JUST because one can make strong arguments that Pakistan’s economy is not as bad as many newspaper columnists make it out to be does not mean that the economy is in good shape and does not need urgent and continuous reform.

Even the best of economies requires reform and adjustment periodically. Even when economies are working well some degree of tweaking here and there ensures that they continue to perform well. Economies cannot — should not — be left on remote control. The Hidden Hand can destroy any successes created by government policy and can cause economies to self-destruct.

Economies need constant review and overview. They need reform whenever they are performing at sub-optimal levels rather than before they reach the point where they begin to unravel. Pakistan’s economy, while nowhere near the brink, is in need of major reform for it to be able to respond to numerous problems.

There are at least two ways of assessing how well — or not — an economy is performing. One is to be able to estimate some kind of potential growth and development path which the economy ought to be on if all things were working well. In times of economic dysfunction and in the absence of what could be called economic policy, if Pakistan’s economy continues to deliver at least three to four per cent growth, it implies that with substantial government interest the growth rate could be markedly improved.

If with prolonged and excessive interruptions of power supply, floods in two successive years, a hostile domestic security environment, political instability and uncertainty, and a host of other factors, the economy still achieves in excess of three per cent GDP growth rate per annum as is expected this year there is no reason why the growth rate cannot be doubled.

This is the main purpose and function of economic policy and of the ability and quality of leadership, both economic and political. The case can be made that Pakistan’s economy is severely underperforming primarily because of the absence of government direction and policy.

Another measure to assess how well an economy is performing is comparison with other, somewhat similar countries. While India feels that it is doing well with its consistently high growth rates over prolonged periods, it always asks the question why China is doing so much better. India’s growth rate has been over seven per cent for many years now, but economists feel that it can do much better, largely because China does even better. Similarly, with so many countries in the region doing so much better than Pakistan, one can make the case that perhaps Pakistan ought to be doing much better as well.

Clearly, while one can argue that Pakistan is a special case and because of this is not doing so well, one can make the same argument for many other countries which are performing better than Pakistan. The ‘special case’ argument can be used occasionally, but not forever, especially when other supposedly basket cases tend to outperform Pakistan. What matters is how governments and leaders are able to respond to and deal with any sort of crisis or situation having an impact on the economy.

All countries have some form of comparative advantage, which could include mineral or natural resources, human capital, locational advantages and a host of special circumstances. What matters is how these conditions are used to one’s advantage.

There is no reason why Pakistan cannot have sustainable high growth rates for prolonged periods of time if better use of its numerous resources were made.

The key missing ingredient is government policy or reform. Of course, there are tangible and substantive reasons why Pakistan’s incumbent government has failed miserably at increasing economic growth, but complacency, denial and short-sightedness have played an important role.

One of the main features of the almost four years of this government has been its inability to prioritise a number of tasks which have required urgent responses. As a consequence, the economy has suffered. Of course, some interventions by the government have been well-focused and timely, such as raising purchasing prices of key crops and improving economic ties with India, emphasising the argument that with greater direction and focus many more thoughtful interventions could have improved the economy substantially beyond its present low rate.Had reform taken place in 2008, despite the problems faced since then, Pakistan’s economy would have performed far better than it has.

There is little doubt that Pakistan’s economy has performed poorly for some years now, and one reason for this is the absence of reform. Numerous analysts have given long lists of what needs to be done with Pakistan’s economy and it is not as if the government does not know. Reforms require leadership, vision and a plan. This government has shown that it does not have any of these and reform of the economy has not been a priority of the government.

This remains the main reason why Pakistan’s economy continues to muddle through, a few per cent growth rate here, some remittances and loans there and little more. Left to itself, the economy will never reach anywhere near what could be its potential. Without active engagement and reform, we should expect more muddling through for a long time to come.

The writer is a political economist.