Boom or doom?

Published July 9, 2024
The writer is a political economist with a PhD from the University of California, Berkeley.
The writer is a political economist with a PhD from the University of California, Berkeley.

NARRATIVES about Pakistan verge on two extremes. The narrative of all our regimes has been that it is on the verge of take-off that will land it in the august company of the Asian Tigers. But such imaginary flights to glory disappear mysteriously like Malaysia Airlines flight MH370. Then there are the prophets of doom who see a collapse soon. But despite close calls, the country has dodged many bullets since 1971.

Which outcome is more likely? On the boom side, the Asian Tigers one is a leap too far. Can we even match South Asian horses like India and Bangladesh with whom we share a DNA? They are no Asian Tigers. Out of the four economic aims — stability, durable growth, equity and sustainability — they have only the first two via a neoliberal model, with sustainability eluding even the Tigers and others globally. For a nation fed by its state with a false sense of superiority over Hindus and Bengalis, it’s a rude shock how far it lags behind them.

Despite similarities with them, we have huge lags that make this outcome hard. There were the congenital ones. India had been a state for centuries and also inherited most of the administrative, economic and political legacy the British left behind. Bangladesh had ethnic homogeneity which further crystallised into a strong sense of nationhood due to 25 years of exploitative West Pakistan rule pre-1971. India and Bangladesh’s freedom drives were led by grassroots leaders pursuing democracy. Pakistan was a divided, brand new state led by elites looking to escape democracy and majoritarian Hindu rule.

These varied birth conditions led to, and were compounded by, three catastrophic choices made by our elite rulers (especially non-elected ones) fearful of losing power: economic dependence on big states, political autocracy and social religiosity. So, we are now the breeding ground for many perverse economic, social and political traits that undercut national progress. This includes a severe gap in social capital and trust due to decades of autocracy and exploitative rule, which undermine cooperation and conflict resolution, and a lack of economic dynamism and creativity due to economic dependence and social extremism.

The task is one of societal transformation.

Our main economic problems — fiscal and external deficits and low growth — reflect these societal traits. The fiscal deficits, given low tax revenues, reflect the social mistrust in the state, while the external deficits and poor growth expose the lack of societal creativity and dynamism.

But these traits aren’t immutable. All were grafted onto society by elites and can be excised via a counter-effort. However, one doesn’t see a strong reformist social group on the horizon with clear ideas that can uproot the exploitative ruling set-up to usher in even economic stability and durable growth let alone equity and sustainability. The task is not just of following the right policies but of societal transformation that only popular movements, and not autocratic regimes, can undertake. The middle class is often billed for this role. But our middle classes and expats are still in the infancy stage of chasing populist messiahs bereft of solid ideas.

So, if even modest progress seems elusive, is doom inevitable? Many say no badly run state can avoid doom for long. We face almost every political and economic path that has led states to doom: religious and ethnic insurgencies, nuclear stand-off, slow growth, high fiscal deficit and debt, depleted reserves and weak currency.

Climate change will hit us more badly to aggravate these issues. Thr­ea­­ts from insurgents are still not as strong as in Yemen, Somalia etc. But our econ­omic issues are grim. Recent state econom­­ic collapses have come from high fiscal deficits and money supply growth causing hyperinflation (Zimbabwe) or high external deficits causing currency collapse and default (Sri Lanka).

Zimbabwe had 250 million per cent inflation caused by money supply growth above 50pc for years even before hyperinflation. Our highest money supply growth was less than 20pc during 2019-2023. Covid-19 and terrorism caused Lankan foreign revenues from remittances and tourism to fall hugely to just $2.6 billion and the current account deficit reached 5pc. Our recent external profile is better but still similar to this. Though it’s improving, external shocks and state policies can quickly reverse it.

So, while the chances of even limited boom are near-zero, the chances of economic doom, though not near-certain, are surely high. The best that we can hope for from the current ruling coterie is that it avoids economic doom. For long-term boom, and that too an equitable one, we must keep scouting the horizons for the rise of better social groups.

The writer is a political economist with a PhD from the University of California, Berkeley.

murtazaniaz@yahoo.com

X: @NiazMurtaza2

Published in Dawn, July 9th, 2024

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