Assessing the Socio-Economic Decline of Pakistan

The assessment and analysis presented in this article, is based, primarily on the prevailing social and political conditions in Pakistan and also reflects on its past social & economic policies. While the future does not appear to be rosy from any angle, it is worthwhile to state that the situation in Pakistan has still not reached a point where we could group it with failed countries. However, if we assess the pattern of so-called economic & social development in Pakistan, one could easily conclude that what many of our privileged and elitist class people like to call “development” is actually a recipe for an upcoming economic & social upheaval, that may be temporarily delayed once again if Pakistan is “selected” for a “proxy” role to serve someone else’s short term and long term political & economic interests, to the detriment of its own strategic interests and generally the interest of its people.

The subject of this assessment is huge and lots and lots could be said, analyzed and written, however, I would only stick to the major issues and problems that continue to haunt our political, social and economic sectors. These are now visible facts that lawlessness, poverty, unemployment and price hike are on a constant rise in Pakistan. Generally speaking, six major factors are responsible for this predicament:

1) Faulty domestic economic policy, employing top-down pattern of development, instead of economic empowerment of masses through participation, incentives, training & education.
2) Common interest of federating provinces not protected. Is Pakistan a federation or a colony of Islamabad?
3) Deep rooted corruption at all levels of the society. Highway robbers at work.
4) International lenders & donors dictate major economic policies. People ask for basics of life but what they get are foreign funded “NGO’s”.
5) Lethal mix of religious & feudal mindset. Time to do new & bold law making. Who can do it?
6) World Trade Organization (WTO) and free trade

Now, let us summarize and assess each category that is a major contributor towards the current predicament Pakistan is in and also analyse what needs to be done in the short term as well as the long term:

I. FAULTY DOMESTIC ECONOMIC POLICY, EMPLOYING TOP-DOWN PATTERN OF DEVELOPMENT, INSTEAD OF EMPOWERING THE MASSES.

There is no denying the fact that when General Pervez Musharraf usurped power from the then “elected” Prime Minister”, Nawaz Sharif, the economy of Pakistan was in precarious condition. Pakistan had exploded a nuclear device in 1998 and as a result, economic sanctions were imposed on Pakistan. During the first three years of the General’s rule, economy generally showed a downward trend consecutively. After September 11 incident, Pakistan’s economy number jugglery started to show improvements, primarily due to financial support of US and other Western countries that included cash grants, re-scheduling of external debt of $ 12.5 billion, new loans from International Financial Institutions on very easy terms and many other external measures. All this was a reward for assuming the role of front line state in the US-led war in the name of fight against terrorism. Remittances received in Pakistan from overseas Pakistanis enhanced tremendously. From September 11, 2001 to end of 2005 jumped to a staggering total of over $ 16 billion as against about $5 billions in the previous period. That helped in building up Pakistan’s foreign exchange reserves. Based upon statistics, the total reserves increased from $1.7 billion in June 1999 to $ 10.5 billion in June 2004, resulting positively on US $ - Rupee parity.

The so-called “improvement” in economy was a facade made to look fantastic by enhanced remittances and the financial support of the West. Without these investments and rewards, it is obvious that looking at the present day economic and political policies of the military government, the economy of Pakistan would surely have been in crises today. The most important and key fact is that most of these so-called improvements are not at all sustainable. This was only a little breathing space made available to Pakistan, due to its political role and the resulting sympathetic attitude of the west. Like what had happened many times in the past, an opportunity once again, for empowering the people and improving the economy on sustainable basis has nearly been lost and is now being lost day after day. Resources have not been utilized prudently and the net result is a bubble economy with soaring prices and declining consumer price index for majority of the people.

