Thursday, 28 August 2014

On saving democracy and Dharnas

Save Democracy! Save the Constitution!

The 2 Dharnas with all their dramas have generated a deep division in the Pakistan media and perhaps even society. One group (comprising of a strange amalgam of older left liberal activists, NGOs and the old guard politicians) continued to see the invisible hand (which never revealed itself) of the army and a potential coup that has not happened till the time of this writing. Another group (another strange concoction of some youth, TUQ followers, and some media celebrities) chased a confused idealistic vision of Naya Pakistan free of corruption and maladministration.

Unfortunately, the debate really did not get beyond name-calling, conspiracy-searching and crude personalized invective. Dharna crowd could not clearly articulate a vision that grabbed the population at large and overplayed their hand hobbled by incredible ultimatums and outrageous ‘Cromwellian’ demands to wind up parliament.

The ‘save democracy’ crowd on the other hand refused to empathize with some legitimate issues—such as electoral reforms, dynastic, personalized democracy, poor governance and corruption-- that the Dharnas raised. The spectre of ‘the boys’ manipulating the Dharna for a return to martial law was continuously raised to silence disaffection and to allow the system to continue.

‘Save democracy’ people continued to ask for the system to continue in the hope that many elections later it will self-correct. In other words, they have the patience to wait for the filter of elections work over 5 year periods. This might take decades. Perhaps even 3 or 4 generations of dynastic rule.
Strangely enough the leading proponents of the ‘save democracy’ mantra were youth from the Bhutto era now quite oblivious to their own disaffection with the 22 families but with a very strong memory of their aversion to dictatorship.
The Dharna crowd was supported at least initially by the youth that Imran Khan galvanized.  5 years ago in the Framework of Economic Growth at the Planning Commission we had pointed out the need for addressing the youth bulge which is going to be a dominant demographic for the coming 2 decades. The current system neither includes them nor provides them opportunity. In fact it even educates them at a lower quality than what was offered to the Bhutto Youth.
Sadly the ‘save democracy’ and the youth from the Bhutto era did not identify with the youth and offer them anything other than ‘have patience, in a few decades the system will work out its defects—maybe”
A moment for an inter-generational dialog was lost. Youth should have been given hope and leadership even if the Dharna leaders failed in doing so. Too much time was lost in focusing on the personality flaws of the Dharna leaders and not developing any understanding of the significance and meaning of the Dharnas.
The spectre of martial law like the weapons of Mass destruction in Iraq is now being used to quell even a discussion of reform.  The easy approach was to hang on to the refrain that ‘democracy is in danger’ and we don’t want another Martial law. What was coming out clearly was that people wanted change that would offer them hope. They wanted inclusion and opportunity. The current system of privilege does not allow merit to work. They felt that democracy should allow merit and it does not.
TUQ, IK and their personalities and absurd demands took up too much time and a possible reform moment was lost. But our ‘save democracy’ crowd too lost the moment. Their refrain was that democracy must continue with all its many wounds and lesions inflicted by our veteran politicians. The implication was that dynasties are all rights. Families have a right to high office and protocol. PM and ministers need not come to parliament which should be just a rubber stamp. Bureaucracy is the true and faithful ally in an executive that has usurped the spirit of the constitution. All agencies of government and several key ministries can therefore be left headless because trusted bureaucrats will deliver in the interests of the executive if not the country. Personalized and over-powerful government has thus been declared as legal by our ‘save democracy’ crowd.
Somehow these people see the military behind all the problems of Pakistan giving the politicians a large leeway for mistakes.  Another refrain is that democracy requires time and we must have elected governments completing their terms. We forget that we have had 8 elections since 1988 and the results have been more or less predictable. Furthermore it took not more than a year for the tarnish to wear off the elected government and everyone to wish that there was a way to put it behind us. Democratic governments spared no occasion to line their pockets and to weaken institutions of governance to favor the executive.
At no occasion did the democratic government think of making serious reform. Throughout the nineties, economic indicators continued to dwindle as the politicians lined their pockets, signed expensive giveaways such as the IPPs and went in for grandiose projects like the motorway.  When they returned in 2008, once again they continued the earlier tricks. Rental power, LNG deals megaprojects, roads and deals but no reform. SROs and commodity purchases that had been more or less abandoned returned in a big way.
Instead of reinforcing checks and balances, they immediately got rid of term limits and any checks on the PM. Local governments which might have allowed a fresh crop of politicians to be trained and which in any case are better for service delivery were rolled back and are seriously resisted. Even their own party members are kept on a leash as the leadership of parties rules through the bureaucracy and buy out their ministers through handouts.
The lust for power for suspicious reasons keeps our political leaders from making good appointments. In fact hey have a clear preference for centralization. BB refused to have either finance or a foreign minister. The current government keeps both the foreign and the defense portfolios weak.  The last PPP government could not keep a credible SBP governor. This government has failed to make appointments to NEPRA, PEMRA, CCP and many other regulatory bodies. Where they make appointments it is fairly obvious they were not looking for the most credible or the most competent. What happened at NADRA and PEMRA is not a testament to good management by democracy. In the name of democracy, public service and governance has suffered.
While the 90s were a period of overly competitive democracy where both sides tried to vilify the opposition, the recent period has become one of a level cooperation bordering on complicity, vitiating the parliamentary institution. For a serious democracy we need a vibrant opposition, not complicit in keeping no check on the incumbent government. A vibrant opposition would have pushed for an electoral test to break the Dharna stand-off rather than seeking to keep the government in power. The opposition played no role even in the registration of the FIR for Model Town. Surely this is not a parliament that keeps the executive on its toes.
If the democrats really got their act together and were not so hungry for power and money at the expense of governance, perhaps the room for Dharnas and ‘the boys’ would be limited. This is something that the ‘save democracy’ crowd will not even consider. Somehow giving politicians more room to establish their dynasties and financial empires will fix itself. Constitutional amendments that would strengthen democracy could be considered.
The shenanigans of IK and TUQ might have given us an opportunity to deepen our reform discussion. Perhaps we could have discussed and pushed for the kinds of reform that would strengthen democracy like instituting local government in an irrevocable manner. If nothing else this opportunity could have been used to found a narrative to reform.  It could have been used to move ahead with local government and less centralization by the PM and the CMs. Parliament and its role which has dwindled to no laws and minimal attendance in the last year could have come into focus.
With hindsight and distance, I think we will come to appreciate the 2 Dharnas despite all their follies. Hopefully, electoral and other issues crudely raised by them will take root. We seriously need a discussion on reform. And one important reform is the institutions of democracy that, right now, are too easy to hijack.  

