Could Pakistan Have Become a Prosperous Democracy Like Asian Tigers By Now?

Taiwan, Singapore and South Korea  experienced a dramatic rise under authoritarian regimes from 1960s through 1990s. The dictators who led these states also showed the way to fellow Asian dictators in Indonesia, Malaysia, Thailand and China who also industrialized and prospered using the same formula that rejected the Washington Consensus of democracy and free markets as the basis for development of all nations.

Per Capita GDP (Constant 2000 US$) Source: World Bank


East and Southeast Asia:

The Asian Tigers have managed their massive growth mainly through export-driven economies that catered to the industrialized West. Each of them has built huge trade surpluses to fund their growth. These countries have invested in  improving education and training to build significant human capital in a couple of decades.

The improved productivity of the workforce, coupled with relatively low wages in Asia's developing economies, have resulted in enormous foreign investments. The large amount of foreign capital has allowed for massive growth. Their export-driven industry has spawned finance and service based industries that we now see, allowing the Tigers to maintain their high GDP. With rapid economic growth and human development, each has built a large middle class, paving the way for democracy to take root. As a result, dictatorships have given way to democracy in recent decades in most of these nations.

South Asia's Performance:

South Asia has been a laggard in economic development when compared with countries in East Asia and South East Asia. No South Asian nation has seen comparable growth in human and economic development. China, a country of 1.4 billion people run by one-party system, is far ahead of India, an equally large country run as a multi-party parliamentary democracy.

Source: Where Are the Poor and Where Are the Poorest?
A billion people were lifted from abject poverty between 1980 and 2010. China accounts for nearly three quarters of these, or 680 million people brought out of misery, by reducing its extreme-poverty rate from 84% in 1980 to 10% now, according to a report in The Economist.  The report adds that with "poorer governance in India and Africa, the next two targets, means that China’s experience is unlikely to be swiftly replicated there".

India: 

As China's share of the world's extreme poor (living below $1.25 per day per person level) has dramatically declined, India's share has significantly increased.  India now contributes 33% (up from 22 % in 1981). While the extreme poor in Sub-Saharan Africa represented only 11 percent of the world’s total in 1981, they now account for 34% of the world’s extreme poor, and China comes next contributing 13 percent (down from 43 percent in 1981), according to the World Bank report titled State of the Poor.

The share of poverty in  South Asia region excluding India has slightly increased from 7% in 1981 to 9% now, according to the report. India now has the world's largest share of the world's poor, hungry, illiterate and sick who still lack access to very basic sanitation.

In a recent book "Street Smarts", a hedge fund Manager Jim Rogers makes some important points to explain how East Asians have succeeded in rapidly developing while others have failed:

 "Many Asians say that the Asian Way is first to open your economy, to bring prosperity to your country, and then, only after that, to open up your political system. They say that the reason the Russians failed is that did it the other way around. Russia opened up its political system in the absence of a sound economy, everybody bitched and complained, and chaos inevitably ensued. As an example of the Asian path to political openness, they point to South Korea and Taiwan, both of which were once vicious dictatorships supported by the United States. Japan was at one time a one-party state supported by the US military. Singapore achieved its current status under one-party, authoritarian rule. All these countries have since become more prosperous and more open. 

Plato, in The Republic, says that the way societies evolve is by going from dictatorship to oligarchy to democracy to chaos and back to dictatorship. It has a certain logic, and Plato was a very smart guy. I do not know if the Asians ever read The Republic, but the Asian way seems to suggest that Plato knew whereof he spoke." Not only is the Asian model different from that of the Soviets, it stands China in marked contrast to those thirty-year dictatorships previously mentioned. Chinese leaders have put a high premium upon changing the country's economy, presumably to seek prosperity for the 1.3 people who live there." 

"And yet,in 1947, when it achieved independence, India was one of the more successful countries in the world, a democratic country. But despite democracy, or maybe because of it, India has never lived up to its potential. China was a shambles as recently as 1980. India was far ahead of it. Bt since then China has left India, literally in the dust....As China rises, India continues to decline relatively. Its debt-to-GDP ratio is now 90 percent, making a strong growth rate virtually impossible."