The “money rush” perpetuated by the hawkish and corrupted stockbrokers, who operate like Mafioso’s, resulted in loot and plunder of national resources, with the Government looking the other way. They plundered, manipulated and looted the stock market. The Ministry of Finance and the Government of Pakistan were helpless against the power of these stockbrokers because these highway robbers, in most cases are “armed” and abetted by the corrupt government functionaries, who also connive with these corrupt elements to skim away national wealth. These thugs were responsible for skimming billions of rupees belonging to the masses. Unmonitored loans were granted amounting to billions, which were not channeled to industry and trade but were used for speculative transactions by the neo-capitalist culprits who, in all probability will never be held accountable. The Pakistani government financial pundits keep chanting the mantra of foreign investment, but the reality on the ground is completely opposite and it is that Pakistan is in fact facing a disinvestment due to the blind privatization process, with complete disregard for any national interest and long-term prosperity. Government is too happy to directly and indirectly patronize profiteers and hoarders, who would spare no opportunity to transfer the capital and profits, if situation in Pakistan gets worse.

The facts mentioned above are only a few glaring examples of the self-destructive economic system being practiced in Pakistan. While prices of daily commodities are skyrocketing and incomes shrinking, people are being fooled again that “good days are ahead”. Education is being commercialized to an extent that good education has literally become unaffordable. Literacy levels are going down and hope for a better future is not in sight. A neo-corrupt class of Pakistani Government officials and their families are seen in Canada, USA and other effluent European countries, where they have moved to protect their families and assets, while they shuttle between Pakistan & these countries, swindle even more and protect their assets in offshore banks, doing covert transactions of money transfer between offshore accounts and their families living in affluent parts of the world and their children getting quality education in good universities & colleges. Another generation of “patriotic” swindlers” is being created, unchecked.

Another aspect of the faulty domestic economic policy is that major chunks of Pakistan’s budget goes to defense and debt servicing leaving practically insignificant amounts for the welfare of the people. The common people of the country are left to the mercy of the hoarders and profiteers and they suffer in silence. The constitution of Pakistan guaranteed that the country would be exploitation free, but ironically in Pakistan worst forms of exploitation are still in vogue.

The only sustainable pattern of development for Pakistan would have been to empower the masses with literacy, strict control on corruption (possibly severe punishment of corrupt officials), development from within and below, together with feasible and appropriate capital investment, that ensures long term growth and manpower development. Making junkyard of Pakistan with huge investments in “useless” assembly plants of automobiles as well as garments, North American & European junk food factory franchises, like, Pepsi, Frito Lay Chips, planters, chocolates, corn snacks and thousands of other unhealthy consumables will produce nothing but illiterate and unhealthy consumers devoid of any social sense and national pride.

II. COMMON INTEREST OF FEDERATING PROVINCES NOT PROTECTED.

Pakistan has always been and continues to be a classical example of tyranny of the Central Government with most of the resources and decision powers concentrated in and controlled by Islamabad. There is a dire need of the hour to increase provincial autonomy and provinces’ control over its natural resources. If the status quo continues, there is a danger of people in the federating provinces adopting other means to obtain their rights. Pakistan is passing through one of its worst constitutional crisis at this time. The 1973 Constitution lies buried under the 17th Amendment laden with President Pervez Musharraf’s decrees and there is a need of a new social contract between the provinces, that can give them sovereignty, self governance, control over natural resources and a workable formula for a provincial-federal interface. We have working examples of many countries of the world that have practiced this arrangement and resulted in a strong & healthy federation with proper and harmonious distribution of resources and a tax arrangement. The only areas that could remain in federal hands should be defense, foreign relations, communications & currency. It is imperative that everything else is decentralized.

Due to the continued centralized control of banking and finance areas, rampant discriminatory practices are in vogue that exclude people of smaller provinces to aspire and reach for positions even at skilled worker level, leaving aside the managerial levels that are practically impossible to reach. This is due to a number of historical reasons that have left majority of the people from smaller provinces with lack of education, skills and work discipline. Industrial, disciplined thinking always comes as a result of involvement of the people in the social and developmental process, something that Pakistan miserable failed to deliver to its people coming from smaller units. One of the most divisive issues confronting Pakistan from its infancy has also been the question of distribution of resources and the safeguard of common interests of the federating territories that constitute the Federation of Pakistan.

