Pathemata Mathemata

Things suffered, things learned. About 5 years ago, I wrote a series of articles, which were published in Business Recorder, on profit, wherein I had concluded that it actually is all about profit. During that journey through Profit, the importance of national assets, such as bank deposits, was highlighted, while simultaneously arguing that state capitalism was not necessarily a bad thing; China being proof of concept.
Relevant to today, the articles wrestled with the conundrum, with an objective to identify the reasons, behind zeroes of the public sector becoming heroes, even if in comparison only, when employed by the private sector. The final conclusion was that the key difference, the motivating factor, was, fear!
Ever wonder why private sector is not plagued by corruption? Primarily, because the Seth hates people who dip into his pocket, deeply; and not just because it's his money, the principle is, tolerance encourages others. Needless to say, penalty for stealing from the Seth is swift and exemplary. And while you need not worry about severe repercussions if you are an honest employee, but you are surely out of a job if you are inefficient, incompetent or simply not required any more.
Conversely, the public sector is all about getting paid whether you work or not; once on the government payroll, it is next to impossible to get fired. Being questioned for non-performance is not very high on the government's KPI list, if there is one in the first place; rather, if you are wise enough to quickly understand how the system works, you are in for a smooth ride! And to top it all, there is a rumour that the phrase, birds of a feather flock together, perhaps has its origin in the Pakistani public sector.
With this kind of on ground situation, it is remarkable that we even debate losses of State Owned Enterprises. Which is why, the suggestion to move all State Owned Enterprise under a quasi private sector umbrella, and thereafter, managing them under private sector rules and systems made good sense.
Okay, fine, public sector employees, and employment, are by and large comparable across the developing world. Except consider it in a different perspective now. Take farming out of the equation, and the Public Sector is undoubtedly the biggest employer in Pakistan; and arguably, in any case, farming is mostly unskilled labour. Even the largest corporations are owned by the public sector, the national airline, the oil and gas corporation, WAPDA, railways, to name a few. And if the public sector, the largest employer, is plagued by inefficiency and incompetence, dreams of becoming a tiger are perhaps misconceived.
In dollar terms, India's per capita income is not very much higher than Pakistani per capita income; the difference is probably around US$ 100. Except that they are amongst the top 10 economies of the world and we are not, only because there are 6 times more Indians than Pakistanis. So while we are gaining on that front, which will probably improve our economy's standing in the world rankings; we are hardly becoming more efficient, or productive. The solution is not privatization, but putting the public sector employee's skin in the game!
"Bureaucracy is a construction by which a person is conveniently separated from the consequences of his or her actions", Nassim Nicholas Talib's book "Skin in the Game".
But I have digressed. By the time I have managed to successfully nudge the preamble towards today's subject, more than half the column space stands consumed. Nonetheless, Talib's message in his latest book is on the money, unless people have to pay a price for their mistakes, they will only make mistakes. If analysts and anchors are not made to pay for their wrong predictions, we will have to bear conspiracy theories forever and ever; the only other choice would be to shut the idiot box. "Journalists who "analyze" and predict, have no skin in the game".
By implication, those taking decisions which result in exporting jobs, have nothing to lose. Imports may make consumption cheaper, but export enough jobs and there will be no consumers; perhaps understandable only by those who have lost jobs to imported shoes, clothes, food and what not. For the decision makers, increasing trade was a feather in the camp; even if the trade increased completely in the wrong direction. I am not aware, but, have we exported construction labour jobs to China as well?
Frankly, never have bad policy decisions ever been a bane for those at the helm of powers. The voters are incapable of discerning the cause of their misery; there is a thin line between controllable and uncontrollable calamities. Accountability for corruption is not the same as accountability for incompetence. An honest idiot can be equally lethal, if not more. The pertinent question is whether we are where we are today because of bad luck or bad decisions; if it is because of the latter, what then is the remedy.
Perhaps, Talib is right. There should be a mechanism for making sure that decision makers in the Government, at all levels, have skin in the game. And election is not that mechanism, especially in a country where the real literacy rate is not ideal. Perhaps next time we go knocking on IMF's door, we can request that structural reforms include provisions for penalising bad decisions. Unless decision makers suffer, they will not learn.
(The writer is a chartered accountant based in Islamabad. Email: [email protected])