By Iftikhar Ahmad
Research and results on ground have indicated that it is man-made political and economic institutions that underlie economic success. What is ultimately required is a society that creates incentives, rewards innovation and allows everyone to participate in economic opportunities. The economic success is sustained because the government is held accountable and responsive to its citizens.
The difference between South and North Korea is due to the politics that created these completely different institutional trajectories. Based on research and experiences of countries analysed by experts over a period of 10 to 15 years, it has been possible to build a new theory of political economy with great relevance for the big questions of today. Studies focus on what is the most effective way to help move billions of people from the rut of poverty to prosperity.
Researchers have provided a statistical analysis of the relative role of institutions, geography, and culture, showing that institutions dominate the other two types of explanations in accounting for differences in per capita income today. Research emphasises the idea that the most important barrier to the emergence of inclusive institutions is the fear of elites that they will lose their political power. This fear influences their economic policies and studies on political economy and economic development research in Africa and Asia has up-held this hypothesis.
The role of political centralisation and state institutions in development has been most heavily emphasised by historical sociologists following the work of Max Weber.
Economists have recently begun to contribute to this literature. Studies emphasised how it was the particular political economy of East Asian nations that allowed them to be so economically successful. Finley, in his study made a seminal argument that slavery was responsible for the lack of technological dynamism in the classical world. The idea that growth under ‘extractive’ institutions is possible but is also likely to run out of steam is emphasised in other studies, such as Acemoglu (2008). The turning point in studies has now focused on politics and economy relationship. We now know, perhaps, the impediments in the way to development.
Looking at Pakistan’s experience we find it was a success story. Their first five-year development plan happened to be a model for some other countries to follow. And they benefitted greatly working on lines suggested by our economists and experts in a variety of specialties. Up to Pakistan’s third five-year development plan, we were doing well. But problems started emerging when the United States applied sanctions on Pakistan that impacted military and economic assistance.
Good political/diplomatic relations were the foundation of sound Pakistan-US relations. American assistance was a factor in Pakistan’s economic and social development. We rightly stress on ‘trade not aid’. The fact remains that the United States assistance to Pakistan was greatly beneficial for our economy and other areas of development and reinforcement.
There is need to upgrade Pakistan-US relations. We are not the only country having benefitted from U.S-AID. India have been smart in this context, having the benefit of American as well Russian economic and military assistance. External assistance from any source, any country is thus a factor in economic development. Political power is however amust. In the current scenario the relationship needs a strong economic base for a way forward.
What is driving politics everywhere, including the United States, is fear. Fear of the unknown and the future are possibly more dominant now than any time since after the end of the cold war. Politics is marked by bitter divisiveness, due to tribalism, nativism, populism, elitism, anger, the abandonment of human rights, and loss of respect for institutions.
Pakistan’s first five-year development plan happened to be a model for some other countries to follow. And they benefitted greatly working on lines suggested by our economists and experts in a variety of specialties. But problems started emerging when the United States applied sanctions on Pakistan that impacted military and economic assistance
People of all states and societies react and revolt when their very survival is at stake. States themselves are confronted with existential questions, issues that need to be resolved effectively and promptly, particularly attitudinal and behavioural issues, economic and political issues and all this is a serious threat to the state, itsinstitutions and citizens. What exactly is corruption and how can it be tackled more effectively? There is nothing wrong with our civil-military relations. But there is need for more effective cooperation and understanding in national interest.
The notion that the development of the rich countries of the west is the mirror image of the underdevelopment of the rest of the world was originally developed by Immanuel Wallertsein. The dual economy idea was developed by Lewis. Fergusson developed a mathematical model of the dual economy. The notion that this was a creation of colonialism was first proposed in the seminal collection of essays edited by Palmer and Parsons. Other scholars have also made significant contribution to explain what made difference for people the world over.
Objectivity and level playing field for all should not only be an ideology but reality of life of every citizen. Every administrative situation is unique and therefore the analysis of cases legal, constitutional and other must not be guided by past experiences. A fresh look needs to be taken.
The way we are trapped in confusion and chaos, it will take not days or weeks or even months. Instead it will take decades to resolve issues which form part of the existential question for Pakistan.