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Tuesday, May 28, 2024

Why is our economy fragile since 72 years?

It’s about time that we Pakistanis wake up and look at the real reasons for the lack of sustainable economic growth. It is about time that we educate each other as to what our vote demands in return from our politicians - Mir Mohammad Ali Khan, economic expert and ex-Advisor to the government, writes while breaking down 72 years' worth of reasons that hinder Pakistan's economic growth.

This past weekend, National Outreach Program asked me to deliver a speech on the subject of my choice. Writing about the temporary ills of our economy and its causes and solutions for years, I wanted to deliver a speech looking back at the root cause of the disease gripping our economy for the last 72 years.

I delved into the economic numbers of our country for the past 72 years. Everything that I could dig up, I dug up. Everything that I could exhume. I exhumed. But that was not the challenge. The challenge was to turn quantitative research into an easy-to-understand qualitative speech that speaks to the common person. Common enough not to understand the financial jugglery but, intelligent enough to understand the ills faced by our economy. Ills that are NOT economic yet, affect the economy. Ills that keep any economy fragile. Ills disrupt growth which could lead to poverty alleviation. Ills that make rich, richer and keep poor, poorer. Ills, with the presence of which, an economy cannot prosper.

These are the ills of an economy that do not directly show up in economic analysis and its figures but affect those figures immensely. These are the ills that we need to address because they spread far beyond politics. They drip down into the valleys of any society like a constantly flowing downward stream, every summer, after the glaciers have melted. It is that stream we can control but not the melting of the glaciers, yet we put all our efforts into controlling the glaciers, and then wonder as to why we are failing.

Read more: How to deal with recent economic woes in Pakistan?

We only look at the entire process of economic growth through the famously propagated terms such as the Current Account Deficit, Budget Surplus or Deficit, Foreign Reserves, Export Growth, Unemployment Numbers, or whatever technical jargon mustered up by the ones on television (who in actuality are supposed to make matters simple enough to understand) make them complicated that you get lost in the translation of such figures and numbers to comprehension.

Economies are made up of societies. People. Tribes. Feelings. Behaviors. Psyches. Rifts. Enmities. Likings. Dislikes. Simply put, economies are made up of human beings whose behavior triggers economic growth or slowdowns.

A society with rampant injustices cannot grow, or a society with immense governmental support in every sector usually does not fail. So we need to understand the societal structure of a country to suggest a remedy for sustainable growth. You cannot prescribe medicine without knowing the disease.

And the disease that eats up any economic future is in three parts; social disease; political disease; and finally economic disease. We, in Pakistan, have always tried to find the cure for social and economic diseases through political means. Yes, it is the politician who is supposed to fix those ills as well, but we without identifying the actual social and economic diseases, expect wonders from political personalities. And when we get sick of political personalities, we pray for divine intervention or a military solution. The solution is only in a political treatment but with the right diagnosis. The right medication for the correctly diagnosed sickness.

So what are the reasons that keep an economy from growing sustainably?

Societal failures of Pakistan

Firstly, Pakistan suffers from chronic human flight, otherwise known as the brain drain. No economy can grow when indigenous opportunities are less than foreign opportunities. Education is never the solution alone but education with its post-education practical applications is the solution. A Ph.D. without a job is not a productive member even with 22 odd years of education as opposed to a plumber with 12 years of education and a job.

Therefore, before we run after having more and more educational institutions that look good to the voters, we need to create a policy where employment demand is higher or equal to the number of graduates each year.

Read more: Brain drain: an Achilles’ Heel for the Global South?

Secondly, Pakistan faces intense demographic pressure. You cannot just keep developing urban centers and neglect the rural ones – that is the story of Pakistan; more roads, more hospitals; more universities, and more applications of the technology are implemented in the urban centers than in the rural ones. This forces the rural population to either migrate to the already pressurized urban centers or travel long distances to avail of urban facilities, putting immense pressure on transportation, housing costs, and fuel. Fuel in an import-dependent energy policy-based country like Pakistan is a huge concern, or it should be.

