Pindi needs the Chicago Boys
This article by Malik Ahmad Jalal has been featured on The News International.
The reform scorecard looks dismal. Thirty months into the PTI government, police, electoral or governance reforms are floundering. From convicting the corrupt to controlling circular debt, there is little progress. Tax and spend initiatives like Ehsaas are performing well, but so did the Nai Roshni and Yellow Cab schemes. Spending money is not reform.
In everyday Pakistan, the PTI’s promise of ‘Tabdeeli’ sounds like Scheherazade’s Arabian Tales!
If reforms were a bus journeying to the destination of ‘Tabdeeli’ or Transformation, then citizens are its passengers and the establishment or executive is at the steering wheel driving us to a brighter future. Pakistan’s ‘Reform Bus’ has promisingly set off before, but often broke down mid-way, leaving passengers despondent. The most spectacular example was the Musharraf regime, which ended where it started, rehabilitating and reinforcing traditional political parties.
Our reforms fail persistently because a journey through unchartered territory needs navigation and planning to chart a path, as the journey to economic progress is challenging and never straight-forward. Without intellectual navigation, we are doomed to lose our way or get stuck in avoidable obstacles.
Also, reforms are long-term projects that require an ideological propellant or fuel, to push the Reform Bus through barriers of old behaviours and vested interests fighting back.
Whether ‘Qarz Utharo, Mulk Savaro’ or ‘Tabdeeli’, our reform efforts are born out of political expediency, hence lacking in intellectual and ideological zeal required to catalyse and drive real transformation.
So, is real transformation possible? Yes!
It happened in our lifetimes in Malaysia under Mahathir, South Korea under Gen Sung-Hee Park and the UK with Margaret Thatcher. Key lessons: first, reforms require 15+ years. Second, reform ideology outlasts initial leadership. In Britain, Thatcherism survived Thatcher, and exists today as the Conservative Party’s main ideology. Third, policy decisions are best driven by a core group of committed ideological intellectuals, such as ‘Thatcher’s Wise Men’. Thatcher’s reforms achieved incredible results transforming Britain’s IMF dependent sick economy to a global financial services centre.
Similar successful reforms happened in Chile under Pinochet (1973–1989). Today Chile’s economy is top in Latin America with GDP per capita increasing from only $719 in 1975 to $14,900 in 2020.
Chile is relevant for Pakistan because reform and its political cover was provided by the institution of the Chilean Army. However, the intellectual and ideological underpinning of reforms was by technocratic Chilean economists called ‘The Chicago Boys’, as a number of them were educated at the University of Chicago under Milton Friedman.
When Gen Pinochet gained power, he used economic and political thought from the Chicago Boys’ publication ‘Program for Economic Development’ as his architecture of reform. From the 1980s onwards, the Chicago Boys were appointed in ministries of finance, economy, planning or as president of the Central Bank, providing the intellectual and ideological grounding to the reforms.
Without a team with intellectual and ideological commitment, the Chilean reforms would have failed due to the backlash. For example, de-regulation of the economy caused short-term unemployment rising to 20 percent and inflation to 375 percent in 1975, and then GDP declining by 19 percent in 1982.
In the face of opposition that often de-rail reforms, the key success factor was the military regime holding steady and providing cover to the Chicago Boys to implement three phases of reforms over seventeen years.
Compare this with similar Pakistani initiatives, which are mostly slogans to garner votes, without sincere intellectual and ideological groundwork or planning. Large, unaccountable task forces, composed of members without passion or ideological buy-in for economic transformation, do not cause reform.
Often business leaders co-opted into advisory committees and task forces have built empires based around the license-raj economy — and so cannot be expected to dismantle the same by deregulation and competition. Frequent U-turns, policy inconsistency, stop-go-stop marred by vested interests are hallmarks of the intellectual and ideological dearth in reform commitment. Hence, our reforms are still-born or die a slow death.
The Chilean case study is not to prescribe the same methods and means, as the regime brutally suppressed opponents. Rather, it is to illustrate the time-tested lesson that all economic transformation projects last longer than a term in office and require an institution to deliver, such as the military in South Korea or Chile, the Conservatives in UK or the Institutional Revolutionary Party in Mexico.
Secondly, reforms require intellectual navigation by committed experts, fuelled by ideological zeal, like Thatcher’s Wise Men or Pinochet’s Chicago Boys, to design and drive complex reform efforts.
Pakistan’s Reform Bus is stuck once again. Citizen-passengers are dejected, with the driving establishment or executive out of reform options and adopting the same-old methods which failed in the past. If indeed, the military is the vehicle for Pakistan’s reform and economic transformation, then Pindi needs to consider the Chilean model and recruit true reformist intellectuals and ideologues, our own local version of the Chicago Boys.
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