Reforming the economy

March 23,2019

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I am not a big fan of imperialist international financial institutions like the IMF and World Bank. Why? Here are just some reasons.

They play an important role in protecting and maintaining American hegemony and interests over the world economy and the neoliberal economic order. They force poor countries to open their economies to the exploitation of multinational corporations through privatisation, free market and neoliberal economic policies and liberalisation.

They act as an arm of imperialist powers and the international capitalist ruling class, and protect their economic interests and hegemony. They play an important role in the economic enslavement of poor countries through loans and through anti-people economic policies.

However, at the same time, both the World Bank and the IMF produce good reports and research on the world economy. These reports help us understand the problems and prospects of the capitalist economy. In my view, the problem is not with the identification of the problems but with the solutions offered.

In most cases, the World Bank correctly identifies the problems of different national economies but never offers solutions that would fix them. That is why not a single country in the last four decades has achieved economic development, prosperity, high living standards and a sustained high growth rate on the basis of IMF and World Bank policies and programmes.

We need to see the latest World Bank report on Pakistan’s economy with this approach. The World Bank report, ‘Pakistan100 — Shaping the future’ provides us analysis and perspectives on where Pakistan’s economy would possibly stand when the nation celebrates 100 years of independence in 2047.

The report contains both good and bad news for us. The good news is that the Pakistani economy has the potential to become $2 trillion by 2047. World Bank Country Director Patchamuthu Illangovan gave this good news while talking to the media in Islamabad and said: “With sustained reforms, Pakistan could be a $2 trillion economy when it will turn 100 in the next 28 years. The $2 trillion economy means an upper middle-income country where per capita income will be $5,702”.

The report further says that “Pakistan needs to invest more and better in its people.....Pakistan can boost its growth by investing in people, improving productivity, reforming institutions and protecting the natural environment.”

Despite the fact that a big chunk of that wealth would go to the ruling class and the elite because they dominate the economy through ownership of the means of production, still the living standards and income of ordinary people will improve as a result of the significant expansion of the economy.

Now comes the bad news. The same report says that to achieve the $2 trillion GDP target, Pakistan needs deep-rooted reforms in the economy and to control the population growth. Pakistan will have to halve its population growth rate to 1.2 percent till 2047. The failure to introduce serious and deep-rooted reforms and to control the population growth would mean that in 2047 the size of the Pakistani economy would be just $1 trillion with per capita income of just $2110. The failure to control the population growth would mean that the total population of Pakistan would be 376 million in 28 years.

Now the question is: why is this bad news when we have to just reform the economy and control population growth? Both tasks are doable; most South Asian countries have a lower population growth rate compared with Pakistan.

The real problem is the performance of Pakistan’s ruling classes and elite on both these issues in the last 71 years. We have failed on both fronts. In the last 71 years, no serious effort was made to reform the elitist economy. The ruling classes and the elite put up a fierce resistance to any serious attempt to introduce long-lasting reforms.

These classes view reforms as an attack on their interests and an attempt to weaken the status-quo. They want to keep their domination over the economy, state structures and politics. So they are not interested in reforming the colonial state, or the economic, social, education and judicial structures to accelerate economic growth and create more economic opportunities with industrialisation and development of productive forces. Pakistan’s economy is highly concentrated in the hands of the elite and ruling classes.

The World Bank report identifies this problem: “Pakistan is inherently susceptible to policy capture because of a historical concentration of economic power among large industrialists and landowners. In the 1960s, the chief economist of the planning commission, Mahbub ul Haq (He also served as finance minister of Pakistan), claimed that 22 families controlled 66 percent of the industrial wealth and 87 percent of banking and insurance (Hussain, 1999)”.

“Since the 1980s, the share of industrialists in the National Assembly and parliament has doubled, blurring the barrier between politicians and businessmen. There is increasing dominance of large business groups with considerable political power, with the industrial assets of the top 44 business groups equal to the entire national budget (Daniyal and Bakhtiar, 2012)”.

“There is increasing evidence to suggest that the dominance of some business groups could be affecting how resources and credit are allocated. For example, between 1996 and 2002, politically connected firms borrowed 45 percent more and had 50 percent higher loan default rates than other firms”.

To be continued

The writer is a freelance journalist.


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