Pakistan needs to be developed evenly, not lopsidedly. Hospitals will create jobs for the rural population in addition to reducing other costs for rural people to travel to urban areas. Schools will create more jobs for teachers. Special economic zones will create employment. And the list goes on and on.

Furthermore, ethnic and religious conflicts hinder Pakistan’s economic growth. Have you ever seen a country in the world that has grown while groups of people keep fighting and killing each other? If you have then you also must have seen a fish driving a car. It is simply not possible!

The government has related economic downturn to terrorism but never has it related economic slowdown to ethnic and religious differences. From Ireland to Nigeria to Bosnia to Serbia to Congo to Vietnam, and many more, economies have shown that they do not grow sustainably if there is religious conflict looming in the air. We need to fix these things if we want sustainable economic growth.

Read more: Political leaders call for peace amid ethnic dispute in Sindh

Where we went wrong

Corruption can never be totally abolished, it can only be curtailed – remember that right from the beginning. However, the biggest menace to any economic growth is corruption. It is a nuclear bomb of all bombs that can be dropped against economic growth.

The best way in this day and age to fight corruption is to reduce the human interaction between citizens and government functionaries. Digitize the process. Automate the systems. Use technology. Reduce people to officer contacts. Make it web-based. Make it convenient for people to access things from wherever they are. Reduce their traveling expenses in addition to reducing corruption and increase their savings which will leave them to increase their spending which will also spur economic growth.

Another major problem is uneven economic development. Cities developed, but villages were left undeveloped. There is no precedence in the history of any country which is developed, has sustained economic growth, and has an uneven economic development phenomenon. West is considered an icon of economic sustainability and in the west, people who stay back in their villages do so out of choice, not otherwise. They have all the basic facilities, health, education, justice, and transportation available in their villages. They remain a productive part of the economy while living where they please.

You will never hear that a citizen going from a suburb of Ohio to Chicago for the treatment of normal diseases. Or you will never hear that a villager outside Osaka Japan is moving with his family to Tokyo because the schools in his village are of the lowest quality. Of course, there will always be a difference in the amenities in a city and a village, but never a difference in the basic facilities provided. Until we promote an even economic, infrastructure, and basic needs development within the rural areas, we will never have any sustainable economic growth.

Read more: Poverty and Human Development in Pakistan

Along with uneven economic development comes rising economic inequality. In a country where we have a substantial portion of our population living in rural areas, economic opportunities can and will be missed by the inhabitants of the rural areas and will keep a major portion of the economy from growing because of a lack of equal economic opportunities.

Business activities other than agricultural opportunities need to be provided to the rural inhabitants. In the day and age of almost-here 5G technology, internet access, and web-based businesses, skill development for rural areas is a must. Not everyone needs to become a Ph.D. scholar in order to contribute to a growing economy.

The West has never grown based on Ph.D.s or university graduates alone. The West has grown because skill development is taught to the inhabitants of the remotest of areas where they can live and make a living at the same time. Alaska, or people in Siberia, are no less skilled than in Moscow or Montana. We are talking about skills, not education. You may find more highly educated people in an urban environment but basic skills can be found in the remotest of areas of the west where people can comfortably make a living.

Major policy oversight

Recessions that affect the entire world or depressions that spread across the globe are absolutely different than repeated economic slowdowns like we have had in the past 72 years in Pakistan. Never have we identified what can go wrong when we are having an upwardly mobile economic graph until that graph changes direction and we again end up at where we started from. Our GDP growth has been moving erratically between 3 and 7 percent for decades upon decades. An average growth rate of only 4.1% but never for more than a period of 5 years historically.

Why?

