Prime Minister Shehbaz Sharif while addressing the nation on 14th August, invited all political parties to the table in order to hash out the contours of a future charter of the economy (COE). The PM has also shared his economic vision in a recent guest column for the Economist magazine. Detractors have been quick to denounce the PM’s talks offer branding these overtures as a ploy to create political breathing space. Still, if one looks at the PM’s invitation and his vision in tandem, the PM appears serious in moving in the direction of a COE. Of course, political events will determine whether the PM is successful in bringing together various stakeholders for COE, but it is a good start.
Writing for the Economist, the PM underscored some important points. First, the PM correctly pointed out some of the severe challenges that the Pakistani economy had to face in the last few months including an increase in the global oil prices and a commodities supercycle. Next, he correctly underscored political instability as one of the “home-grown weaknesses” that have mitigated against economic growth, at least since 1990s.The PM also dropped a few hints about what, in his opinion, should a future COE look like. According to the PM, COE should be a series of “agreements on a few principles” like prudent management of public finances.
Following the PM, some analysts have argued that COE is not the rewriting of a new social contract; rather, it entails only following the rules of the existing economic game like fiscal austerity, balanced budgets and zero subsidies. These analysts often liken COE to the “Charter of Democracy” that was signed between the PML-N and PPP in 2006, when both political parties agreed to play by the rules of the democratic game.
However, the two political parties were able to agree on a charter only because they reached a consensus on the efficacy of democracy for the Pakistani political system after long and protracted deliberations. In other words, the two political parties concluded that democracy was going to be the only game in town and that both political parties would respect each other’s mandate and not destabilise elected governments. In a sense, charters or rules only take on significance once a consensus is reached not only on the type of game that is going to be played, but also on who is going to be a player and who is going to be a referee.
Unlike politics in 2006, there is no consensus on what shape the Pakistani economy should take. If we ignore the usual neoliberal pundits, there is no agreement on some key economic questions: What precise role does the state need to play to guide Pakistan towards the direction of economic growth and development? What style should be adopted, a hands-off approach or by becoming a developmental state in the East Asian style? What type of economic growth will take place in Pakistan? Will it make the rich even richer or will it be truly inclusive or pro-poor so that the vast majority in this country can hope for a better economic future? What benefits will be provided by the state for its citizens including BISP, clean drinking water, disability benefits, free university education, national health insurance, and a free Wi-Fi? Who will make economic policy, will it be some techno-authoritarian “scientist” flown in from abroad, or will democratically elected representatives exercise control over economic production and distribution? Who will pay for these facilities, will the state extract more and more surplus from those already paying taxes like the salariat, or new sectors will be brought into the tax net?
Pakistan’s existing economic game—or its social contract—is not working for majority of its population. In South Asia, Pakistan comes at the bottom of the Human Development Index that measures health, literacy and income. Since the 1990s, Pakistan is also becoming a more unequal society according to World Inequality Database. For this reason, before talking about a COE, Pakistan’s political leadership needs to come together in order to forge a brand-new social contract.
The PM’s heart seems to be in the right place. He needs to realize though that without a new social contract, COE, agreements or new rules are going to add limited value only. After 75 years of Independence, there is still a dire need to dismantle structures of economic domination and inequity in Pakistan; all the more so because a massive population of unemployed young people is on the verge of becoming a demographic disaster. Pakistan does not need new economic charters or rules; the nation is clamouring for a new economic game altogether, with new teams, new players and new referees.
Writing for the Economist, the PM underscored some important points. First, the PM correctly pointed out some of the severe challenges that the Pakistani economy had to face in the last few months including an increase in the global oil prices and a commodities supercycle. Next, he correctly underscored political instability as one of the “home-grown weaknesses” that have mitigated against economic growth, at least since 1990s.The PM also dropped a few hints about what, in his opinion, should a future COE look like. According to the PM, COE should be a series of “agreements on a few principles” like prudent management of public finances.
Following the PM, some analysts have argued that COE is not the rewriting of a new social contract; rather, it entails only following the rules of the existing economic game like fiscal austerity, balanced budgets and zero subsidies. These analysts often liken COE to the “Charter of Democracy” that was signed between the PML-N and PPP in 2006, when both political parties agreed to play by the rules of the democratic game.
However, the two political parties were able to agree on a charter only because they reached a consensus on the efficacy of democracy for the Pakistani political system after long and protracted deliberations. In other words, the two political parties concluded that democracy was going to be the only game in town and that both political parties would respect each other’s mandate and not destabilise elected governments. In a sense, charters or rules only take on significance once a consensus is reached not only on the type of game that is going to be played, but also on who is going to be a player and who is going to be a referee.
Unlike politics in 2006, there is no consensus on what shape the Pakistani economy should take. If we ignore the usual neoliberal pundits, there is no agreement on some key economic questions: What precise role does the state need to play to guide Pakistan towards the direction of economic growth and development? What style should be adopted, a hands-off approach or by becoming a developmental state in the East Asian style? What type of economic growth will take place in Pakistan? Will it make the rich even richer or will it be truly inclusive or pro-poor so that the vast majority in this country can hope for a better economic future? What benefits will be provided by the state for its citizens including BISP, clean drinking water, disability benefits, free university education, national health insurance, and a free Wi-Fi? Who will make economic policy, will it be some techno-authoritarian “scientist” flown in from abroad, or will democratically elected representatives exercise control over economic production and distribution? Who will pay for these facilities, will the state extract more and more surplus from those already paying taxes like the salariat, or new sectors will be brought into the tax net?
Pakistan’s existing economic game—or its social contract—is not working for majority of its population. In South Asia, Pakistan comes at the bottom of the Human Development Index that measures health, literacy and income. Since the 1990s, Pakistan is also becoming a more unequal society according to World Inequality Database. For this reason, before talking about a COE, Pakistan’s political leadership needs to come together in order to forge a brand-new social contract.
The PM’s heart seems to be in the right place. He needs to realize though that without a new social contract, COE, agreements or new rules are going to add limited value only. After 75 years of Independence, there is still a dire need to dismantle structures of economic domination and inequity in Pakistan; all the more so because a massive population of unemployed young people is on the verge of becoming a demographic disaster. Pakistan does not need new economic charters or rules; the nation is clamouring for a new economic game altogether, with new teams, new players and new referees.