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Tuesday August 16, 2022

Charter of growth

August 02, 2022

Pakistan Institute of Development Economics (PIDE), an Islamabad-based university and policy institute, has recently published its Charter of Economy. This is in response to calls being made for the country’s economists to come out with a non-partisan Charter of Economy.

We may not agree with what all is suggested in PIDE’s Charter of Economy; yet it is a worthwhile effort and other economists, policymakers, and political parties must also come up with their own charters of economy; so that a serious debate can take place on long-term planning for the next 20 to 30 years. At the end, some committee can synthesize all the different aspects of various charters of economy and come up with one comprehensive document that has cross-party approval and validation.

PIDE’s Charter of Economy has some useful statistics and suggestions. However, the main problem with PIDE’s effort is that it views “politics” and “economics” as two separate entities, while they are in reality co-joined. PIDE’s Charter states, “Politics and economics must be delinked if we are to take on the path of economic growth and development in the real sense of the word.”

The neoliberal view expressed above is reflected throughout the document where the authors call for various independent commissions to separate the economy away from politics and politicians; so that it can be better regulated. Whereas, in reality, politics is the way of negotiating and distributing resources amongst communities, groups, ethnicities, regions, provinces both within these categories and also across them; therefore no economic decision-making can take place first without taking its politics into account. So, it is an erroneous belief that a charter of economy can be successful by delinking it from politics. What we need is in fact a Charter of Economy and Politics and not just a Charter of Economy.

PIDE’s document says that in the twelve years from 2008 to 2020, the growth has averaged around 3.25 per cent annually, crossing the 5 per cent mark just twice. The total factor productivity has grown at the rate of 1.62 per cent from 1972 to 2019. In the long-term trend, all indicators including GDP, total factor productivity, investment as a percentage of GDP have been declining.

PIDE’s document calls for fixing the size of the cabinet to be no more than 10; merging intersecting ministries; instituting a police service and not police force; establishing an independent Planning Commission, an autonomous budget unit, autonomous debt agency, a Growth Commission; reforming the civil service and tax administration; pushing for performance-based government employment; ensuring universal internet access in the country; reimagining the present cities; making public investment effective; making the authorities independent; and have a long-term vision for exports-promotion.

PIDE’s overall call is to push for growth and productivity as Pakistan needs to grow at the rate of 7-9 per cent to absorb over 2.5 million new entrants in the working ages. PIDE also calls for reforms in various sectors in the agriculture, real estate, energy, natural gas, and fuel oil markets.

PIDE’s Charter of Economy fails to understand that one cannot wish a transition from the “limited access order” (where the privileged few enjoy economic opportunities) to “open access order” (where economic opportunities are available to the public at large). That needs a transformation in the structures of the state and society that can bring about such a change and such a transformation is often determined both by historical path-dependence as well as contemporary socio-political and economic policy formulation and implementation.

In Pakistan, an intra-elite tussle has been going on certainly since 1988 (following the patterns in the formative decades of the country) between political forces and non-parliamentary forces. All energies of the elite are spent in upstaging each other and in the ongoing elite factional warfare, so no meaningful transformation can take place that can focus on long-term economic and political development based on a charter of economy and politics.

Non-parliamentary forces have an upper hand in this intra-elite tussle while the political elite has been trying to both covertly and overtly resist the hegemony of the non-parliamentary forces while tugging along to their dictates as well. However, a lot has been written about the domination, coercion, and suppression of non-parliamentary forces; and the fact is that the political elite is also shortsighted and only thinks in terms of the short-term gains hovering around election cycles.

Had it not been for politicking reasons, the PML-N’s government in its last stint from 2013 to 2018 should not have kept the dollar overvalued to ease the inflow of imports that kept the middle classes happy and the party’s election prospects bright but which had a negative impact on the country’s trade deficit. Similarly, the PTI lowered the petroleum prices by going against economic wisdom just when it realized it is about to lose power in 2022. The PTI government also took unprecedented huge amounts of loans during its tenure and does not have anything to show for them. When one political government wants to broaden the tax net by taxing traders and others or liquidate the hemorrhaging state-owned enterprises, the political opposition creates a storm, and this cycle is repeated when the opposition is in power and the incumbent government is in opposition.

It is due to such short-term political gains by the political elite that institutes like PIDE are calling to delink politics from economics that cannot be done in real life. What is needed is to reform both politics and economics. All political elites need to recognize each other, give legitimacy to each other, and negotiate a 20-30 year Charter of Economy and Politics with across-the-board consensus and ownership. Unelected segments too need to stop their constant manipulation and needling of politics and political elite if they want the country to transform to pro-growth, development and equity structures.

The writer is an Islamabad-based

social scientist. She can be reached at: fskcolumns@gmail.com

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