Economic growth and development bring progress and prosperity, but at the same time, they tend to create imbalances in the growth of various sectors of the economy.

If an economic model does not provide a mechanism for timely remedial measures to manage emerging macroeconomic imbalances, this raises the risk of an economic crisis. So, stability has to be blended with economic growth and development. And without social development, economic growth remains sluggish. It is only a high rate of economic growth that can generate enough jobs. The social exclusion widens the disconnect between the people and the government.

Similarly, the process of economic growth and development brings about socioeconomic changes in which an idea, theory, set of principles, or economic model may lose its social utility and trigger a crisis prompting transformational change, made possible through technology, innovation and human capital.

And this process leads to a conflict of interest between losers and winners, prolonging the required course correction. It is a universal trend now being witnessed on different scales, especially in countries with low productivity burdened with unsustainable foreign and domestic debt.

In this backdrop, the International Monetary Fund (IMF) needs to evaluate the performance of the current government in achieving fragile macroeconomic stability in the short term. Owing to ‘a higher than targeted primary budget surplus and greater revenue-to-GDP ratio’, officials are confident that the IMF will ignore the slippages in the tax target. Pakistan is well positioned for review talks with the fund, says Finance Minister Muhammad Aurangzeb.

Economic democracy proposes a shift of ownership from corporate shareholders to workers and the broader public

However, according to a media report, Pakistan may have to further reduce federal development spending, take a combination of revenue measures, and activate contingency measures committed with the lender (likely from April 1) to unlock the next IMF tranche.

Analysts at Dawn are of the view that the IMF’s scrutiny of Pakistan’s performance is most likely to progress smoothly without any harsh conditions for the second half of the present fiscal year or punitive demands of the lender for tax slippages — considered the main cause of the fund’s worry.

While acknowledging that strengthening economic stability depends on the success of the IMF’s review, the analysts note that the price for fragile stability — a sharp slowdown in domestic growth as well as rising unemployment and poverty — has been massive. With the second Trump presidency in the US shaking up the global economic and political order, they add that the need to free the economy from the clutches of the forces of the status quo and get it back on its feet has never been so compelling.

The exclusion of fundamental matters of distribution of resources and lack of acknowledgement of the need for economic democracy means that the establishment-centric system cannot be fundamentally overhauled, notes scholar Aasim Sajjad Akhtar.

Social exclusion widens the disconnect between the people and the government

Grounded in values of solidarity, cooperation, democracy and sustainability, economic democracy has been defined as a system where people share ownership and decision-making over power and resources in their communities. It means real partnership and shared power, control, and benefit for everyday people in the things that matter in their lives.

Categorised as a socioeconomic philosophy, economic democracy also proposes a shift of ownership and decision-making power from corporate shareholders and corporate managers (such as a board of directors) to a larger group of public stakeholders that includes workers, consumers, suppliers, communities and the broader public. It may be noted that the global effort in this direction to promote diversity, equity and inclusion in the corporate world has not made significant headway anywhere.

“There is no quick fix that leads to economic democracy”, says columnist Aasim Sajjad Akhtar, “but if we do not acknowledge this imperative, we will forever be pinning our hopes on self-proclaimed democrats that do not fundamentally want to break with the economic logic of the existing political order.”

It may be pointed out that the status quo often tends to resist fundamental changes through authoritarian rule. However, there may be no escape from political instability owing to the suppression of the organic growth of democracy in an era of self-determination of individuals and nations. This is evident from rising self-employment, job hopping by professionals, and brain drain in the pursuit of better livelihoods. That brings into question the ability of hybrid regimes to deliver public goods.

There can be no meaningful pro-democratic politics, Mr Akhtar maintains, without stopping the hidden subsidies that both the public and private sectors enjoy.

Taking into account the whole range of economic activities in formal and informal sectors, including rent-seeking and unsustainable import-created foreign debts, a political economist argued some decades ago that the dispersal of capital was faster than the concentration of capital.

For example, business groups, particularly the textile industry and even multinationals, outsource certain labour-intensive stages of their production to the informal sector to cut costs in the business environment they work.

Published in Dawn, The Business and Finance Weekly, March 10th, 2025