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Atlas bolted

January 15, 2019

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The writer is chartered accountant based in Islamabad.
The writer is chartered accountant based in Islamabad.

THE key quality of a great storyteller is his or her ability to have the reader rooting for a character that the latter despises in real life. As an example, fellow countrymen cheering the hero of an Indian spy thriller movie has always been pretty irksome; don’t they realise that the bad guy, explicitly or implicitly, is a Pakistani! Economic reasons aside, this is another good reason to ban Indian cinema.

But that perhaps is a key strength of Atlas Shrugged, a novel by Ayn Rand; you may not agree with her philosophy of objectivism, but the story is, if nothing else, compelling. So much so that the opponents of capitalism who should per se be rooting for Wesley Mouch, director at the Bureau of Economic Planning and National Resources, cannot help but miss out that Mr Mouch is the real hero and not John Galt.

The story is all about how the state’s repressive laws, including nationalisation and coercive appropriation of fundamental economic rights, forces the creative entrepreneurs to disappear into a valley organised by John Galt, the hero, until such time that the government completely collapses due to mismanagement, and at which time the capitalists decide to return and create utopia.

The title of the book is a metaphor, with Atlas representative of all the industrialists, the inventors, the artists, the professionals and the entrepreneurs who are portrayed as the driving force behind the economy, but decide to ‘shrug’ their responsibility due to the high-handedness of the state. And obviously in that fictional world everything collapses.

For those who can’t recall Atlas, he is the Titan holding up the heavens on his shoulders as a punishment from Zeus.

The right economic solution lies between two extremes.

Here, it might be appropriate to clarify my personal take. The right economic solution lies between two extremes, capitalism and state-planned economy, depending upon a particular nation’s current stage of development. Note that a pure free market is a mythical construct while a completely state-controlled economy has empirically proven to be a disaster. This argument of a golden mean between two extremes is amicably supported by the economic history of developed nations and that of the currently growing economies such as China.

Unfortunately, there are no mathematical models that clearly identify the level of economic freedom and state intervention for a given stage of development. But rather than reinventing the wheel, a better strategy might be to learn from the history of developing nations which have a successful economic road map in modern times, say the last two decades. Invariably the state might need to invest directly in certain projects, all the while nudging the private sectors towards others. Frankly, a complete reliance on the invisible hand without the help of the visible hand of government is probably not the solution for Pakistan — as quite evident from the last decade.

Finally, deciding which industries need focus is directly associated with available resources, perhaps with export-oriented and import-substitution industries in the cross hairs. As a side note, the view that FDI has any motive other than profits, with payback directly linked with country risk, is misguided. Further, it must be appreciated that foreign investors’ interest in an economy would be largely inexplicable, from a purely economic standpoint, when domestic investors are shying away from investing in their own country. As a wise man rightly said, the best and only helping hand is attached to your wrist!

With this background, the current rumours floating around that domestic business is contracting and that domestic entrepreneurs are shying away from investing in the current uncertain situation are rather worrying; if they at all be true. As argued earlier, the state cannot drive an economy on its own, and domestic business going into hibernation may have repercussions, primarily in the form of unemployment. While Wesley Mouch remains my hero, there is a clear realisation that John Galt is a necessary evil.

A recent announcement by the country’s chief executive that the government will be focusing on the Ease of Doing Business Index ranking was a welcome development. The state, however, needs to realise that whilst any such change is a positive, substance over form should be a fundamental principle. Beyond building perceptions that doing business is easy in Pakistan, in reality it should be easy to do business in Pakistan.

Identifying critical industries which should be controlled by government and allocating key industries amongst domestic business houses for investment whilst providing such businesses protection are some of the lessons out there which Pakistan can learn from and replicate. All the wheels of the economy should move in a synchronised manner and the state should take necessary policy decisions before we find that Atlas bolted!

The writer is chartered accountant based in Islamabad.

syed.bakhtiyarkazmi@gmail.com

Published in Dawn, January 15th, 2019