This is a three-part article based on analytics. In part I, I show why conventional wisdom has gotten Pakistan wrong to improve the quality of life. Part II, answers the question, can Pakistan rise to economic glory by using conventional economic wisdom. Part III utilizes data from the previous two parts to formulate an algorithm so to speak to improve the economic quality of life in Pakistan, and for the country to come out of the IMF’s restructuring programs.
How is the quality of life in Pakistan today Vs Pakistan’s glorious days? Here is a simple and perhaps not academically acclaimed method of evaluation. Pakistan’s glorious decade was in the 1960s. On March 31, 1967, the rate of exchange F.C. to USD1.00 was Rs4.808. (In December 1967, it was Rs4.7575.) About this timeframe, the imperial gallon of gasoline cost Rupees (Rs) 2.24 (Rs0.50 per liter.)
The assumption, keeping other things equal, since March 1967, Pakistani currency has devalued by about 36.19 folds. At present, with 1967 as the base year, the current cost of gasoline in Pakistan should have been Rs81.065 per liter. However, Pakistanis are paying Rs137.79/liter, is a point in time figure. Hence, the quality of life has deteriorated by approximately 41%.
Pakistan’s deterioration in the quality of life is impacted by traces of global in nature. Pakistan is measured with a yardstick created to measure global interest in the conflict of giants (The U.S., China and once the Soviet Union.) The reading is inaccurate. This is how the ‘framework’ has dealt its card to Pakistan and has shot itself in the foot. The world powers have shut the door on them to benefit from Pakistan’s strategic dispensation.
The primary purpose of this article is to look at Pakistan’s economic strength from the perspective of the quality of life, and Pakistan’s future economic capacity of the defense of the country. The secondary goal is to identify the characteristics within Pakistani society that would guide us to whether the recommended economic models of the West are suitable for Pakistan. The tertiary aim is to ponder over the failing economic model that gives rise to societal disorder.
To explain the latter within the primary purpose, an explanation of the former suffices. To explain the former, I bring forth one underpinning characteristic of Pakistan that in my view is the salient reason of why the conventional wisdom does not get Pakistan right.
The characteristic is, Pakistan, and not in the medical sense, is a bipolar country. Bipolar is a behavioral characteristic. I use this characteristic as a measure of synergy between Pakistani society’s behavior and the economic inputs, to show which economic model can work in Pakistan to improve the quality of life.
A few aspects make Pakistan bipolar. One is Pakistan’s bipolar divergent characteristic, i.e., Pakistan is a simple country and at the same time very complex. Pakistan is simple because it does not have a flourishing institution to consume complexity. Pakistan is complex because of the second pairing characteristic—the same weakness acts as a strength. Examples abound, for instance, Pakistanis are behaviorists, is a strength and a weakness. Pakistanis have an appetite for peculiar tolerance and hope, is a strength and a weakness.
The People’s virtue of antonym (strength and weakness) intolerance and hope makes them strong and stagnant respectively, which is equal to having the quality of being hardened metaphoric ‘immortals’ and at the same time holding degeneracy respectively.
Degeneracy for instance could mean failing to promote the wellbeing of a Nation-State, and the “quality of hardened ‘immortals’” could mean, nailing doctrines to failure—Pakistan is inoculated against doctrines. Doctrines are not effective when it exploits a weakness that is also a strength and vice versa.
Similarly, Pakistan’s army, a salient party to internal politics and foreign policy, is bipolar too. Corruption in the army strengthens the army. Whereas, the same strength becomes a weakness and weakens the Nation-State. For instance, the corruption in real estate development, and coercing judges strengthens the army but weakens the State. Likewise, corruption (political interference and bribery) among Judges makes them bipolar. Additionally, Pakistan’s natural features make her bipolar because she is a hostage and a beneficiary of her geography.
The aforementioned narrative, which garnishes the complexity of this State, leaves me to conclude: 1) The conventional wisdom gets Pakistan wrong, 2) The usual Western economic solutions prescribed to opportunities from conventional economic wisdom are not effective. 3) There are instances where degeneracy vanishes. In the case of degeneracy, an instance that possesses strength and a weakness, the strength will override the weakness.
I explain the foresaid as follows:
1) Pakistan as a bipolar country is the main reason why the conventional wisdom gets Pakistan wrong.
2) The Western economic solution is not working because of the weakness formed by the two governance systems running in parallel in Pakistan. One is the governance that incorporates the Western economic principles and the remnants of the British Raj system, and the other is adopted by people immersed in the Quran’s code—the way of life. The people’s basic guidance as in their chemistry is shaped by the fundamentals of this code—the institution, which should not be erroneously confused with Pakistanis following the teachings of Islam to the letter.
