Economists have been facing the challenge of putting Pakistan’s economy on the right track since the very first day of the country’s existence.
Economists have been facing the challenge of putting Pakistan’s economy on the right track since the very first day of the country’s existence. There have been efforts, with mixed results though, to improve the economy and come up with feasible plans. One recent effort is the book under review.
The very title of the book specifies what it deals with — an economy that has historically offered benefits of economic development to the elite class mainly. The embossed image of a majestic and elaborately decorated elephant on the book cover is an accurate reflection on the nature of our economy, which is controlled by a small minority. Amid widespread poverty, the common man keeps waiting for the economic benefits to trickle down.
The book lays threadbare fundamental issues of growth and structural change, agriculture and industry, macro-economic foundations, problems of infrastructure and trade. It does that in a manner that both the hard core economist and a general reader acquainted only with a limited understanding of economy, gets a clear picture of Pakistan’s economy and the corrective course it must take.
First published in 1999, the second edition is a much-needed update on the first, taking into account the economic and socio-political realities.
A brief look at the author’s profile lends weight to what the book explains and recommends. Ishrat Husain, presently Advisor to the Prime Minister on Institutional Reforms and Austerity, has served as chairman of the National Commission for Government Reforms (2006-2008), and governor State Bank of Pakistan (1999-2005). He has held important positions at the World Bank (1979-1999). The writers’ previous publications, such as, Governing the Ungovernable (OUP, 2018) and Economic Management in Pakistan 1999-2002 (OUP 2003), are authoritative reference material on the ups and downs in Pakistan’s economy.
As the book cover explains, it has three main components. It traces the history of Pakistan’s economic development during the last 70 years and outlines an agenda of economic and social reforms for the country. More importantly perhaps in our context, the author analyses Pakistan’s economic development in the political context, a connection mostly ignored by some economists or discussed only briefly.
Looking at the political economy, the author lays emphasis on the fact that accumulation of wealth amid widespread poverty is not sustainable socially and economically. To him, economic factors alone are not sufficient to explain “the Pakistan paradox”, that is, high growth rate “with low and uneven development, followed by sluggish growth and weak social indicators”. How to put that right?
As he points out in the chapter on Investing in People: Education, Population, Health, and Poverty Alleviation, one of the worst problems of Pakistan’s economy is the “widening income inequalities and weak social development in spite of high growth rate”. Investing in people, thus, is the way out.
As he explains in the preface, serving in major capacities for twenty years at a stretch enabled him to see “firsthand some of the dynamics of the elitist model in action”. He does not stop at lamenting the fact that the elitist grip on our resources and their distribution still remains firm, he goes on to present an alternative. How the current model of growth can be dismantled for the benefit of the majority of the people, is his question which he answers in detail, especially in the chapter on the economic and social agenda for the 21st century.
But just before that, in the preceding chapter, Explaining Pakistan’s Economic Performance, he gives a detailed analysis of Pakistan’s economic picture. He argues that a broadened concept of sustainable development which, besides growth, incorporates other components of sustainable development, such as environment, equity, and social justice, is critical for Pakistan’s development strategy. He also compares Pakistan’s experience with best-practice countries’ performance and with other East and South Asian countries, notably India. Of course, there are many lessons to learn from some regional countries which have been through somewhat similar situations.
The chapter on foreign trade, external debt and resource flows provides an in-depth analysis of governments’ performance and concludes with the suggestion that Pakistan will have to adapt to the emerging trends of the 21st century, the sooner the better.
In the chapter on the economic and social agenda, the author lays stress on reforming three key institutions — judiciary, education sector, and financial institutions — by the main political parties. He believes that the “beneficial effects” of reforming these three institutions for economy and policy are too large to be ignored.
The book seeks to dispel the general perception that international financial institutions, such as the World Bank and the International Monetary Fund are to primarily blame for hijacking our economy and prescribing their own corrective measures. To be rid of the elitist economic system, it proposes “a new model of democratic governance” where the state, markets, and civil society “play different but synergetic and mutually linked roles” as the way forward.
The book has a substantial number of nicely placed and sourced graphs, tables and charts to bring home the point. It is a valuable addition to the already available debate and analysis on economic reforms, such as Growth and Inequality in Pakistan by Hafiz A. Pasha and Pakistan’s Agenda for Economic Reforms by Vaqar Ahmed. Last but not least, the bibliography at the end of the book provides a useful list for further reading on the subject.
Pakistan: The Economy of an Elitist State
By Ishrat Husain
Published by Oxford University Press