The IMF program is not working. The economy continues to slide downhill. Inflation is raging out of control, demand is collapsing, industrial output is shrinking, auto assembly plants are shutting down, unemployment is increasing rather than decreasing. One could go on. But the point is made. We are not in a good place.
The biggest mistake the PTI government has made in its tenure is to cede absolute control of our economy to the IMF. Self-respect and sovereignty have been thrown to the wind by this recklessness. In the scheme of things Pakistan, this can be overlooked. The real tragedy though is that there is not, forgive the banality, a snowball’s chance in hell of the IMF succeeding.
One only has to look at the history of the IMF’s involvement in countries around the world. Wherever they have been involved they have left behind a litany of shattered economies and lives. To appreciate their abysmal track record look no further than Naomi Klein’s excellent and bestselling book: The Shock Doctrine: The Rise of Disaster Capitalism. Klein, in her book relates case studies of IMF intervention in several countries such as Chile, South Africa, Poland and post USSR Russia. In each case the implementation of IMF policies resulted in disastrous consequences for the vast majority of people in these countries.
In a recent meeting with his economic team the Prime Minister asked them to come up with ‘unconventional and out-of–box solutions’to pull Pakistan’s economy out of its nose dive. He’s talking to the wrong people. The IMF’s people are congenitally and irrevocably constrained to a box. Like farm animals, it is impossible for them to look outside their religiously held theoretical blinders. Asking them to think outside the box is like asking a leopard to change its spots.
There is a reason that Thomas Carlyle described economics as the dismal science. Economists, including those at the IMF, are some of the most brilliant people in the world. They build complex and elegant mathematical models, which only the most erudite can understand. But there is a problem. At the heart of these models are assumptions that seek to mathematically quantify human behaviour. Some of these assumptions are, at best, questionable and at worst, absurd. So, constructing a model based on them is like building a magnificent skyscraper on quicksand. It will stand only until the first storm passes by. This is what happened in 2008 when these models failed miserably to predict what was the severest global recession since 1929.
The point is that the economists at the IMF may well be brilliant and well intentioned. But the theoretical ground on which they base their prescriptions for hapless developing countries have historically only ever resulted in disaster. And this is exactly what we are seeing in Pakistan today.
If the Prime Minister is really interested in out of the box solutions, and in the end it is only out of the box solutions that will save Pakistan, then here are some ideas:
First, start by sending all the IMF and World Bank people home including the imported finance minister and governor of the State Bank. And replace them with competent local academics and professionals. By this I mean new people, not the old rejected and recycled material – former finance secretaries and bank heads – that we see return time and time again whenever a crisis occurs and make the same mistakes that they always make. There are many brilliant people out there who can do the job. Find them and give them the reigns.
Next repudiate all international debt. This includes that taken from multilateral institutions such as the World Bank, IMF and the likes, and also international banks. In doing so we stand on strong moral ground. The bulk of this debt was taken by corrupt former governments, and much of it ended up in their Swiss bank accounts or was used to buy chalets and estates abroad. Why should the poor people of Pakistan be burdened with repaying it? We need to assure these lenders that their principal is safe. Every penny of it will be paid back according to a mutually agreed schedule. But we will no longer pay interest on any of the debt. This action will save roughly one trillion rupees a year; money that can be spent at home alleviating poverty.
The banks lent to corrupt politicians knowing that the money would be misused. Their motivation was greed: Interest rates well above those that were available in the financial markets. So now it is only fair that they also pay a price in the form of foregone interest as penalty for their recklessness.
Technically, such action constitutes a default. And this will bring with it severe consequences such as blocking access to international financial markets. Sanctions could follow. Trade and tariff barriers will be erected. State assets – airplanes, ships, and buildings – could be seized and appropriated. Dire as this sounds in the end it will force Pakistan to become more self-reliant and resilient. What’s more it will have zero effect on the vast majority of our population who survive on a handful of dollars a day. It will, however, cramp the lifestyle of the rich who may have to take the bus or train instead of a flight, and forego that next vacation in London or Thailand.
And while we’re thinking out of the box let’s also look at some solutions for corruption, which is the main mantra of the present government: Start by introducing the death penalty for senior public servants who steal from the public. This would include anyone Grade 18 and above in the government service, SPs and above in the police, and elected representatives in any assembly or local body. Similarly apply the death penalty to any judge who takes a bribe. Establish ‘corruption courts’ along the lines of the present terrorism courts. Those accused of corruption should get swift justice and, if convicted, swift punishment. Execute one or two top people and see how quickly corruption becomes a thing of the past.
Bureaucracy, responsible for so much our backwardness and pain, needs radical treatment. An out of the box solution would look like this: Send into immediate retirement all senior government officers who are currently in grades 19 to 22. And move up their juniors to positions of responsibility. Accompany this with a doubling or tripling of their salaries and bring in a strictly merit based system to gauge their performance.
Reduce the total number of ministries to no more than ten at both the federal and provincial levels. Dismiss all ministers who are elected representatives and replace them with professionals from the private sector. And fire all the special advisors to the Prime Minister. Doing all this will result in short term disruption and confusion. But this may still be better than the status quo, which is in a perpetual state of, not only confusion, but extreme dysfunction.
The above is just a sampling of what is possible when one thinks out of the box. Of course, there is much, much more that can and eventually must be done if we are to succeed as a nation.
Finally, all this will only work if we have a Prime Minister who has the capacity, vision, intelligence, and wisdom to implement such drastic reforms. If he does not, and we have seen no evidence yet that he does, then we are condemned to wait for a new leader to bring our ship home.
Let me conclude with a quote from great Arabic scholar Al-Khalil ibn Ahmed al Farhahidi who died in 170AH (786AD). Brilliant, sparse, pious and ascetic he is considered to be the first to have codified Arabic grammar. He is also credited with discovering the science of A’rud – metre in Arabic poetry and producing the first Arabic dictionary.
He says “There are four types of men: A man who knows and knows that he knows; he is an A’alim so follow him. A man who knows but does not know that he knows; he is asleep so wake him. A man who does not know and knows that he does not know; he seeks guidance so teach him. A man who does not know and does not know that he does not know; he is a ‘jahil’ so beware of him.”
I fear that those who now lead Pakistan fall squarely into the last category.