Time for new vanguard of economic policymakers overdue

‘The current economic order neglects the interests of people and the planet, and the world needs a system that will serve both. Achieving that change will require more than tinkering at the margins—it demands a deep restructuring of how economies work and whom they benefit.’ – An excerpt from a February 25, ‘Foreign Affairs’ magazine article ‘The broken economic order’ by internationally-renowned economist, Mariana Mazzucato

Most talk shows in media and policy thought process broadly for a number of years now point towards the preponderance of neoliberal-minded economists.

Even after years of misgivings of Neoliberalism and the related over-board austerity and pro-cyclical policy, the continuation to place time and again the economists with an overall mindset that reflects this policy bent – from a number of finance ministers, governors of central bank to deputy chairmen of planning commission, to ministers of other economy related ministries – has to be more than just naivety, but strongly appears to be indicative of screening people by overall successive governments to serve the Neoliberalism-based extractive politico-economic institutional design.

This is also made more evident in the shape of serious lack of comparable air-time or space in policy discussions of economists that internalize in their arguments the misgivings of neoliberal policies.

Neoliberalism, over-board austerity framework, and pro-cyclical policy inclination have come under serious scrutiny over the last four decades or so, but particularly since the Global Financial Crisis 2007-08 in particular, made all the more a cause of concern due to increase in income inequality, reversing of the long-term trend of otherwise declining levels of absolute poverty, diminishing resilience in economy, and overall society; something which was made all the more visible in the wake of fast-unfolding climate change crisis and Covid pandemic.

It is important to note that even recent discourse in media, and as reflected in policies in all four broad sectors of the economy – real, fiscal, external, and monetary/financial – there is a serious lack of internalization of the misgivings of a (wrongly) diminishing role of government in shaping ministries/institutions and, in turn, through them providing an environment for underlying organization – government departments, state-owned enterprises (SOEs), and private sector firms/entrepreneurs – and markets.

In fact, government is required to provide ample public investment and, overall, through pro-active, mission-oriented and purpose-driven governance, and incentive structures to usher in the economy, much-needed greater level of productive, and allocative efficiencies, including lowering transaction costs, which are basically search- and information-related costs.

Instead, the policy emphasis is somewhere stuck in the rhetoric of the heydays of the Reagan-Thatcher era-styled neoliberal policy milieu – governments only as facilitator to private sector, and only reacts to market failures, that inflation is mainly a monetary phenomenon, and as such requires primarily over-board austerity-based aggregate demand squeeze policies.

On the contrary, years of diminishing role of government in a number of countries, including Pakistan, and even the shifting nature of policies in otherwise traditionally strongholds of social democratic policies – the Scandinavian countries – and the rise in the usage of outsourcing, working with over-financialization taking away money from much-needed resilience related investments to profit-seeking endeavours under lopsided market signals, have all resulted in weak public sector capacity to check the ravages of existential threats, to stop creation of economic migrants, and have increased inequality, poverty, and unjustified capture of public policy by moneyed/oligarchic/plutocratic interests.

Yet, there is talk of unjustified level of downsizing and, shockingly, in a country where there is need for deep level of public investments, on the contrary, there is emphasis to significantly reduce public sector development programme (PSDP) at the federal level, and annual development programmes (ADPs) at the level of provinces. This, on the pretext that money is not being spent efficiently, and to meaningful levels of what is allocated, along with leakages through corrupt practices.

Also, instead of improving public expenditure levels, and their efficiency, there is emphasis in certain policy circles to directly provide money at the individual family level, along with deeply cutting public expenditure!

Hence, rather than fixing issues that are stumbling blocks in efficient spending of public tax money, their saving, they argue should channel more through otherwise sub-optimal, deeply profit-minded private sector spending. What is the point of elected public representatives, and their appointed public officials, if the tax money is not being spent on the resilience, and welfare of the masses, but rather virtually opaque private sector hierarchies get to decide about the allocation of expenditure, and that too under weak regulation of markets.

Government should definitely be in the business of improving the economy in a pro-active way. Safeguarding the economic interests of the demos is among their main businesses. In that sense, over-board independence of State Bank of Pakistan (SBP) also needs to be revisited with, for instance, greater presence of government in the monetary policy committee (MPC) of SBP.

Moreover, this old vanguard of economic policymakers – that are knee-deep in neoliberal/monetarism/Washington Consensus orthodoxy – see the need for economic growth more in terms of an end than as a means to take place in a way that improves the distribution of economic growth which, in turn, cannot happen without the government taking a non-neoliberal route. This in turn, would mean among other things that growth is based on greater inclusion of labour force, and employs much broader group of entrepreneurial minds, not to mention that the growth model sees to it that rents for capital, and rents for labour are an outcome of a process that is based on transparency, and that creates outcomes in an equitable way. Such a process requires a well-capacitated role of public sector. Hence, time for a new vanguard of economic policymakers is due for some time now.

Copyright Business Recorder, 2025