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Is Pakistan's Economy At "Take Off"?
Dr.Akmal Hussain
Newspaper: Daily Times
Dated: Thursday, 1st May 2003

Following the ministrations of the military regime over the last three years, officialdom including those in exalted positions, would have us believe that Pakistan's economy has achieved "take off". It may be time therefore to subject the usage of this term to serious scrutiny. Unless the state of the economy is accurately described, policies for its improvement cannot be identified. In this article, we will examine the meaning of the term "take off" in economic discourse and then see whether it is a correct description of the current state of Pakistan's society and economy.

The "take off stage" became part of the lexicon in economics when W.W. Rostow published his controversial book, The Stages of Economic Growth. (Rostow was an economic historian, who worked as special advisor for foreign policy to presidents Kennedy and Johnson respectively). On the basis of the historical experience of Europe, he proposed that in the context of economic development, it is possible to classify all societies within one of five stages: (i) The traditional society. (ii) The preconditions for take off. (iii) The take off stage. (iv) The drive to maturity. (v) The age of high mass consumption.

The usefulness of Rostow's theory lay in the fact that it combined prevailing social attitudes, the relative importance of the landed elite in the political structure and technological and economic features of a society as the basis of determining the stage of economic development. The theory was criticized on grounds that: (a) It was a spurious 'theory of history' because while ignoring the actual history of societies in Asia, Africa and Latin America, it used certain present features to place them into a structured framework of the European historical experience. (b) By placing all existing societies into stages, the theory ignored the interaction between the advanced industrial countries (stage 5) and the under developed countries (stages 1 and 2). An analysis of such an interaction, critics argued, could provide insights into why certain countries were developed and others under developed within a globalized economy.

In the context of the current economic debate on the 'stage' of Pakistan's economy it may be useful to indicate some of the defining features of Rostow's traditional, the pre take off and the take off stages respectively.

The traditional stage was characterized by pre scientific social attitudes, the predominance of the landed elite over political power with "family and clan connections (playing) a large role in social organization." At this stage there is a low ceiling on productivity growth because modern science and technology were "either not available or not regularly and systematically applied." Are not these features of a traditional society, characteristic of large parts of Pakistan's society, polity and economy today?

In the pre conditions for take off stage according to Rostow, "the idea spreads not merely that economic progress is possible, but that economic progress is a necessary condition for some other purpose (example national dignity)." At this stage the process of self-sustained economic growth has not yet begun, but the defining features are political. "Politically, the building of an effective centralized national state, on the basis of coalitions…in opposition to the traditional landed regional interests…was a decisive aspect of the preconditions period; and it was, almost, universally, a necessary condition for take off." Are these not features which could be a major part of President Musharraf's political agenda which could at least move us to the pre take off stage? Instead the government's spin masters have conveniently assumed that we are already at the take off stage, thereby obviating the need for the hard political and economic choices necessary for reaching even a pre take off stage.

For Rostow the take off occurs when there is "not only the build up of social overhead capital and a surge of technological development in industry and agriculture, but also the emergence to political power of a group prepared to regard the modernization of the economy as serious, high order political business." At this stage "both the basic structure of the economy and the social and political structure of the society are transformed in such a way that a steady rate of growth can be, thereafter regularly sustained." Such self-sustained growth is based on: (i) a dynamic entrepreneurial elite, (ii) a high rate of domestic savings, (iii) a large professional middle class, (iv) a diversified industrial structure and the institutions for translating scientific research into rapid technological change. Can it be said that these transformations of the political, social and economic structures have been achieved in Pakistan? Surely not, if we consider the facts. Let us take each of these necessary conditions for take off and see if Pakistan has fulfilled them:

(i) The entrepreneurial elite by and large is not characterized by innovative, risk taking captains of industry but by a tradition bound elite that has historically relied on government subsidies and protection measures within a patron client relationship. For example during the early 1960s it has been estimated that the average rate of effective protection was as high as 271%. By the 1990s even though the rates of effective protection had been considerably reduced, the increase in the share of manufacturing attributable to protection amounted to 5% of GNP (Gross National Product).

(ii) The industrial elite far from raising domestic savings and achieving self reliance for the country has engaged in conspicuous consumption. For example during the 1960s, 15% of the resources annually generated in the rural sector were transferred to the urban industrialists and 63% to 85% of these transferred resources went into increased urban consumption. Far from raising the domestic rate to the target level of 25% (which would have reduced dependence on foreign loans) the actual saving rate never rose above 12% right upto the end of the decade of the 1990s.

(iii) Poor coverage of education and even poorer quality of education has meant that the middle class is both narrow and professionally ill equipped to sustain rapid economic growth.

(iv) Failure to diversify is a pronounced feature of Pakistan's industrial structure: For example, the percentage of total investment in the manufacturing sector going into traditional textile and related goods was 41% in 1964-65 and in fact rose slightly to 44% in 1990-91.

Finally both the structures of society and of 'democratic' governance are dominated by the landed elite and the systems of power, pelf and privilege typical of its culture. The nascent social stratum, which seeks to build a progressive society and a dynamic economy based on the discourse of reason, the pre eminence of merit, equality of opportunity, economic welfare of all citizens and honest governance, lives precariously on the margins of the social and political structure.

Given these facts it is no service to the country to mislead the nation into thinking that the necessary social, political and economic features of the take off stage have already been reached. The regime of President Musharraf has taken many hard decisions and has a number of achievements to its credit. However it risks threatening the credibility of its real achievements by claiming what it has not achieved. Pakistan is not yet at the take off stage. The regime may have begun the journey, but it still has a long way to go to reach even the pre take off stage, let alone take off.

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