Friday, 22 August 2014

Understanding Growth and Development

Understanding Growth and Development
Fundamentally what has preoccupied most of economic thinking over the centuries has been the question “how can living-standards be improved for most of humanity”. Answers have varied but the quest remains the same.
In some sense this has been an eternal struggle for mankind. Most religions have been based on giving us order so that human welfare can be maximized. Utopian philosophers have also developed visions on how to organize society so that people can live better.
This very human quest also fires up debates and people tend to be vehement in defending their version of utopia or faith without even feeling that they are merely preaching. Everyone seems to know how people’s lot can improve if only their prescription were followed.
The development community has also fallen prey to this prescriptive approach.  Experts pretend to have solutions which if followed will lead to riches not only created but well distributed among the citizens of a country. We are frequently told that all that is needed is “Implementation! Implementation! Implementation!” Thus these experts set up all manner of monitoring mechanisms such as the Millennium Development Goals to measure and make development happen.
Yet 70 years of expert development policy, aid funding and many consultants, plans and monitoring, development has eluded a large number of poor countries.  Why is that?
Donors and experts have an easy answer: their prescriptions were not well implemented. Often this is summed up in a phrase “political will”!  So they have an easy out. If it happens experts and their funding agencies can claim victory. If they have it wrong, blame politics and lack of implementation.  
For decades expert advice has been based on developing models drawn from ‘bestpractice drawn from other experiences. Thus all countries had worked on similar policies and built the same model of economic policymaking as elsewhere.Moreover since prescriptions were well known, the government was the best implementing agency. The approach was and remains top down. The solutions come from mostly from foreign experts with ample funding. Implementing agencies are created, Land Cruisers bought, consultants come and go and there is great expectation of development. Yet the results are less than inspiring.
What is wrong with this model? Basically, the ideological model and that of donor experts assumes that society and development is an engineering problem. All we have to do it plan properly and if everyone lives according to plan good things will happen. Development will be delivered ‘top down’ to a passive population.
What they forgot is that engineers deal with inert materials while in social economic problems we deal with self-willed, individualistic human beings. People have plans, ambitions and desires, individually and collectively. They will not easily change their plans merely because the consultant said so.
Most serious economists have moved away from this approach. Increasingly there is a realization that the economy is shaped by a series of individual and group decisions. In this view the economy is built “bottom up”. It is the actions of many people in their formation of enterprises—profit and nonprofit—that generates productivity, products, activity and trade and exchange. Development then is a byproduct of all these individual efforts. It is not the mere sum of these efforts but could be larger than these efforts as public and community good creation and innovation and entrepreneurship increase the menu of choices and discover new technology.
In other words, development emerges from the many transactions undertaken by people individually or networks. Planning and government efforts that are based on an assumption that the expert knows where to invest and what people should do are bound to fail because the command control method does not work in a ‘bottom-up’ complex system.
Even clearly well motivated plans to send kids to school come unglued despite all manner of goal setting and quantification because family decisions are more complex than the simplistic assumptions of planners.
Development is also not uniform across the country contrary to planning wishes.Local issues, local culture and local community, social and human capital plays a critical role in developing local welfare. Planners try their best even out these difference often at huge cost but with little success.

