Book Review: Pakistan: The Economy of the Elitist State by Ishrat Hussain

In this second edition (published in 2019), Ishrat Hussain presents an analysis of the economic development in Pakistan. Hussain compares Pakistan's case with other countries in South Asia and East Asia. He also presents an outline for the economic and social reforms in Pakistan. Hussain believes that the elite in Pakistan continues the unjust accumulation of wealth because the respective roles of the state and the market have been reversed in the case of Pakistan.

Ishrat Hussain says that the share of agriculture has declined to 25 percent (p. 6). In 1947 Pakistan only had 57 MW of installed capacity of electricity (p. 249). Tracing the history of Pakistan's economic development Hussain writes that due to the Korean War a new class of industrialists developed in Pakistan (p. 13). Hussain says that in the 1950s there were food shortages. Pakistan became a net food importer. Despite having such fertile agricultural land and a well-developed irrigation system speaks volumes of the anti-agriculture bias of Pakistan's ISI (import substitution industrialization regime).

Zulfiqar Ali Bhutto provided subsidies on wheat, edible oils and other goods consumed by the poorer section of the population. This consumed 2 per cent of the GDP by the mid-19970s (p. 128).The average inflation rate from 1971 to 1977 was 16 percent (p. 23). In the 1980s steel, automobile and engineering were the weakest sectors and the better preforming ones were cement and fertilizers (p. 102). After Zia, when Benazir Bhutto took over she strengthened the private industry. In Pakistan's history the interim government of Moen Qureshi introduced an agricultural income tax which was vehemently opposed by large feudal and land-owing interests (p. 43). PPP's performance from 2008 to 2013 was on average 2 percent of growth (p. 446).

Comparative advantages based on high skills, product differentiation, and new technologies last much longer (p. 107). Hussain states that the aim of the financial-sector reform is to establish a flexible system of financial intermediation in which a variety of instruments are made available to savers and borrowers through stable financial institutions (p .145). Ishrat believes that 'success of Pakistan's economic policy will depend on its ability to maintain fiscal discipline' (p. 171). Ishrat suggests that 'international experience suggests that in low-income developing countries, small scale agriculture, small and medium enterprises, and, more recently, knowledge-based enterprises are the main avenues for productive employment' (p. 232).

Ishrat is of the view that at the time of public procurement of wheat the food inspectors make purchases from influential farmers (p. 461). Husain states that estimates suggest that about one-third of the sick in developing countries are victims of nutritional disorders (p. 224). The author writes that low-cost arrangements to mobilize savings in the rural areas have proven effective in Bangladesh, Bolivia and Bangladesh (p. 164). The author does not even mention a single example of rural support programs in his home country Pakistan, where the rural support programs achieved a lot in terms of mobilizing savings in rural areas.

Throughout the book Ishrat criticizes the civilian bureaucracy, labor union leaders, engineers and other factors that hinder growth and development, but he refrains from writing about the military establishment's role in Pakistani politics and economy. According to the author, in practice the elitist growth works on three factors. one, a strong leader who has concentrated power without any checks and balances. Two, a bureaucratic class which implements the wishes of the leader. Three, a dormant and subservient population that is passive and indifferent to the actions of the leaders and bureaucracy (p. 381). Ishrat does not mention about the reasons behind the subservience of the population. In fact, Ishrat Hussain himself writes in a very subservient tone throughout the book. At times it feels like reading a text book on the economic history of Pakistan.

The author is in favor of allowing Independent Power Producers (p. 427). Hussain writes about GST, VAT, inflation, foreign banks in Pakistan, local banks, Pakistan's financial sector, foreign currency deposits, measuring poverty, primary and tertiary education, value addition, child labor, some useful tables comparing Pakistan with other regional and international figures, and private sector involvement in energy. Hussain also discusses sources of external capital flows to Pakistan, misery index, the impulses of greed, corruption in Pakistani society and social ostracism (p. 453), Benazir Income Support Program, role of FBR and the need for improvement and issues of obtaining finances in Pakistan.