PakistanColonial Mindset and Economic Policy
Re-posted from Islamic WorldView Blog: Impact of Colonial Heritage on Economic Policy in Pakistan. [http://bit.do/azich]
In this post, we provide a video-lecture and a summary of comments by Guest Panelist: Dr Asad Zaman on a Research Presentation by Syndicate-1: “Task Force on Governance” at National Institute of Management on Thursday, 23rd May, 2019 from 12:00-13:00 hrs. The task force developed plans for effective economic security of Pakistan, according to Terms of Reference provided by the trainers at NIM. I provided comments and feedback on these plans. A Video Recording of my comments, entitled “Economic Policy for Pakistan: Recognizing and Overcoming the Colonial Heritage” is linked below. A written summary of the issues discussed is also provided below the video
As Vice-Chancellor of PIDE over the past five years (Dec 2013 to Mar 2019), it was my main job to provide research support to any number of government organizations, to allow for better planning and more informed decisions. The bitter lesson from from this experience is: nobody wants to listen to research advice. Whereas it is commonly believed that we lack the knowledge and research required for good planning, this is not actually true. There are many instances when we made brilliant plans, and even brilliant execution. Our steel mill was a far-sighted investment, launched at around the same time, and with nearly the same technology, as the Korean Steel Mills. While Korean Steel has been spectacularly successful and is among the worlds best today, our steel mill is the biggest budgetary burden for the nation. PIA was once among the worlds leading airlines, and supplied the expertise and skills to launch dozens of airlines throughout the middle east. Now these newbies have taken the lead, while PIA is a model of corruption and inefficiency. Dozens of cases can be cited where brilliantly researched and well-executed plans came to disastrous ends.
So the question is “why”? Why cannot good organizations which serve the public interest thrive in Pakistan? A big clue towards the answer is furnished by the exit speech of Marc-André Franche Country Director UNDP, who said that “ You cannot have an elite that takes advantage of very cheap and uneducated labour when it comes to making money, and when it is time to party it is found in London, and when it’s time to buy things it is in Dubai, and when it’s time to buy property it invests in Dubai or Europe or New York. The elite needs to decide “do they want a country or not.”
To put the matter more starkly, there is not one, but two Pakistans, as Tariq Rahman writes in his book “Denizens of Alien Worlds”. The upper class elites speak English, go to different schools, receive different education, health care – they live entirely different lives from the majority of the population, who cannot afford to give their children medical treatment which is received by cats and dogs of the elites. This class structure is the legacy of colonialism, which created bureaucratic structures purely for the purpose of ruling the country for orderly extraction of resources. This structure is designed to keep power and voice away from the public – you cannot give power to the exploited for they would only revolt against you. The Americans did revolt successfully against colonial rule in 1776, while our own revolution in 1859 failed, and this accounts for the differences we see today. It is worth noting that the American revolution succeeded because the British could not act as ruthlessly towards their fellow white men, as they could and did towards the inferior black races inhabiting India.
In order to understand the roots of our current problems, it is essential to understand the methods by which a handful of British ruled our huge country. This is not widely realized, but colonization is primarily a process of conquest of minds – a few thousand people cannot rule over millions without their willing consent. The soft power essential for power and control is based on creating a Deep-Seated Inferiority Complex in the enslaved masses. It is based on creating the myth of the “Civilizing Mission”, so that we come to believe that the British came to educate and civilize us, instead of looting us of trillions of dollars. It is based on a Divide-and-Rule strategy, which keeps us fighting each other instead of recognizing our real enemies and oppressors. But most importantly for our present purposes, Colonial rule depends on an educational system designed to create respect and admiration for the British colonizers, and contempt and hatred for our own society and ancestors. Absorbing these myths of Eurocentric history creates a substantially distorted picture of history and of our place within it, making it very difficult to “Discover Who I am?”
