An unrepentant politician

By Shahid Javed Burki

"Pakistani politics have long been characterized by provocative rhetoric. But even by their over-heated standards, Benazir Bhutto, the country's former prime minister, has some startling things to say," wrote John Thornhill, the Financial Times journalist who interviewed Bhutto in London in early August.

What was the statement that drew this comment from the interviewer? It is worth quoting it at length. "I believe that there would never have been the World Trade Centre attack, the bombing of Afghanistan and the hair-raising tension of a possible nuclear conflict with India had there not been the predominance of the military in the politics of Pakistan," she said.

In other words, had Pakistan been left in the hands of the politicians the events that redefined the world order would not have happened. The Taliban would not have taken control over most of Afghanistan, Osama bin Laden and his Al Qaeda associates would not have established themselves in Afghanistan, nineteen exceptionally angry Arab men would not have sacrificed their lives and attacked the United States on September 11, and the war on global terrorism would not have been launched under the leadership of the United States.

We can continue with the counter-factuals suggested by Benazir Bhutto. Had the politicians retained power, Pakistan would not have become a central player in the war against terrorism. The importance assigned to Pakistan led to a reaction by India and the start of yet another "near-war" between Pakistan and India. That would not have happened and the world would not have faced the possibility, as it did in the spring of this year, of a nuclear holocaust in South Asia.

There are two problems with this line of thinking and the world view it represents. I am much more concerned with the second problem, but let me first state the first. In saying what she said, Benazir Bhutto is reinventing history. This was recognized by John Thornhill in the long article he wrote for the Financial Times based on the interview with her. "But times have changed and the extent of her political popularity remains uncertain. Both governments she led were dismissed early amid accusations of widespread corruption.

General Musharraf's denunciations of Pakistan's 'sham' democracy that have left the people with nothing but unsustainable foreign debt have much political resonance. Besides, Ms Bhutto was in office at the time of the Kashmir insurgency in 1989 and again in 1994 when Pakistan first gave support to the Taliban movement in Afghanistan," wrote Thornhill.

The second problem with the former prime minister's approach is more troubling. She is not prepared to accept any responsibility for the harm done to Pakistan during the time she and her opposition were in power. The 1990s have been rightly described as Pakistan's most wasted decade. Let us see what happened to the country's economy between 1989 and 1999.

In the quarter century before the return of civilian politicians to power, Pakistan had enjoyed a reasonable rate of economic growth. Between 1965 and 1989, per capita income had increased at a respectable rate of 2.5 per cent a year.

In India, the rate of increase was considerably lower - only 1.8 per cent a year. Not only was this a comforting performance, the growth trajectory pointed in the right direction. The rate of GDP growth had accelerated, from 5.2 per cent a year in 1965-1980 to 6.4 per cent a year in 1980-1989. Assuming population growth rates in these two periods at three per cent and 2.8 per cent respectively, the GDP increases translated into per capita income increases of 2.2 per cent and 3.6 per cent a year.

Some economists follow a rule of thumb according to which per capita income increase 25 per cent higher than the rate of growth of population should make a significant dent in the incidence of poverty. In 1980-89, income per head in Pakistan increased at a rate 29 per cent higher than the rate of growth of population. As should have been expected, there was, as a result, a significant decline in the level of poverty. According to one estimate, by 1989 the proportion of people living in poverty had declined to below 20 per cent. In other words, in 1989 Pakistan had about 20 million people classified as the absolute poor - a small number compared to the situation that was to emerge a decade later.

It is useful to recall two other sets of numbers - gross domestic investment rates and the burden of external debt - in order to develop a reasonably comprehensive picture of Pakistan in 1989 and 1999. In 1980-89, gross domestic investment increased at the rate of 5.7 per cent a year, nearly three times the rate of growth of 2.4 per cent per annum in the fifteen-year period between 1965 and 1980. However, since gross domestic savings had declined from 13 per cent of gross domestic product to only 11 per cent, all of the increase in investment was financed from external capital flows. In 1989, Pakistan had an external debt of $18.5 billion.

Let us now look at the performance of the economy during the decade of the nineties. The increase in gross domestic product dropped to only four per cent in 1990-99. With population now increasing at the rate of 2.7 per cent a year, this meant an increase in per capita income of only 1.3 per cent a year. This was less than fifty per cent of the rate of increase in population.

