By Aasim Sajjad Akhtar
"Mainstream economics is the most peculiar of all theoretical failures. Unlike astrology or phrenology, economics becomes more discursively powerful the greater its incapacity to inform us on really existing capitalism." — Yanis Varoufakis, Professor of Economics, University of Athens.
Reading the annual report of the State Bank of Pakistan (SBP) is a particularly painful exercise. I would recommend it only to those who want to understand the extent to which our intellects have been made captive to an historically contingent discourse that poses as reason itself.
To be fair, the SBP is not the only institution in this country that incessantly spews out reports to placate our technocratic overlords in Washington, Manila and Brussels. Just about every Pakistani ministry has learned the language of ‘good governance’ and ‘structural reform’. And in the 2-3 decades that this new policy-speak has been imbibed by all and sundry, the structures of economic and political power that keep the majority of this country’s – and for that matter, world’s — people enslaved have become virtually liberated from the intellectual and political scrutiny that was prevalent until the 1980s.
The SBP report is relatively critical of the government’s policies even while acknowledging that serious shocks have made objective challenges much more daunting. Yet the criticism remains rooted within a familiar paradigm in which the ultimate end of economic and social policy is ‘efficiency’, the ‘unimpeded operation of markets’, ‘rationalisation of prices’ and the proverbial reduction of the fiscal deficit.
A great deal of emphasis is placed on the huge burden that is the energy sector, as it should. Pakistan’s oil import bill is already in the tens of billions and is increasing at a completely unsustainable level. And while the SBP is right in asserting the need for a serious overhaul of the energy sector its major gripe with the government has to do with the manner in which subsidies to consumers of electricity have been withdrawn.
One of the planks of neo-liberal policies has been cutting public subsidies across the length and breadth of the economy, both to producers and consumers. While there is no disagreement that direct or indirect subsidies from government accruing to the rich and powerful represent a major social injustice, the facts bear witness that it has been the poor and defenseless who have primarily been at the receiving end of the anti-subsidy crusade. If there is any doubt about this we need only to cast our thoughts to our electricity bills which have doubled in recent months. And if the readers of newspapers such as this one are feeling the pinch, then one can imagine how a family of six earning Rs10,000 a month is coping with an electricity bill of Rs2000 (and often more).
The SBP insists that the government should have phased out the electricity tariff subsidy more gradually. In other words, there is no questioning of the policy itself, just a recommendation relating to how the policy should be implemented. Similar assertions are made vis a vis what the authors clearly consider to be other self-evident policy staples throughout the report. Within neo-liberal discourse there is no questioning of the infinite wisdom of the market, the inevitability of privatisation of state enterprises, the liberalisation of trade and finance, and the imposition of regressive taxes. If the objective of social and economic policy is to improve the lives of working people then why is it that the very policies that have intensified dispossession and exclusion are exempt from ruthless and honest appraisal?
Of course, a genuine programme of structural reform is exactly what is missing in most of these reports. The SBP report repeatedly notes the importance of broadening the tax net, but continues to eulogise the general services tax (GST) as the panacea to our problems. There is no mention of reviving the wealth tax, for example, which was of course abolished under the Shaukat Aziz regime even while liquid earnings of the rich and powerful were increasing exponentially. There is no mention of properly accounting for and then taxing the earnings of military-run enterprises (whether mills, colleges, real estate, etc. etc.). These are the big fish that need to be giving up a significant chunk of their incomes, while GST is simply pushed onto the consumer in the form of higher prices.
And then, as always, there is the token mention in the SBP report about the white elephants that continue to paralyse our economy along with the standard caveat about how there is little that can be done: "Admittedly, there are significant rigidities in government spending, including debt servicing, defense, the government salary bill, etc." These three heads comfortably account for 75-80 percent of total public spending. But the SBP proceeds to note: "However, there appears little evidence of efforts to contain the growth in even the discretionary components". In other words, the government can only exercise discretion on matters other than defence and debt servicing. If this is true then the very exercise of being in government is a contradiction in terms!
The absurdity of the discipline of economics, at least as it has evolved in the past 25-30 years is indeed that its theoretical and policy exertions are in total dissonance with the actual lived reality of actually existing capitalism. The global financial crisis exposed this fact to an unprecedented extent yet mainstream intellectual and political circles are pretending as if the economic policy paradigm that precipitated the crisis somehow had little to do with it. The acknowledgment that there is something fundamentally wrong with the assumptions we make about human life, and in particular about the rationality that inheres in (individual) human behaviour is conveniently glossed over by blaming everything on the rapaciousness of a few greedy CEOs.
The problem is arguably much more serious in countries such as ours. Centuries of subjugation to Western imperialism has stunted our capacity to think independently and to defy our overlords, in spite of the evidence that such defiance is the only way forward. Among other things, the kind of economy mapped in the SBP report is a far cry from the actually existing Pakistani economy (and here I mean the real markets and real pricing mechanisms and real rationality that together constitute the so-called informal economy). It has been said before but needs to be said again: intellectual honesty is a pre-requisite to the kind of social change that we need in this country. The plethora of reports that are produced in this country prove just how much we lack exactly what we desperately need.