The wrong perception that Pakistani nation cannot remain solidly together and function without one state language proved completely devoid of any sense and was disastrous. From the time Pakistan came into being, these views were not accepted by most people of the smaller federating units particularly Bengalis. In the early days of Pakistan’s creation, there were other forces in play that ensured that the new country remained together as one entity, most important being that there was the dynamic personality of Jinnah and other founders of the country who were there to guide on a day-to-day basis. After the death of Jinnah, there was a world of change, followed by power grab game by greedy, ambitious leaders with and without uniform.

The inability of the politicians and military generals to provide a stable government was largely a result of their mutual suspicions. Their loyalties revolved around personal, ethnic, linguistic and provincial identities together with lust for money, rather than national and social issues. Finally, federating provinces in general and Bengalis in particular started demanding provincial autonomy as they could see that Pakistani feudal politicians and military generals would never ensure that their common interests, within the federation are protected. As a result, they started to demand autonomy. Rest everything is history. We are all aware of the aftermath of rejection of West Pakistan's dominance by Bengalis and their desire for provincial autonomy that ended in a blood bath, break-up of the country and the formation of Bangladesh.

Pakistan is, once again at the crossroads. The perpetual drift towards socio-economic decline and political chaos has started to take roots, once again and we are all looking towards an uncertain future.

III. DEEP ROOTED CORRUPTION AT ALL LEVELS OF THE SOCIETY. HIGHWAY ROBBERS AT WORK

Pakistan is one of those countries where masses are always left out of the social and economic equation. Thieves, tax defaulters, corrupt military generals, feudals and other power brokers keep enjoying all luxuries of life, while poor masses face a state of semi-starvation. Contrary to what the “Constitution of Pakistan” stipulates, there is no “freedom of justice” in Pakistan. The “state apparatus” mainly consists of “corrupt to the core” functionaries, who are only concerned about filling their own coffers. Even “basic” and “fundamental” rights are negotiable. There are parallel civil and military judicial systems, that are a product of prolonged military rule and we are running out of options.

Pakistan’s banking and taxation system is completely exploitative. Massive tax theft is in vogue, and traders, wholesalers and transporters pay very low token taxes. Tax on agricultural produce from large agricultural lands owned by feudal lords is also negligible. Pakistani people in general and our politicians, in particular raise hue and cry against feudal system, but they have no influence to make the government impose an agriculture tax. Perhaps, most of the lawmakers are, themselves from the feudal classes and until the situation changes, there is no hope of any major shift towards betterment.

It is shockingly true that most, if not all of our politicians are loan defaulters to different levels of defaults. The bigger feudal politician is a bigger loan defaulter and many of these enjoy patronage of government. Only those loan defaulters are nabbed, those are the political opponents of the regime. This institutionalized corruption with the covert and active support of government machinery has reached such an alarming level that accountability had lost its meaning. The entity called National Accountability Bureau (NAB) also requires accountability. Government is very keen to establish its writ in the areas bordering Afghanistan, but is totally incompetent to establish its writ on these highway robbers, which rob the country in broad daylight.

The sale of national assets and key industries in a non-transparent manner and in a hurry is also a matter of serious concern and raises a lot of doubts in the minds of the people. During last few years, National Refinery, Habib Bank, United Bank and many other institutions have been sold out. Most of these institutions and industries were profitable entities and the manner, in which they were sold, given the general culture of corruption, raises huge doubts regarding integrity of these deals. It is also important to note that the profits of public sector enterprises are retained in the country but after privatization, their profit may be remitted abroad putting a pressure on the economy that is already ailing.

It is absolutely important that public sector companies that yield profits should be retained in the public sector. It is also important that the policy of privatization of profitable units is immediately scrapped. We have an example of our neighboring country, India that has also decided not to privatize profitable units.

