Urgent need for deep economic policy thinking

China in the 1980s was quite similar to Pakistan in terms of economic orientation – mainly an agriculture sector, and one that was trying to industrialize, while keeping macroeconomic balance by relying more on domestic resources, and not taking much the route of going for aid, but rather enhancing exports, and by keeping inflation stable, low, and in check. In that sense, China is different from Pakistan, and Russia, for instance, was that unlike these countries, it did not take the route of price ‘shock therapy’.

Instead, it liberalized prices in a gradual manner, and with disaggregate approach towards commodities, by adopting ‘dual-track’ pricing mechanism, under which price control was loosened at the margins, whereby prices of commodities were left to market to decide, which were in excess supply, and were not that strategically important for either food security, or as raw materials for industry. On the other hand, commodities that were scarce in supply, or were strategically significant for domestic production, and exports, and for achieving food security, were kept under price controls.

This meant procuring commodities, for example, strategically important agricultural commodities for smooth, and predictable supply chain, for both controlling inflation by government increasing supply where, and when needed, and for achieving competitiveness in both local industry – as larger profits were virtually de-linked from exploitative market practices, and under a policy of good incentive structures were rightly made dependent on enhancing productivity, and efficiency techniques – and in exports.

Taking a loan from International Monetary Fund (IMF) is one thing, but it does not mean subscribing to price ‘shock therapy’ for commodities and markets that deal with essential commodities like wheat, both in terms of food security, and also for exports, something, which the government is unfortunately apparently doing. Policy under the influence of neoliberal-minded ‘Chicago boys’ styled policymakers even outside of the Neoliberalism-influenced IMF programmes has resulted in basically subscribing to shock therapy, and lack of price controls. Here, instead of improving the process, by refining the underlying institutional and organizational framework, the very importance of practicing procurement, and controlling prices for both agricultural, and non-agricultural commodities was wrongly blamed by seeing them as among main sources of the twin deficit.

Deep policy thinking by the country required – and still requires – adopting ‘non-shock therapy’ policy in the first place, like adopting ‘dual-track’ pricing, and taking a gradualist approach. For instance, one of the things China did was to liberalize prices along the coastal region in an overall effort to open up economy in a gradual way so that people go through minimum economic distress, and that too for commodities, which were in excess supply or strategically insignificant, or both.

This approach Pakistan could have tried, and can still move towards, instead of adopting virtually wholesale, price shock approach, which overall it remains committed to under the most vociferous neoliberal assault the country has gone through since the late 1980s, and that is both inside and outside of the IMF programmes. Hence, for instance, the government instead of increasing the sphere of price ‘shock therapy’ in agriculture sector, wherein it stopped procuring wheat from farmers, and not even announcing a price floor in this regard, should have gone the other way, and included in its policy of procuring wheat, many other agricultural commodities like rice, corn, sugarcane, and cotton, which are important for food security, and as raw materials for industry.

In Pakistan, rather than improving the process, for example, as adopted by China, or by Scandinavian countries under the ‘Nordic model’, state-owned enterprises (SOEs), or public sector enterprises (PSEs) were improved to provide deep industrial base for instance, and important public services both through brining in sound institutional, and organizational framework, and through providing deep financing. Pakistan did neither of that and blames the role of government in keeping PSEs inefficient.

World famous thinker Noam Chomsky once remarked for instance with regard to British Railways, and privatization overall: ‘There’s a standard way of privatizing something. Like when Margaret Thatcher wanted to privatize the British railroads, the technique was, defund them. Now when they don’t work, people get angry, say let’s do something. Say hand it over to private enterprise, which totally ruins them, and then the state has to come back in, big cost, and try to construct it somehow. It’s known as privatization.’

The argument makes sense, and sounds familiar when one looks at the country’s privatized energy sector, the issue of circular debt, and the very highly priced energy. This is not to say privatization does not have any space, but rather the way it is done the strategic nature of the sector and regulatory, environmental and welfare aspects, given due consideration are all important factors when deciding about privatisation.

In the spirit of the comment by Noam Chomsky above – and digressing from it to the extent that government, by giving it the benefit of doubt that it is looking to reach its primary goal of watching out for public interest and not private vested interest, and hence is not taking the route of intentionally defunding for instance, so that privatization is reached – it appears that rather than improving the process by improving institutional, and organizational framework, and reaching better productive and allocative efficiencies for more sustainable economic growth, macroeconomic stability, and equity/welfare gains, the government is falling into the trap of not funding enough, and not institutionalizing/regulating enough, and in the course of this bad name – including by government itself –is being wrongly given to the very involvement of government’s otherwise much-needed role in market creation and regulation.

On the contrary, instead of privatizing sectors, which are strategically important, and where innovative ways like, for instance, adopted by China in the shape of moving towards mixed ownership enterprises (MOEs), could be adopted rather than going for wholesale privatization, and leaving economic agents basically to the whims of private, virtually totalitarian command systems, and which are mostly driven by the sole signal of profit margins.

Hence, deep economic policy thinking is also needed, among other areas, in terms of improving the ‘incentive structures’. What sort of message is being given to farmers that while government has not created sound real sector-, and financial sector institutions, organizations, and markets, ensuring in turn for instance, no role of middle men, or ‘Aarthi’, the farmers are expected to deal with seriously sub-optimal pricing markets – having a strong network of tools like hoarding to interrupt supply – poorly constructed farm-to-market infrastructure, and poorly regulated middle men.

