Borrowing from Thatcher’s playbook

In the late 1970s, Britain faced one of its most challenging periods economically and politically. The ‘winter of discontent’ in 1978-79, marked by widespread strikes, rampant inflation, and economic stagnation, underscored the decline of the British economy.

It was in this environment that Margaret Thatcher rose to power in 1979, becoming the United Kingdom’s first female prime minister. Her leadership did not only reshape Britain’s economic landscape but also offers valuable lessons for Pakistan as it seeks to overcome its own economic challenges.

However, it must be recognized that Pakistan’s conditions are different in some fundamental ways, and any economic turnaround strategy must take these differences into account.

Pakistan is an underdeveloped country with one of the worst Human Development Index (HDI) rankings globally. With a federal structure comprising multiple layers of governments, resources have been squandered for decades without significant improvements in the quality of life for its citizens.

The state of education and healthcare in Pakistan is particularly alarming. The country’s literacy rate has remained static at around 60 per cent for over a decade, and it ranks 164th out of 193 countries on the HDI. Health indicators are equally troubling, with high infant mortality rates and inadequate healthcare infrastructure. Over 26 million children are out of school, making Pakistan the largest populations of out-of-school children in the world. Over 40 per cent of under-five children are stunted. This poor human development is exacerbated by inefficiencies and mismanagement at both the federal and provincial levels of governments.

The federal government has been responsible for several key failures, particularly in the energy sector. The excessive expansion of power generation through independent power producers (IPPs) and retaining monopolized control over transmission and distribution within the public sector, instead of developing a competitive power market has resulted in frequent blackouts, high energy costs, and massive circular debt.

These inefficiencies not only drain public resources but also make electricity unaffordable for the average citizen and undermine industrial productivity, as our private sector is unable to compete globally with exorbitantly high cost of power. Numerous state-owned enterprises (SOEs) have also been incurring huge losses for decades, further straining the national treasury without delivering commensurate economic value.

Pakistan’s fiscal policies, characterized by high tax rates and inefficient subsidies, have stifled the growth of a competitive private sector, discouraging investment and innovation. The country’s regulatory landscape is marred by excessive and ineffective regulations that create significant impediments for businesses.

Provincial governments have also failed in their mandate to improve human development outcomes, despite increased resource transfers under the 7th National Finance Commission (NFC) Award in 2010. Pakistan’s education and health indicators remain among the worst in the world, reflecting poor governance, ineffective policies, and a lack of accountability.

Like the federal government, provincial administrations are plagued by inefficiency and corruption, particularly in infrastructure development, where resources are often siphoned off through corrupt practices, leading to substandard projects that fail to meet the needs of the population.

Margaret Thatcher’s tenure as prime minister was marked by a series of bold economic reforms that fundamentally reshaped the British economy. She undertook large-scale privatization of state-owned enterprises (SOEs), such as British Telecom, British Airways, and British Gas, reducing the fiscal burden on the government and revitalizing these industries through competition and market discipline.

Thatcher also confronted powerful trade unions, curbing their powers through legislative measures that allowed for greater economic stability and reduced industrial disruptions. She believed in the power of the free market and worked to reduce the regulatory burden on businesses. Deregulation, particularly in the financial sector, helped to unleash a wave of entrepreneurship and economic dynamism.

Thatcher’s government implemented strict monetary policies to control inflation, even at the cost of a painful recession in the early 1980s, which ultimately stabilized the economy. Her tax reforms, which included significant cuts to the top marginal tax rate, incentivized investment and economic growth.

Like the UK, Pakistan’s priority should not only be on drastically reducing the size of its government but also on making governance effective with accountability for results at all levels – federal, provincial, and local. However, unlike the UK, Pakistan is a federation, and therefore, it is critical that there is collaboration between the federal and provincial governments to ensure socioeconomic development. Effective governance is essential to improving Pakistan’s economic prospects, and this must be coupled with strong leadership that is committed to implementing necessary, though painful, reforms.

One approach that has gained recognition in Pakistan, as also mentioned by the current finance minister, is the use of public-private partnerships (PPPs) to improve outcomes. It is proposed that the majority of public-sector development projects, both at the federal and provincial levels, should be done using the triple P model. Given that outcomes in education and health sectors have not improved despite major spending over the decades, provincial governments should consider converting and managing their education departments using the triple P model – a public funding, private execution approach. This would entail partnerships with private entities that have a proven track record of delivering results, ensuring that public funds are used more effectively, and achieving better outcomes at lower cost.

Margaret Thatcher’s success in turning around the British economy was not just a result of her policies but also her strong leadership and political will to execute difficult and disruptive reforms. Pakistan needs leaders who possess the same commitment and resolve to push through necessary disruptive and difficult reforms, duly tailored to Pakistan’s unique circumstances, with a particular focus on improving human development indicators by ensuring effective governance.

By adopting a Thatcher-inspired approach that is mindful of Pakistan’s specific needs, the country can reduce the size of its government, improve governance by enhancing transparency and accountability for outcomes, and promote focused private sector-led growth. It goes without saying that the key to success lies in strong and committed leadership with the political will to implement these reforms.

Ultimately, it is not just the HOW or WHAT of reform that matters, but the WHO. With the right leaders at the helm – leaders who are capable, resolute, and backed by teams comprising individuals with competence and ethical integrity – Pakistan can embark on a new journey toward economic revitalization and secure a brighter future for its people.

The writer is a former

managing partner of a leading professional services firm and has done extensive work on governance in the public and private sectors. He tweets/posts @Asad_Ashah