Thursday June 20, 2024

The primacy of economic power

Several issues of critical importance will be waiting for attention of new government as it assumes the reins of power

By Javid Husain
January 11, 2024
This picture shows a general view of the Karachi sea port. — AFP/File
This picture shows a general view of the Karachi sea port. — AFP/File 

As the nation gears up for the general elections, it is of the utmost importance for Pakistan’s leadership and opinion-makers to debate and determine the priorities to be followed and the goals to be achieved by the elected government with the assistance of the public servants.

Several issues of critical importance will be waiting for the attention of the new government as it assumes the reins of power. Perhaps the most important of them is the perennial issue of guns vs butter, which determines the allocation of resources between the military and non-military sectors of society.

No independent and sovereign country can afford to ignore the legitimate demands of its security against external and internal threats. At the same time, no government can turn a blind eye to the imperatives of economic development and social welfare which directly affect the lives of the people it is supposed to serve. The challenge that any government faces is to strike the right balance between these two important aspects of national policy to ensure the country’s short-term and long-term security as well as accelerate its economic growth and promote its social welfare.

The importance of economic strength in the calculation of a country’s national power and the realization of its national goals cannot be overemphasized in the modern world. The Soviet Union collapsed not because of the shortage of conventional and nuclear weapons but mainly because its weak economy could not sustain the enormous burden of its extensive strategic commitments and heavy military superstructure.

Economic and technological development is not only an indispensable condition for a country’s progress and the prosperity of its people but also an important source of strength to its military power and an essential ingredient in the calculus of its national security, especially in any long-term context.

The development of a country’s economic and commercial relations with foreign countries, besides being beneficial from the economic point of view, produces an impact on the configuration of its security environment, both regional and global. Economic and commercial links provide strength and substance to friendly relations with foreign countries. The depth of the impact on the regional and global security environment would be determined obviously by the strength of a country’s economy and the level and extent of its foreign economic and commercial relations.

It is noteworthy that China’s rapid economic growth over the past four decades combined with its fast-growing economic and commercial links with the rest of the world, particularly with Central Asia, Africa, Latin America, West Asia, and ASEAN, are changing global alignments, thereby transforming the global security environment.

Paul Kennedy in his seminal book, ‘The Rise and Fall of the Great Powers’, elaborated at length on the importance of the relative economic rise and fall of a Great Power in determining in the long run its growth and decline as an important military power. According to him, the main issue facing a government was one of “balancing the short-term security afforded by large defense forces against the longer-term security of rising production and income.” These conclusions have important strategic lessons for the US in dealing with China’s relatively fast economic growth and the consequent rapid buildup of its military power.

It is worth recalling that China’s gross domestic product in PPP terms overtook America’s in 2014. America’s GDP in nominal dollar terms was estimated to be $26.95 trillion as against $17.70 trillion for China in 2023. But China’s GDP in nominal dollar terms grew at the rate of 5.5 per cent in 2023 as against 2.4 per cent for America’s.

If China can maintain a much higher growth rate of its economy than the US, it is inevitable that its economy in nominal dollar terms also will catch up with and surpass America’s at some time in the future, possibly by 2035, with the attendant consequences for the balance of the military power between the two countries and the international security environment.

Considering the time lag between the growth of economic power and the buildup of military power, one can safely conclude that the balance of national power between the two countries will shift in favour of China by 2050 or earlier if the present trends continue.

The foregoing analysis calls for a thorough review of Pakistan’s economic and security policies. Ideally, at the initial stages of its development, a country should assign higher priority to the growth of its economic and technological power than to the building up of its military power because as noted above a sound military superstructure can be built only on the solid foundation of economic prowess. Reversing the order of priorities as Pakistan seems to have done since its independence can lead a country to disastrous consequences, which are now visible in the country.

Pakistan’s GDP growth rate slowed down to 0.3 per cent in 2022-23 as against 6.3 per cent for India in 2023. The total size of India’s GDP was estimated to be about $3.73 trillion in 2023 as against only $341 billion for Pakistan. We suffer from perennial current account deficits because of our tendency as a nation to live far beyond our resources, making us dependent upon doles from the IMF or friendly countries.

It is disgraceful that, whereas our national saving rate is as low as 12 per cent of GDP, the corresponding rates for China and India are 45 per cent and over 30 per cent of GDP respectively. A faster rate of growth of the economy would require us to raise our national saving rate to 25 per cent of GDP or above so that we can raise our national investment and GDP growth rates substantially without running the risk of high current account deficits. A national policy of austerity is therefore the need of the hour. Our leadership, both on the civil and military sides, should set an example in this regard.

In the modern knowledge-driven world, economic progress is primarily a function of the priority that a nation attaches to education in general and to science and technology in particular. Pakistan’s record in the field of education is extremely disappointing with a low literacy percentage, poor academic standards, and inadequate attention to science and technology in our academic institutions. The new leadership should come up with a comprehensive plan to overcome these deficiencies.

In a nutshell, the linchpin of Pakistan’s grand strategy should be to assign the top priority to the goal of rapid economic growth and subordinate everything else to the attainment of this supreme national objective. This would require a single-minded focus on and maximum possible allocation of resources to the task of economic development.

However, this will be possible only if we have peace in our neighbourhood and avoid a major armed conflict allowing us to allocate the lion’s share of our resources to economic development while maintaining a credible security deterrent. This in turn would require us to pursue a low-risk and non-adventurist foreign policy. Over-ambitious foreign policy goals should be avoided so that we do not fall into the trap of strategic over-stretch and exhaustion in which we are caught at present.

The writer is a retired ambassador. He can be reached at: