Friday, June 23, 2006

Neo-liberalism: clinging to the past

Over lunch with Wasim Sajjad this weekend I had the opportunity to question him about the government's neo-liberal economic policies. Even as the world is reassessing its commitment to liberalisation, privatisation and deregulation, Pakistan has embraced neo-liberalism with a gusto that rivals anything seen at the height of the discredited theory's heydays in the 90s. The result of that commitment has been entirely predictable: increased inequality and a static, arguably worsening, level of poverty.

Wasim Sajjad acknowledged that the problems of inflation, unemployment and inequality needed to be addressed urgently, but he was less forthcoming on the specific policies necessary to tackle those problems. I asked him whether Shaukat Aziz was the right man to continue to set the country's economic compass given that he seemed incapable of thinking beyond stale and discredited policies and again he was reluctant to comment. Obviously as Chairman of the Senate, Wasim Sajjad must toe the party line - a party that is nominally headed by Shaukat Aziz.

However, the Supreme Court has finally shown some steel and cancelled the corrupt auction of the Pakistan Steel Mills to a consortium of Pakistani and foreign businesses. The Steel Mill's debacle highlighted a critical flaw in the government's neo-liberal policy: a fire sale of the country's assets will only harm the state rather than strengthen it. Disinvestment is only beneficial if it is carried out transparently and at market prices, but in the Steel Mill's case neither was achieved.

The other fundamental flaw in the government's strategy is that the necessary degree of market regulation and oversight has not been enforced. The crash of the Karach bourse can be attributed to a reluctance of the government to take on the powerful financiers; in the absence of the proper regulation it was only a matter of time before the market crashed.

Now that 7 years of neo-liberal policies are proving to be inadequate to address Pakistan's structural problems, the crucial question is whether there is any meaningful internal dissent that could mitigate the worst excesses of neo-liberalism. On the evidence before us so far, the answer is a resounding 'No'.


Anonymous said...

I've still never been able to understand how on earth someone with only banking experience and an MBA was allowed to run a nation's economy.

Cy said...

The US, too, has an MBA president and his resume is definitely less stellar than our own SA. The problem isn't the qualifications, but the stewardship. I find it hard to believe that SA is the man to fix the very problems that he has created.

Anonymous said...

Agreed, that the problem isn't qualifications, but there is still big difference GWB and SA.

W came to office as president through a popular election. (And he did have some prior experience as state governor), so it was not necessary for him to have the right technical qualifications.

SA on the other hand was appointed to be a so-called "technocrat", so one would expect him to have the right technical qualifications -- but he doesn't.

Second, is also the finance minister. But GWB is only the president, while the US finance minster portfolio is filled by a professor in economics, who had plenty of public service experience prior to his appointment.

Cy said...

I think you may be confusing the role of a state/central bank governor with the finance minister/treasury secretary. The former leans towards academics while the latter is definitely a political job.

Not that Pakistan should be trying to emulate the US!