To change this existing situation, the enlightened middle class (if it exists by then), the working people and other poverty stricken masses would have to join hands to bring about a sustainable revolution, that has inbuilt checks and balances to avoid exploitation of general masses in the name of development and progress.


IV. MAJOR ECONOMIC POLICIES DICTATED BY INTERNATIONAL LENDERS & DONORS.

Countries like Pakistan are not free to design policies for the welfare of their own people; rather they are left with no choices but to make policies on the dictation and coercion of international lending institutes and world powers. Military dictators, who are generally unelected and lack the mandate to govern, as well as the so-called elected leaders are obliged to obey orders of the powerful financial institutions to prolong their rule. These dictators, on the other hand always need the patronage of powerful local feudal lords, tax thieves and loan defaulters.

How independent our economic polices are, could be easily gaged from the fact that the last three governors of the State Bank of Pakistan were “imported” from the IMF, World Bank and Asian Development Bank. Pakistan’s economy is being held hostage to foreign neo-colonial economic interests. The only solution for Pakistan is to “break out” of this economic “Catch-22” situation and design its economic policies strictly based upon its long term interests and linked to gradual prosperity of its masses, following the principles of “grass root economy”.

The following facts extracted from State Bank of Pakistan Reports and reports of other financial experts, are alarming and validate the facts stated above. These facts have been obtained from various sources on the net:

1) The rate of inflation that was 6.2 percent in 1999 jumped up to 7.6 percent in 2005. As the inflation does not include oil and food prices, it is quite obvious that rise in inflation during last few years is not merely due to rise in the price of oil in the international market. The rampant corruption, both financial & intellectual, economic policies based on feudal culture on one hand and manipulation of international lenders on the other hand have contributed in enhancing the miseries of common man.
2) Pakistan’s trade deficit was $ 1.6 billion in 1998-99 but in 2006 it jumped up to $ 6.2 billion. This year it is expected to jump over $ 7 billion. In a country like Pakistan it is dangerous and risky to have such a huge trade deficit.
3) A part of trade deficit is due to rise in prices of oil but the fact is that we had imported automobiles of about $1.6 billion in a 16 months period from July 2004 and had also made significant imports of wheat and sugar.
4) Unemployment was 5.69 % in 1998-99 but rose to about 7.9 % in 2005. All this is indeed a matter of concern and anxiety. The poverty is on the rise and the gulf between the rich and the poor is widening.
5) In 1998-99, the rate of inflation was 6.2 % and the rate of profit on Special Saving Schemes, where mostly retired, salaried persons and widows etc., generally invest, was 14 % per annum which means that the investors got a positive rate of return of 7.8 % per annum.
6) The banking sector is now a partner in exploitation of the people. The rate of return on Special Savings Scheme in 2005 was reduced to about 8.4 % per annum but the inflation rate in that year was 9.3 %, which means that the investors actually incurred a loss of 0.9 % per annum. This is indeed a criminal behaviour of our financial institutions.
7) The average weighted rate of return on savings bank account was 2.55 % per annum in 2005 whereas inflation was 9.3 %, which means that the millions of depositors bore a loss of 6.8 % per annum. This was the highest loss to the account holders in the entire financial history of Pakistan.
8) In 1993, the then governor State Bank had observed that if a bank pays a return to depositors, which is less than the rate of inflation, it is exploitation. He had also said that State Bank of Pakistan should not sit on the sidewalks of the banking system witnessing this exploitation and suggested that banks should pay a minimum rate of return of one percent per annum over and above the inflation rate to their account holders. This suggestion has never been implemented.