This chemistry gives Pakistanis a certain color, which would usually match certain other colors—quite like a fashion design appropriately matched (synchronized.) However, looking at Pakistan closer, I reason, there is a one-to-one color match. That is, their aptitude, strength, compatibility (chemistry) and what they bring to bear has only one match—the code. The chemistry requires a certain growing condition. That is, the institution of Islam that has shaped and styled Pakistanis conflicts with the Western economic models.
The strength of Islam adopted by people as a code for the way of life is a mismatch to the usual Western economic solutions because the people’s “style” from the code is not helpful nor it can contribute to in building supportive institutions of the Western color. Hence, the strength of Islam becomes a weakness. The people’s chemistry cannot contribute to and cannot use the Western governance system as a springboard to grow within the next better quality of life sequence.
3) To explain the vanishing degeneracy, a good example is by adopting a simple model for economic growth that harnesses Pakistan’s strength, which will override the weakness. In a simple economic model, Pakistanis will start a new day as before by “hoping” for a better quality of life. They will equally work hard as before, but this time within the spell of magic—a simple economic model, which will serve as a bridge to match the institutional code they have breathed since birth.
Islamic economic models are simple and require only one institution, the matching governance—the code that is an institution. Hence, a simple economic model acts as a bridge between the people and the matched institution (governance model.) Therefore, the people, economics, and one institution end up in a thoughtful harmony to yield growing results., is almost automatic.
The hope, which is also a weakness is still there but does not manifest as weakness in the above-harmonized scenario. Pakistanis did not do anything different. They woke up and worked hard during the successive days as before. Just as in the past, they did not invent anything new to change the status quo. They cannot. Hope and tolerance of a peculiar kind stop them from investing into an idea for it to become a movement, an agent of change for their betterment.
The difference is, in the past, which is the current system, working within the two parallel systems, Pakistanis performed within the bounds without the magic—the missing of the Islamic code at the State’s governance level requiring the bridge—a simple economic model within a matched governance—simple institutional ideas styled after the “code.” This statement will become meaningful and hopefully mind-altering as I conclude my perspective.
Pakistan to this date has failed to gain expertise in keeping pace with the Western economic models to help improve their quality of life. Pointing mainly to corruption as the cause of failure is not the answer—corruption is everywhere, including China, which per Dr. Yukon Huang, strengthens China. Hence the adage, Pakistanis suffer from conflicting institutional labyrinth and Pakistan is a simple country.
In the remainder of this article, I will apply the simplicity characteristic of Pakistan to the thesis—measuring Pakistan’s economic strength by improving the quality of life and achieving it with a simple economic principle—posing the essential questions. It also means I will not explain the quality of life in Pakistan with the usual indices of the Western economic principles: Per capita gross domestic product – “the total output of goods and services divided by population;” the most common indicator, GDP – “Size and health of the economy;” the current account – “Exports minus imports;” or the foreign exchange reserves – “Foreign ‘currency’ held by the State Bank of Pakistan (SBP).”
The aforementioned indices within the context of Pakistan are too complex to achieve within a holistic Western economic model that relies on a swath of variables, dependencies, interdependencies and its supporting institutions. Achieving these indices are misplaced economic health indicators that do not nicely align with the strengths derived from the Pakistani characteristic—simplistic.
Additionally, the Western economic programs under the direct and ‘qualified’ watch of a range of leaderships (IMF, World Bank, SBP, and finance ministers,) have failed to improve Pakistan’s economy is obvious from the system’s indicators found on the Internet. The evaluation indices are for the period 2018 and 2021—PM Khan’s office term.
The Public debt is up by 51% (includes 21% Chinese power generation debt.) Factoring in devaluation of currency for these indices, the external debt has gone up by 26% to $122B, and inflation has more than doubled to 10.74%. The current account deficit has improved by 400%; and foreign exchange reserves have increased by 31.5% to USD25B—an important measure to manage the value of currency. These factors play into the evaluation of currency. Since 2018, Pakistani currency has devalued approximately 43%, from Rs122 to Rs174 to one USD.
Do the above-mentioned statistics mean that the PM Imran Khan, a man of high integrity after assuming office in August of 2018, with a promise to fight corruption, has lost the country to the power of corrupt mafia he cannot bring to justice, high consumer good prices from the acts of mafia cartel and devaluation of currency?
Setting aside the sabotage of the mafia cartel, we can develop some sense of why PM Khan’s 2019 appointee, the governor of the SBP Dr. Reza Bakir, may have made a decision to devalue currency by looking at the salient factors impacting the value of money.
