Crises are not new for Pakistan. It has faced dozens of economic, political and humanitarian crises since 1947—around one every 2-3 years. Since 2000 alone, it has faced three mega humanitarian crises (2005 earthquake; 2010 and 2022 floods) and a dozen smaller ones; massive internal displacement due to the war on terror; on-going insurgency in Balochistan; endless political crises and 5-6 major economic crises. It is perhaps the most crisis-prone state globally since 2000.

Even by these standards, the current poly-crises encompassing an economic current account crisis; a political crisis since the April 2022 vote of no-confidence and the 2022 floods against the backdrop of the global slowdown due to the Ukraine war easily ranks as one of its worst crises.

If the current situation is bad, future trends show that Pakistan may face even bigger crises in the next 25 years leading to its 100 years as a free state than it has so far in 75 years.

Demographically, our population may hit 325 million by 2050 against 220 million now. Demographics spell doom against the backdrop of misrule if the state fails to invest socially in health and education. Already, we have the second most illiterate kids globally. Ecologically, by 2050, climate change will destroy fertile soil, swamp coastlines, cause water wars and up disasters and migration hugely. As one of its biggest victims globally, we may face more mega emergencies, epidemics, migration and conflict as more people chase fewer goods.

Economically, we suffer from long-run slow GDP and job growth, high twin deficits, huge debt and low innovation and competitiveness. This has led to 23 IMF programs since 1958, high unemployment and economic stagnation. There are little signs these economic trends will change soon. Socially, fake religiosity, false patriotism and extremism are increasing rapidly. The Tehreek-e-Labbaik Pakistan reflects this trend. It is a monster still in evolution well below its full potential that could cause huge harm, more than the Taliban, as it expands its faith agenda, street power and electoral clout in key Punjab and Karachi areas. A state can’t be both an economic and extremism hub. Externally, our growing Barelvi extremism lies close to Hindu and Buddhist ones in the east and Salafist and Shia ones in west. All hate yet feed each other, making this area the most unstable extremism mosaic globally.

Indo-Pak enmity is the main global nuclear risk in future. Instability in Afghanistan poses increased terrorism threats,as does the Baloch insurgency. Politically, we suffer from elite patronage politics that causes misrule and constant interference by the army in politics which undermines political institutions and increases political autocracy. Politics is society’s avenue to adopt apt policies against other threats. But for us, it poses threats itself.

These six trends portend six security and economic paths to doom for Pakistan, some more immediate than others. The gravest security pathway is nuclear war. The Indo-Pak tiff is the big nuclear risk globally. No two nuclear states have fought yet but there is always a first time for new mania. Another grim security pathway is internal extremist war that ruined Somalia and Syria with big areas falling to them.

Taliban too seized ex-Fata and Swat in 2007 and were sixty miles from leafy Islamabad sending panic waves among its elites. Army action during 2008-16 cut the risk but Taliban’s Kabul win has upped it. Another risk is ethnic insurgency and succession, as with Sudan, Yugoslavia and us too in ’71. Our ethnic Achilles heel is Balochistan. Baloch rebels lack capacity to secede soon or even hold much area but have made some no-go areas and can now stage big attacks beyond home.

Economically, one path to doom is the Soviet one which fell after decades of de-growth due to big misrule and army outlays. We have both too. We don’t yet see prolonged de-growth but may in the long-run, as its two causes persist. Another economic path to doom is hyperinflation. Loose monetary and fiscal policy creating wage-price vicious circles cause it. Our usually cheery central bank glumly told us recently those circles are emerging. A last economic pathway is currency collapse as in East Asia in 1998 due to external deficits as the private sector took short-term foreign loans for long-term work that gave no dollar earning. A scare in one state made foreign lenders pull loans regionally to cause currency collapses. We have had external deficits for decades but now take bigger foreign loans for works with no dollar earnings, though mainly less panicky state to state ones. But souring ties with big lenders may mean default.

How far are we from each tipping point and can we change course before the points of no return? Among the six, nuclear war may occur any time, but its risk is low. But the risk of the last two inter-linked economic pathways is high. We may only be a couple of years from the tipping point as new economic risks like wage-price spirals and foreign loans for local works increase. Economic doom doesn’t cause the gory violence of security dooms. Yet it causes silent, covert violence that hurts the poor badly via local disease, crime, and abuse. We are the only large state globally, and perhaps even only one facing all recent security and economic pathways to doom seen globally except warlord politics that doomed Liberia etc.