One reason for the decline in the rate of GDP growth was a significant reduction in investment. The rate of investment declined from 19 per cent of the gross domestic product in 1990 to a paltry 15 per cent in 1999. This decline was the consequence of a sharp reduction in external capital flows. By then both official development assistance and foreign direct investment had come to a virtual stop. Pakistan was popular neither with the governments that provided aid nor with private investors.

This fall in foreign capital flows should have meant a reduction in the rate at which the country was adding to its debt burden. That did not happen for the reason that the country failed to increase its export earnings. This was an extraordinary feat since the decade of the 1990s saw an unprecedented increase in global trade.

Pakistan had no share in this expansion. Instead, its balance of trade continued to increase. In 1999, Pakistan ran a deficit of $2.3 billion on the trade account compared to a deficit of $966 million in 1990. Since neither aid nor foreign direct investment was arriving in any significant amount, Islamabad's policymakers resorted to expensive, short-term borrowing to pay for the large and growing trade deficit.

In 1998, Pakistan's external debt was estimated at $34.3 billion. It had added $16 billion to its debt burden over the ten-year period of democratic rule. It was now a heavily indebted poor country with debt outstanding equivalent to 43 per cent of the gross national income.

But large external borrowing was not the only way the country financed the bills it could not pay from its own resources. The government had also resorted to heavy borrowing from the domestic markets to finance a large budgetary deficit. Domestic debt increased dramatically during this period. Combined with what the country owed to outside creditors, by the time the military intervened in 1999, Pakistan's total debt - both foreign and domestic - was equal to its gross national income. By then debt had also become a drag on economic growth since the government spent some two-fifths of its total revenues on paying interest and principal to its creditors.

A sharp increase in the incidence of poverty was the inevitable consequence of the slowdown in GDP growth. According to a survey carried out in 1997, the incidence of poverty had increased to 37.3 per cent of the population. This meant that by 1999, Pakistan had 50 million people living in absolute poverty in a population of 134.8 million.

Over the ten-year period during which Ms. Bhutto's Pakistan People's Party and Mian Nawaz Sharif's Pakistan Muslim League were alternately in power, the country saw more than doubling of the size of the pool of poverty - from 20 million in 1989 to 50 million in 1999. During this period, therefore, the number of people living in poverty increased at the extraordinary rate of 9.6 per cent a year - three and a half times the rate of increase in population.

Loss in the momentum of growth, heavy build-up in debt, failure to better integrate the country into the global economy, a rapid increase in the number of people living in poverty are some of the ways in which the lost decade of the 1990s manifested itself. The state failed also in a spectacular way to provide basic social service to a rapidly increasing population. In fact, in the last decade we saw significantly reduced progress on major social indicators such as life expectancy, maternal mortality, infant and child mortality, literacy and education. This is exactly what should be expected in a period of sharply reduced economic growth. So we are not just talking about dry economic statistics here: It is the lives and health of tens of millions of people that have been stunted.

In her interview with the Financial Times quoted earlier, Ms. Bhutto claims that had she been allowed to govern in the 1990s, the rise of militant Islam would not have happened in Pakistan, Taliban would not have taken control of Afghanistan, and the terrorists would not have struck America on September 11. And yet, it is the failure of the state during the time that she shared power with her opposition that we saw the rise of madrassah education which was to fuel the growth of radical Islam in Pakistan. As is now well recognized, it is the graduates from the madaris who provided thousands of leaders and foot soldiers to the Islamic causes that were pursued around the globe.

According to Najum Mushtaq who wrote a report on madaris published recently by the International Crisis Group, "the original purpose of madaris was education but that tradition has all but vanished." Madaris which teach Islam and train clergy have been in existence for a thousand years but it was only in the 1990s that they became a strong social and political force in Pakistan. There were only 245 madaris in Pakistan at the time of the country's birth in 1947.

By 1995, when Ms. Benazir Bhutto was in power, 3,906 madaris were registered with the government. According to a recent New York Times story on religious education in Pakistan, the government now says it believes there are 10,000 madaris providing education in the country to some one million students, mostly boys and mostly in towns and cities. "A problem as worrisome as religious extremism is that many madaris provide little learning relevant to jobs outside mosques, or beyond the 18th century curriculum that most madaris use." Pakistan's politicians must take full responsibility for this unhappy development.

[taken from http://www.dawn.com/2002/08/14/op.htm]

Date/Time Page Created: 12/01/2004

Date/Time Last Modified: 12/1/2004 8:30:23 AM

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