Though a few important indices are favoring Pakistani currency to hold its value, can the influence from IMF, the differential in inflation rates from 3.9% to 10.74%, interest rates and the increased debt be wrapped in a skewed weighted analysis to support Pakistan’s recent misfortune in Dr. Bakir’s decision to devalue currency? Devaluation of currency should be resisted when there is larger proportional external debt and deficits to means.
The dilemma of Pakistan’s folly is in why the conventional economic wisdom in understanding Pakistan is wrong. When Dr. Yukon Huang retired as the World Bank’s China Country Director for seven years, he while in semi-retirement realized that he did not hold the views on China to that of the world’s conventional wisdom. Dr. Huang said that we both had gotten China wrong. Dr. Huang explained, he got China wrong because he was working under the World Blank’s Beijing-centric framework. –Source: World Affairs Council; Nov. 30, 2017.
Expanding on Dr. Huang’s assessment, I claim, the IMF and the World Bank’s framework is mismatched approach to Pakistan’s economic opportunities because their views about Pakistan are wrong. If their views and perceptions are wrong, then their policy recommendations are wrong. Dr. Huang also explained China in this way, but only after he retired.
Therefore, the professional resources that these institutions recommend to help Pakistan, like Dr. Bakir, are likely restricted to actions within the institutional framework that recommended them. Else, if they want to fall further from the tree, they may hamper their benefit in these Western institutions.
Therefore, measuring and improving the quality of life requires asking a simple essential question. Would the quality of life be better if all of Pakistan can without hardship afford to purchase the essentials—basic food and shelter? If the majority of Pakistanis would agree, I find the solution in coining another essential question.
Therefore, our essential question is, what is one thing Pakistan can do that will enable a destitute in making a financial transaction? Answering this question is not a debt-generating workflow, in which case, among other benefits, the country will head towards full employment within a simple but innovative fashion. (Hint: a destitute cannot enter a barter transaction, because he is destitute—has nothing.)
In support of the tertiary aim, in Pakistan, anything less than full employment, even in the best of Western economic conditions, i.e., those unemployed under the condition of the natural rate of unemployment, is fodder for violent or terrorist groups. Pakistan government’s peculiar tolerance on November 01, 2021, “inked a deal” with a proscribed and violent organization Tehreek-i-Labbaik Pakistan (TLP).
The path to full employment is a human dignity right, which conflicts with one of the ideal principles of the Western economic models, i.e., “the natural rate of unemployment,” where the unemployment rate is just right to produce zero-rate inflation. Try selling this “natural” unemployment rate to Jesus (peace be upon him) – He would have acute guidance—the conventional wisdom has gotten humanity wrong.
Similarly, what is one thing Pakistan can do to maintain the intrinsic value of the financial transaction created in the above example or in any situation? It is a simple question that has a simple answer, and it is not a debt-generating workflow either. Debt-generating workflows increase external debt.
Another essential question is, what one thing Pakistan can do where the manufacturing cost of goods produced may fall in the short run, but will definitely fall over the long run? (It is not a debt-generating workflow.) This question is not a pipe dream to vanish inflation head-on. You can fathom how it may assist the current account deficit in the balance of trade, a factor that benefits the value of the currency.
Interestingly, Quran also has exemplified the “one thing” principle of the economics craft. Quran in the early verses reveals, though not with a question, but with a message of essential guidance to those that are “conscious of Allah.” The guidance has the making of an entire economic system. God says, “and spend out of what We have provided for them,” will be “the successful.” –Surah Al-Baqarah, The Quran.
The people are aligned with Surah Al-Baqarah’s principle. More than austerity is the message of the Quran to the Pakistani advisors and the Raj ul Waqt (the ruler of the time.) It can make man-made evaluation/devaluation of currency irrelevant. This guidance says “spend” and not ‘buy.’ Spending means, decreasing costs by paying less and increasing efficiencies, which helps with the concept, the ‘falling manufacturing cost of goods.’
By answering the essential questions and heeding to analytics, the quality of life of the people of Pakistan then becomes a strict governance (institutional code) matter, secured through the people holding higher merit for the ideally matched people to the code that practice peculiar tolerance and amazing hope.
Bio:
Mian is CEO of Mian Systems LLC., offering analytical consulting services in the Information Technology Cloud Computing field. He is a student of South Asia policy. The views in this article are taken from Mian’s upcoming book SOUTH ASIA: The Cost of Investing in Paradox — Policy Maker’s Enfeebling the Wisdom.