There are two important results of this multi-pronged attack on our societies. One is that the institutional structures of colonization were not designed to serve the people — they were designed to support the process of ruthless and extreme exploitation. The bureaucracy, judiciary, police, military, were all institutions to impose and maintain imperial order and prevent revolts. Furthermore, people inducted into these imperialist services were educated into becoming a “Coconut Class” – brown on the outside, but white on the inside. The major problem for us today is that the nature of the institutions, and the people who control them remains the same as it was in colonial times. Although the name is “Public Servants”, our bureaucrats are rulers of the country, and have the mindset required for extraction of revenue. This is also something our institutions were designed for – extraction of revenue from an unwilling and oppressed public. With this background in mind, we can now look at the measures recommended for enhancing economic security by the NIM Task force on Governance. Summary below discusses a few selected points, while the video-lecture discusses all the recommendations of the report.
One recommendation is to reduce the size of the informal economy, to bring it into the tax net. But given an exploitative government structure, not designed to serve the people, why should we try to give it more power. Other studies show that in terms of charity and generosity, Pakistanis are well above average. If we could find ways to create transparency in tax collection, and show people how tax money is used to provide services, they would be willing to contribute more. Corruption and in-efficiency in tax collection is the biggest reasons for the low tax revenue, and it is not fair to ask for more taxes without undertaking serious reforms in the collecting process, ensuring fairness and equity. The fact that our government is exploitatitve and extractive is also of great relevance in the debate on “Privatization of State Owned Enterprises”. Global experience shows that essential services should not be given to private sector, because the p[rofit motive leads to exploitation of the public. When the government is also motivated by exploitation and extraction of revenues, this creates a dilemma which cannot be solved except by creating changes in mindsets of the people.
Regarding the issues of government budget – raising taxes, reducing expenditures, attempting to balance the budget, and lowering the deficit — Modern Monetary Theory offers radical insights into this matter, which differ greatly from conventional wisdom of standard macroeconomic theories. For a detailed discussion of these aspects, see “Modern Monetary Theory“.
The persistent deficit in Balance of Payments is a consequence of persistent over-valuation. For understanding of why this has happened, as well as remedies for the problem, see my posts on “Rupee Over-Valuation“, “Fear of Floating” and “Burning Billions“.
To achieve economic security, we must tackle the Central Economic Problem, which is to ensure the use of all idle resources in the productive process. The Most important idle resource is Unemployed Laborers. The Key Keynesian Insight was that a market economy routinely creates unemployment, and we must use monetary and fiscal policy to achieve full employment. Modern Monetary theory builds on these insights and offers methods to create “Employment for All“.
We are now in a position to answer the question posed initially – why do brilliantly planned projects fail? Why is no one interested in listening to research advice? For a bureaucracy bent on increasing its perks and power, and in extracting revenues, there is no relevance of research which shows how best to serve the public. They have no difficulty in analyzing which policies will gave them greatest personal advantages, and have no interest in research. Attempts to gain private benefits at public expense frequently leads to the ruin of well-designed projects. One of the key elements required to improve performance of projects is an effective process of monitoring and evaluation. For an extensive list of recommendations on how to do this, see “MPDR Seminar: Improving Planning and Policy“.
In terms of planning, we pay too much attention to material resources and external circumstances, and not enough to the software of development. In fact, all episodes of development can be traced to changes in the spirit and motivation of the people. Ideas which energize and unite people to work together for a common goal are the most powerful drivers of change. For more details, see “Pakistan Economy in the Global, Regional, and Domestic Context”
Concluding Remarks: The central changes that we need to make are in the software – healing the divisions and hatreds created by colonization. This requires changing the narratives from Eurocentric history to an Islamic WorldView.. It requires breakiing the chains of colonized thought in order to “Learn who you are“. It requires restoring the self-confidence shattered by colonization and Western education, so that we can recognize and honour our heroes like Mahbub ul Haq who created the concept of Human Development, and Akhtar Hameed Khan, who created the concept of Community Driven Development. Pakistan is endowed with immense resources, and great human talent. The Quran says that Allah T’aala does not change the condition of a people until they change themselves. It is this internal change of creating peace and harmony, and working together for common goals, which is needed for us to “Unite and Prosper“.