May 13, 2002	Monday	Safar 29, 1423

The result of the national referendum held last month is but a general affirmation of the “reform” process started by General Pervez Musharraf’s government some two years back. However, the referendum question did not permit the respondents to express their true position on each of the various types of reforms being undertaken.

To that extent, it is not a valid indicator of the constituents’ position on various components of these reforms. For, the question assumes that a “yes” to one type of reform should also imply a “yes” to another, and thereby a “yes” overall. Conversely, a “yes” overall is a “yes” to each component of the overall reform effort. By no means is this the case in reality.

Even those who might have voted a “yes” overall might disagree very strongly on some components of the reform. For example, the so-called economic “reform” effort, a case in point. So, their overall “yes” is not an internal contradiction but it is an outcome of a careful cost-benefit calculation they may have made to decide effectively within the constraints of the referendum question. That is, if the gains from a “yes” on the issues of extremism, corruption, and the rights of the disadvantaged outweighed the costs from an implied “yes” on other issues, they might have decided on a “yes” overall. So, the “yes” outcome this April 30 shows only the “net” position on the reform effort and certainly not the reform-specific position as the question was not designed to gauge the same. The policy elite should, therefore, not be concluding that the people in general have sanctioned their economic “reforms” as well. They should be interpreting the referendum results with caution in the light of the ambiguity built into the question.

The referendum question could sell on the hot issues of extremism, corruption and the disadvantaged, especially the women. This is notwithstanding, the continued sectarian killings and the victimization of women like Zafaran Begum under the discriminatory laws. “Yes” votes were, therefore, cast in strong hope which will begin to vain soon unless the actual results are quicker and clearer.

As for the so-called economic “reform” effort, one can hardly find any innovation. Nearly all components of what is presented as economic reform are a continuation of the structural adjustment process started over a decade ago under the aegis of the IMF and the World Bank. No government can, therefore, own this policy direction as it is a lender-driven agenda. The government may want to take credit for micro-finance banks they started last year. However, this too is an idea that was being implemented already by the Orangi Pilot Project and to a large extent by the First Women’s Bank. The government can only be commended for extending the micro financing effort. However, as mentioned time and again, this is a tool to help a minute fraction of the total poor eke out an existence. It will certainly not take a jab either at the source of poverty or at its causes. It is effort in the latter direction that is required to prevent the system from generating more poverty. Emphasis on micro-financing actually anticipates more poverty which will, in turn, create more demand for micro-financing and more business for some failed bankers of the country.

Poverty alleviation requires solutions that transcend the realm of economics. To strike at the roots of poverty is to take a jab at those very structures of power which are responsible for generating the same. Is it then possible for a government to work in this direction as nearly every other government is either a part of these power structures or falls prey to them sooner or later?

While the so-called democratically elected governments in the last over a decade hailed from the same wealthy structures that cause the malaise thus giving the country more plutocracy than democracy. The current incumbents ought to be freer people considering their hard working class backgrounds in the middle-income range. However, it remains to be seen for how long will they be able to resist a wealthy elite capture. For, the wealthy elites appear to have taken up the causes of the civil society in a big way, given their wider organizational and financial resources.

They also appear to have hijacked and modified the agenda thrown up from the lower income strata which included empowerment of the peasantry through land reforms. So, while this more aware class professes the same goals, the soft road it wishes to take will not help us get to the goals even in a century for as long as they will wish to bypass the essential measures. For, they wish a change without the kind of change required essentially to transform the country’s landscape in the foreseeable future.

And, by virtue of their wider resources, they are able to access the corridors of the policy elite which access can soon be transformed into an invasion. More so, through a nexus between them and the landowning classes within the military establishment.

This is perhaps one of the reasons why in the realm of economics we see more of goals than strategy proper. So, even though the President confessed his intent for land reforms publicly before a Pakistani audience in Tokyo during his recent visit to Japan, it remains to be seen how soon would he be able to translate it into a reality.

If driven by expediency for too long, we will only see a slide into the capital-intensive plantations that will further immiserize the rural and thereby the urban poor through linkages discussed last time. Expediency will then perhaps prepare a hotter recipe for a further deterioration of the law and order situation which feeds back into economic stagnation. This dog-chasing-its-own-tail syndrome should be avoided if the current incumbents seriously wish to make a clear break from the past for which singular purpose “yes” votes were cast in this referendum, reform-specific differences notwithstanding.

Another link in the elite network that believes it thinks best for the people is the World Bank or the connected group of Pakistani expatriates who have returned home to serve after or shortly before their retirement in the land of milk and honey. Indoctrinated by a free market, free trade ideology that the US exported eagerly towards the end of the Cold War; the honest amongst them are beginning to accept that the IMF and the World Bank recipes have neither given us growth nor exports, nor the concomitant results they expected would be delivered by enhanced growth and exports.

As we continue to experience low growth, low exports, low tax revenues; this class of professionals wonders about the lag between reform and desired results. And, in order to achieve the results everybody wants to see, they want more of that reform that has failed to turn the economy around. We are, therefore, pushing more of a failed strategy when even a successful strategy is not advised to be followed in the present or in the future as it may not fit with the changed environment.

So, while even a successful past strategy is to be evaluated for current suitability, a failed strategy is to be discarded no sooner than it fails. If not, it is poor strategizing and this is precisely what is happening in the realm of Pakistan’s economy. It has not turned the corner despite a $5.5 billion in forex reserves contributed more by extraneous factors than by the internal economic strength.

The issues faced on the front of reform are the same. Inability to attract either foreign or domestic private sector investment or to turn the public sector around into profitable resource generating entities.

Casualties made in the process of turning the public sector around are many which has further fed into the climate of discontent and lack of confidence prevailing in the country when an upbeat atmosphere is required to induce private investment.

The vicious circle of economic stagnation is yet to be broken. In the meanwhile, efforts are being directed at minimizing the debt and the debt-servicing burden in which direction there may have been some percentage point gains. The “mass of misery piling up at the base” is, however, awaiting quantum and not percentage point changes in their lives.

The above percentage point gains too are driven more by the non-economic factors following September 11, 2001 rather than by the economy’s intrinsic strength. If, at all, the international power brokers see our reforms headed in the “right” direction, it is more due to our prompt liberalization through rapid import tariff reduction that integrates their surplus production capacities with our upper crust consumers with surplus wealth. So much for the country’s international economic integration whose own industrial manufacturing capacity is fast giving way to trading. We must, therefore, be able to appreciate why we sometimes receive kudos from the foreign lenders whose objectives are dictated by their financiers rather than by our domestic economic interests which we alone can guard.

Or, perhaps we cannot for as long as we define road maps that will keep deflecting us from the path required to get to the overall economic goals. While there is a consensus on economic goals, the strategy should begin harmonizing the domestic economic interests soon before a continued disharmony renders it impossible to make progress even in the non-economic realms put up in the referendum question.