There is a need to develop strong economic, political, social, and legal institutions to provide prosperity, and social justice to people, and correct the malfunctioning
of the political and economic systems. Above all, there should be political
honesty from those who are at the helm of political and financial affairs
By Dr. Noor Fatima
Does good politics make bad economics? Good politics serves the survival of a government, but the issue is whether economics is on the same page. Politics and economics of any region are closely related and in a political economy, all actors are expected to behave rationally. One may conveniently assume that it is only the private sector or entrepreneurs that can work as the backbone of a well functioning economy, but this cannot take place without the government’s critical role to set the economic agenda – a conceptual foundation.
Generally, the people’s fury at politicians today indicates a much deeper problem in Pakistan’s political system, which has been growing for years and is the reason why a debate on political economy paradigm is important. The prevailing scenario of suspicion and cynicism – related to politics and politicians, is the outcome of people’s rather slow but clear-cut realisation that they have very little control over economic decision-making and distribution. The public reaction over different kinds of economic crises stemming from political indecisiveness is far too serious to estimate. There is a great concern to ask the current government why a sense of power and control over economic decision-making is draining away. The economic situation reflects that no one is ready to hold responsibility of addressing the many severe and crucial problems that exist today. It is a known fact that there lies a strong relationship between a country’s development strategy and its political system, plus economic development is always an outcome of the political system, which, in turn also determines the success or failure of any nation.
When one studies the present trend of politics in this paradigm, a number of questions arise. For example, what is the role of political institutions in economic growth and development? Is democracy beneficial to economic growth and does it have an impact on economic development? Is there a trade-off between political system and economic growth? Whether it is mainstream conventional economics or the ‘new political economy’, it is accountable for the behaviour of the electorates, the legislature and the bureaucracy of a given economic system. Thus, this proves that a greater relationship lies between economic growth and democracy on the one hand and between political instability and income inequality on the other.
Nevertheless, the fact remains that neither the way political institutions influence the pace of economic growth is something easily quantifiable nor can it be termed as a trade-off between politics and economic growth, but it is some what a subtle relationship. Similarly, the degree of political stability cannot be measured but strikes, riots, consumer unrest, unproductive profit seeking activities, lack of people’s faith in the government, poverty and income disparities reflect political instability, which has to be qualitatively analysed and that too with great caution, as the magnitude of such action strengthens the forces which work against the growth process.
Pakistan’s economy is in a downward spiral, with obstacles such as high inflation, rising unemployment, sugar crisis, power shortages and so on.
The question is, has the present political system even been able to give priority to economic policies? This confirms that the relationship between economic growth and political institutions is weak, unless supported by good economic priorities. Historically speaking, there has always been a great pressure on the democratic government to perform well from other forces of the society, which force them to leave the economic agenda behind and focus on just to remain in the seat of power.
If we look at the newly industrial regions in Asia, we will realise that in addition to human and physical capital accumulation, technology improvement and foreign trade investment, political stability positively contributes to economic growth. Pakistan, despite commendable economic growth from 2003 to 2007 was not able to sustain it, due to growing political instability which cautioned investors about the lack of enforcement of property rights and no proper system of law and order in Pakistan.
If a country has a democratic and economic system corrupted by special interests and selfish motives, with no sense of political stability, it will hinder the foreign direct investment, increase inflation and unemployment, implying questioning the linkage of political system with economic growth. Unfortunately so far, all the political regimes in Pakistan have not pondered enough over the self-sustaining policies and took refuge in begging from the IMF and other international financial agencies for foreign aid. Economists and strategic analysts have claimed to excel at this task and at the same time, pledged to end ahead of schedule the country’s loan programme with the International Monetary Fund. It goes without saying that Pakistan’s economy required external finance for balance of payment issues but becoming one of IMF’s biggest customers has always been a disastrous option.
Both political and economic spheres are deteriorating and in order to reverse this trend, several steps need to be taken. Economics is not concerned with the form of regime; rather it is longevity of the regime that matters most. If the regime has a positive behaviour and impact, then political stability prevails and at the end of the day, this leads to provision of more economic opportunities, which is the main concern for the common man. One may agree that Pakistan is far from being a “failed” state but one may not differ that it is turning into a “weak” state. This is due to the situation in Pakistan becoming increasingly dire, as a result of external and internal tensions, rising social and economic disparities, growing inflation and unemployment, where the present political system appears helpless to control events and playing ‘catch up’ would seriously undermine its viability.
The hope for a stable Pakistan still rests with its efforts to deal with economic and social issues to bridge the gap between democracy and economic growth in Pakistan. The bottom line is that there is a need to develop an optimal mechanism of strong (economic, political, social, and legal) institutions to provide prosperity, and social justice to the people and to correct malfunctioning of the political and economic systems and above all, there should be political honesty from the people who are at the helm of political affairs.