Reconstruction for economic democracy — II

The writer is distinguished professor of economics at Beaconhouse National University in Lahore

I propose that post-flood reconstruction be used as an opportunity to initiate the reconstruction of our social order for economic democracy.
The institutional structure for economic democracy would provide opportunities to all citizens of Pakistan, rather than a few, to have access to overproductive assets. By bringing the middle class and the poor into the process of investment, there would be a much broader base of investment, competition, efficiency increase and innovation, thereby achieving a sustained and more equitable GDP growth. Three policy initiatives could be considered for initiating a process of sustained economic growth on the basis of economic democracy:
(1) Land for the tiller: a small farmer-based agriculture growth strategy. The government has 2.6 million acres of cultivable state land. It is proposed that this land be distributed amongst current landless tenant farmers, in packages of five acres each. This land for the tiller policy would need to be backed up by establishing what I have called a small farmer development corporation (SFDC) which would provide small farmers with facilities for land development, access over new agriculture technologies (such as tunnel farming, drip irrigation etc.), extension services for developing high value crops, livestock development and production of milk and milk products. The SFDC ought to be owned by small farmers who could buy equity in this corporation through government loans, but would be managed by high quality professionals.
The proposed land for the tiller policy with institutional support of the SFDC would provide small farmers with both the incentive and the ability to increase agriculture productivity. The small farm sector (farms below 25 acres) constitutes a substantial part of the agrarian economy and possesses the greatest potential for productivity increase. Small farms constitute 94 per cent of the total number of farms and 60 per cent of the total farm area. Therefore the proposed land for the tiller policy could enable a shift from the ‘elite farmer strategy’ of the last four decades to a new ‘small farmer strategy’. Small farmers could thus become the subjects of a new trajectory of a faster and more equitable agriculture growth.
(2) For inclusive growth through equity stakes for the poor, the poor can be included in the process of investment and economic growth not merely through micro enterprises, but can be engaged into the mainstream corporate sector as well. The idea here is to establish large corporations, owned by the poor and managed by professionals, in a number of strategic sectors such as milk and milk products, livestock, telecommunications, information technology services, construction and automotive parts production. These corporations could be set up through loans to the poor for purchasing equity stakes in these corporations, and the loans could be returned through dividends earned.
(3) Small scale manufacturing industries require lower capital investment and generate higher employment per unit of output and also have shorter gestation periods compared to the large scale manufacturing sector. Therefore an increased share of investment in this sector could enable a higher GDP growth for given levels of investment as well as higher employment generation for given levels of growth. At the same time if the institutional conditions could be created for enabling small scale industries to move into high value added components for both import substitution in the domestic market and for exports, Pakistan’s balance of payments pressures could be eased. The key strategic issue in accelerating the growth of SSEs is to enable them to shift to the high value added, high growth end of the product market. These SSEs include high value added units in light engineering, automotive parts, moulds, dyes, machine tools and electronics and computer software.
These initiatives for economic democracy constitute a strategy for higher GDP growth through equity. The people would thus become both the subjects as well as the beneficiaries of GDP growth. It would be economic democracy because it would enable growth for the people and by the people. Such an economy could become the basis of sustaining Pakistan’s political democracy for which the people have struggled so long and for which Mohtarama Shaheed Benazir Bhutto gave her life. The best homage to her memory would be to strengthen the foundations of democracy by giving a stake in the country to the poor.
Published in The Express Tribune, October 9^th, 2010.

Reconstruction for economic democracy — I

The writer is distinguished professor of economics at Beaconhouse National University in Lahore

