Pakistan's Economic Advisers

With the new government taking shape in Pakistan, with a promise of democracy, M. B. Naqvi writes about the economic direction that this government will take. Article published in The Post, Pakistan

Related Links
The Weighty Issues
Military Inc and the Death of Civic Society
Pakistan Needs a Real Democratic Government
WB Officials Refuse to Be Held Accountable

A new Government is about to be formed and its shape is more or less clear. It will comprise PPP, PML (N) and ANP coalition at the Centre and similar coalitions in at least three provinces and maybe that some similar development takes place in Balochistan. The country's economic condition today can only be described as being a mess after eight years of economic mismanagement by Musharraf's gift of New York based economic wizards. Surely, the new regime will be forced to have new economic policies and will necessarily seek advice over what policies to follow.

In this connection, some trade union leaders with a banking background have suggested to the PPP, PML (N) and ANP leaders that they should avoid taking advice from economists that are linked with IMF. This is a sensitive issue but the advice is sound. Much of the economic malaise that afflicts Pakistan economy points, in many ways, to what the economic advice from the IMF (and World Bank) was. The IMF-World Bank duo, working in concert with American Treasury and WTO or its predecessor bodies, has duly led Pakistan down a path that has created today's anomalies.

This, to use a plain description, must be said that many of the Pakistani economists have been corrupted by IMF and World Bank by luring them into writing papers for them for fees that are seen to be very attractive here; this is a highly corrupting influence because their papers tend to end with operative advice such writers imagine will be appreciated in the World Bank-IMF community. It is a fact that many Pakistani economists, despite knowing better, tender an advice that is in consonance with the advice that the IMF and the World Bank actually give to the third world under their various programs of structural adjustments, now called globalisation guidelines.

There is no doubt that the new government will need competent advice. It should come from Pakistani economists and not from abroad. But these economists must not have been under undue influence of IMF-World Bank thinking. The best course would be for the victorious parties to either have their own think tanks comprising Pakistani economists and perhaps retired officials or the coalition should have its own one larger think-tank. There is no escape from the necessity of sound research by locals, keeping in mind local conditions and problems. One formula for the entire world does not and cannot work. That one formula formulated by Western economists in Washington and London would, ipso facto, be tailored to serve the interests of the rich and industrial Western economies. Pakistani rulers need to beware.

Pakistan is passing through a phase that can mark a new beginning if the new Government surmounts its initial political difficulties of wresting decision-making powers from President Pervez Musharraf and his old cabal of advisers. Assuming that a new beginning has to be made - and there is no other option - new economic policies will have to be evolved whether they conform to the thinking of World Bank-IMF or not. Blindly following the World Bank-IMF advice has led Pakistan down the garden path of present straits.

Pakistan is an underdeveloped, quite partially and newly industrialised and not very efficient and still largely agricultural country, with few skills and little education. It was advised, or forced into, adopting a set of coherent policies - a specific paradigm really - that have created conditions that, if they persist, can cause the failure of the state or a meltdown. Why because it needed ever more loans and was forced into throwing open its doors wide to more efficient exporters and Islamabad being persuaded to let its price levels rise as markets demand and make the currency convertible on both capital and current account - a formula to lead it eventually into a failed state because it needs more imports and exports less unless it can industrialize and export more (that would be impossible because of policy conditions Pakistan accepted earlier). The advice also included the strange formula of working for high growth rates, based on producing more (and if possible with growing efficiency) for foreign markets and based on imported capital for investments, the profits of which would continue to go out. The magic of markets has in fact produced the present conditions because Pakistan, like a tamed animal, has been obediently following IMF-World Bank advice for as the ZA Bhutto days.

Unless Pakistan devises a growth strategy based on a modernised and rejuvenated agriculture based on effective land re-distribution and a self-reliant and self-sustained industrialization based on expanding education and skills and domestic savings and investments and the new industries producing primarily for the needs of a burgeoning population, the development would be fickle and uncertain as indeed it has been. Nobody in the West owes Pakistanis the sound development of industries for the benefit of Pakistan. If they do give aid, it is only to serve the ends of their own economies. Foreign official aid does what commercial credit does in the private sector. It is not a safe means of sustained growth for a poor third world country that would also reach down to poorer citizens of the country.

The new rulers have to tackle mountainous problems. To deal with them will not be easy. The new rulers would also need some help. But that should be more on sound advice that supplements, and not supplants, the recommendations of local independent economists, rather than financial investments in making primarily consumer goods. The international economic conditions in which the new Government will start its innings are harsh and forbidding. Look at the oil prices so high above $106 a barrel. This factor alone can cause an international recession. The poorer third world countries, including newly industrialized ones, will find it hard to exports to markets in recession, that will put new burdens with origins in international recession and its many causes: beginning of a revolt against a fast-depreciating dollar, the geo-political difficulties of America that are isolating it and making it world's greatest debtor, the rise of new economic superpowers and above all the greed and designs of major international oil companies and the oil producers cartel who are making a killing or grain markets sharks' activities.

The huge profits to these huge companies and oil giants and producer all make big profit at the expense oil-dependent world - most of which are poorer third world countries including NICs. How long can this go on? It is obscene loot. While other factors have to be taken into account, it is time that the poorer nations taking the lead, unite into a sort of international consumer's cooperative while bringing to bear their political unity on big multinational corporations that control international oil and other trades. Some sense has to be drilled into them so that they remember their own rhetoric social responsibility. Let's hope that can go some way toward preventing racketeering by what are called oil giants and other MNCs, who keep many of the oil producers in their pocket.

This is a field that had been briefly broached in 1970s as an evanescent concern of the PPP government of Z.A. Bhutto who came under tremendous American opposition afterwards. This had begun to be articulated in the wake of the first Oil Shock. The new government must realize its correct place in the world even as it eases out of the American stranglehold over its economic and political policies such as making Pakistan a non-NATO ally. Do Pakistanis need to be one? Do they feel any affinity with NATO that has obviously outlived its original purpose and is now involving itself far and wide in ME, Africa etc.

All said and done, the new rulers must realize that a majority of Pakistanis are living lives of misery, thanks to the high levels of inflation, led by high food prices, results of agricultural stagnation, poverty of the masses, lack of education and skills and of course underdevelopment of all kinds. Willy-nilly the new government(s) are required to be agents of change whether or not the leaders actually want any real change. If they do not come up to the expectations of voters to change their lives for the better, they will end up as failures and shall soon be driven out of politics.

- The writer is a veteran journalist and freelance columnist
Posted by collective at March 17, 2008 07:40 AM