Why is Pakistan alone so vulnerable to doom compared to other large states in South Asia, such as India, Bangladesh, and Sri Lanka? Politics is the driving force behind all security, economic, social, and external threats. So, what is so different about our politics from other similar regional countries with whom we share geography, history, culture, ecology and economy? Why is that the country from which Pakistan split (India) and the country that split from Pakistan (Bangladesh) are economically and politically much more stable and dynamic than it? A comparison of our politics shows that these three regional states too have similar dynastic political parties and are close to us on the Transparency International Corruption Perception Index, with Bangladesh being much worse than us. Yet those political parties deliver much better than ours on governance. Deeper analysis shows that the contrasting point is on civilian supremacy and democratic continuity. While India and Sri Lanka never had military rule and have had regular elections and peaceful transfer of powers from the beginning, Bangladesh has joined their ranks too in the last 15 years and has in fact started progressing since then.

In contrast, Pakistan had its first and only peaceful transfer of power between two fairly elected political parties only in 2013 and has since then regressed again since the 2018 elections were very controversial, as mentioned even in the European Union’s election monitoring report for 2018. The security establishment has rigged partially or fully thirteen out of our fifteen national-level elections or referenda and has been instrumental in creating or controlling political parties, with the founders of all three major parties (PTI, PML-N and PPP) having been brought into politics by generals. So, clearly the fountainhead of a way forward for Pakistan towards political stability, economic dynamism and social progress has to be civilian supremacy and an end to the political role of the security establishment. Yet, so badly has its political interference over the past 60 years damaged Pakistan’s politics that its after-effects will continue to haunt it for decades even if it were to become apolitical immediately, of which there are yet no signs.

But assuming civilian supremacy, the next questions are about the right governance structure for Pakistan. The multiple hybrid systems short of outright martial law tried by the security establishment during the 1960s, 1980s and 2003-2008 have all failed too. China and Vietnam’s success has evoked much interest in the virtues of one-party rule among some analysts despite its big failures elsewhere. None of our parties have the huge capacities or the national stature to manage a one-party system successfully in Pakistan. Some analysts see electoral system fixes as panaceas: Presidentialism, proportional representation and term and family limits. But there is no global evidence show that any of them work better than our current first past the post parliamentary system or that a simple switch from one system to another can resolve the major underlying political problems that Pakistan faces. In fact, the more successful regional states like India and Bangladesh have achieved their success with a system very similar to ours. However, India’s Congress model, where after Rajiv Gandhi’s death, the Gandhi family restricted itself to running the Congress party while appointing competent non-family Prime Ministers to manage state governance is one that Pakistani family and personality-driven major parties like PML-N, PPP and PTI must emulate as India’s march towards being a global power started under such eras after 1991.

So badly has the security establishment’s political interference over the past 60 years damaged Pakistan’s politics that its after-effects will continue to haunt the country for decades even if it were to become apolitical immediately, of which there are yet no signs.

So rather than getting into futile exercises to change electoral system with unclear benefits, the focus must be on pressurizing the current parliamentary system to deliver the right mix of social, political and economic policies to halt the malaise and make a move towards progress to at least narrow the gap between it and the more successful regional states. The first issue here is the role of the state. We neither need the elitist state like our own, nor the neo-liberal, hands-off Latin American state nor the Myanmar or North Korea’s totalitarian state nor the Iranian theocratic state. We need a state that combines the developmental role played by Asian Tigers states (good macroeconomic management and stability, a competent bureaucracy, symbiotic state-business relations, publicly controlled financing for development, and a dynamic industrial policy to facilitate industrial and exports growth) and the welfare role played by the Scandinavian state. Their broad contours are so well known. Economically, it requires increased taxes and exports to cut our big fiscal and external deficits that often give crises; population management, reforming power and water sectors and increasing social and economic investment and productivity to get sustainable and equitable growth. Politically, it means devolution; police, judicial and bureaucracy reforms; peace with Baloch rebels and ending TTP terrorism. Externally, it means peace with India and good ties with all key allies like the West, Gulf states and China. Socially, it means ending extremism and full rights for women, minorities, and other weak groups.

We must devise an innovative “Poor-led progress (PLP)” model. PLP sees investing in the poor not just as an ethical or anti-conflict concern but actually as the main driver of national progress. Our internal market is small, despite a large population, given the low incomes of the majority. Increasing their incomes expands national market size and profits for producers. This in turn again expands jobs and incomes for the poor and national market size, thus igniting a virtuous cycle of national progress. The poor spend more on local goods than the rich, thus benefiting local producers and external account. So investing in the poor, largely seen as a moral aim, can actually be the main national growth engine under trickle-up economics that puts those at the bottom at the top.

