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.

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Book Review: Property Taxes and State Incapacity in Pakistan by Muhammad Mujtaba Piracha

Piracaha tries to provide answers to some of the most serious questions regarding taxation in Punjab, the most populated province of Pakistan. The author discusses the reasons behind the low property tax in Punjab, inter-governmental politics, low fiscal equilibrium, public service delivery, formal tax collection, questions of enforcement and what can be done to improve the tax collection. In the preface of the book Pircaha writes about the 'fiscal contract' between the citizens and the state. In the state the people are sure that their lives and property are secure and that they are getting services in return for their money (taxes).

In Punjab alone, the government collects about 1 billion in agriculture income tax, where the potential is between 50-70 billion (p.7). Some experts say that the aid flow to Pakistan helped the government put off the required tax reforms and avoid the political costs of taxation (p. 7). Piracha is inspired by Robert Wade (1982), whose work is used as an approach to study the irrigation department in India.

The author says that Punjab has historically neglected raising its own source revenues (p. 19). One perspective is that the provincial government of Punjab does not commit adequate resources to digitalize property tax (p. 38). Further in the book the author discusses responsibilities of junior officer, channeling of taxes, district civil service cadre, global level institutional arrangements, initiation of NFC in 1951, government's financial accounting system, local banks, failure in the delivery of public services

Piracha is of the view that the rich including the industrialists show large chunks of their income as agricultural (p. 85). An oft-quoted quip in the civil service is that 'it is easier to fire the Prime Minister of Pakistan, than a peon in a government office' (p. 102). Other themes discussed in the book are bribes and hiring in Punjab, increase in reviews and monitoring missions by donors, ET and NCD hierarchy of Punjab, corruption, patronage, and the civil service.

The lower staff usually feels threatened by digitalization (p. 121). The constable usually introduces himself as 'tax officer' (p. 120). Piracha also writes about the difficulty in collecting full payments, different types of taxes based on location, examples from an established family of Lahore, lacking in the tax assessment, tax administration reform and corruption amongst the civil servants. The last line of the book says that 'a nation's real strength lies in socio-economic progress and the happiness of its people' (p. 185). 

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Book Review: Ali Baba: The House that Jack Ma Built by Duncan Clark

Duncan Clark provides an account of the world of Jack Ma, one of the leading figures in the present economy of China. Jack Ma built one of the largest companies of the world. An American tourist give him the name 'Jack.' His original name is Ma Yun.

Jack took the Gaokao. In China it is seen as the most challenging exam in which high school students appear for a merit based exam for higher education. Jack badly failed in the exam. scoring 1/120 in math. In the early phase of his career Jack listed different positions on several versions of business cards (p. 70-71). I personally find this a very unethical act.

Jack says: " Today is brutal, tomorrow is more brutal, but the day after tomorrow is beautiful" (p. 120). Clark explains Jack's marketing techniques, his personality and how he keeps his staff involved at various levels. To keep up the morale, the staff were involved in playing video games, coding, exercises and handstands. Jack says that 'if you use money to solve problems, why on earth would the world need businessmen anymore" (p. 176). Jack says that he has three principles of doing things: first,  100 percent legal; second, 100 percent transparent; third, build the company sustainably and healthily. 

Writing about business in China, the author argues that 'for Alibaba, and any other private company, the Chinese government itself is a multiheaded hydra of agencies, often competing with one another for influence, licensing fees; or other forms of rent to justify their existence, often lacking sufficient central government support to finance their operations (p. 238). During a IPO show Alibaba focused on three central growth drivers for the future which includes 'cloud computing/Big Data; expansion into rural markets; and globalization/cross-border trade (p. 250). 

When in the United States of America, Jack was often asked 'When are you coming to invade America?' Why do they perceive him as an invader? A question- what does free market preach?

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Book Review: 23 Things They Don't Tell You About Capitalism by Ha-Joon Chang

 

Chang says that free market ideology makes us believe that markets will produce the most efficient and just outcome. This is because competitive market processes ensure that individuals are rewarded according to their productivity. The author is not critical of capitalism, in fact he is critical of free-market ideology.

