ISLAMABAD: Pakistan’s politics and economic policies need to be aligned for the common purpose of long-term growth and development.
This was stated by Professor of Economic Policy at Oxford University Stefan Dercon while speaking on elite bargain and economic policies of Pakistan.
Talking to a group of journalists in Islamabad on Friday, he was of the view that economic policies need to understand political equilibria.
There should be a set of incentives for the emergence of a better elite bargain for growth and development, he said.
A low degree of implementation of economic reform is part of the same "political economy" equilibrium, as is the obsession with quick “technical” fixes (including of those who mean well) is also linked to the perception of long-horizon actions have zero change of success, he said.
Prof Dercon emphasized that there is a need now to lay foundations for “sensible” macroeconomic management, calling for designing tax policies and collection policies that touch clientelism but in ways that are hard to object to not manual but automated, transparent audit, not political exploitation of cases and simplification of tax codes.
He further said that India surpassed Pakistan in GDP growth, even Bangladesh with dramatic and mild progress. Ghana, with similar GDP, per capita in 1990, as of Pakistan, now actually much more looking like India, in terms of GDP.
All these countries, they do not have perfect institutions. There are governance issues, there are political issues, there are even corruption issues. If you go a little bit further back, maybe a decade earlier, you can knowil that easy to do. The countries that make progress, they have political systems, some are more democratic, he added.
I would call a reasonable set of economic policies and for systems to do in that, which means, pay attention to macroeconomic stability, said the professor, adding that do reasonable things and try to actually make progress in health and in education, in infrastructure.
Talking about what is required, Prof Dercon, who is a former chief economist of the DFID of the UK, stated that there is no short-cut to building common ground across politics and others such as military. Based on shared recognition, the status quo is untenable and hurts Pakistan, and even the elite is losing now, he asserted.
Talking about political contestation, he underlined the need for some common ground on the centrality of growth and development, citing examples of India, Indonesia, and Bangladesh.
Experience teaches that crisis can be moment, he said, while referring to the situation in India and Bangladesh in the 1990s, Indonesia in the 1970s, and China in 1979, and warned that Pakistan is in crisis now.
Prof Dercon talked about countries with different specifications and said all the countries do not have perfect institutions. There are governance, political, and corruption issues. However, there are countries that make progress as they have political systems and some are more democratic, he said.
Referring to Pakistan, he said while going through the history, there is a particular implicit deal, and the same set of family players have been central to the way the deal, and the strengthen of the deal works itself out in the country. “In fact, in many countries, the underlying deal is a deal for the state to scroll. It is actually in the line, deal for the state to scroll,” he said. The deal that is in Pakistan, it is to be a deal that is a focused on the status quo, he added.
Discussing the economics of that elite bargain, Prof Dercon said low tax collection is part of equilibrium. Too many unreasonable policy measures regularly led to macroeconomic fiscal crises and need to outside support. He also spoke about high subsidies, with low savings and investments. Inward orientation and control regimes are part of avoiding dynamic firms to emerge, plus an easy way to control economic rent distribution like licenses and access to procurement contracts.
Copyright Business Recorder, 2023
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