Consider the scale of the destruction resulting from the great flood: over 20 million people affected, homes destroyed, livelihoods lost, canals, barrages, water courses, tube wells and electricity stations damaged, roads and bridges wiped out. My own rough estimate of the reconstruction cost is about $18 billion.
The scale of the required reconstruction effort, while it presents a formidable challenge, also provides a great opportunity. The opportunity is to undertake the structural reforms necessary to place Pakistan’s economy on a new path of sustained and equitable growth. Such a growth process, if achieved, could give a stake in the economy to all of the people rather than a small elite and thereby lay the basis of what in my recent work I have called economic democracy. In this part of the article, I will indicate some of the immediate policy initiatives required, and in the second part, an outline of strategy to achieve economic democracy will be articulated.
For short-term policy imperatives, four immediate economic policy measures may be considered in the context of the reconstruction effort:
1. If the winter (rabi) crop is to be planted and a serious food deficit next summer is averted, immediate measures must be undertaken to provide farmers in the flood affected areas, good quality seed, fertiliser and pesticides together with timely provision of tube well water to enable the planting of wheat in the month ahead.
2. It is time now to consider shifting away from the IMF approach of economic contraction to a new policy of economic stimulation that aims to revive economic growth. Pakistan’s GDP growth has declined sharply to two per cent this year and the per capita income growth has become negative. Not only has this sharply increased poverty and unemployment, it will also result in a slowdown in the growth of government revenues. The former will place further stresses on the fragile democratic structure and the latter will increase the budget deficit. The earlier attempts to cut down the budget deficit (6.3 per cent of GDP this year) through expenditure reduction have failed, and in the years ahead the only viable policy of controlling the budget deficit is by increasing revenues through accelerated GDP growth. Infrastructure projects in the flood affected areas provide an opportunity of doing so.
3. Just before the flood, the food insecure population had been estimated at about 77 per cent, it may now have reached over 85 per cent. There is clearly an urgent need to provide food security to the people of Pakistan in general and in the flood-affected areas of the country in particular, where food insecurity is most intense. In this context the coverage of the social protection measures needs to be enlarged, and the identity and locations of the flood-affected population quickly established so that ATM cards under the Benazir Income Support Programme can be issued as soon as possible.
4. At the same time an employment guarantee scheme in the form of a cash for work programme ought to be launched in the flood-affected areas in the first instance, followed by the rest of the country.
Published in The Express Tribune, October 6^th, 2010

Changing the social order

The writer is distinguished professor of economics at Beaconhouse National University in Lahore

The problem with ongoing discussions in the spheres of economic and political policies is that policy options for change in one sphere are being considered in isolation of the other. Thus issues of corruption, democracy and the rule of law are being divorced from the issues of reviving the economy on a sustainable basis, overcoming poverty and providing basic services to people. When the required changes involve not just tinkering with policy but rather fundamental changes, we must consider an important proposition: Political and economic systems are organically linked within the social order and are subject to what has been called the theory of ‘double balance’: Sustaining fundamental changes in the political system requires changes in the economic sphere and vice versa.
The New Institutional Economics suggests that a social order encompasses the political, economic, cultural, religious, military and educational systems. Therefore, changing the social order involves changes in each of these elements and the relationship between them. There are two kinds of social orders in the contemporary world. The Limited Access Social Order of the undeveloped countries and the Open Access Order of the developed countries. The institutional structure of the former is characterised by a coalition of elite that excludes the majority of the population from the process of governance and growth. On the basis of this exclusion, it generates unearned income for itself, uses its power to structure markets in its favour and creates wide interpersonal and inter regional inequalities. Poverty is endemic in such a social order because it precludes thriving markets and sustained long-term growth. By contrast, the Open Access Social Order exhibits systematic competition in both economic and political spheres, free entry and mobility and hence long-term development.
The policy issue in Pakistan is not merely which sector to select as a ‘driver of growth’, or ending corruption by making an example of a few, but must address the question of why attempts at such policies in the past have failed. Changing the social order is the central challenge for both democracy and development in Pakistan.
The essential feature of this change process, as shown by Douglass C North, John Joseph Wallis and Barry R Weingast (in Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History), is that it initiates “a series of reinforcing changes in institutions, organisations, and individual behaviour such that incremental increases in access are sustained by the existing political and economic systems at each step along the way”.
Let us indicate the doorstep conditions for initiating the process of changing Pakistan’s social order: (1) Rule of law. This involves subordinating individual or party interests to the obligation of maintaining the balance between various organisations of the state as specified in the constitution. The rule of law also requires the development of new norms that can underpin and are consistent with the formal rules specified in the constitution. (2) The military must maintain the integrity of the state by subordinating itself, in actual practice, to elected civil authority as stipulated in the formal rules of the constitution. This change could be facilitated, if elected governments enlarged their space within the power structure, by delivering economic and social justice to the people who are the source of legitimacy. (3) Foreign policy must be driven not by a ‘national security paradigm’ but by Pakistan’s economic interests and the logic of human security. (4) Social and political organisations that align themselves behind the Change Agenda need to develop democratic rules and norms in their organisational structures and should network amongst themselves to create a mutually reinforcing momentum.
In the present critical crisis, creating the basis of a fundamental change in the social order is necessary if state and society are to survive and prosper.
Published in The Express Tribune, November 1^st, 2010.