The first argument of the author is that there is no such thing as a free market. Two, companies should not be run in the interest of their owners. Three, most people in rich countries are paid more than they should be. Four, the washing machine has changed the world more than the internet. Five, assume the worst about people and you get the worst. Six, greater macroeconomic stability has not made the world economy more stable. Seven, free-market policies rarely make poor countries rich. Eight, capital has a nationality. Nine, we do not live in a post-industrial age.

Point ten, the United States does not have the highest living standard in the world. Eleven, Africa is not destined for underdevelopment. Twelve, governments can pick winners. Thirteen, making rich people richer does not make the rest of us richer. Fourteen, US managers are over-priced. Fifteen, people in poor countries are more entrepreneurial than people in rich countries. Sixteen, we are not smart enough to leave things to the market. Seventeen, more education in itself is not going to make a country richer. Eighteen, what is good for a large company (such as General Motors) is not necessarily good for the United States. Nineteen, we are living in planned economies. Twenty, equality of opportunity may not be fair. Twenty-one, big government makes people more open to change. Twenty-two, financial markets need to become less, not more efficient. Twenty-three, good economic policies do not require good economists.

Chang stresses that 95 percent of economics is common sense made complicated. In the book he tries to provide solution to the problem in simple plain language. He argues that the fundamental theoretical and empirical assumptions behind free-market economics are highly questionable. The author suggests that free-market capitalism has served humanity very poorly and because of this we should build a new economic system which recognizes the limitations of human rationality, brings out the best in people and stops people from believing that people are always paid what they deserve. Furthermore, Chang views making things (manufacturing) very important. Moreover, he says that striking a balance between finance and ‘real’ activities is important. The seventh point of the author is that the government needs to become bigger and more active. Last but not the least, the eighth point states that the world economic system needs to ‘unfairly’ favor developing countries.

In the concluding paragraph of the book the author says that ‘unless we abandon the principles that have failed us and that are continuing to hold us back, we will meet similar disasters down the road’ (p. 263).

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Book Review: The New Rulers of the World by John Pilger

John Pilger is an Australian investigative journalist and documentary film-maker who lives in London. In this book, Pilger exposes the myth of globalization. He gives a detailed analysis of the events in Indonesia.  He reveals how General Suharto came to power in 1960s due to western agenda which marked start of the imposition of the ‘global economy’ upon Asia.

The author brings to light the nature of modern imperialism. He unveils its secrets and illusions. Pilger states that about a million people died in Indonesia because of the World Bank’s ‘model pupil’. Atrocities of the western powers in Iraq also covered. With that, he also discusses the subjugation of the Aboriginal people in Australia.

Pilgers says that a sophisticated system of plunder has forced more than ninety countries into ‘structural adjustment’ programs since the eighties, widening the divide between rich and poor as never before. According to him this results in a world where an elite of fewer than a billion people controls 80 per cent of humanity’s wealth. The author objects to the West’s claims of furthering development of the poor world. He says that although members of the United Nations have agreed that the rich countries should give a minimum of 0.7 per cent of their Gross National Product in genuine aid to the poor world, Britain gives just 0.34 percent and the United States barely registers, with 0.19 (p. 121).

Pilger believes that ‘when great truths are omitted, myths take their place, and the nature and pattern of great power are never explained to the public’ (p. 128). He criticizes the academic hierarchy by mentioning the politics departments. As per Pilger, in these departments the task of liberal realists is to ensure that western imperialism is intercepted as crises management, rather than the cause of the crises and its escalation. By never recognizing western state terrorism, their complicity is assured. To state this simple truth is deemed unscholarly; better to say nothing (p. 156).

Writing about the Aboriginal population the author states that the life expectancy of the Aborgines is up to twenty-five years shorter than whites, lower than in most countries and matched only in India and Central Africa (p. 165). Pilger’s solution for the Australian tragedy is through justice and political will.

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