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Charter of Economy: Conflict or Compromise?

One major aspect of ‘fixing’ the economy requires taking on historically privileged business groups that are mobilized and carry an extensive political voice, both through the party system and the civil and military bureaucracy.

UMAIR JAVED — IN this golden (or is it gilded?) era of one-page-ism, multi-stakeholder governance, and lofty national consensus, the idea of a cross-party ‘charter of economy’ appears appealing. Its premise is that Pakistan needs to undertake corrective measures to ensure that the three-decade-old cyclical pattern of growth and stagnation, with recurring balance of payment and fiscal pressures, is broken. This requires improving productivity, catalyzing domestic and foreign investment, and, most importantly, getting rid of rent-seeking practices that drag down the economy from both a fiscal and a competitiveness perspective.

While this package of solutions may be technical (or technocratic), it is, like all things associated with the economy, deeply political. It involves making swaps and trade-offs, which would inevitably make some segments worse off than they are now. Cynically speaking, this wouldn’t be much of an issue if the only segments being made worse off were poor people with little organized political voice. The state has a long and illustrious history of making decisions that leave marginalized groups worse off without so much as a second thought, and is expected to do the same at any time of asking.

Parliamentary politics may be enshrined in the Constitution, but the mainstream political culture for all parties continues to be majoritarian bordering on authoritarian in nature.

This time, however, the problem is that one major aspect of ‘fixing’ the economy requires taking on historically privileged business groups that are mobilized and carry an extensive political voice, both through the party system and the civil and military bureaucracy.

The theoretical downside for any party that attempts to take on politically powerful interest groups is multifaceted. The first and obvious one is electoral — groups may choose to back other parties, cutting down on financing or other forms of support for the party in government and switching their allegiances in the process. This may create internal stress within the ruling party, as its legislators start getting jittery about their odds of retaining rich backers or potent vote blocs. Such complaints often snowball into forceful pressures, which helps explain why governments have backed off from taking difficult decisions in the past.

Should there not be a charter of social development through which every party agrees to spend what’s needed to enhance the welfare of poorer groups, and ensure a progressive distribution of the state’s resources.

The second potential downside is the short-term impact on the economy. Here we may see status quo actors engage in more drastic measures like shutter-downs and public mobilization (particularly for groups such as traders), or even something more drastic like capital strikes or capital flight in high-revenue and major-growth-generating sectors. While less likely to happen in Pakistan, such reactions have been seen in other parts such as India (during the 1980s) and Latin America.

A ‘charter of economy’ — an idea that was first floated by Ishaq Dar — seeks to minimize the odds of such downsides by ensuring vested groups don’t have an easy ‘out’. With all parties consenting to solve the malaise of bloated public-sector bureaucracies, rent-seeking by industrialists, and tax evasion by traders, corrective measures should be theoretically easier to undertake.

Maybe we’ll need another charter of democracy before a charter for the economy can be operationalized.

While the idea might sound great at first, there are several practical and moral issues that need to be highlighted. The first is that such a consensus can’t emerge in a heavily polarized atmosphere, where the government does not see the opposition as legitimate and vice versa. Parliamentary politics may be enshrined in the Constitution, but the mainstream political culture for all parties continues to be majoritarian bordering on authoritarian in nature. This is why we see repeated disregard for parliamentary fora, such as the committee system, where consensus-based ideas might even be developed. Instead, everyone’s busy playing to the gallery (or in our case, breaking news tickers) with masala-laden sound bytes, leaving the actual process of policymaking to opaque bureaucratic/ technocratic processes.

The second, and related, issue is that given the weakness of political parties, attempts at forging consensus may not be communicated effectively to voters. This is the likely reason why Maryam Nawaz Sharif came out so loudly against the idea; she probably recognized that a compromise would be a hard sell to her party’s voters at a time of economic stagnation. Because parties do not have the appropriate apparatus to ‘sell ideas’ to voters, they have to appear to be ‘doing opposition’ constantly. A good example from the recent past is the PML-N’s and PPP’s somewhat docile relationship with each other between 2007 and 2013, which alienated the core voters in both parties.

The third issue is moral/intellectual in nature. In every discussion of a national strategy to save the economy, the content retains a heavy focus on the macroeconomic side. How should we decrease the fiscal deficit? How do we ensure demand compression? What needs to be done to increase exports? One can reasonably assert that there already is a consensus on a few of these issues, given that each government over the last two decades has pursued structural adjustment in some form or the other, often with the same individuals manning finance and planning offices.

On the other hand, rarely do we see conversations on developing a consensus over social development — i.e. strategies to protect the most vulnerable from the consequences of adjustment. Should there not be a charter of social development through which every party agrees to spend what’s needed to enhance the welfare of poorer groups, and ensure a progressive distribution of the state’s resources.

Finally, related to the previous point, a successful consensus-based charter for the economy would mean that political parties are acknowledging their shared role in steering policymaking. It also means that they take ownership of the fact that their role is primary. Which is why it’s worth asking whether all political parties currently exhibit that tendency? In other words, wouldn’t such a charter first mean that those elected to do a constitutionally assigned job actually embrace this role, rather than voluntarily or involuntarily giving it up to some other stakeholder? If the answer to this question is in the affirmative, then maybe we’ll need another charter of democracy before a charter for the economy can be operationalized.

The writer teaches politics and sociology at Lums.

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