India in Afghanistan — I

The writer is an assistant professor at Georgetown University and author of Cuisines of the Axis of Evil and Other Irritating States (The Lyons Press, August 2003) christine.fair@tribune.com.pk

India’s profile in Afghanistan has been a looming concern for New Delhi, Washington, Brussels and, of course, Islamabad with all wondering what the optimal role for India in Afghanistan’s reconstruction is, in light of the security competition between India and Pakistan. Some want to expand India’s presence in Afghanistan through Indian training of Afghan civilian and military personnel, development projects and economic ties. Others caution against such involvement. Others yet see Indian and Pakistani competition in Afghanistan as a new “Great Game” and argue that Afghanistan can be pacified through a regional solution that settles the Kashmir dispute.
India’s interests in Afghanistan are not only Pakistan-specific but also tied to India’s desire to be seen as an extra-regional power moving toward great power status. While India’s presence in Afghanistan has Pakistan-specific utility, India’s interests in Afghanistan can be seen as merely one element within India’s desire to be able to project its interests well beyond South Asia.
India has three principal aims in Afghanistan. First, it faced security threats from the Taliban regime in Afghanistan in the 1990s which provided training opportunities and safe havens for several Pakistani groups, such as Lashkar-e-Taiba and Harkat-ul-Jihad-al-Islami, which operate in India. India insists that Afghanistan should not again become a terrorist safe haven.
Second, India wants to retain Afghanistan as a friendly state from which it can monitor Pakistan and, where possible, cultivate assets to influence activities in Pakistan. Naturally, Pakistan seeks to deny India such opportunities.
Third, developments in Afghanistan and Pakistan have a negative effect on India’s domestic social fabric. Hindu nationalists and their militant counterparts live in a violent symbiosis with Islamist militant groups operating in and around India. Islamist terrorism in the region provides grist for the mill of Hindu nationalism and its violent offshoots.
Contrary to some Pakistani views, India’s ties to Afghanistan are not new. In 1950, Afghanistan and India signed a “Friendship Treaty.” Prior to the Soviet invasion in 1979, New Delhi formalised agreements with various pro-Soviet regimes in Kabul. During the anti-Soviet jihad, India expanded its development activities in Afghanistan.
After the Taliban consolidated their hold on Afghanistan in the mid-1990s, India struggled to maintain its presence. It aimed to undermine the Taliban by supporting the Northern Alliance in tandem with other regional actors.
Working with Iran, Russia and Tajikistan, India provided important resources to the Northern Alliance, the only meaningful challenge to the Taliban in Afghanistan. According to journalist Rahul Bedi, India also ran a 25-bed hospital at Farkhor (Ayni), Tajikistan, for more than a year and supplied the Northern Alliance with high altitude warfare equipment worth around $8 million. India also based several ‘defence advisers’ in Tajikistan to advise the Northern Alliance in their operations against the Taliban.
Since 2001, India has relied upon development projects and other forms of humanitarian assistance. To facilitate these projects and to collect intelligence (as all embassies do), India now has consulates in Jalalabad, Kandahar, Herat and Mazar-e-Sharif, in addition to its embassy in Kabul. There are also a number of smaller-scale activities throughout Afghanistan. According to the US, British, and Afghan officials that I interviewed over the last several years, India’s activities are not isolated to the north, where it has had traditional ties, but also include efforts in the southern provinces and in the northeast, abutting the Pakistani border.
This is a condensed version of an article that was first appeared on Foreign Policy’s Af-Pak Channel on October 26, 2010
Published in The Express Tribune, October 31^st, 2010.

Revisiting Pakistan’s ‘Strategic Depth’

Syed Nadir El Edroos 1 month ago

We need to engage with both Afghanistan and India to leverage our geographic position to develop strategic depth with positive connotations.