1960s Pakistan:

Pakistan was on a similar trajectory as the Asian Tigers during 1960s under Gen Ayub Khan's rule. GDP growth in this decade jumped to an average annual rate of 6 percent from 3 percent in the 1950s, according to Pakistani economist Dr. Ishrat Husain. Dr. Husain says: "The manufacturing sector expanded by 9 percent annually and various new industries were set up. Agriculture grew at a respectable rate of 4 percent with the introduction of Green Revolution technology. Governance improved with a major expansion in the government’s capacity for policy analysis, design and implementation, as well as the far-reaching process of institution building.7 The Pakistani polity evolved from what political scientists called a “soft state” to a “developmental” one that had acquired the semblance of political legitimacy. By 1969, Pakistan’s manufactured exports were higher than the exports of Thailand, Malaysia and Indonesia combined."




Bangladesh:

Some argue that it was Ayub Khan's rule in 1960s that resulted in the loss of Pakistan's eastern wing and the creation of Bangladesh. I strongly disagree with this view. I believe that ill-conceived general elections of 1970 gave the opportunity to Pakistani politicians to lie to mostly poor and illiterate electorate of the time to win their votes. Shaikh Mujib exploited normal regional economic disparities that can be found in any country, including India and US, to argue that Bengalis were unfairly treated. Just look at the income data for various states in US or in India and you'll see huge gaps in incomes and standards of living. Indian Punjab's per capita income of Rs. 88,783 is 1.4 times higher than West Bengal's Rs. 62,831. Bihar's per capita income of Rs. 28,317 is less than a quarter of Haryana's Rs. 122,660. New Jersey's per capita income of  $53,628 is much higher than Mississippi's $33,073. 

In the end, Zulfikar Ali Bhutto refused to sit down and talk with Shaikh Mujib and forced the split. Here's how one of Bhutto's friends late Gov Salman Taseer offered his view in his book "Bhutto: A Political Biography"

"Blame can never be satisfactorily or finally apportioned to the major players in this grisly drama, but that Bhutto, Mujibur Rahman and Yahya Khan share responsibility there can be no doubt. Many, indeed, are inclined to the view that Bhutto, as the most sure-footed politician of the three and thus the best equipped to assess the consequences of his actions, must accept the lion's share of the blame. Argument on this point will remain one of the central themes of Pakistani politics, perhaps for decades."

The fact is that economic gap between former East Pakistan and Pakistan has grown over the last 40 years, and the per capita income in Pakistan now stands at more than twice Bangladesh's in 2012 in nominal dollar terms,  higher than 1.6X in 1971.



 Here are some figures from Economist magazine's EIU 2013:

Bangladesh GDP per head: $695 (PPP: $1,830)

Pakistan GDP per head: $1,410 (PPP: $2,960)

Pakistan-Bangladesh GDP per head Ratio: 2.03 ( PPP: 1.62)

Pakistan's Economic History:

Since 1947, Pakistan has seen three periods of military rule: 1960s, 1980s and 2000s. In each of these decades, Pakistan's economy has performed significantly better than in decades under political governments.



In a 10/12/1988 interview with Professor Anatol Lieven of King's College and quoted in a book "Pakistan-A Hard Country", here is how eminent Pakistani economist Dr. Mabubul Haq explained lower economic growth under "democratic" governments:


"..every time a new political government comes in they have to distribute huge amounts of state money and jobs as rewards to politicians who have supported them, and short term populist measures to try to convince the people that their election promises meant something, which leaves nothing for long-term development. As far as development is concerned, our system has all the worst features of oligarchy and democracy put together.

That is why only technocratic, non-political governments in Pakistan have ever been able to increase revenues. But they can not stay in power for long because they have no political support...For the same reason we have not been able to deregulate the economy as much as I wanted, despite seven years of trying, because the politicians and officials both like the system Bhutto (Late Prime Minister Zulfikar Ali Bhutto) put in place. It suits them both very well, because it gave them lots of lucrative state-sponsored jobs in industry and banking to take for themselves or distribute to their relatives and supporters."
Human and Economic Development under Musharraf:

Pakistan saw yet another confirmation of accelerated economic and human development under military rule in years 2000-2007.
Pakistan's HDI grew an average rate of 2.7% per year under President Musharraf from 2000 to 2007, and then its pace slowed to 0.7% per year in 2008 to 2012 under elected politicians, according to the 2013 Human Development Report titled “The Rise of the South: Human Progress in a Diverse World”.

Source: Human Development Report 2013-Pakistan



 At 0.515, Pakistan's HDI is lower than the average HDI value of 0.558 for South Asia which is the second lowest among the various regions of the world tracked by UNDP. Between 2000 and 2012, the region registered annual growth of 1.43% in HDI value, which is the highest of the regions. Afghanistan achieved the fastest growth (3.9%), followed by Pakistan (1.7%) and India (1.5%), according to the United Nations Development Program.