Why have we not been able to have sustainable growth of our GDP for 22 or 18 or even 12 years in a row of above 6%? Because our policies are ad hoc. Because we expect miracles from political leaders instead of sustainable economic policies. We have never demanded that our policies for all of the above reasons that I have mentioned are implemented. We are too busy supporting our party leaders instead of supporting sustainable economic policies and holding them accountable for their implementation.

Read more: The delusive matrix of policymaking in Pakistan

Woes of foreign interference

Not a single decade has ever passed in Pakistan when we did not have an external hand wanting to destabilize the country – and this is not paranoia, it is a reality. The ones who doubt this reality can visit the American CIA website and read the declassified documents about Pakistan going back to the early 1950s when the CIA admits its interference in our domestic affairs. Then came the KGB, The NDS, The RAW, The Mossad, and the list grew and grew.

This is the way the world works. We cannot blame others. What is needed is that we have a mechanism in place to combat all these menaces at hand. Economic growth cannot come if we are busy fighting foreign forces, covertly like Khulbushan Yadev, or overtly like in the Soviet-Afghan war.

We need to remain neutral. We need to concentrate on our internal economic growth before we take political sides. We need to educate our masses from a young age at schools about how the world is run, and its ugly and uglier realities. We need to stop sugarcoating things to our younger generations that “All is well”. All is not well and never will be. We have to grow within the boundaries of all not being well.

Read more: Neutrality and moral partiality in Pakistan’s establishment

No country has ever grown without external threats. Hitler attacked Europe. France has had wars with its neighbors. Japan has been at loggerheads with China. The world is full of examples of external interferences. We are no exception. Yet the world has grown economically and we are still busy playing the victim card for 72 years. We need to wake up. The morning has arrived. Wake up. Rise and shine.

Politics – Pakistan’s own Achilles heel

Nothing is a bigger problem for any economy than the rise of the political elites who directly or indirectly benefit monetarily a country’s economic activity while fronting as public servants. When power is concentrated within a few hands to grant contracts and licenses, to themselves through front companies or to their cronies for a bribe, then economic inequality is created and a sense of discouragement takes birth.

Two things happen then, either you become a crony of those political elites or if you still have your conscience intact, you flee the country for better economic opportunities or you remain in the country while your capital is invested in some other country. In a developed country, you do not need to know a politician or be close to the political elite to compete for business on a level playing ground.

One of the biggest ills of any economy is when the political elite start to control the economy. It is a metaphorical death of economic growth. Until this is addressed with an iron fist, until examples are made out of those political elites who have choked the economic growth and only benefitted themselves, until punishments are rendered, our economy will never grow sustainably. We will always remain hijacked in the hands of the political elites and this vicious circle will continue for another 72 years.

Read more: The political hypocrisy in Pakistan

Furthermore, unchecked powers in any society – may they be political powers, judicial powers, economic powers, social powers, or any other form of an advantage over the other – are the biggest hindrance to economic growth. What reforms have we brought in Pakistan in the past 72 years to address unchecked powers? None. We wake up after we are robbed. We rise with slogans after the state has been looted. We come onto the streets after an embezzlement story.

Why in this day and age of technological-based, errorless checks and balances, and reporting, we are still crying after the spilled milk? We need reforms. We need to address this problem today. If we want our economy to grow sustainably and if we want our future to be bright, we need reforms for putting checks on the power of the ones who abuse it.

The economy and unchecked powers are like acid rain and a flourishing crop. They do not mix together. They are enemies of each other.

Read more: Pakistan under political turmoil!

It’s about time that we Pakistanis wake up and look at the real reasons for the lack of sustainable economic growth. It is about time that we educate each other as to what our vote demands in return from our politicians. Unless we know what the disease is, we will keep choosing the wrong Doctors (Read: Politicians) and keep complaining about not being cured.

It is as simple as that.

The writer is the founder of an investment bank on Wall Street and the author of four books. He previously served as an advisor to the government of Pakistan. The views expressed in the article are the writer’s own and do not reflect the editorial policy of Global Village Space.