There was an air of great expectation before General Pervez Musharraf unfurled his “Economic Revival Plan”. But there are no novel or quick-fix solutions in it. Indeed, many of the economic ideas which Mr Shaukat Aziz is tinkering with have been advocated before. Others have been abandoned because the social or political infrastructure for accomplishing them was found wanting. The most glaring omission, of course, is that of an overriding political philosophy aimed at restructuring and retooling the economy for self-sustainable growth in the future.
The economic debate in this country is conducted by free marketeering economists or their bureaucratic nemeses and rarely, if ever, by political economists. One conventional group doesn’t give a damn for the principles of equity, the other conventional group gives two hoots for the requirements of efficiency. One loves “supply side” incentives, the other is obsessed by “demand management”. Both are prisoners of conventional economic wisdom which may have succeeded in stable and democratic Western economies but has consistently floundered in unstable, authoritarian countries like Pakistan with highly iniquitous social structures and highly inefficient bureaucratic-capitalist environments.
In this context, two like-minded philosophical observations from two opposite ends of the philosophical tradition may shed some light on Pakistan’s current predicament. The first one was made by Karl Marx 150 years ago. Marx postulated that when “the social relations of production (class or power structures) become a fetter on the social forces of production (economy)” in any society, radical political remedies are needed to break out of economic stagnation and decline. The second was made less than 150 days ago when the President of the Islamic Republic of Iran, Mohammad Khatemi, said that Iran’s economy would not be able to develop and grow until “democratic freedoms and laws” were established in civil society. Both are, in effect, saying the same thing, albeit in different historical contexts: that when certain social and political structures of power begin to throttle the inherent creativity and dynamism of human endeavour instead of facilitating them, a critical economic situation arises which requires an appropriate change in these relations and structures of power. What does this mean in concrete, contemporary terms?
Marx’s European context was clear enough. Feudal relations (of power and production) had to be abolished before the capitalist industrial revolution could take off. Khatemi’s context is equally succinct: the Iranian revolution’s rigid orthodoxy and authoritarianism (relations of production), which was once its propelling force, has now become a bureaucratic millstone around the neck of the economy (forces of production). Consequently, an enlargement of democratic freedoms and strengthening of civil society is required in order to unleash the creative enterprise of the people of Iran. What are the lessons for Pakistan?
The inefficient and iniquitous nature of Pakistan’s powerful landed gentry is adversely impacting on the agricultural and industrial economy of the country. Since bloody revolutions are out of fashion, and paper partitions of land have rendered radical land nationalisations and redistributions impossible, the state must tax the absentee landlord and subsidise the tiller-peasant. Progressive agricultural “income taxation” coupled with micro-credit extension and poverty alleviation programmes is one way to do this. Mr Aziz recognises this instinctively but shies away from immediately striking at the roots of rural stagnation. The simplest and most effective remedy is to levy a flat income tax rate of about Rs 750-1000 per acre per year, irrespective of the size of land holding or ownership and without any exemptions, collect Rs 25-50 billion through the patwari\tehsildar and put it all into a poverty alleviation and agricultural extension and training programme for the rural middle-class and poor, thereby unleashing the productive power of the self-interested direct producer.
The same approach is needed to break the other social fetters on the economy. The businessman-trader must be made to pay taxes. But the taxes cannot be extracted from him through a hostile, corrupt and rapacious tax-collecting bureaucracy. First, Mr Aziz must hold the tax collector accountable, simply the tax collecting laws and demonstrate the state’s bonafide by providing transparent and good government. Then he can rightfully stake a claim to the hard earned incomes of the business community. The other way round would be misplaced concreteness of the worst kind.
The organs of the state, too, must come clean and demonstrate their sincerity and purposefulness. This can be done by holding the bureaucracy accountable, by rightsizing the public sector, and by speeding up privatisation. General Musharraf’s decision to cut Rs 7 billion from the budget of the armed forces is a major step in the right direction.
Finally, and most critically, the Pakistani state needs to break the bonds of international debt by recasting its foreign relations to allow the economy to obtain breathing space for itself on the basis of a significant debt write-off. This requires a critical reassessment of our cold-war “national security” paradigm so that the health of the economy becomes an integral element of it rather than be cripplingly dependent upon it.
There is no time to be lost. There may never be a better opportunity to reinvent the lost idea of Pakistan.