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It’s The Economy |By Abdul Majeed Abid

It’s The Economy |By Abdul Majeed Abid

The art of politics is inextricably linked with the economy. The study of economies of states was called Political Economy by European philosophers. In the modern world, a basic understanding of economy is essential for people partaking in politics. It is not a hard and fast rule though and politicians, even in the most economically developed countries, sometimes say things which do not make any economic sense.

Pakistani politicians, since independence, have remained aloof of economics and not a single political party in our history has presented a realistic economic vision to the country. The founders of Pakistan had not anticipated the doldrums that Pakistan would find itself in, particularly on the economic front. There was a paucity of industrial units in the country and Muslim as well as non-Muslim industrialists had to be convinced to invest. Mr. Jinnah reportedly asked the United States for $2 billion as economic aid.

Pakistan’s economic situation didn’t improve till a decade after its inception.

It was under Ayub Khan—the dictator—that the country achieved economic growth. ‘Trickle-down’ theory was applied and advice was sought from Harvard-trained economists to bring about the so-called ‘Green Revolution’. The Ayub era growth failed to steer the country out of poverty (partially due to an unnecessary war with India) and a select few reaped the rewards. Despite the growth figures, economic disparity increased in both halves of the country. Anti-Ayub sentiment aroused by dismal economic conditions was tapped by populist parties in East and West Pakistan. Zulfikar Ali Bhutto’s Peoples’ Party adopted ‘Islamic Socialism’, a curious hybrid of religion and socialist principles. Sheikh Mujib’s Awami League had many communists in its fold and promised a nationalist, egalitarian solution to the economic woes of East Pakistan.

After East Pakistan’s secession in 1971, Mr. Bhutto was provided an opportunity by fate to implement his economic policies. Nationalisation as a policy had been unsuccessful in most countries of the world till that point. The Bhutto Government pursued nationalisation starting in 1972. It was a glorious failure as civil servants tried (and failed) to run sugar mills and other industries. Privatisation was then carried out in the 1980s and 1990s. Pakistan’s economy in the last six decades has only been stabilised by virtue of generous foreign aid. This is not a sustainable model of growth and politicians have been unable to do anything about it.

Professor of Economics and Social History at Leiden University, Dr. Richard Griffiths has mentioned three ‘motors of economic growth’ in his work. The first option is of ‘neighbouring markets’ with which a country can form mutually beneficial trade linkages. Another option is ‘specialisation in the production of products’ that have a global demand. The third way towards attaining economic growth is increased competitiveness in terms of goods already produced by that country (our products should be better than products made by others). There is a shortcut to increasing growth as well, which is Foreign Direct Investment (FDI). FDI is defined as ‘purchase or expansion of a business in one country by a business in a foreign country’. It can involve purchase of shares in the host country, merger of companies, establishment of new business facilities in the host country or enlargement of an existing foreign business.

We don’t produce any products that can compete on the international level, as most of Pakistan’s exports are in the form of raw materials. We don’t specialise in exporting goods that are in high demand across the globe. Due to the law and order situation, very few countries or foreign companies are willing to invest in Pakistan, thus the decreased FDI. The only major option left is that of trade with neighbours or acting as transit for international trade. Nawaz Sharif’s current government was voted in because they promised better trade relations with India and improvement in the country’s financial situation. Due to interference by the military establishment and unwillingness on the part of some lobbies in India, prospects of trade between the two countries are low. The PMLN government has been unable to attract foreign investment (beyond China and Turkey) and hand-outs by IMF and other ‘friends’ have been utilized to run the economy. A country cannot survive entirely on the basis of remittances and foreign aid.

Other major political parties are similarly clueless. Pakistan’s tax to GDP ratio is among the lowest in the world. Some efforts were made by Federal Board of Revenue to widen the tax net but people are unwilling to pay income tax in our country. The only people paying income tax in our country are the ones who can’t avoid paying it. Middle-income retailers are the biggest tax evaders in this land. They are willing to donate heftily to religious charities and similarly shady organisations but paying tax is considered an act of vulnerability. People here perennially complain of negligence shown by the government regarding the provision of services such as health, education and public transport. The same people are unwilling to pay taxes to the same government.

Until the common man and politicians are educated about the basics of economics, Pakistan is not going to achieve economic growth and the downward spiral is likely to continue.

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