Overall, Pakistan's human development score rose by 18.9% during Musharraf years and increased just 3.4% under elected leadership since 2008. The news on the human development front got even worse in the last three years, with HDI growth slowing down as low as 0.59% — a paltry average annual increase of under 0.20 per cent.

 Who's to blame for this dramatic slowdown in the nation's human development?  Who gave it a low priority? Zardari? Peoples' Party? Sharif brothers? PML (N)? PML (Q)? Awami National Party? Muttahida Qaumi Movement?  The answer is: All of them. They were all part of the government. In fact, the biggest share of the blame must be assigned to PML (N).



Sharif brothers weren't part of the ruling coalition at the center. So why should the PML (N) share the blame for falling growth in the nation's HDI? They must accept a large part of the blame because education and health, the biggest contributors to human development, are both provincial subjects and PML(N) was responsible for education and health care of more than half of Pakistan's population.

Pakistan R&D as Percentage of GDP Source: World Bank


Going further back to the  decade of 1990s when the civilian leadership of the country alternated between PML (N) and PPP,  the increase in Pakistan's HDI was 9.3% from 1990 to 2000, less than half of the HDI gain of 18.9% on Musharraf's watch from 2000 to 2007.



Acceleration of HDI growth during Musharraf years was not an accident.  Not only did Musharraf's policies accelerate economic growth, helped create 13 million new jobs, cut poverty in half and halved the country's total debt burden in the period from 2000 to 2007, his government also ensured significant investment and focus on education and health care. In 2011, a Pakistani government commission on education found that public funding for education has been cut from 2.5% of GDP in 2007 to just 1.5% - less than the annual subsidy given to the various PSUs including Pakistan Steel and PIA, both of which  continue to sustain huge losses due to patronage-based hiring.

Source: Pew Surveys in Pakistan

Summary: 

Looking at examples of nations such as the Asian Tigers which have achieved great success in the last few decades, the basic ingredient in each case has been large social sector investments they have made. It will be extremely difficult for Pakistan to catch up unless similar investments are made by Pakistani leaders.



Had Pakistan's development continued on the 1960s trajectory, it is quite conceivable that Pakistan would be a prosperous democracy like the Asian Tigers today.

Related Links:

Haq's Musings

Challenges of Indian Democracy

Pakistan's Economic History

Comparing Bangladesh with Pakistan

Economic and Human Development in Musharraf Years

India's Share of World;s Poor Up from 22% to 33%

Why is Democracy Failing in Pakistan?

Musharraf Era Higher Education Reforms in Pakistan

Comparing 30-Year Dictatorships in Indonesia and Pakistan

Comments

Riaz Haq said…
Here's a Deccan Chronicle Op Ed by Kuldip Nayar:

That India is an economic mess is known all over the world. What is not yet public is that the malaise was because of the wrong decisions which president Pranab Mukherejee took when he was Union finance minister from January 2009 to mid-2012 and also when finance minister P Chidambaram was heading the ministry nearly till the end of 2008 and before.

Mukherjee lives in the luxuries of Rashtrapati Bhavan and Chidambaram shields himself behind tall promises he still makes to mend the economy. Both of them are accountable. They should tell why they took the steps which disturbed the rhythm of progress. Because of lack of transparency in the affairs of government, only a handful of people know about the blunders the two committed.

One of the decisions taken by Mukherjee was to impose the Rs 1200 crore tax with retrospective effect on a foreign mobile company. After having lost the case in the Supreme Court on September 8, 2010, the government promulgated an ordinance before amending the Finance Act 2012. The retrospective clause in the act has scared away foreign investment which India badly needs. A bagful of concessions has not brought the Walmart yet to the Indian soil. Foreign investors have withdrawn a large sum of money which they had invested. In a few weeks, as much $ 200 billion has reportedly gone out. The outflow has not stopped yet.


Prime minister Manmohan Singh did not anticipate the repercussions. In fact, after seeing the mess Chidambaram had created in 2008, the prime minister should have taken over the finance ministry himself because of his expertise in economic matters. Unfortunately, his own record as coal minister does not hold promise but the prime minister would have done better in finance. India should have been exporting coal, as it did, instead of importing it. Manmohan Singh may not be personally responsible for the corruption in the allotment of coal blocks. But the bungling runs into thousands of crores of rupees. The full story may not yet come out because some files are missing. The government has admitted this before the Supreme Court.