A seven-step approach (COMPASS-credit, organizations, market power, protection, assets, skills and social services) that goes beyond giving only cash hand-outs serves as the compass for PLP. One, we must expand the poor’s ownership of assets. This includes land reforms, key to East Asian progress. Two, we must expand easy credit for the poor. Three, we must expand the access of the poor to appropriate skills and technology. Four, the government must ensure the rule of law to protect them from economic and physical abuse, e.g., evictions, false cases and labor abuse. Five, the state must expand locally devolved quality education, health, family planning, disaster and other social services for the poor. Six, there is a need to support community-based groups which mobilize, link and advocate for the poor. Seven, increasing the bargaining power of the poor in markets is key. Minorities, women, and people in far-flung areas must be prioritized. All this may require the state to invest Rs. trillion-plus yearly on the poor above current funding which it can do easily by increasing agriculture, property, retail, transport and wealth taxes; and cutting state enterprise losses, elite subsidies, defense outlays and tax evasion.

Experts offer very blueprints for each one of these ideas. But the issue is getting the state to adopt them as these steps nix the interests of powerful elites that stymie their adoption. These include politicians linked to sugar, real estate mafias etc., military elites who thwart peace with Baloch groups and India and thwart cuts to their big budget and businesses; bureaucrats, Mullahs etc. Can major change emerge fast enough from this paralyzed labyrinth of elite politics to avert doom? There are two paths forward. The first is a dose of doom jolting our elites finally into action. We have seen this already. The only time in recent decades our state took big action to end a major threat very successfully was in 2015 when thousands of deaths, big terrorism in major cities and loss of large areas finally jolted our elites to end terrorism. But even it has upped recently as elite interests cut full action and fatally led to futile peace talks with TTP again. A mix of hyperinflation, Rupee collapse and default is a serious risk in next couple of years. Would it jolt elites to act? The key worries on this path are the high human costs and unclarity on whether we would be able to end the crisis and if even it would invoke deep reforms. Many states have overcome such crises to do deep reform, but all had strong capacities, like Israel and the Asian Tigers. Among weak ones, Zimbabwe still is badly misruled and prone to a relapse. We face much more complex and multi-axel problems than it, including ethnic and extremism issues, a badly divided polity, and hostile ties with neighbors. Thus, such an economic crisis may morph into a political and security Armageddon for us. Luckily, there is a second, more proactive, path too.

The history of successful states shows that social movements play a critical role in improving the quality of governance and making it more people centered. Thus, it is critical for Pakistani society to organize itself better and form an alliance or coalition for change to force elites to adopt egalitarian policies that help avoid doom. Progressive, grassroots, pro-poor groups are obvious partners for leading the coalition for this pro-poor agenda. But Pakistan’s situation is so precarious, especially economically even in the short-term, that most components of this agenda would appeal to a much broader alliance, which is also necessary given the enormity of the task involved in swaying strong elite interests. Thus, a broader coalition that includes pro-poor advocacy groups, farmer, and labor entities as leaders but also professional bodies of lawyers, doctors, teachers, engineers and others; media groups, business groups, academia and expatriate groups is needed.

This practically means society willing to support such an agenda outside the narrow range of elite interests that currently control state policy or extremist and criminal groups. The starting step could be for progressive grass-roots groups to come together and then gradually expand the coalition by inviting other societal groups into it. But even this doesn’t guarantee success given the low odds of firstly getting such an alliance together and secondly its low odds of succeeding. But the chances of any other path succeeding are even lower. This sadly reflects our poor odds going forward.

Dr Niaz Murtaza

The writer is an Islamabad-based Political Economist with a Ph.D. From the University of
California, Berkeley. He can be reached at murtazaniaz@yahoo.com. X:@NiazMurtaza2.

The post Pakistan Needs To Invest In The Poor As The Main Driver Of National Progress appeared first on Dissent Today.

This short piece goes beyond the immediate multiple crises Pakistan faces on which others contributing to this series have offered thoughts and insight. Some may even be brave enough to present ideas and perspectives which are essential for Pakistan to exist at a level where a predominant majority of the population benefits from public and political action. Some will suggest how many of the chronic problems Pakistan faces today could be resolved.