Marching to the Tune of Defunct Economists


Lord Keynes had famously said that “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist”
Pakistan offers the best illustration of Keynes’s statement.
Here we are still suffering from S M Akhtar even though most kids don’t even know who he was. If you know this name you are probably old.
I remember I could never read that book called Economic of Pakistan by S M Akhtar. It was like memorizing the economic survey and a plan both of which are unreadable documents. The trick was to memorize numbers and throw them back at the examiner. And you also had to kind of compartmentalize your mind. Whatever you learnt of real economics—theory and empirics—you kept separate from the economics of Pakistan.  
Pakistan economics is still recovering from the Akhtar. And it is never more apparent than at budget time. People treat the numbers of the economy with the same sanctity that we treated them when taking our BA exam. Regurgitating numbers without any point was enough to win you points.
Economy was not about understanding relationships between key variables, uncovering agent and agency behavior, delineating the role of policy or debating market or government failure. Mindless number pronouncements were enough. At least 2 common fallacies survive from Akhtar days. (There are more. Will cover them later)
“Targets!”
It was also an era of planning when the book was written. Hence it was important to think in terms of government targets, plans and achievements. The literature moved on and we now know that the government has no way of targeting any variable. There is no serious economic work being done in the government. In fact the government does not even employ economists.
More importantly, economists have known since the seventies that prediction is not possible given the many forces at work in the economy. Without having meaningful forecasts, how can the government announce targets? Yet headlines are written about targets and many columnists discuss these as if those targets have meaning.
There is much excitement around the setting of export and growth targets. No one asks where they came from? Just that the government fixed a target. Even in the earlier planning models, the announcement of targets were supposed to be accompanied by an analysis outlining the instruments of policy that the government had for trying to achieve the target.  Not here. The government can announce any target and tell you nothing about their policy instruments and certainly not connect their policies with the target. But the old Akhtarites have been trained merely to memorize targets and feel good.
Numbers are so all important in this scheme. The export target is always mentioned as 17% or 18 %. It remains in that narrow range and no one questions it. MOC has no analytical model or anything that justifies that number. But more importantly no one notices that the nominal GDP often is growing by the same amount. Hence in terms of the share of GDP exports will not grow.  Indeed over the last decade or more this ratio has remained constant despite MOC sounding heroic announcing the target and many media columnists being excited about it.
Numbers
Numbers are so all important that we quibble over the 3rd decimal point. For example headlines were given to the growth number this year, with MOF claiming 4.1 % and several economists claiming 3.5 %. Much excitement was generated.
I have also seen MOF claiming a great achievement by showing an improvement in the deficit of .2 %. Can we measure these numbers so finely?
Unfortunately, a course in statistics was not a requirement for graduating with S M Akhtar. I have asked many a columnist who comes to me with a question on numbers asking me to interpret a minor difference in economic numbers, have you taken a course in statistics and the answer invariably is “no”. But then this is directly from the way our curriculum was set.
Now a first course in statistics will teach you that most data collection can never be exact. It always comes with a margin of error. In reality we have an interval of possible measures. More than likely, both 3.5 and 4.1 are in the realm of possibilities statistically speaking. So the debate is useless as statistically both numbers are indistinguishable.
In a recent paper on energy and growth, Imran Choudhry, Noreen Safdar and Fatima Farooq present the mean and the standard deviation of the GDP in Pakistan over the period 1972-2012 to be 4.82 and 1.96 respectively. The well-established rule is that 2 standard deviations from the mean on either side marks a confidence interval where most outcomes can be considered possible and cannot be ruled out as different from the mean.  Given this well established rule, the confidence interval for our growth data is between .94 and 8.44.
The fuss that is being created about the numbers is totally uncalled for. The precision required to differentiate between 4.1, 3.5 and 3.3 is not there. It just makes good copy and shows people how clever we are when we question numbers even though the numbers don’t mean much.
Sadly this mindless following of a defunct economist is keeping the real economic debate away!

