Why does our economic policy fail us?

Economics has been reduced to meaningless numbers in Pakistan and these numbers aren’t even telling us a coherent story. The only story they tell us is that the government doesn’t perform well. The fault lies in Islamabad and the provincial capitals where incompetence reigns.

The government is always run on large deficits, both visible and invisible. It is like a leaky sieve – there are so many leaks that no one knows the real deficit. Poor governance based on arrogant and wilful policymaking, and no reform is the root of this mess.

Yet, no one goes deeper than the mention of the phrase ‘poor governance’. Merely footnoting it, our economists return to their meaningless numbers and fake policies to address those numbers. The issue is incompetence and wilful governance.

Every finance minister (FM) wants to be the czar of the economy, without consultation, analysis or a team. This is how Dar and previous ministers played to continually create a mess of repeated IMF programmes as well as a debt problem that is always running ahead of us.

FMs have an advisory committee of friends and family, much like the mad hatter’s tea party – talk shops with no research, responsibility or independent thought. Members feel important and get cheap influence in the government. But no serous policy issue is tackled. FMs simply get some buy-in from important people.

The provinces are busy developing grandiose megaprojects that have never been fully understood or analysed for their benefits and financing. They also struggle to deliver public-service delivery with a bureaucracy that lacks capacity. Rather than bureaucratic reforms, they come up with half-baked schemes, such as expensive corporations that report to the bureaucracy. All these initiatives do is raise costs and opportunities for corruption.

This system leads to excessive costs everywhere, poor public-service delivery, and a pile up of debt. Economists looking at numbers have an easy way out of only watching debt numbers. They don’t see the poor governance system building up the debt.

For example, no one saw how the badly planned, costly metros were building up debt as well as future subsidies for the budget. When LNG was imported, everyone cheered without thinking that it would be a debt burden. Excitement over CPEC avoided a discussion over financing obligations. Energy was built up through coal and solar without questions on debt implications.

Cheaper and alternative options were never considered because we continue to live in Akbar’s time (We even built a Fatehpur Sikri –Islamabad that is still a drain on the economy).

Why does our economic policy fail us? Why are our economists unable to look beyond numbers? Why is our public investment such a waste? Why do we continue to borrow without achieving growth? These are the central questions that need answers.

Unfortunately, there is no place where such questions can be researched and debated. The bureaucracy ensures that there is neither money for research nor any think tanks or universities that can debate such deep issues.

The new government must change the policy process. Here’s how: Dispense with advisory committees or Mad Hatter’s tea parties. Instead, empower universities and think tanks to conduct a deeper analysis and create alternative approaches and visions. For this, the government must provide funds from the PSDP (say one percent of the PSDP).

To interface with the thinking sectors, each government department must develop research departments and the capacity to prepare policy notes through research and learning.

The cabinet and the government must develop due process, as I pointed out in a recent piece, to ensure that policy and decisions are based on thought and research. The cabinet must be fully engaged and discuss all policies presented to it thoroughly. In addition, the public must be fully informed on policy and project proposals.

All this won’t be possible until the Pakistan state is modernised. For the last 71 years, the country has been very careful in preserving Macaulay’s system of colonial rule with additions of a more arbitrary ‘raja rule’. The civil service, judiciary, legal system and the army all are running on 19th century colonial terms where centralised authority is used purely for extracting rent from the local economy.

Government functionaries in this colonial system seldom consider public good as they are maximising colonial benefits –plots, perks (houses cars, trips etc), and protocol (VIP pleasures). Living in gated estates at the government’s expense, these people are fully disconnected with the local population and their problems. Their view is to let them eat cake.

It is, indeed, surprising that our economists and policy thinkers don’t see the extremely high costs of running a 21st century state with a 19th century colonial extractive system. No wonder, the recommendations of our economists remain empty. We repeatedly hear about the need to increase productivity, growth and exports. That is tantamount to going to the moon on a bullock cart.

If the new government relies on these measures, they will go the way of their predecessors – incremental change and some window-dressing to a new debt trap and an IMF programme in 2023.

The only way out is a strong and serious effort at modernizing the state through serous reforms to align it with the needs of the 21st century.

The writer is former deputy chairman of the Planning Commission.

Email: nhaque_imf@yahoo.com

Twitter: @nadeemhaque