Moreover, the government at the same time expects that presence of losses, and lack of institutional, and organizational support will not only allow farmers to produce, but to also enhance productivity! Similarly, how does the government expects to control inflation, and provide stable, and competitiveness supporting prices for both keeping domestic production de-monopolized, and for allowing exports to remain internationally competitive, under such turbulent economic environment for both farmers, and industrialists, both as supply agents, and as contributors to aggregate demand?

This is overall a recipe for continuing to remain stuck in low economic growth equilibrium, and in boom-bust cycles, mostly as a result of positive, and negative external shocks, something, which the country remains significantly exposed to in the absence of import-substituting industry, and in terms of any meaningful level of green, resilient economy.

So, what if the private ownership of agricultural lands goes into the hands of corporates as farmers will get disgruntled by spree of loss-making – for instance, second year in a row, farmers are facing huge losses in wheat, while for other crops as well prices are generally hugely manipulated by market players, and hence are very erratic from year to year, especially without any sound economic reason – as government decides to completely leave the farmers at the whims of a non-conducive economic environment as discussed in the previous paragraphs.

Perhaps the government has already not had enough of a hassle with already privatized sector in the area of essential-natured commodities and services, with their highly paid lawyers and deep pockets of the corporate sector to take legal battles with governments having little fiscal space, and their weakly capacitated regulating bodies for implementing prices that keep profits very high, that it wants to perhaps go through the same ordeal for itself, and for the people at large, who have otherwise seen their real incomes fall over the last many years overall, not to mention the fast rising level of poverty, especially in the wake of the Covid pandemic, and catastrophic flooding in 2022. This is not to say that private sector is minimized, but to ensure that the government has a meaningful say in the production, and consumption decisions, both in terms of pricing, and in achieving allocative, and productive efficiencies, especially in strategic sectors like agriculture, and SOEs in general, and for instance, steel, railways, and electricity in particular.

Moreover, what will the rural/farm economy get reduced to, if for food security, labour absorption – not to mention labour having virtually no chance of having its own piece of land like it can currently, working under reasonably sized farm holders with limited financial pockets to carry out otherwise unjustifiably prolonged legal battles to stop workers from rightfully owning a certain piece of land, a size small enough to allow them purchase from their limited resources. That will most likely become a pipedream under large corporate land holdings, and where there will be added pressures originating from large-scale conglomeration, network effects of corporates – and essential raw materials for industry are to be negotiated with farms under corporate sector.

Here, a misconception is that ministry of finance has a leading role in economic management, which is why imbalanced attention is given by media, for instance, for answers on economic issues, while planning ministry, and other ministries should come forward in this regard. Also, especially after the 18th Amendment on one hand, where a lot of subjects of huge significance like education, health, agriculture, industry in many areas, and services as such are basically provincial subjects, and after the 7th National Finance Commission (NFC) award where a majority – close to sixty percent - share of federal divisible pool of resources goes to provinces, on the other hand, in turn calls on provinces to come forward with deep economic planning, and not mainly decisions of limited penetration, and coverage, and those too introduced in a disjointed way basis, devoid of any overall sectoral plan/policy at the provincial, and the overall national economic plan/policy.

In addition, in the farming sector for instance, and otherwise as well it is important to fix price signals, and institutional, and organizational environment, rather than leaving the peoples’ hope pinned on getting loans, and private sector led/owned limited number of storage spaces. More broadly, the likelihood of increasing bad loans in both agriculture, and non-agriculture sector remains high, if the over-arching institutional and organization framework, and government’s regulation stands on very weak grounds, as currently is the case at both the federal and provincial levels. Therefore, the provincial government, for instance, should check its rollout of loan programmes in the light of thought process outlined above.

Hence, similar to the plight of people in advanced countries in general, where they remain highly indebted due to sub-optimal regulation of private sector under the neoliberal assault during the last four decades or so, the current ways of handing out loans without backing people with sound, and deep economic policy is most probably leading the people to the same fate of becoming highly indebted on one hand and, on the other hand, price shock therapy, and large-scale privatization/corporatization will be taking away in a significant manner from the economic planning initiatives at the individual level and economic policy at the level of governments, given large scale corporatization, especially under weak regulation leads to virtual monopolization of economic sectors under few big conglomerates.

Keeping these outcomes as highly likely in mind, the government should adopt deep economic policy thinking, and renegotiate with IMF as well on these lines, apart from learning from the highly successful experiences of China, and Nordic countries. Such thinking is also important, as government pushes the country on a path of green, resilient economy, where unlike as seen during the days of the Covid pandemic, too much leeway of private sector in economic decision-making, developed and entrenched over years of neoliberal assault, giving governments the wake up call to take back control and regulate, and become equal partners in market creation for much-needed greater signalling for reaching better productive, and allocative efficiencies. This, in turn, is a must for economic resilience against existential threats like climate change crisis, and ‘Pandemicene’ phenomenon, and for beating the rising wave of ‘disenfranchisement’ of public opinion from public policy by weakening the link between vested interest led financing of election campaigns, and their rising influence on public policy.

Here, in one way, the farmer is being wrongly incentivized to become a bigger player in the corridors of power and wealth to have rightful pricing, as is done by cartels, rather than allowing them to focus on enhancing farm productivity as the signal for having greater profits under much more optimal price signals ensured by a better working, government led, institutional and organizational framework, and one that plays a more meaningful role in market regulation, and overall market creation in collaboration with the private sector.

Copyright Business Recorder, 2025