Two words that hold our country hostage is our policy of maintaining ‘strategic depth’ in Afghanistan. Apart from referring to a poorly titled adult film, the policy envisages to protect Pakistan’s eastern borders from unwanted Indian influence.
However, the consequences of continuing with this policy and differentiating between the ‘good’ and the ‘bad’ Taliban, has led to accusations of Pakistan playing a ‘double-game’ in Afghanistan. For many the accusation has become quite stale and repetitive. It seems to have become an open secret, with many accepting it as a reality, a part of the status-quo for dealing with the troubles in the region.
Whether the policy has been successful is debatable. The military’s and the ISI’s continued links with the Haqqani network ensures that they are a sought after broker for any back channel attempt to woo the Taliban.
The strategy aims to maintain Pakistani influence in/over Afghanistan, and to thwart alleged Indian designs. However, the policy has at the same time made Pakistan quite unpopular with large segments of the Afghan establishment. Interfering in Afghanistan’s affairs, while demanding an end to foreign influence in Pakistan is met with much ridicule in foreign capitals; it reeks of hypocrisy.
The policy is also questionable, as it breeds violence, and is responsible for the deaths of thousands in Pakistan and Afghanistan. As the violence continues, Pakistan is sure to be in the news, accused for fostering, abating or at the very least tolerating continued bloodshed to maintain its interests.
The result is the ‘image deficit’ that haunts Pakistan. The dismal public response to the floods in Pakistan for example was attributed to this effect. It has also been more difficult for our economic managers to garner favourable trade concessions and development grants. Winning over wider public support remains a problem, as Pakistan remains associated with fostering rather than curtailing violence in Afghanistan. Politicians in the west are portrayed as weak by the right-wing media, such as Fox News in the US, for taking initiatives to support Pakistan.
Look at any article posted on any western news outlet. The comments question the calls for sympathy for Pakistan as we are branded as supporters of terrorism, who inflict material and physical damage on their interests.
An alternative strategy
There needs to be an alternative to our current strategy. The alternative need not be between defending Pakistan from India or bowing before it and allowing it a free hand in Afghanistan. We need to engage with both Afghanistan and India to leverage our geographic position to develop strategic depth with positive connotations.
The US, Afghanistan and India have been pressing Pakistan to allow the transit of Indian goods over Pakistan through to Afghanistan and vice versa for years. I say, let the goods pass, hell put them on the trains. That will help to give our faltering railways a financial shot in the arm. Extend the Iran-Pakistan pipeline into India, let the gas flow. Transit fees galore! Rather than questioning Indian development aid to Afghanistan we should support it. Geographically it’s more of an advantage for us, as any increase in economic activity in Afghanistan will immediately suck in Pakistani exports.
What would the advantages be? Imagine the headlines. Pakistan would look like the peace builder, shunning international criticism and situating itself as committed to the development of an Afghan state. We would also be seen on the diplomatic offensive vis-à-vis India. With Pakistan offering so many incentives, India will have to respond in the affirmative. After all India is cultivating its image as a regional and global superpower, the ball will firmly be in India’s court. It cannot be seen rebuffing genuine gestures from its old foe.
Importantly, a policy that leverages our geographic position economically rather than militarily negates any association with violence.  We would be treated as victims rather than the guilty.
If India is indeed developing consulates across Afghanistan housing RAW agents that ferment trouble in Pakistan, improved economic ties will help shed a spotlight on the functioning of these consulates. As Pakistan becomes vital for transporting Indian-Afghanistan exports and imports to each other, minimising any threat to these links will become a primary concern for Indian traders. This will build added pressure on those who dare concoct nefarious designs to fuel militancy in Balochistan for example.
India can switch on and off the belligerent rhetoric as India’s economy has little or no interests in Pakistan. However, a Pakistan which is vital for Indian trade, supply of resources etc will have no choice but to tone down any sabre rattling that seems to be a cyclical part of Pakistan-India relations.
So where does Pakistan’s security come in?
In any period of belligerent hostility Pakistan will have the ability to cut of energy and trade links. Containers can be seized, Indian traders in Pakistan arrested, and diplomatically we can garner support by portraying ourselves of peace. We have gone the extra mile to foster our relations with India and support a viable Afghanistan. India would be seen as the aggressor. How is that for maintaining strategic depth?
Our present policy allows for India’s security establishment to deal with her interests in Afghanistan ignoring any media or public scrutiny. A policy that places economic links at its foundations will open up Indian policy on Pakistan and Afghanistan and the actions of its security agencies to wider scrutiny. The competition between competing interests will insure that whatever policy is actually implemented is a watered down compromise that is not a real threat to Pakistan.
We have to find alternatives to the status-quo. With the nation reeling under flooding, terrorism and economic stagnation we are more dependent on foreign assistance than at any point in our history. They are not many variables that we can control for. We can’t control how the foreign press paints us, how we are perceived abroad etc. However, what little we can do to help alter these perceptions, we must. And this does not have to lead to subjugation to Indian influence that many right wing commentators would suggest.
If we are to continue with our obsession with thwarting Indian designs, can we please do it in a manner that doesn’t hold us all hostage to violence and paint us as terrorist?
Shaping global opinion is a long term effort which must start sooner than later. Our challenges for the future, access to water, natural disasters caused by climate change and development depends in a large part to interaction and support of our neighbours and the international community. Politics and security needs are always a concern, but we must get society at large, the world over on our sign. We are not the cause but the victims. Strategic depth? Sure, but by other means.

A dangerous narrative

Rafia Zakaria
(21 hours ago) Today

By Rafia Zakaria

THE evening after the conclusion of the Pakistan-US strategic dialogue, soon after the Pakistani delegation had said its goodbyes and boarded the flight home, President Obama`s special envoy to Pakistan and Afghanistan Richard Holbrooke gave an interview to a major American news channel.

