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Bhuttoism vs ‘Imranomics’

It is increasingly clear that PTI and its leader PM Imran Khan (IK) have a two-part vision for this country: a) exposing and penalizing the corrupt and money launderers and b) laying the foundations for a welfare state or Riasat-e-Medina. IK’s early re-shuffling of the cabinet (apart from the finance minister) due to inflated gas bills and medicine prices, and intentions for provision of low cost housing, employment opportunities, shelter homes, better nutrition and concerns for poverty (setting up a division of social protection and poverty alleviation) and environment, is a credible evidence for his ideological commitments to a welfare state. Some analyst may consider the comparison between ZAB and IK audacious as how can an iconic statesman, western educated and experienced politician such as ZAB be compared with IK? I may restate that my comparison is only restricted to economic ideology which was/is the basis of coming into power of these two leaders. In this context, I may be provocative and advance a testable thesis in suggesting a counter-factual, that if IK had come to power half a century ago, and was impressed by the global economic powers and their ideologies sweeping the world at the time, he would have adopted and implemented the economic reform strategy very similar to ZAB’s to create a social welfare state, and if ZAB had lived long enough and come to power with coalitions and thin majority in 2018, he would have faced the same constraints and challenges as being faced by IK to implement his pro-poor economic ideology.

Let me briefly highlight few similarities between the two leaders. Both spent their younger life in the UK, a bastion of social economic ideology, which shaped their common view of a welfare society. IK’s strategy for winning the elections was fairly similar to ZAB’s. The latter wanted the country to be rid of 22 industrial families (a perception created by Mahbub-ul-Haq), by expropriating their wealth and raise awareness of worker’s rights versus IK’s election slogans of ending corruption, money laundering of the political elite (thanks to the Panama Leaks) and expropriating their looted wealth for the benefit of the down trodden masses. The part b) of ZAB’s vision of providing Roti, Kapra aur Makaan (RKM) to every vulnerable citizen is a softer and worldly vision of the more idealistic/ambitious vision of Riasat-e-Medina. Both can be called PMs in hurry to transform Pakistan into a welfare state. In economic terms, ZAB started with half of the country/economy, substantial loss of exports (Jute), 59 percent devaluation of PKR against US $ and faced oil price shock in 1973. IK has inherited a large undocumented, consumption oriented, speculative economy with unsustainable debt trap, low tax ratio and stagnant exports for the last 10 years. Relatively, he also faces another mini oil price shock. The similarities end here.

In an ex-post sense, ZAB was partially successful in implementing his RKM strategy as according to some sources absolute poverty declined from 46.5% in 1970 to 30% in 1979, although many of the major macro indicators worsened during the period, except public investment and employment. IK faces severe challenges as he embarks on the commitment to create a welfare society during the political cycle. In essence the varying degrees of the ability of the two leaders to implement similar vision are due to international and national political environment during their respective tenures. In 1972, ZAB as civilian martial law administrator and president, inherited weak establishment (after the effects of 1971 War), unassertive judiciary and almost a passive parliament busy in drawing up a new constitution for the country. The icing on the cake was almost absolute majority of ZAB’s party in the legislature. Globally, the world was divided into two super-powers with different economic systems and a Communist China was silently rising as a third power. On the other hand, IK faces an entirely different environment globally and nationally. Establishment, Judiciary and Parliament are active and assertive stakeholders as pillars of state and national security, along with 18th Amendment, a vibrant media and a system of check and balances (albeit nascent). The Washington Consensus is the dominant economic model, tweaked by Russia, China and India to suit their economic interests.

The question is that with almost an economy in half, how was ZAB able to extract the surplus to carry forward his social welfare agenda over the short political cycle of 5-6 years? Undoubtedly, it was his belief (almost religiously) that socialist mode of production was the panacea for the ultimate creation of a social welfare society. This belief in the state control of the economy and above favorable drivers helped him to: a) kill crony capitalism of 22 families via expropriation of assets and potential profits, b) create awareness of workers’ rights and c) generate over/excess employment by expanding public sector enterprises to achieve RKM. His three episodes of nationalization of industry during 1972-1976 helped advance all the above 3 components to build a welfare society. In the short political cycle, it maintained his political popularity but in the medium to long-run he inadvertently embarked the economy from crony capitalism to state/party cronyism, which to this day is popular (either due to political or ideological exigencies) with various governments (political/non-political) including PTI.

In view of the similarity in economic meltdown, faced by the two leaders, the vision for creating a welfare society, by extracting surplus from the wealthy elite is far difficult half a century later in a short span of 1-2 years during a single political cycle, in case of IK than it was in the case of ZAB. IK is fighting War on Corruption (WoC) against politicians who have a political base and bureaucratic sympathies since last 20 years, while ZAB took over the assets of docile 22 families overnight, who eventually took sweet revenge in the long-run by partially de-industrializing the country. As stated above, most of the current institutional and ideological drivers available to IK are not geared for ‘shock and awe’ surplus generation strategy that was available to ZAB. In the above scenario, IK has the following options to create surplus for creating 10 million jobs during the political cycle: i) some variant of Saudi/ Chinese Model to extract US $5-10 billion from the money launderers within the first 2 years of his political cycle. For this to happen all the institutions have to agree on a single time consistent agenda. Even then, the success is not guaranteed; ii) converting to renewable energy on a war footing (provided there are short-run net saving in foreign exchange); iii) adding another layer of taxes to the already suggested by IMF, e.g., a nation-wide one time temporary comprehensive wealth (net worth) tax of 1/2 to 1 percent, to re-distribute the wealth from the haves to the have-nots in shape of low cost housing. I am aware that it is easily said than done; and iv) pray patiently for ‘manna from heaven’ (e.g., oil and gas discovery, donations/grants).

After all, if Narendra Modi can win his second-term in spite of overnight demonetization, expand the banking base, document the economy through imposition of VAT, without showing anything ‘above-the-ground’, a one-time wealth tax can be re-distributed at least to show wealth creation for down trodden in Riasat-e-Medina.

(The views expressed in this article are not necessarily those of the newspaper)

Copyright Business Recorder, 2019

Dr Sajjad Akhtar, "Bhuttoism vs ‘Imranomics’," Business Recorder. 2019-06-27.
Keywords: Political science , Money laundering , Social protection , Global economics , Economic ideology , Tax reforms , Poverty alleviation , Nationalization , Imran Khan , PTI , IMF