As the Business Recorder celebrates the fiftieth year of its publication, it is worth examining where Pakistan stands today, the reasons there for, and the way forward because despite the many failures and few successes of the regimes that administered Pakistan, it has the potential for rising well above the level it is at. However, neither the public nor the private sector shows enough awareness thereof.
At present the stumbling block is the public debt; in 1958 it was only Rs 5.8 billion of which just 13% was external, but in 1968, it rose to Rs 17.7 billion of which 49.6% comprised external debt but the bulk thereof was spent on infrastructure development and industrialisation, yet wasn't enough because population growth was high, as it is today - an imbalance that has only worsened.
In 1964, at a World Bank conference on 'Problems of Developing Countries', eminent economist Professor Richard Eckaus concluded that, based on its record in the early 1960s, Pakistan was "a puzzle, a miracle of levitation; with one of the lowest domestic savings rate in Asia [due to low growth in per capita income], its economy has performed quite creditably", but wondered "whether the capital inflows sustaining this growth would last".
The 1960s were unique in providing the private sector the freedom it needed to bolster growth, which was rapid to a point where SBP found it hard to ensure monetary expansion at the commensurate pace. To achieve this aim i.e. keep inflation at the logical level, SBP had to use all regulatory tools including credit controls, statutory reserve requirements, credit ceilings, lending quotas for banks, and floors and ceilings on lending rates.
The fact that SBP focused so much on regulating the monetary system pointed to a developing cavalier attitude among bankers - surrendering to market demands without foreseeing the economic consequences of this attitude. The freedom afforded to the private sector proved fatal because it gradually led to creation of serious economic imbalances between East and West Pakistan.
The 17-day war with India in September 1965 was a tragedy of incalculable proportions. The pace of economic development suffered a reversal because resources were diverted to replenishing the losses of the defence forces. It was a turning point in our history under whose dark shadow we have lived ever since, though deterioration in other areas, especially state administration, aggravated the problems.
The post-1965 economic slowdown was manifested in many ways. The 1960-65 period was nicknamed the "green revolution" because agriculture registered the highest-ever growth rate. Besides, gross fixed capital formation averaged 21% of the GNP and GNP growth averaged 6.4%. All these indicators began sliding. On top thereof, simmering popular dissent led to the downfall of the Ayub regime and then the break-up of Pakistan.
No one can deny that private sector - engine of growth in non-communist states - must be afforded the freedom it needs to perform at the optimal level, but the state cannot shrug its obligation of giving this sector direction so that the eventual result is higher prosperity for all - not a select class. This has been the key (though vocally denied) failure of all regimes to-date.
The beginning thereof was heralded by wholesale sacking of principled and forthright bureaucrats by General Ayub. Z.A. Bhutto did the same at a far higher scale, forcing the bureaucrats to become servants of the politicians, not the state, which compromised the integrity of the state. Now even the National Accountability Bureau doesn't (let alone the other pillars of the state) hold accountable the known criminals.
Over the decades, sidelining of those who were both capable and competent but suffered from the disease of being "visionary and sincere" has diluted, in fact decimated, the key social values. Striving for short-term material gains has now become the main objective, irrespective of how the flawed routes to achieving it damage the society - today's stark reality.
This pursuit has become the accepted life-style - a trend that can damage the country irretrievably. In 1987, Allan Bloom authored a book (The closing of the American mind) pointing to the intellectual deficit in America's educational system which was imparting knowledge based on superficial coverage of disciplines that amounted to institutionalizing closeness in the guise of openness.
"When there are no shared goals or vision of public good, is a social contract possible", he asked, and lamented the corruption of future generations' mindset with the premise that American way of perceiving and resolving issues is ideal. He agreed with Plato that if we are to be truly human we shouldn't be content only with the values our culture provides; such existence is a closed cave - a prison sealed by a blinkered self-righteous attitude".
The deadliest of the flawed values is elevation of self-benefit above all considerations because it amounts to saying "everyone for himself, God for us all"; when applied to economic activity, this mindset rapidly escalates economic disparities, which is the harsh reality of almost every country, but Pakistan is among those that manifest it starkly, as depicted by its rising (but uncared for) poverty line.
What worsens this scenario is the fact that, instead of accepting their governance failures, regime after regime either simply denies them, or cites bigger failures of previous regimes as the consoling factor although it amounts to admitting being at least as incompetent and corrupt as the previous regimes - a tendency that has turned mal-governance and trampling of civilized values into the accepted culture.
Although the Rupee depreciated throughout the last 25 years, this flawed culture didn't make entrepreneurs realize that, given their inability to undertake requisite balanced modernization and replacement of the industrial base, they cannot achieve the competitiveness imperative for serving the local markets at globally competitive prices and gaining and sustaining a foothold in foreign markets.
All they keep asking for are tax concessions, which escalate the fiscal deficit, and prevent repairing and expanding the physical infrastructure which is rendering businesses progressively more un-competitive. Until Pakistan is able to overcome the gaps in its physical infrastructure, the sane strategy is to focus on sectors that are based on local inputs and don't require highly specialized skills.
Pakistan's reality is that each year its youth population increases by 3.6 million and now forms 53% of the total. These boys and girls are units of energy; it is up to the state to decide in which direction this energy should go - petty and big crime, terrorism, or professions wherein it is utilized productively and the youth get used to earning through hard work.
This huge mass can't be educated but vocational training can turn it into productive, self-sustaining individuals who could be employed in Pakistan or abroad. In Pakistan, they could be employed in agriculture, orchard, dairy farming, animal husbandry, poultry farming, and fisheries sectors. With a largely uneducated population that's what Pakistan should capitalize on.
But doing so implies confronting tough challenges from the firmly entrenched landlord aristocracy; it would do everything in its power to stop in its tracks any corrective effort e.g. corporate farming, which was offered by Middle Easter investors but didn't materialize due to landlords' resistance. It is unfortunate that this failure wasn't highlighted by the media.
As it is, agriculture sector's infrastructure is in shambles; its profile worsened after the 2010 and 2011 floods, but the private sector has yet to realize, for instance that, for preserving crops' attributes while stored, purpose-oriented storage facilities are vital. Besides, well-monitored storage facilities could help in borrowing on secured bases to finance a host of agriculture-related inputs-seeds, fertilizer, pesticides, tools, gadgetry, etc.
Pakistan is a mega producer of fruits and milk, but we didn't develop adequate capacity to preserve and process these items. We need 'cold chains' to move them to domestic markets, and country-wide network of processing plants to produce and export their value-added output. The side benefits would be rise in activity in specialized auto, cold storage, processing technology, and packing material sectors, above all, in employment.
Same is true of animal husbandry, poultry farming, and fisheries sectors. Besides developing these sectors the other issue demanding attention is revival and expansion of the 'import-substitution' sectors - sectors that can produce locally what is being imported and adding to Pakistan's bludgeoning trade deficit. All this is now imperative because if this isn't done, the load of external debt will virtually kill Pakistan.
But nothing can change without ridding the state bureaucracy of the cronies, incompetent and the unprincipled therein to guarantee pervasive transparency for optimal resource utilization instead of squandering. Before the 1988 British elections The Guardian had rightly pointed out that "governments come and go; only a competent, committed and forthright bureaucracy provides continuity to the state and assures stability, not its politicians."