A flawed development model

Published September 23, 2016
The writer is a senior research fellow at the Institute of Development and Economic Alternatives and an associate professor of economics at Lums, Lahore.
The writer is a senior research fellow at the Institute of Development and Economic Alternatives and an associate professor of economics at Lums, Lahore.

EACH time we have had a growth spurt in Pakistan, it has been based on investments in physical infrastructure or investments in physical capital. Expansion in the 1960s was based on gains in industrial and agricultural production. There were gains from increased agricultural productivity but these were based on research that had mostly been done elsewhere.

The expansion in the 1980s was again a similar combination. We did get some benefits from opening up the economy in the early 2000s but most of the gains even then were consumption-led. Now we are again hoping investments in the energy sector, roads and other infrastructure projects, through the China-Pakistan Economic Corridor (CPEC) or otherwise, will get us the economic growth we need.

In all previous instances, reasonable or high growth rates vanished fairly quickly. The last years of reasonable growth were almost a decade ago. Recently, we have even been struggling to reach growth rates of five to six per cent. Low growth rates of the economy limit our ability both to tackle poverty and offer good employment opportunities to the millions who join the working-age population every year.

There might be a number of hypotheses that could, quite reasonably, be created to explain why we have not been able to sustain high or reasonable growth rates. Corruption, overregulation, weak institutions, poor infrastructure, state incompetence and institutional inefficiencies could all provide alternative explanations. But I want to focus on another candidate: the poor state of our human capital. I feel this, more than anything else, explains where we stand today.


If people are educated and healthy, why should it matter if growth rates do not match those of East Asia?


Many experts have commented on the human development gap in Pakistan over the last two to three decades. They have pointed out that for our growth rates and level of income Pakistan’s achievements in the area of human development has been much lower when we compare them to other countries in similar situations. We could and should have been doing much better in terms of education, health and other human development indicators.

Going further, my contention is that the reason we have not been able to sustain high growth rates, even when various events have afforded us a few years of higher growth is that we just do not have the human capital: we do not have enough creative, educated, trained and healthy people who can sustain growth.

Historically, we have never invested very much in our people. And you can see the difference in countries that have. When East Asian states started to invest in their people they were not very different from where we were at that time. Today, the comparison appears unwarranted and decades of investments have created the difference. But the conditions back in the 1950s were not terribly different.

We have good examples closer to home too. Sri Lanka is an excellent example of a country that invested heavily in its people and that is now reaping the benefits. Despite decades of civil strife, Sri Lanka’s life expectancy today is 77.9 years, its infant mortality rate is 8.5 per 1,000 births and maternal mortality 0.39 per 1,000 births. Its overall literacy rate is 92.5pc, while the youth literacy rate is 98pc. In addition, 87.3pc of the population has access to safe drinking water. All of the above statistics are comparable to developed countries and are several orders of magnitude better than where we stand today.

The numbers mentioned here are indubitable. But some experts have been arguing that Sri Lanka’s higher achievements in the area of human development in that country have been achieved at the cost of GDP growth: by diverting resources to health, education and other human development sectors, Sri Lanka has had to live with lower growth rates of GDP.

There are two responses to this. One, this story might have been a good reading of Sri Lanka until a decade or so ago, but it is no longer the case. Sri Lanka has doubled its per capita income since 2005. Poverty levels stand at 7.6pc only and the current unemployment rate is 4.9pc.

But secondly, and far more importantly, so what? If growth has been a little slower, so what? Is the quality of life of the people there not the metric by which to judge the success or failure of the policies of a country? If the people are educated and healthy, and have a reasonable standard of living, why should it matter if growth rates do not match those of China or East Asia?

Sri Lanka offered free education, for nine years of schooling, for all children, in 1945. Their motorways were built only recently. And even now the motorway they built is a four-lane one (we have a six-lane one). We announced free and compulsory education only six years ago. And we have not been able to implement this responsibility to date.

Visit Sri Lanka. Talk to ordinary Sri Lankans and see the impact education has had on their approach to work and life and their aspirations. You will immediately see the point of having a human development-focused development model or policy.

Will CPEC give us high growth rates? Maybe it will. If the volumes of investment that are being talked about do come through, higher growth rates will be the result. But will we be able to sustain these growth rates given the human development levels we are at currently? It seems impossible. Will CPEC and other infrastructure investments be able to transform us into a developed society and allow our people to be a lot more educated and healthy? Not likely. Our model of growth and development is a deeply flawed one. It might deliver some elections for the government, it is unlikely to lead to sustainable growth and development.

The writer is a senior research fellow at the Institute of Development and Economic Alternatives and an associate professor of economics at Lums, Lahore.

Published in Dawn, September 23rd, 2016

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