Observers have been commenting on if/whether Pakistan were to default, what strategies would be required to continue functioning. (There are numerous templates and suggestions where one can look to find answers, although Pakistan’s specific economic configuration, size, location and relationship with many countries will always warrant somewhat different solutions.)

Some have also been asking if there is an alternative to the IMF, and issues related to dealing with International Financial Institutions. Another particularly topical theme on which many would give suggestions, relates to the need for ‘political unity’, or ‘consensus’, where the three or four main civilian political leaders would be advised to ‘sit and talk’ and come up with a strategy to ‘save’ Pakistan – with the military a possible arbitrator to such negotiations and talks. (The contradictions in such an endeavour ought to be obvious to anyone who sees which institutions are mentioned here, being the cause of the problems in the first place.) Issues related to macroeconomics, the Constitution, the ubiquitous climate crisis, and educational and legal reforms are also being discussed by analysts.

Reform and rethinking in all these and numerous other areas is essential, and the status quo cannot continue. For Pakistan to even exist with any prospects of hope and progress, it will have to offer very different possibilities. Avoiding mistakes of the past is important. Some areas which need to be on the agenda for discussion, and if possible, implementation, are presented here.

Neoliberalism’s failure

Perhaps neoliberal policies, backed by global capital, the IMF and the World Bank, work in some countries, where some level of economic growth and stabilisation may have taken place, albeit at huge environmental costs and with increase in inequality. This is a big ‘perhaps’. In fact, one can argue that many years after the failure of the worst kinds of capitalist exploitation under the name of neoliberal economics – the electorate – in many countries, has shunted out governments who supported and endorsed such policies. Latin America’s recent ‘Pink Tide’ offers numerous alternatives.
Moreover, the one-policy-fits-all fails, precisely because not all countries are alike. Pakistan is a good example of such failure, with after 22 IMF programmes, every government insists on starting a new one. This is a failure of every Pakistani government, of the IMF especially, and of neoliberal economics’ generalisations which are supposedly applicable to all, or most, countries.

While Pakistan cannot opt out of the globalised world capitalist system, it can adopt and promote numerous policies which focus on local needs and priorities more than those of global capital. Political leaders will need to take numerous hard decisions to make redistribution instead of accumulation the main pillar of economic policy. Key components for such an economic policy would need to include issues related to: taxation of all incomes regardless of source, taxation which is highly progressive and based on direct taxes rather than indirect taxes, doing away with most tax exemptions and benefits which favour only the elite and the private sector corporations, and similar issues.

A thorough review of expenditure and perks available to public sector employees and interests, including the military, is necessary. A wish list would allow for more spending on education, on promoting the right mix of economic incentives and opportunities, etc.

Income and wealth inequality, with extremes visible, has become a clear manifestation of every economic policy followed under the guise of neoliberalism in Pakistan. A recent UNDP Report found that ‘the richest 20 percent of Pakistanis hold 49.6 percent of the national income, compared with the poorest 20 percent, who hold just 7 percent’. At times of economic crises, as Pakistan faces currently and into the future, such inequality manifests itself in the worst form of discrimination. These policies must change. Trickle-down economics does not work. Land reforms – both urban and rural – better, focussed, distributive policies, all need to be implemented to include the poor and marginalised. All economic and social interventions have distributional consequences which affect different sections of society very differently.

Income and wealth inequality, with extremes visible, has become a clear manifestation of every economic policy followed under the guise of neoliberalism in Pakistan.

Whether a government goes to the IMF or doesn’t, the consequences fall differently on different sections of the population, the well-off, the middle class and the poor, very differently. Distributional consequences need to be factored into every decision taken.

Putting women first

In the literature on development economics and from history, numerous facts emerge repeatedly, which suggest some patterns and allow us to draw some clear conclusions and insights. One such finding is the need to put women first, in every public and private policy initiative. Without the participation, and in many cases, without the promotion and incorporation of women in every activity, countries will not progress. Women are central and foundational to the economic, social and cultural constituents of society and all things which exist subsequently. Every single policy in Pakistan must put women first. From literacy and education, to public safety and making transport available, to ensuring economic rights and opportunities, to providing equal inheritance rights, and rights to choose a spouse or the number of children they want. Such demands are a bare minimum for any collective measure required for the development of women, and ultimately for the progress of the country. At the minimum, equity and egalitarianism in every development and social project, needs to be gender-based. Our analysis of all economic and social issues needs to be based on a clear gendered perspective.

Educating women, giving them more jobs, creating a conducive environment which protects and allows them opportunity for education and financial resources will have huge knock-on effects on the economy and on society overall. From demographic consequences, to acquiring more rights and incomes, educating women will transform the social and economic structures of society and make Pakistan a far better place to be.