According to CBI as many as 157 files are missing. The missing files reportedly have some letters and noting on the allotment of coal blocks. The prime minister cannot absolve himself of the responsibility that he was not the custodian of the files. He was in charge of the coal portfolio. A top CBI official, who is probing into the scandal, has said that there may be a need to ‘examine’ the prime minister, who was in charge of the ministry from 2006 to 2009. Could the prime minister have connived at what the ministry had been doing because his personal integrity is beyond reproach?

http://www.deccanherald.com/content/355537/is-india-story-over.html
Riaz Haq said…
Departing UNDP Official on Pakistan:

1 Pakistan's Progress on Development Isn't Fast Enough
Mr. Franche is quoted as saying he is frustrated that a country full of “capable and intelligent” people isn’t making more progress on reducing poverty and modernizing the state. “The fact that even in 2016, Pakistan has 38% poverty; it has districts that live like sub-Saharan Africa; that the basic human rights of minorities, women and the people of FATA [tribal regions in the northwest] are not respected; that this country has not been able to get its act together and hold a census; or that it has not been able to push for reforms in FATA, an area that is institutionally living in 17th century. It is extremely preoccupying,” he said.

2 The Country's Political Class 'Uses Its Power to Enrich Itself'
The UNDP official said the country’s elites needed to change their lives to help Pakistan. “You cannot have a political class in this country that uses its power to enrich itself, and to favor its friends and families. This fundamental flaw needs to be corrected if Pakistan is to transform into a modern, progressive developed country,” he is quoted as saying.

He said elites take advantage of cheap labor while partying in London, shopping in Dubai and investing in property abroad: “The elite needs to decide, do they want a country or not,” he is quoted as saying.

Mr. Franche also had a word for the propertied classes. “I have visited some very large landowners, who have exploited the land for centuries, paid nearly zero money for the water, and how they almost sometimes hold people in bondage. And then they come to the United Nations or other agencies and ask us to invest in water, sanitation, and education for the people in their district. I find that quite embarrassing,” he is quoted as sayin
3 Local Governments Need Real Power
Mr. Franche said provincial governments in Pakistan don’t have enough power. “Only KP [the Khyber-Pakhtunkhwa province] has a decent law that gives real power and real money to the local government. Local government does not mean that you just elect them and deny them fiscal resources or power,” he said.


4 Pakistan's Media Is 'Manipulated'
He also said the media should be one of the pillars of democracy, but “unfortunately, the level of dependence of the government on military authorities, and the degree by which a lot of media in this country is manipulated by powerful sources, are sources of erosion of democracy and erosion of the institutions that are the foundations of this country.”
5 Country Needs More Opportunities
“The apartheid of opportunities in Pakistan is horrible, which is why so many young people are trying to leave the country,” Mr. Franche is quoted as saying.

“Pakistan will not be able to survive with gated communities where you are completely isolated from the societies, where you are creating ghettos at one end and big huge malls for the rich at the other end. It is not the kind of society you want your kids to live in.”

http://blogs.wsj.com/briefly/2016/08/30/5-criticisms-un-official-made-of-pakistan/
Riaz Haq said…
Arvind Subramanian, economic adviser to Narendra #Modi: #India will catch up with #China in 20 or 30 years" https://www.ft.com/content/6aa3ec6a-3013-11e7-9555-23ef563ecf9a via @FT

One of India’s most important economists on globalisation and how he expects the country to catch up ‘with China in 20 or 30 years’


Arvind Subramanian owes both his job and his plush New Delhi residence to the same man: India’s prime minister Narendra Modi, who hired him as the government’s chief economic adviser in 2014. Subramanian hurriedly departed from his role at a US think-tank and moved back home to work in the finance department, only to find himself lodged temporarily in a humdrum guest house. “The finance minister was very sweet,” he says. “He rang the housing minister, and said, ‘I want him to get a very nice house.’ ”


Subramanian now lives in New Moti Bagh: a leafy estate in the heart of the capital, where grace-and-favour bungalows are granted only to elite civil servants, making it arguably the most powerful neighbourhood in India. “This place has been called the new Forbidden City,” he says, in reference to the walled imperial palace in Beijing, the heart of Chinese government for five centuries. India’s equivalent is less forbidding: a compound of 116 white bungalows and 10 apartment blocks nestled amid pleasant parks, through which the resident officials, judges and military top brass go for their morning walks.

