March 23, 2008

I am an accidental economist. I turned to the subject when I went to Oxford as a Rhodes Scholar in 1961. I had meant to study physics, a subject in which I had already received a Masters degree from Government College, Lahore. By the time I arrived at Oxford’s Christ Church College, I had joined the Civil Service of Pakistan (CSP). Within a week of my arrival at Oxford, Sir Roy Harrod, one of the most eminent economists of the day who was also my ‘moral tutor’ advised me to change my discipline. The moral tutor was the person who served as a guide and philosopher to those who attended Oxford and his advice mattered. He persuaded me that studying economics made greater sense for me than continuing in physics.

I was then a fledging civil servant hoping to earn my living by succeeding as a public servant. Sir Roy, a disciple of John Keynes and also his friend and biographer, was of the view that economics would prepare me much better for my chosen career in the Pakistani bureaucracy. It would help me to understand the problems faced by the country and the people I was hoping to serve. ‘Not only should you study economics’ he said to me ‘but also write about it’. Looking at the short essay I had written for him on the subject of the contribution trade could make to development he said that he could see that I could express complex economic thoughts in simple language. These were flattering words from one of the best economists of his day and one who wrote a lot and simply. I took his advice and began to both study economics and write about the subject.

The second prominent economist to influence me both as an economist and as writer on economics was Professor Alexander Gerschenkron, an economic historian of great repute who taught economic history to graduate students enrolled for doctoral studies at Harvard. His book, Economic Backwardness in Historical Perspective (Cambridge, Mass. Belknap Press, 1962) had been extremely well received by the academia. In it he posited a theory which explained how countries that had lagged behind the leaders sometimes managed to catch up with those who had initially led the way. For that to happen needed good public policy. In his book he explained how France caught up with Britain and how Germany, some decades later, caught up with both of them.

Both France and Germany followed different approaches; France used the state to guide the private sector while Germany encouraged a close working relationship between the banking and industrial sectors. Both countries succeeded since they based their approaches on some historical facts. In France the state had always been stronger than in other European countries. In Germany private sector had learnt both industry and banking and built strong institutions in both sectors. The Germans, working on their endowment, linked together the two sectors which led to massive bank investment in the country’s industrialisation.

Having thus explained the rise of various countries in Western Europe, Gerschenkron turned his attention to the Soviet Union and explained that country’s development effort in terms of a leadership in a hurry that wished to industrialise rapidly in order to catch up with the rest of Europe. The Soviet relied only on the state to hurry up with the process of development and shortcutting it by forcing the private sector to work according to the command of the state.

Gerschenkron invited me to join a small group of budding economic historians who were working in various fields. We met every week in his Cambridge house. He asked me to work on the way the British administration had used the public sector to develop the system of irrigation in what are today the provinces of Punjab and Sindh in Pakistan. The British invested in these provinces in order to solve the problem of recurrent food shortages in the eastern part of their vast domain in India.

By working on this subject, I learnt to use economic history to understand the nature and scope of current economic problems and also to search for solutions to the problems by finding their historical context. I learnt how the state could use its own strength as well as that of the private sector to systematically deal with a difficult situation. The state had the financial resources and technological knowledge to harness the vast rivers that flowed through Punjab and Sindh and provide irrigation to the extensive virgin lands available in these places. Having done that, the British turned over the virgin land to individual farmers to cultivate it.

While the land was being thus colonised, the British strengthened the system of land administration which provided security and legal cover to the new landowners, while taxing them to recover some of the investment they had made. They also built an extensive system of research and extension to keep the farming community current with modern practices. This model worked. Within a short period of time the British had turned the Punjab and Sindh into the granaries of their Indian Empire solving the problem posed by recurring famines.

Since those early days I have written a great deal on economics, on economic development in various parts of the world, and on Pakistan’s economic history. My latest book, Changing Perceptions, Altered Reality: Pakistan’s Economy under Musharraf 1999-2006 was recently published by Oxford University Press and reviewed by this magazine on February 3. In writing the book I relied on decades of reading I have done on economics and on Pakistan to present some ideas on the challenges the country faces and how it could search for solutions to them.
 

While the land was being colonised, the British strengthened the system of land administration which provided security and legal cover to new landowners, while taxing them to recover some of the investment they had made. They also built an extensive system of research and extension to keep the farming community current with modern practices.
 

In this context I would like to mention a few books that helped me to understand where Pakistan stands today. The first is by Gurucharan Das, an Indian corporate executive, who in India Unbound (Alfred Knopf, 2001) told in beautiful language how his country had freed itself from bureaucratic controls and set its economy on a trajectory of high growth. Pakistan’s policymakers would do well to study the book and understand how India began to deal with its problem of economic backwardness. It took only a handful of foreign-trained economists, among them Manmohan Singh, the country’s current prime minister, to free India in the mid-‘80s from what was then called the ‘license raj’ and went on to accelerate its rate of economic growth and modernise its economy. A cumbersome system of industrial and trade licenses and other controls on the working of the private sector had kept the Indian private sector leashed to the ground. These controls were put in place by Jawaharlal Nehru who ruled India for 17 years. He was very impressed by the Soviet model of state-guided economic development which, as history was to prove, helped neither Russia nor India.

The other book, also by an Indian business executive, has a lot to say on how to introduce new products to the low income consumers. Prakesh Tandon’s Punjbai Century, 1857-1947 (Berkeley, University of California, 1969) tells the story of the introduction of Dalda in Indian villages by using a tin which could be used over and over again by the poor consumers. This is an interesting story that should be of value to Pakistani producers as they enter the long-neglected area of agro-processing.

The final book that I would pick up from my large personal collection is David Warsh’s Knowledge and the Wealth of Nations: A Story of Economic Discovery (New York, W.W. Norton, 2006). Warsh is also a must-read for concerned Pakistanis since it tells how recent developments in economic theory can help the policymakers in the country to use the vast human resource available to them for producing a higher rate of GDP growth, reducing the incidence of poverty and improving the distribution of income. Before these new developments, the governments in developing countries tended to use labour and capital accumulation as the major determinants of growth. Now they are learning to factor in technology, human development, and institutional strengthening as the factors contributing to growth.

The purpose of this essay was to tell readers how a series of chances helped me to go towards economics — not any economics, but the part of the discipline that has a direct relevance for a country from where I come and whose development and betterment I remain passionately interested in. The same avenues are available to tens of thousands of young Pakistanis looking for a future for themselves that would not only help them, but also aid their country. Knowledge of economics and familiarity with economic history makes people understand how they can improve their lives. It also helps them not to make the mistakes made by those who came before them.