Entropy and its costs

Published May 14, 2022
The writer is a former member of the prime minister’s economic advisory council, and heads a macroeconomic consultancy based in Islamabad.
The writer is a former member of the prime minister’s economic advisory council, and heads a macroeconomic consultancy based in Islamabad.

“If you leave Argentina and come back 20 days later … you will find everything is different. But if you come back after 20 years, you will find everything is the same.”

THE quote above on Argentina from Kemal Dervis reflects a frustration about a country being stuck in one place and time that is equally applicable to Pakistan. Despite its immense promise, Pakistan has been the ‘sick man’ of South Asia for several years in terms of not just its economy but also on wider social as well as governance indicators.

A brief run through a sampling of statistics and indicators is illustrative. Pakistan’s per capita income is 178th in the world, currently 69 and 61 per cent of Bangladesh and India respectively. Twenty years ago, Pakistan’s per capita income was 138pc that of Bangladesh and 130pc of India.

Read: Modest progress on SDGs

The country’s rank on UNDP’s Human Development Index is a pathetic 154th globally. On the Global Competitiveness Index, Pakistan is at number 110. Its rate of overall fixed investment as a per cent of GDP averages around 14pc — almost exactly half the average for South Asia. Foreign direct investment into the country was the equivalent of 0.8pc of GDP in 2019, less than half the rate for India (1.8pc of GDP). In terms of inflows, Pakistan attracts around $3 billion in gross FDI annually, compared to $50bn-plus for India.

Pakistan is not in a good place, and there is no one to blame but a toxic governance model.

Pakistan ranks amongst the lowest — and poorest — countries in the world in terms of both spending as well as outcomes with regard to education and health. It performs poorly on virtually all social indicators.

Equally telling, perhaps, is the country’s standing in the World Justice Project’s Rule of Law Index. Pakistan ranks at 130 out of 139 countries, behind Mozambique, Bangladesh, Uganda, Honduras, Zimbabwe, Myanmar and Bolivia. Within South Asia, it ranks second from the bottom, just ahead of Afghanistan.

In the latest Worldwide Governance Indicators, Pakistan was ranked in the 25th percentile on ‘Rule of Law’ (ie lower than 75pc of the countries worldwide), in the 22nd percentile on ‘Control of Corruption’ (ie worse than 78pc of the countries worldwide), and 32nd percentile on ‘Government Effectiveness’ (ie worse than 68pc of the countries worldwide). For ‘Political Stability’ and ‘Absence of Violence’, it is ranked in the fifth percentile (ie worse than 95pc of the countries globally).

There is a common thread that weaves through these sorry statistics: a disinterested and “extractive” elite, as suggested by Acemoglu and Robinson, and William Easterly in slightly different terms two decades earlier.

However, there is something more fundamental at work, lurking in the shadows. If a disinterested and “extractive” elite, civilian as well as uniformed, is Pakistan’s bane, the logical question then is — what is propping this elite up, even with urbanisation and the rise of a middle class? How does this elite manage to thwart the impulse for change coming from a growing population with middle class incomes, education, values and aspirations? This last question takes on greater importance in the context of the elite’s abysmal performance in governing the country for such a protracted period without apparent serious pushback.

To get to the root of Pakistan’s dismal long-run performance across a wide front, one needs to unpack the country’s toxic ‘governance model’ adopted by the establishment since virtually the country’s independence. This model has involved eviscerating and undermining the judiciary and other institutions of governance (such as the Election Commission), actively subverting accountability processes and criminal investigations, protecting and fostering the most ‘compromised’ and corrupt politicians (with Gen Musharraf’s NRO the most egregious example), cobbling political coalitions and alliances, breaking apart political parties and engineering election outcomes.

Read: NRO promulgated to remove vestiges of political vendetta, says Musharraf

For decades, this governance model also involved practising ‘managed chaos’, creating ethnic and sectarian militant outfits whose blowback not only cost thousands of Pakistani lives but also pushed the country back years.

With the slow transition to democracy taking root in the country since 2008 (albeit with caveats), and the military’s adoption of the so-called ‘Raheel Sharif doctrine’ to battle the fifth-generation war unleashed on the country, it appeared that the establishment had finally embraced institutional strengthening and a cleaning of the political stables as the only viable way forward for Pakistan.

However, the events of April 9 proved such hopes to be unfounded, while also exposing the ‘wiring’ of the system running from Pindi to Aapbara to Constitution Avenue. The model of installing a corrupt, compromised old guard is back. (Perhaps coincidentally, the US has followed the same model around the world, installing corrupt, autocratic and repressive governments from Indonesia to Latin America, to Egypt most recently).

To understand the costs this governance model has imposed on Pakistan, its people and the economy, one needs to adopt a ‘systems’ approach. If Pakistan is a whole, unified system composed of a hierarchy of subsystems, which are interconnected and interrelated, then the efficiency of the system can be measured by the degree of entropy — the level of randomness or disorder in a system. This randomness or disorder means ‘energy’ within the system is diverted and becomes unavailable, reducing overall efficiency.

This is precisely the outcome the toxic governance model has produced. It has introduced ‘managed’ chaos in the system, diverted energy and resources from productive uses, and reduced overall efficiency. It has also introduced uncertainty, whether political, economic, with regard to security or the independence of the judiciary — leading to human as well as capital flight, lower investment, etc.

It is easy to put Pakistan’s dismal performance across a broad front down to a ‘complex’ environment. But this complexity has been purposefully introduced. To achieve any meaningful measure of progress and prosperity, Pakistan has to be governed like a normal country where the rule of law is supreme, and political, judicial and accountability mechanisms and processes are allowed to function independently.

The writer is a former member of the prime minister’s economic advisory council, and heads a macroeconomic consultancy based in Islamabad.

Published in Dawn, May 14th, 2022

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