Subramanian is sitting in the spacious living room of his own six-bedroom, two-storey home, dressed in a white linen shirt, black jeans and brown leather loafers. At 57, he looks trim and speaks with rapid, Tigger-ish energy. Outside, the mid-afternoon sunshine is falling on his front garden, whose verges are filled with lush green shrubs.

The house resembles a colonial-era bungalow, with a roof terrace on the second floor and two sets of servants’ quarters at the rear. It is actually newer than it looks, he says: the entire area was rebuilt about a decade ago, hence the “new” in New Moti Bagh. Though spartan when he arrived — “there was maybe a wooden bed, a cabinet, but basically nothing else” — the interior is now pleasantly decorated with furniture he and his wife Parul shipped back from Washington DC, including a series of Impressionist-style paintings by his elderly father, a retired civil servant.

----------------------



Subramanian admits he has learnt to watch his step on delicate topics, in public at least, giving an example of debates about protecting cows, which some conservative Hindus consider sacred. “I was asked for my views on the beef ban in Mumbai and said jokingly that if I speak on this I’ll probably lose my job — and that went on the front page of The Indian Express,” he recalls. “In that case I was told to be a bit more careful.”


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Modi’s support for globalisation is deeper than most people realise, he adds, a flip side of the fact that India is now a much more open economy than commonly acknowledged. The country’s future growth is not without challenges, however. “We have this whole ambivalence about the private sector which we’ve never really overcome,” he says. Yet he remains bullish, claiming that he expects India to catch up with China “within the next 20 or 30 years or so”.

This will happen even as globalisation is set to slow down somewhat, he argues, albeit only compared with the unusually rapid growth in trade seen during the 2000s. “‘Hyper-globalisation is dead, long live globalisation,’ is how I like to put it,” he says. “If you look crudely at the postwar period, 80 per cent of globalisation is driven by technology, 20 per cent by policy. And that 80 per cent, you can’t stop.”

Riaz Haq said…
Meet 'The Brothers' (Dulles Brothers) Who Shaped U.S. Policy, Inside And Out

Stephen Kinzer on NPR Radio

http://www.npr.org/2013/10/16/234752747/meet-the-brothers-who-shaped-u-s-policy-inside-and-out


On the Dulles' ability to overthrow regimes in Iran and Guatemala but not in Cuba or Vietnam

They were able to succeed [at regime change] in Iran and Guatemala because those were democratic societies, they were open societies. They had free press; there were all kinds of independent organizations; there were professional groups; there were labor unions; there were student groups; there were religious organizations. When you have an open society, it's very easy for covert operatives to penetrate that society and corrupt it.

Actually, one of the people who happened to be in Guatemala at the time of the coup there was the young Argentine physician Che Guevara. Later on, Che Guevara made his way to Mexico and met Fidel Castro. Castro asked him, "What happened in Guatemala?" He was fascinated; they spent long hours talking about it, and Che Guevara reported to him ... "The CIA was able to succeed because this was an open society." It was at that moment that they decided, "If we take over in Cuba, we can't allow democracy. We have to have a dictatorship. No free press, no independent organizations, because otherwise the CIA will come in and overthrow us." In fact, Castro made a speech after taking power with [Guatemalan President Jacobo] Árbenz sitting right next to him and said, "Cuba will not be like Guatemala."

Now, [Vietnamese Communist leader] Ho Chi Minh was not establishing an open society ... the fact is, he had a dictatorship, he had a closed, tyrannical society, and that made it much more difficult for the CIA to operate. So we find this irony that if [Prime Minister of Iran Mohammad] Mossadegh and Árbenz had been the tyrants that the Dulles brothers portrayed them as being, the Dulles brothers wouldn't have been able to overthrow them. But the fact that they were democrats committed to open society made their countries vulnerable to intervention in ways that Vietnam and particular North Vietnam then were not.

On how things might have been different had the Dulles brothers not intervened

It's quite possible, even likely, had the Dulles brothers not been [in Vietnam] or had acted differently, there never would've been an American involvement in Vietnam at the cost of a million lives and more than 50,000 Americans. Guatemala wouldn't have suffered 200,000 dead over a period of 35 years in the civil war that broke out after they intervened in Guatemala and destroyed democracy there. Iran fell under royal dictatorship and then more than 30 years of fundamentalist religious rule as a result of the Dulles brothers' operations. Had they not intervened in Iran we might've had a thriving democracy in the heart of the Muslim Middle East. ...

So you look around the world and you see these horrific situations that still continue to shake the world, and you can trace so many of them back to the Dulles brothers.

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