Hooked on hopium

Though commonly used by stock traders to describe the tendency to keep holding a stock as it plummets in value, the word ‘hopium’, a portmanteau of hope and opium, nicely captures our current economic dynamic: the tendency to keep hoping private players will step forward to do the government’s job of growing the economy even when they do not do so year after year after year.

Data tells that public investment has been falling since 2017 – the key marker of hopium. Now it is just 43 per cent of its level at that time. But crucially, in all these years, private investment did not step forward but fell by 18 per cent. Hopium remained constant even as regimes changed.

Since investment drives growth, less investment begets less growth, which means that by reducing public investment, the governments have been, at best, complacent about growing the economy.

Nothing encapsulates this complacency more than the negative industrial growth in four of the past six quarters. And it explains why the present government has come this far without settling on the big issues that will define it. Hence, building roads and economic infrastructure, or ‘bricks and mortar’ economics which defined previous PML-N governments, and the other key issues we must address immediately: poverty, illiteracy, and child malnutrition, are nowhere on the government’s list of to-do things.

This is an awful lot of reality to set right. Not addressing it directly and proactively with the mighty hand of the government, also called industrial policy, is just a bad choice. Its absence since 2017 and the hope that the private sector will ‘step forward’ explain how a country with a vast pool of hard-working people can go downhill so fast in just seven years. And made our country the world’s sad story.

So, if you are looking for a strong industrial policy this government is not your go-to – for two more reasons: One, because too much of its economic actions and discourse is shaped by the misplaced sense that the only matter of concern is the current account deficit. Even though, the real reasons for our economic decline are diminishing public investment and spending public money as if we are far richer and less secure militarily than we are, which haemorrhages our resources, big time.

The second reason this government is not your go-to is that asset-stripping the state –selling SOEs – now suffuses everything. The finance minister says that not doing so will not grow the economy. But this recipe is self-defeating. I have been arguing for months on these pages against selling profitable SOEs such as OGDCL and PPL. My beef is simple: OGDCL and PPL do not fit the government’s narrative that SOEs are an apocalyptic threat to the economy’s health. Rather, they give immense profits: Rs321 billion in 2022-23 and Rs1.7 trillion in the previous seven years. They are the federal budget’s cash cows; they create fiscal space for sorely needed public investment.

We cannot ignore these plain facts. Yet the government does not feel obliged to accept them. It pursues SOEs with its privatization wrecking ball – at warp speed. As Talleyrand (Napoleon’s crafty diplomat) reputedly said of the Bourbons (the guys on the wrong side of French history), they have ‘learned nothing and forgotten nothing’ from failed privatizations such as PTCL and KESC. The economic obtuseness here is striking.

So then, if facts don’t matter, how do you approach this towering mountain of evidence against selling profitable SOEs? Or, broadly speaking, how do you answer the question: with absent industrial policy, what economic weapon will cannonball Pakistan into the ranks of ‘tiger’ economies?

The government’s answer to both questions is hope. However, the ideas and nostrums of free markets that underpin this hope encapsulated in the finance minister’s oft-repeated mantra – business is not the business of the state – do not work because they are rooted more in ideological dreams than reality. They unsubtly imply a dislike of anything left in Mr ZA Bhutto’s legacy.

Also, these ideas and nostrums go against the very grain of our constitution: whose principles of policy compel state actors to give people free and compulsory education (Article 37B), food, housing, and medical relief (Article 38D), prevent wealth concentration (Article 38A), and remove inequalities (Article 38E).

But our present economic effort is far from a struggle to live up to these ideals. Neither do you see them anywhere in the current political and judicial discourse and actions.

More and more, it appears the government does not have a strategy to grow the country beyond wishful thinking. Neither is it a good sign that our future means hoping that the government’s most barmy economic ideas will come to pass. They did not in the past seven years and won’t in the future. It is bad that the PML-N is not engaged in deeper soul-searching about being hooked on hopium even as its economic policies financially tar and feather the people. And persisting with hidebound extreme right-wing ideas adds to the sense that it is stunningly disdainful of their plight.

If you continue with this stubborn condition, you write your political epitaph.

The clearest path ahead for the PML-N is to ditch its barmy economic ideas and move forward with a strong industrial policy. But it shouldn’t be by anointing another technocrat/banker; political leaders must be firmly in charge of the economy – people who answer directly to the people; who have learned crucial lessons in leadership and accountability; and who, as per Kamala Harris’ famous riff, do not ‘just fall off a coconut tree,’ as the former do.

The writer is a freelance contributor. He can be reached at: Khwaja.Sarmad@gmail.com