In the last week's article I had analysed some aspects of the neo-liberal policies and had come to the conclusion on some aspects of liberalism and what it meant for Pakistan. Liberalism requires an internal combustion engine in the powerful sectors of the economy so that things can be on course. So a free market is not a panacea for all ills. Even in the most developed countries, the government of the day interferes with the market mechanism and tries to correct inefficiencies.
In the developing countries, the interventions on behalf of the limited private sector (if at all), is constantly done. The corollary to this is that once the corrective curse is determined for a faltering economy then the governments of these countries will have to remain involved till such times as the correction is made. There is thus a difference between interference and involvement. There is a second corollary that states that the policies have to be made for the many rather than the few. It is not the Benthamite philosophy but something that the author of this article has been advocating ever since the experience of East Pakistan and more recently of the NW and SW, not to speak of the other areas like Fata and the hot deserts.
If markets are determined at the levels that are optimum for the consumers, the producers and the other middle-level players nothing could go wrong. However, these optimum levels would determine on a locally cultural base the pliability of the interventions. In a changing world scenario, the flexibility that is sought is not given to the poor but to the rich.
The concept of efficiency for a developing agriculture sector is largely determined by the efficiency in the agriculture sector though let me be very clear that the industrial sector is different for different countries. It is for the policymakers to amend the requirements from time to time and to ensure that there is no stagnancy in these options. In that sense the fundamental problem is that there are very few policymakers that are constantly in review for today's excellent propositions may not be suitable for tomorrow. In agriculture, as also in industry, there is a constant urge to review efficiency. The neo-liberals have an allocative static efficiency concept and not a dynamic one. The dynamic efficiency is closely related to developmental goals. There are in agriculture about 53 variables. These variables are constantly moving and whereas there are endogenous movements due to these variables the exogenous ones are also there to add to the complexity of the situation.
The time-honoured way of analysis of two variables may sound very convincing but the concepts are not relevant to real world situations. Developing world is certainly not enamoured by these concepts of the neo-liberals. The problem really is that in order to find jobs for their own industries a certain policy initiative is taken by the developed world irrespective of misallocation of industry. Take the recent case of a fertiliser company that has invested 1 billion dollars according to its CEO and the investment was made in the entrepreneurial sense and therefore, if that investment has gone sour why should the government bail that industry out. Why? Where is the neo-liberal tradition that if the market rejects your investment premise you ought to get the results whichever way they go?
The dynamic concept was dealt with differently in Pakistan by the senior policymakers for the years 1994 to 1996. In this the developmental goals were to be achieved by a different route. Research and development was placed on its head and development came first and then research. The rationale for this was if research were to come first then the policy options were to be researched and that is a decade (minimum) old effort and then would be development which would be another five to six years. Two decades on would mean that the intervention was dated and obsolete. A number of these kinds of projects were taken in hand, in agriculture addressing very difficult situations. Edible oil is a good example. The situation in Pakistan is alarming. The effort was started during the time of Shaheed Benazir Bhutto and a new organisation was created which by itself was indicative of a new initiative for it was not out of the consolidated funds of the government of Pakistan. The WB had launched some years earlier an oil seed project and something like Rs 176 crores were siphoned off by a group of research toadies. Nothing had come out of it. So a new discipline had to be created and not the research-development line but the reverse of that. The industry was asked to pay a cess and the oilseed organisation (Pakistan Oilseed Development Board) came on the scene and within a period of two years reduced the import bill by over Rs 2 billion. There were non-agricultural options that were exercised. Then came a change in leadership and the PODB started having all kinds of problems. It is now in shambles and in disarray. Leadership matters. If the leadership is one of cheap scoundrels then this is the fate that it will meet. Static allocative efficiency does not automatically translate into dynamic efficiency for there is no theoretical or practical evidence for this. Innovation often requires leadership that is capable of walking a tight rope and occasionally if not frequently breaking the rules. In this case the institutional arrangements were changed for the former PM was capable of supporting such moves.
So freeing the market may be decent theoretical option, in practice there are too many whys and where offs. Moral judgements are not required as to which the best forms of government are but which are the most relevant. Legitimacy of policy options change with time. There is a continuous iterative process that has to be addressed by those in leadership positions. There is a considerable amount of discretion that has to go into decision-making. These can easily be misread as being inefficient management.
The free market option is a disaster. What are the ingredients of the free market? How free? How regulated? What and where is this free market? Where does it emerge from? What kinds of markets are necessary? What and how is the relationship between the players carried out? We know that the arhti has started playing havoc in the marketing sector. These days the arhti is supreme and determines the dynamics of the market. Therefore, this determines to a large extent the food inflation in the country.
Why should any model be copied and why should we be copycats? More recently the world has come to know that there are very many ways of skinning a cat? There are as a matter of fact many options coming up. As can be seen the neo-liberal markets malfunction and that this option has many flaws. These flaws and more will be the subject of the next analysis. Pakistan has to go it alone and have faith in our actions.