistan has given rise to population explosion, boundless poverty and destitution.
The outcry of over 100 million poor, destitute, hungry, thirsty and have-nots is a spit on the face of a rotten and cancerous leech system which is built on inhumanity, injustice, exploitation, oppression and daylight robbery.
Unfortunately they had never any visionary guide besides all the populist jokers and therefore there is no chance that they ever would come out of the cesspool of poverty.
A poor farmer without shoes and toilet, who produces Basmati rice under the blazing sun, feeds the millions of western people and the money goes in the pockets of mafia rulers, Jagirdars, Waderas or the Fauji foundations.
Instead focusing on education,science ,PML-N focused mega project like metro bus,motor way,laptops which caries large kickback. No importance were given to ministry of science and technology,which is headed by Arts graduate ,he has same brainless advisers as a minister .MNS intention is not to serve but only to increase his business and nothing more
If pmln come through this, we will just see more of the same. See the thing is, pmln actually belive that people want roads and buses, not clean water and police reforms.
@Alama Nawaz-ul-Imran: or whatever your name is.... it's not those three people who should be shot... it's people like you who want a thief for theft and two other people who want to punish the thief. By your standard a judge who awards a death sentence to a killer should also be hanged.This is the basic problem with Pakistan... Pakistanis are himself not sure what they want.
@AJamal: "NS government coming through this crisis"??
Jamal sahab you must be feeling especially optimistic this morning.
@Alama Nawaz-ul-Imran: fourth will be you and the likes of you plus your first cousin Shahbaz Sharif the murderer.
Three people need to be shot immediately.
1)Qadri 2)Nawaz sharif 3)Imran Khan.
3 people have taken the whole country hostage in the name of some blind dreams. SMH.
A very rationale and logical analysis. I believe that even if the govt focuses only on two issues i.e. energy and law & order it would automatically improve upon a lot of other factors. The other two most imporant elements i.e. education and health should be left for provinces to focus upon.
Once the NS government has come through this crisis, it will focus more on optics, more physical infrastructure instead of institutional reforms as this is the it has always worked and people fooled.