Dawn News

Electoral economics

HOW will the state of the economy over the past four years play out in the next general elections? The recent launch of PTI’s economic plan has sharpened focus on this issue, with the other principal political parties — PML-N, PPP and MQM — also expected to announce over the course of the next few weeks their own plans to manage the economy and the myriad challenges it faces.

The economics of it is quite straightforward, from my perspective. The economy has performed very poorly, on the whole, since 2008 for a large number of (mostly urban) people. Economic growth has stagnated, investment has disappeared, and inflation has surged to its most sustained double-digit level ever, especially food inflation.

Public debt has soared, delivery of services has virtually collapsed, and the average citizen has had to endure the worst energy crisis on record. Perhaps not unsurprisingly, some opinion polls over the past two years have indicated a majority of Pakistanis believing that the country is headed in the wrong direction, or have expressed a declining faith in democracy.

More surprising, in my opinion, is the fact that rising economic disaffection has been captured in official surveys. The Pakistan Social and Living Standards Measurement (PSLM) survey 2010-11 records 43 per cent Pakistani households as believing that their economic condition had worsened in the 12 months prior to the survey, while only 16 per cent felt their economic condition had improved.

The results of the household perceptions survey are surprising for another reason. By virtue of the fact that the sample composition of the PSLM is more rural than urban, it partially challenges the assumption that the rural economy is unremittingly better off since 2008.

However, that said, the working assumption that the farm sector has done well, on the whole, since 2008 on the back of bumper crops and booming prices — though it has been hurt of late by a sharper rise in input prices — should remain intact. Higher remittances amid official data of one million Pakistanis finding employment overseas in the past four years, is another source of support for a fairly significant segment of the population.

As an aside, whether this is the ‘worst ever’ period in Pakistan’s history or not can be established fairly simply by an objective analysis of the data. However, this line of inquiry is superfluous, in my view, since voters are not concerned with comparing economic performance under an incumbent government with say, the period under Field Marshal Ayub Khan 40 years ago. People tend to ‘short frame’ things, meaning that their primary point of comparison would be the closest reference period on hand — in this case, Gen Musharraf’s years in power.

In comparison, the ‘bubble economy’ under Musharraf appears halcyon. Whether conjured by massive foreign inflows or contrived (towards the end) by dubious national accounting, should be immaterial to voters. What probably matters is that, by and large, they were better off by comparison. The economy was growing at a fast clip and jobs were being created — questions regarding the sustainability, equity and desirability of the growth model employed by Mr Shaukat Aziz and his economic team apart.

Investment was at its highest level for decades (thanks to investment-friendly policies among other benign factors), public financial management was far better, and inflation was pretty much ‘moderate’ or ‘tame’ when weighed against the post-2008 period.

The politics of the electoral calculus is more complex, and hence subjective as well as interesting. For starters, if we accept the working premise that the economy has tanked for urban voters and not as much, or at all, for rural ones, it translates into potentially a limited loss of support for the PPP, given that voters are predominantly in ‘rural’ constituencies.

Another moot point is how many of the people worse off since 2008 are voters who will actually vote on the basis of their economic condition. In addition, an observed voting pattern in many rural constituencies — especially ones that are deemed ‘safe’ with limited contest — is that no matter what the economic condition of voters, the status quo candidate usually wins.

In any case, if indeed voters will make a comparison between the 2008-12 period with the 2002-2007 one, and if they believe the latter period was visibly better in terms of improving their economic prospects, they would essentially still be crediting a PPP ally — the PML-Q — to the possible detriment of the other main contenders (especially in Punjab).

Its success in carving a wide political coalition is PPP’s ‘force multiplier’. PPP’s coalition building means it does not have to contest, and win, each and every constituency in the country. Continued support of PML-Q, MQM, ANP and possibly JUI-F puts it in a commanding political position entering into the elections.

The other ‘economic’ pivots to winning elections are of course public spending via the Public Sector Development Programme (PSDP) and subsidies. In the case of the next elections, for the first time, a nation-wide unconditional cash transfer programme — the Benazir Income Support Programme (BISP) — will also be part of the equation. Public spending generally cements the chances of incumbents, while BISP is meant to target potential new voters.

The massive ramping up of public spending appears to have played a role in protecting PML-Q from a complete rout in 2008, especially in Punjab. However, it also served to highlight the limitations of PSDP in delivering an election. Eventually, the Lal Masjid affair and other fiascos of the Musharraf government wiped out its perceived economic ‘success’ and the effects of development spending-on-steriods.

The BISP is potentially a game changer. PPP insiders claim that close to two million of the roughly four million women that are currently recipients of cash transfers under BISP have been enrolled as ‘new’ voters. (If spouses are newly-enrolled as well the total reaches four million — enough to potentially deliver 30 to 40 NA seats).

However, it remains moot whether their enrolment would reinforce existing voting patterns or act as a catalyst for winning additional seats. One dynamic at play would be if the cash under BISP is perceived by recipient households to be enough to offset any economic pain they may attribute to the government via higher food inflation or energy costs or lower incomes and lost jobs.

In the final analysis, for all the punditry, it is voters who will decide at the hustings. While large-scale surprises have been thrown up in national elections before, the hope of radical change and a sorely needed new beginning may be trumped by good old-fashioned pork-barrel politics of the ‘guns, goons and gold’ variety.

The writer is a former economic adviser to government, and currently heads a macroeconomic consultancy based in Islamabad.

Comments (3) Closed

Sep 08, 2012 11:05am
Great ! It seems Mr Sakib Sherani is more bent towards PTI... though he would be very careful to give any such clues, being the kind of person he is.
Sep 07, 2012 12:29pm
Very interesting analysis. However, let's hope and strive for the better.
Khalid Latif
Sep 07, 2012 12:52pm
What is the reason for electricity shortage in Pakistan. All thermal power houses are in working condition which can meet the national power demand. Is it not obvious that either the fuel is not being baught or something shady has been going on i.e corruption and fraud? Has any organization carried out the inbvestigation, including the media? Shortage of electricity generatio, causes less income which compells the increase in rates per unit, for the pay, allowances and other expenditures of the white elephant, called WAPDA.