V. LETHAL MIX OF RELIGIOUS & FEUDAL MINDSET. TIME TO DO NEW LAW MAKING

In Pakistan’s history, people have always been betrayed in the name of a utopia called “Islamic economic system”. Some rulers even attempted to try out this system (to suit whatever it meant to them), with no tangible results and the people were left with some legal Arabic terminology that actually meant nothing different than the earlier English terminology, but the mindset of the rulers was such that that they felt satisfied that “Islam had dawned” on the country with a bunch of Arabic words flying around, like mudharba, zakat, qanoon shahadat etc. The superficiality of medieval economic practices and belief of some people that it would make a change in the economic formation of our society is another pipe dream. The fact is that the so-called “Islamic system” of economics cannot be called a system at all (It is actually a set of moral & spiritual values). It might have been the practices of the societies at that time, but with the present day complexities of trade, industries, stock exchange and currencies, this and other economic systems claimed to be based upon religious injunctions are absolutely a complete pipe dream and can never be practised. Our so-called Islamic experts have yet to decide if the interest is Islamic or unIslamic, and what interest actually means and really meant 1500 years ago. Lot of other mullahs are busy probing the Holy Books to find details of explicit or implicit mention of economic system nitty gritty, something that is simply not there. Replacing terminologies and other economic / judicial jargon to Arabic-sounding words has made the economic and judicial system so confused that we have two different laws pulling the people in two different directions. We have become a “laughing stock” for enlightened world in the Western hemisphere as well as the Eastern Block.

Another menace, called feudalism, has plagued the politics and governance of Pakistan since the day it came into being. With each passing day, the anti-people policies and strategies devised by the power hungry feudal and their cohorts, who happen to be the main power brokers in Islamabad, keep changing hands but invariably stay in power to maximize their wealth and power. They are known to be ruthless manipulators who do not hesitate to intimidate, indulge in violence and employ other forms of ruthless tactics.

The combination of religious and feudal mindset is what is the most diabolical for the ordinary working people of the country. This mindset has now penetrated deep into the flesh and fibre of the Pakistani society and shaped their attitudes. This combined with the falling levels of literacy has caused havoc with the general level of consciousness of the Pakistani people.

A country that was created for the uplift of a community that was neglected in history in British India is fast turning into a dream gone sour. The country has turned into a “war of proxy” land for different contenders, super powers in particular. Our leaders, instead of making laws to turn the Pakistani society into a dynamic, forward looking and secular one are busy in their own personal power agenda’s and have effectively turned governance into “prostitution of politics”.

Until there is a general uprising against this mass loot and plunder, on life’s basic issues, there is little hope that there would be a tangible change in the country’s state of affairs. Law making has then to be done by the democratic institutions to be an appropriate blend of laws based upon Universal Charter of Rights, our culture & traditions.

VI. WORLD TRADE ORGANIZATION AND FREE TRADE

The capability of Pakistan to pay off the foreign liabilities is decreasing day after day as reserves are declining and imports are sharply rising, together with the external debt. Contrary to the economic mantra that the governments keeps chanting, the most alarming fact is that in the event of any major external shock, there is a danger that the reserves will just vanish in no time. The emergence of the phenomenon of free trade and World Trade Organization (WTO) clearly places some nations ahead of and at the expense of others. The so-called ‘free market’ is clearly anti-people, in nature. Free market can never be a fair market. Countries of Latin America including Argentina, Venezuela and Bolivia were taking courageous steps to get rid of this free market system and devise economic policies to benefit their own people. On the other hand, Pakistan is busy in privatization of the energy and many other sectors. Bolivia had nationalized its gas resources. It is indeed imperative for Pakistan to break the spell of the free market and pave way for the people friendly polices.

Many third world countries have started economic collaboration to safeguard their interests. India and Brazil are playing important role for reforms in WTO. Pakistan has to remain vigilant and acknowledge that this is the era of globalization, liberalization and deregulation and there is no escape from these. We need to adjust our policies to benefit from the new environment. If China and India can become a major beneficiary; why can’t Pakistan do it?

The only powerful aspect of Pakistan is that it has a very high percentage of young people in comparison with some of our neighboring countries and even some rich industrialized countries. This is a huge asset, which can be capitalized. With pro-people policies, good planning, professional competence and commitment, people of Pakistan can rid their country and its social & economic system from all shackles of exploitation, take away power from a small group of people who are responsible for this predicament and take Pakistan to new heights of real progress of the people.