Neighbourly relations: An end to no-war, no-peace

Few countries progress or develop – however one wants to define either term – without engaging productively with their neighbours. The academic and anecdotal evidence and literature cites numerous economic and cultural evaluations which underlie this premise. Increasingly, countries are participating in and benefitting from regional trading blocs. South Asia remains the only major region, with as many as 1.5 billion people (twenty percent of the world’s population), which has little trade or economic engagement. The reason obviously is the relation between India and Pakistan.

Neither country is going to (physically or ideologically) move out of South Asia, although Pakistan has unsuccessfully tried for decades to do so. Both neighbours will have to come to terms with different religions, ideologies and political constituents and will have to accept each other’s domestic preferences and work around them. India is expected to be the fastest growing economy in 2023 and 2024, and in 2023, 15 percent of global growth will come from India.

Pakistan, at a time of extreme economic crisis, will be the biggest loser – having lost the opportunity to benefit from and participate in India’s economic boom. Pakistan’s leadership will cry hoarse over India’s internal politics, but this will not help Pakistan’s case. It will have to engage with its larger neighbour and accept that it is the junior partner, but a partner no less, and take South Asians forward. Egos and jingoistic sabre-rattling is not going to help Pakistan. There is an urgent need to rethink Pakistan’s India policy as this has far greater consequences than just possible economic benefits. The entire political economy of Pakistan will change if Pakistan and India can actively wage peace and engage in economic, social and cultural exchange.

Negotiating the military/negotiating with the military

Politicians are as much responsible for bringing the military into power in Pakistan, as the military’s own ambition and its greed and hubris. Pakistan continues to be dominated by the military because politicians have made it easier for the military to do so. Every opportunity that civilian politicians have created to enforce their writ on the political settlement, has been lost, as the military has re-established its writ and hegemony over civilian politicians, essentially due to some politicians (usually the opposition at any given time) reaching out to the military to favour it (the opposition) against the incumbent government.

As long as politicians and civilians believe that the military is their benefactor, it will continue to reign supreme. Pakistan’s military governments are a consequence of the failure of civilian politicians to be able to reach some form of understanding and equilibrium amongst themselves as to how to deal with the military, the so-called ‘establishment’. Individual civilians, in particular, have played a role in claiming ‘same-page-ness’ with the military, and have benefitted as well as suffered, by giving individuals in the military too much importance. While it is easier said than done, civilian politicians need to understand that the military is always a non-democratic force and needs to be kept away from politics. Only a consensus by civilian politicians can do this.

Moreover, it is important to realise that the question of the military’s budget as a share of the overall budget, is not of the consequence it once was, and today the dominance of the military in civilian and economic affairs, is much greater than what can merely be measured as a percentage of GDP. Agricultural land of many thousands of acres given by the government, or the many businesses of the military and real estate assets and connections, are far greater in value than its military budget. The absence (or inability) of civilian oversight and control, allows a severely warped playing field to exist, which hinders civilian enterprise – creating further privilege in favour of an institution which remains outside the control of civilians.

The aforementioned UNDP report shows that Pakistan’s military has ‘the largest conglomerate of business entities in Pakistan, besides being the country’s biggest urban real estate developer and manager, with wide-ranging involvement in the construction of public projects’. Pakistan’s politicians are responsible for this only as much as Pakistan’s military itself.

Conclusion

Neoliberalism’s failure in Pakistan is not simply a failure of the market or of capitalism, but also of those groups and parties which have constituted government and have held power over the last several decades – the elite in their political manifestations. Every political party as well as the military, is equally implicated in Pakistan’s acute failures and to expect the same groups of institutions or individuals to now do things differently, is irrational.

The existing political settlement has completely failed, and collapsed, and new political and class forces will have to capture political power to offer alternatives. An end to Pakistan’s political, social and economic problems can be achieved through different forms and manifestations of collective action since the existing political forces are unable and unwilling to bring about change even when the old order has unambiguously collapsed. This is a minimum requirement which underpins the possibility of meaningful and substantive change or A Way Forward for Pakistan. Otherwise, we repeat, we fail, we repeat again, and we fail better.

S Akbar Zaidi

The writer is a political economist and currently heads the IBA, Karachi, a public sector University. These views are his own and do not represent those of the institution.

The post Pakistan Needs To Make Redistribution The Main Pillar Of Economic Policy appeared first on Dissent Today.