Is economic stability possible without political stability?

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Many researchers have conducted independent studies and come to the conclusion that a politically unstable country cannot become economically stable for a number of reasons. To begin with, political instability prevents the implementation and continuation of policies. Moreover, in a politically unstable country, the leaders resort to populist projects and are more interested in launching projects than in introducing real reforms. So, in this article, Pakistan would be used as a case study to establish how impossible economic stability is without political stability.

When Pakistan gained its independence in 1947, it was unstable both economically and politically. It lacked economic stability because it had almost nothing on which to base its economy to develop. He had no financial resources. In fact, unlike India, it had no capital. Moreover, India denied the country its 17% share of finance in its early years, and transferred only part of it; this only became possible after Liaquat Ali Khan’s flight to Delhi combined with Gandhi’s intervention. Pakistan was therefore not a stable country in its early days.

Regarding the political stability in the early years of the country, it was also unstable as there was no constitution until 1956. The first constitution, which was formulated 9 years after the country was established, also was repealed within three years. after its formulation. Thus, since then, political stability has continued to elude the country as its political parties have created an enabling environment for the military to disrupt the democratic system and impose coups.

Political instability has hurt Pakistan’s economy in many ways. To begin with, the necessary and indispensable institutional reforms have not been implemented or carried out because of this. History bears witness to the fact that whenever attempts have been made to introduce reforms, they have not been fully implemented. Let us see the main attempts to introduce reforms.

Although Pakistan’s economy was in shambles from the start, no substantial reform was undertaken until Ayub’s era, when Pakistan was plunged into political chaos and constitutional crisis. Ayub, who took power in a coup, adopted liberal market policies. He aided the growth of industrialization through privatization. This is why his time is characterized by the wealth of 22 families.

However, Ayub’s reforms could not be fully implemented as they lacked legitimacy. So when Bhutto came to power after the East Pakistan debacle, he wanted to impose socialism in Pakistan. He nationalizes large industrial complexes and wants to confiscate the wealth of 22 families. Its slogan was Roti, Kappra and Makkan.

Bhutto failed to establish socialism in Pakistan because he was ousted in a coup by General Zia ul Haqq. After Zia died in a plane crash in 1988, Benazir Bhutto was elected to government. She did not pursue her father’s policy of socialism. She barely introduced economic reforms and continued with the status quo. So since then, all governments, including the military, have continued to follow the economic system of neoliberalism. However, not a single government has been able to introduce reforms.

The purpose of the brief discussion of the leaders’ attempts to introduce reforms is to show that they all failed to introduce real reforms due to political instability. The local government system introduced by Pervaiz Musharraf is a typical example. When the PPP came to power in 2008, instead of fixing the flaws in the system, it abandoned it completely and brought in a very inefficient system.

Due to political instability, since 1988 the country has negotiated various agreements with the IMF, but has not been able to conclude a single one. Every time a government reaches an agreement with the IMF, it gets off course or misses its mark because of the change of government. In this context, even the recent $6 billion bailout granted to the PTI government could not be completed as it was removed from office by a vote of confidence after much political uproar and unrest. Consequently, the government in place must renegotiate the agreement.

Political instability erodes the confidence of investors who fear losing their investment due to the instability. They are therefore reluctant to invest in Pakistan. As a result, foreign direct investment is almost drying up in the country. Even natives avoid investing.

Another manifestation of political instability is that leaders launch populist projects and adopt populist policies that lead to economic instability. For example, when it became clear to Imran Khan that he was unlikely to win the vote of no confidence, he resorted to populist announcements. In order to convince people, he subsidized oil prices despite the fact that this would have disastrous consequences for the economy as his government was already providing cheap gasoline and diesel.

This is not limited to Imran Khan alone. In fact, Prime Minister Shahbaz also resorted to populist announcements by issuing a 10% increase in salaries and pensions for government employees and declaring Saturday as a working day; but later he had to reconsider his decisions.

In conclusion, the government in place will have to realize that economic stability is not possible without political stability. Therefore, he should try to achieve political stability by conducting talks with taxation parties. Only then can it move forward in the direction of economic sustainability.

The writer is a freelance columnist based in Larkana. [email protected]

gmail.com

Political instability erodes the confidence of investors who fear losing their investment due to the instability.


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