Dumping on Technocrats!


Pakistan society at all levels has a very uneasy relationship with technocrats. The common refrain is, “we want ‘doers’ and not ‘thinkers’. The implication being that we are a ’doing’ and not a ‘thinking’ people. I confess, I have no idea what this ‘doing’ is that we take pride in? What wonders have we created in our country to allow us to take such pride in our ‘doing’?
In the same vein, we keep looking for ‘practical solutions’ not theoretical. Anyone who says something that we do not like is labeled impractical. And please do review where our ‘practicality’ has got us?
Invariably, column-writers, conference participants, TV anchors find some way to point to the flaws of what we call technocrats. There is a deep distrust of them?
Who are these technocrats? It is a loose term that we use to lump all semi-well clad, reasonably well-read people who are outside the government. I have often tried to find out what is the difference between a professional, a researcher, a writer, a professor, banker, a doctor, a lawyer and other such skilled people. But no we do not distinguish they are all ‘technocrats!’ Gentlemen!” that is all we are looking for!
How these people use the term ‘technocrat’ is as a catchall for “not in bureaucracy or army, not in politics and somewhat educated.”  
In an age of specialization, it is surprising to see that in Pakistan, a bureaucrat with no specialized training can move from making education policy to running an energy plant to managing the national airline. Then we call them technocrats.
Now for some reason, these technocrats are seen as henchmen of the army. When martial law is imposed, popular myth has it that ‘technocrats’ are called in to fix the system. And indeed by our loose definition,technocrats are called in. In Ayub’s Martial Law the technocrats were the bureaucracy. In Zia’s time again it was the bureaucracy led by GIK. Mahbub ul Haq tried but was strongly resisted by the bureaucracy.
During Musharraf’s marital law we saw the entry of our technocratic Finance and then Prime Minister, Banker, Shaukat Aziz. Yes some industrialists and retired civil servants too joined in. And of course 2 serious economists, Salman Shah and Hafeez Sheikh!
Even in this lineup with only 2 or 3 professionals and the rest loosely defined technocrats, the line ministries and all other government agencies remained solidly in the hands of the bureaucracy. The line positions of government are never compromised to technocrats.
Does this history suggest that technocrats always aid martial law?
But then in my view our approach to the term technocrat and professional skills is all wrong. Whether martial law or democracy, there should always be a strong demand for good professionals to staff key positions in the government! The regulatory agencies—NEPRA, PEMRA, SECP, OGDC etc.—should always be deeply staffed with the best professionals and be given the widest possible autonomy to do their job. And there job is to do first rate research on their system. After all the job of regulation is monitoring, evaluating and adapting to innovations. This job has to be done by the best and most specialized professionals. And certainly such agencies should not report to any generalist secretary or any minister.  
Similarly, the job of a policymaking ministry should be to understand through research the area of their concern to see how it is shaping up and if a policy intervention is required. In this world view policy is a reluctant nudge applied when necessary. But we do not see that as the job. In our traditional, perhaps even feudal mindset, the job is running the sector through giving orders, telling people what to do, and conducting transactions. Here, policy is a sledgehammer and not a nudge.
Looked at in this way, there should be a strong demand for professionals in government and indeed everywhere. Why then do we look down upon them and constantly infer that technocrats are anti-democracy? And why are our democratic leaders not looking for strong professionals to manage agencies and develop policy.
Professionalizing government is the only way to improve governance and raise professional standards in the country. For too long, dilettantes have had their whimsical ways and have refused to succumb to discipline. I guess these continuous attacks on professionals are to prevent governance to improve?
So they pose the question as democracy versus martial law and throw in technocrats on the side of the army.
Meanwhile the invisible bureaucrat--the powerful mafia in control--continues to run all systems even when occasionally a few technocrats are allowed into the periphery.
To my mind we should ask all governments-- as well as all other organizations- to show us good professional appointments everywhere. All positions everywhere—even journalism and TV--requireprofessionalism.
Professionalism is not an option. Any government that is not making good appointments should face public opprobrium. And come election time, we should tell them that they do not know how to hire good people.  
And we should give professionals more respect by being more mindful of their skill rather than lump them into one vague term called technocracy.
Finally democracy is not the election of a ruler who will run the country as a family kitchen. The election merely confers the power to translate the people’s desire into policy. The machinery of government has to be independent and professional to keep the continuity of business going translating the desires of the electorate through their representatives.