By Mushtaq Khan

Published in Dawn, Books & Authors, April 12th, 2020

For the most part, the media discourse on Pakistan’s economy has focused on the International Monetary Fund (IMF), revenue shortages, food inflation, the country’s increasing debt, how few Pakistanis pay direct taxes, rising utility rates, the growing burden on the poor and corruption/incompetence in government agencies. Those who have a say in the matter — the government, business leaders, international financial institutions (IFIs), global ratings agencies, academics and business journalists and analysts — often put forward a poorly textured picture of the economy.

With limited success in implementing structural reforms since the late 1980s, the public dialogue is frustratingly familiar. For example, the government assures us that things are progressing well, the IFIs have supportive things to say, businessmen complain and nothing really changes. Worse still, because this dialogue is tiring, conspiracy theories are created — the more outlandish the theory, the greater the traction.

This is why New Perspectives on Pakistan’s Political Economy: State, Class and Social Change, edited by Matthew McCartney and S. Akbar Zaidi, is a book long overdue.

Economic analysis in Pakistan is done within a political, cultural and historical vacuum. Little is said about the political will needed to take on vested interests, root out corruption (especially when friends and allies are involved), expose past policy mistakes for fear of offending the bureaucracy, analyse the role of financiers in political parties and question whether advisers have a conflict of interest in carrying out their government service.

McCartney and Zaidi’s book seeks to create a better understanding of Pakistan’s political economy. Since academics do not express their ideas in isolation, the two editors and 11 contributors have built their arguments on the seminal work of Hamza Alavi (1921-2003), an academic with Marxist leanings whose best work dates back to the ’60s and ’70s. McCartney and Zaidi’s book builds specifically on ‘The State in Post-Colonial Societies: Pakistan and Bangladesh’ — Alavi’s 1972 paper in the New Left Review.

After three decades of stop-start reforms, both academics and practitioners need a better understanding of exactly how Pakistan’s political economy works. A new book provides a promising start

Alavi proposed the idea of the overdeveloped state in Pakistan, arguing that, even before independence, the propertied classes had already decided the new shape of Pakistan’s government. Subsequent research on Pakistan’s political economy focused on the state, the military, the bureaucracy and large landowners, all operating within the imperial legacy that the British left behind.

McCartney and Zaidi argue that much has changed since the early 1970s, and new players and forces must be factored into the picture. Their book is the first stab at creating a more comprehensive framework for Pakistan’s political economy.

Why is this important? In my view, Pakistan’s repeated failure to overcome structural economic weaknesses and the reasons it has fallen so far behind other nations in South East Asia — which were peer countries in the ’60s — not to mention its neighbours in South Asia, cannot be understood without looking at Pakistan’s political economy.

Without getting into the details of who said what, I will simply highlight the issues that have been raised in this book. Compared to the static analysis put forward by Alavi (politics driven by the propertied class, the Westernised bureaucracy and an independent military), McCartney and Zaidi’s book flushes out the following facts: social classes have evolved; politics have changed; the media is driven by the private sector; smartphones are everywhere; women’s participation has increased; the bureaucracy is fragmented and politicised; the rural middle class could be the new face of Pakistani capitalism; bazaar traders have gained immense wealth and political power with the growth of the informal economy; and militants and religious groups have become influential non-state actors. These factors combined have seriously diminished the power of the state.

Many contributors talk about the politics of patronage. Simply defined, patronage refers to how individuals use their wealth and connections in government to shape state policies, influence the choice of senior bureaucrats, determine the management of state-owned enterprises (SOEs) and direct government spending. To facilitate this confluence of interests, opportunistic middlemen connect aspiring patrons with government officials and politicians to create mutually self-serving relationships.

The rise of bazaar traders is particularly interesting. Other than signifying the transition of wealth to the big cities, this group has thrived under the tax radar. With growing wealth, traders have acquired the political influence that is necessary to remain outside the tax net. Although there is no explicit study of the size of Pakistan’s informal economy in the book, the editors/contributors explain how local governments are influenced by bazaar traders, either by their spending power or their ability to shut down local markets. This group is against any form of documentation as this would undermine their modus operandi.

The book argues that the growth of the informal economy, the fragmentation of the bureaucracy, the acceptance of patronage within the government machinery and the devolution of power to provinces and local governments have weakened the federal government. This creates a disconnect between what Islamabad would like to achieve (eg tackling loss-making SOEs, increasing documentation to raise direct tax revenues, stopping the haemorrhaging in the power sector, addressing the gross undervaluation of real estate, etc), and the specific interests of those people/organisations that need to change their behaviour to fix the economy.

The relevance of this discussion to the ongoing IMF programme will not be lost on anyone.

While some of the essays may not suit the palate of market analysts and corporate executives, both academics and practitioners must make an effort to narrow the gap. Practitioners (both policymakers and private sector decision makers) want to understand why Pakistan has fallen so far behind its peers in South East Asia and South Asia, but this is not possible without an intellectual thought process (framework) that allows for a meaningful comparison across countries. Academics, on the other hand, should align their research interests to the sort of questions that practitioners are desperately trying to figure out.

I am confident that if McCartney and Zaidi’s book gains traction with practitioners, this will trigger a meaningful dialogue in the country which, in turn, could be a beacon for Pakistan’s social scientists to customise their work accordingly. The editors acknowledge that the book does not address many relevant issues, but it strikes a note of optimism that the new generation of social scientists in Pakistan are better equipped and motivated to address these concerns.

The book argues that efforts by the Higher Education Commission, the increase in private universities, the shift away from pure economics to a multidisciplinary approach, the increase in women academics,

PhDs wanting to teach instead of working for international organisations and the return of professionals from the West who have started think tanks etc, create a far more productive environment for social scientists in Pakistan.

As an academically trained economist who has never taught at a university or published in an academic journal, I have experienced the glaring disconnect between academic economists and decision-makers in the government and the private sector. For real economic change in Pakistan, this disconnect must be addressed. After three decades of stop-start reforms, both academics and practitioners need a better understanding of exactly how Pakistan’s political economy works. McCartney and Zaidi’s book is a promising start.

The reviewer is the founder and author of the financial advisory Doctored Papers

New Perspectives on Pakistan’s Political Economy: State, Class and Social Change
Edited by S. Akbar Zaidi and
Matthew McCartney
Cambridge University Press, UK
ISBN: 978-1108486552

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