Review By: Wazir Zafar Hassan
S Akbar Zaidi is a renounced political economist with a Ph.D. in History and an MPhil in Economics from the University of Cambridge. He has more than 35 years of experience in research and teaching. He is currently the Executive Director of IBA Karachi. It has always been a hot and challenging topic to understand the issues in the economy of Pakistan. S. Akbar Zaidi has made understanding the issues in Pakistan’s economy easy by writing this book, giving a broad spectrum and overview of the economic history since its independence, highlighting the reasons behind the crippling economy of Pakistan. Akbar Zaidi has provided an overview of economic history from 1947 to 2021, which consists of different phases: the era of experimentation, the twisting economy, and the era of the problematic economy. Akbar has identified issues in nine critical areas in the economy of Pakistan that need to be addressed and provided solutions.
The most significant issue lies with the policy framework in the country. The author believes that policymakers in Pakistan are not clear about the direction of the policy framework. They do not understand the intensity of the economic crisis and make flawed policies. The author believes Pakistan is no longer an agricultural country, but the policymakers always treat it as an agricultural economy. He discussed salient problems the agricultural sector faces, such as the lack of proper mechanization, technology, credit lines, and production. The author argues Pakistan has transformed from an agrarian to an industrial economy. To support his claim, Zaidi mentioned that 45% of the population gives their input to the agricultural sector while contributing just 19% of GDP. On the other hand, 19% of the population provides input to the industrial sector, contributing 30% of GDP. This shows the flawed policies that need the divert of attention towards the industrial sector.
While discussing issues with industry, the author considers the real problem lies in the direction. Pakistan never had long-term economic policies. Akbar Zaidi divided Pakistan’s economic history into three phases: The Era of Experimentation (1947-1979), the Era of Twisting Economy (1979-2000), and the Era of Problematic Economy (2000-2021). In these eras, many economic models were experimented with, including the Howard Trickle Down Model of General Ayub Khan, the socialist model of Zulfiqar Ali Bhutto, and General Zia ul Haq’s foreign aid-based economy. After Zia, the twelve years of political unrest and power struggle between Benazir Bhutto and Nawaz Sharif, Pakistan was trapped in the vicious debt trap of the IMF. From General Musharraf’s Consumer Credit Model to Nawaz Sharif’s Crony Capitalism and Imran Khan’s Riyasat e Madina Model.Due to many contrary models, Pakistan’s economy could not sustain itself.
Akbar Zaidi then explores the issues with fiscal policy. Pakistan’s expenditure is always more than the country’s income. Due to this, the debt has to be taken to meet expenditure. There exist issues with the sources of the economy. The tax system is unable to collect maximum output, and the state-owned enterprises, instead of making a profit to the state, have become a burden, such as Pakistan Steel Mills, PIA, WAPDA, and Pakistan Railways. The reasons behind failure are the bureaucratic, political, and military interventions, the lack of professionals, and the weak private sector against state enterprises.
Another significant issue is related to fiscal federalism. There is no devolution of power and weak local governments. Strong local governments help improve tax collection. The tax collection rate is much higher in a world where power is devolved to a low level. In Pakistan, the political elite never allow this to happen, fearing power constraints.
While discussing the monetary policy, Akbar Zaidi believes the banking system is flawed. The banking system only supported the elite industrialist class by giving them huge loans. On the other hand, it is quite difficult for a common man to get a loan for business purposes. Further, only a few players dominate the equity (stock) Market.
The Washington Consensus, which includes the International Monetary Fund (IMF) and World Bank, are significant constraints in the economy of Pakistan. IMF gave loans through structural adjustment programs and stand by arrangements programs. These conditioned-based loans ensure the loan-receiving country never prospers by entangling the country in a vicious debt trap. The authors view it as a form of neo-imperialism. Akbar Zaidi suggests to avoid this trap; the government should avoid unnecessary expenditure and increase tax collection.
There is a development paradox in Pakistan. The author argues Pakistan has witnessed development but in a limited sector. Such as Pakistan saw tremendous growth in the Housing industry, where only a few elites dominate the sector. Bahria Towns, DHAs, and City Housing, etc. are flourishing, but what about other stakeholders?
Despite economic growth and several IMF loans, the country’s poverty and class inequality have increased. IMF structural adjustment programs directly affect public expenditure, such as health and education, thus affecting the poor. This created an inequality in urban and rural regions’ education and skill levels.
Last but not least, Akbar S Zaidi marked class politics as another significant issue. The middle class in other countries plays a significant role in the country’s development. Still, in Pakistan, the middle class is not that dynamic, has a conventional approach, and does not accept ideas and technology efficiently. The middle class is not playing its due role in the development of the economy of Pakistan. On the other hand, the narrow elites of feudal, politicians, and capitalists dominate the economy as the parliament. They never let economic policies that go against their interests and could flourish ordinary people.
Akbar S Zaidi has covered critical areas of the economy where attention is needed. With solid arguments supported by facts and figures, the book has become an authentic source on the economy of Pakistan. I strongly recommend the book to economy enthusiasts and CSS aspirants to understand the issues of the economy in depth so that one can hope these issues will be solved in the future. Without a strong focus on the economy, one should not expect to keep pace with the world’s progress.