During the interview, Holbrooke was asked whether Pakistan had given the US “a commitment that they would go after sanctuaries on their own territory”. He replied: “We urge them to do more. And they are gradually doing more, not as much perhaps as we would want.” While he went on to recognise that Pakistan was doing more than it had in previous years, the tone and content of the statement largely defined the public construction of both Pakistan`s role and the point of the dialogue in the American media.
The construction of Pakistan as a complicated country with shifty interests and many secret agendas has thus continued even after the strategic dialogue, which was sold as a much-touted trust-building measure. On television again on Sunday Holbrooke deflected a question about why Pakistan always seemed to have excuses when asked to take on the insurgent groups on its own territory by saying that he was “not there to defend Pakistan or the Pakistani Army”.
The tone and tenor of all these statements, and the recurrent characterisation of the US as a patient, cajoling ally heaping billions of dollars in civilian and military aid on a shadowy Pakistan, is notable for several reasons. It provides an indication of how the image of Pakistan continues to be created before the American public.
During his campaign, and continuing through these first years, the Obama administration has adeptly begun to deflect the failures of Afghanistan on not itself but on Pakistan. To substantiate this claim, administration officials including Holbrooke have become adept at counting down the number of terrorist groups currently operating with impunity in that country. Nearly every debate focusing on Afghanistan ends with a discussion of how American forces in the region are routinely and continually undermined by their attackers` ability to run off across the border into Pakistan.
In this latest instance, Holbrooke did mention that thousands of Pakistanis have been killed by the Tehrik-i-Taliban Pakistan, but this integrally important fact was presented, as always, as a convenient aside — the preface to allegations that reiterate the fact that the Pakistani agenda remains at best murky and at worst downright antithetical to American interests.
There are other advantages to the construction of Pakistan as a shady villain. The Obama administration is well aware of the fact that inevitably, some nefarious plot to conduct a terrorist attack in the US will eventually be successful. Given that terrorists routinely strike soft targets and aim to cause civilian casualties, it is a virtual impossibility to prevent such an eventuality.
If Pakistan has already been defined as a murky place, consisting largely of terrorist hideouts and a population that continues to hate the United States regardless of its benevolence, there is unlikely to be much political opposition to an aerial bombing campaign that in the words of President Obama would “disrupt, dismantle and eventually defeat” Al Qaeda in Pakistan. While the American public is largely war weary, a new terror attack could well provide the impetus to conduct an operation that would use massive American airpower to take care of the Pakistan problem.
Strategic relationships are constructed largely by the party that controls the narrative. In the case of Pakistan and the US, it is undoubted that the latter is involved in just as many shadowy negotiations and multiple games as Pakistan. Even as the Obama administration impressed upon Pakistan the necessity of an operation in North Waziristan, Nato airplanes were reportedly transporting various members of the Afghan Taliban for discussion with the Karzai administration. Similarly, an important issue that officials of the Obama administration brought to the table during the talks was the granting of visas to several hundred CIA operatives that the US wants to send to Pakistan to carry out covert operations against Al Qaeda and the Taliban.
This then is the central contradiction that remains invisible to the American public. While the US engages in talks and deals with the same Taliban that Pakistan is accused of canoodling with, and the CIA carries out security operations and extra-judicial killings with impunity, the facts are never allowed to impact the narrative of the Af-Pak war.
Pakistan`s loss in these negotiations is thus not the failure to procure a civilian-nuclear energy deal similar to the one provided to India, nor the inability to get some reassurance from the United States to mediate in the Kashmir issue. Pakistan`s trouncing is comprised of its complete failure to provide its side of the story to any degree of prominence in the Afghanistan-Pakistan narrative.
The challenge before Pakistan`s civilian and military leadership vis-à-vis its relationship with the US thus does not pivot on the commitments of aid or the energy projects it can negotiate before it loses its strategic bargaining chips. Instead, it should focus on gaining some control over the narrative of the Af-Pak conflict and positioning Pakistan on the world stage as a victim rather than a perpetrator of terrorism. n
During a week when much of Pakistan`s civilian and military leadership was in Washington, not a single American media outlet focused on the over 300 suicide bombings that have taken place in Pakistan this year, nor the thousands of innocent Pakistanis that have been killed at the hands of terrorist groups. The world`s blindness to Pakistan`s pain leaves the country vulnerable to invasion and attack in the unfortunate event of another terrorist attack on American soil.
The writer is a US-based attorney teaching constitutional history and political philosophy.
rafia.zakaria@gmail.com

Democracy & development

Democracy & development