Good Governance, A Panacea (Remedy of All Diseases) I Dr. Ishrat Hussain

Summary

This speech explores Pakistan's economic history, highlighting its growth in the first 40 years (1947-1990) with a 6% annual growth rate, in contrast to the decline post-1990, where growth fell below 4%. The speaker critiques various explanations, including military spending, aid dependency, and the international environment. The core argument centers on the decay of key institutions—like the Planning Commission, WAPDA, and PIDC—over time, which once played a crucial role in economic development. The speaker urges a focus on strengthening governance and institutions to address the nation’s economic challenges.

Takeaways

• 😀 Pakistan’s economic growth was impressive from 1950 to 1990, with an average annual growth rate of 6%.
• 😀 From 1990 to 2022, Pakistan’s growth rate declined to less than 4%, while neighboring countries like India and Bangladesh improved their growth significantly.
• 😀 Despite various external shocks, including wars and political crises, Pakistan had strong institutions in its first 40 years that contributed to economic success.
• 😀 The Garrison State hypothesis, which suggests military dominance over the economy, does not fully explain the economic decline, as defense spending dropped significantly after 1990.
• 😀 Foreign aid and flows, including from the US, Japan, and international institutions, were important but not the sole factor behind Pakistan’s earlier growth.
• 😀 Pakistan’s declining share in global trade, compared to growing shares in India and Bangladesh, is indicative of its economic stagnation in the 1990-2020 period.
• 😀 The international economic environment during the 1990-2020 period was favorable for developing countries, so this does not explain Pakistan's decline.
• 😀 Strong institutions like the Planning Commission, PIDC, and WAPDA were instrumental in Pakistan’s earlier growth by establishing industries and managing crucial sectors like agriculture and water resources.
• 😀 The decay of key institutions over time, such as the Planning Commission and WAPDA, led to inefficiencies and failures in governance and public services.
• 😀 The decline in Pakistan’s economic performance is largely attributed to institutional decay, which has impacted various sectors, including disaster management, education, and infrastructure.

Q & A

What is the primary focus of the speaker's analysis?

The speaker primarily analyzes the economic history of Pakistan, comparing the country's growth during the first 40 years (1947-1987) to the subsequent 35 years (1990-2022), and the reasons behind the economic stagnation after 1990 despite favorable conditions in neighboring countries like India and Bangladesh.

What was the economic growth rate of Pakistan during the first 40 years?

Pakistan experienced an average growth rate of 6% during the first 40 years of its existence, making it one of the fastest-growing developing countries at that time.

What is the economic growth rate of Pakistan from 1990 to 2022?

From 1990 to 2022, Pakistan's economic growth rate declined to less than 4%, a significant drop compared to the earlier period.

How did India and Bangladesh perform in terms of economic growth during the same period?

During the period from 1990 to 2022, India’s growth rate increased from 3.5% to 7%, while Bangladesh's growth rate ranged from 6% to 7%, significantly outpacing Pakistan's growth.

What are the four major hypotheses the speaker considers for Pakistan's economic stagnation?

The speaker considers four hypotheses: 1) The Garrison State Hypothesis (military dominance affecting growth), 2) Dependency on foreign aid and external flows, 3) Adverse international economic conditions, and 4) Institutional decay and weak governance.

How does the speaker refute the Garrison State Hypothesis?

The speaker refutes the Garrison State Hypothesis by noting that Pakistan's defense expenditure peaked in the 1980s at 6% of GDP and has since declined to below 3% from 1990 to 2022, indicating that the military’s economic influence cannot explain the stagnation.

What role did foreign aid play in Pakistan's economic performance during the 1980s and 2000s?

In the 1980s, foreign aid, particularly from the U.S. due to the Afghanistan war, significantly contributed to Pakistan's economy. However, in the 1990s, Japan became the largest bilateral donor, and even though there were foreign flows in the 2000s, their impact on long-term economic growth was limited.

Why does the speaker reject the argument that international economic conditions were to blame for Pakistan’s decline?

The speaker points out that, during the same period, other developing countries, including India and Bangladesh, experienced significant growth despite similar global economic conditions, thus negating the idea that international factors were primarily responsible for Pakistan's stagnation.

What does the speaker suggest is the main cause of Pakistan’s economic stagnation post-1990?

The main cause of Pakistan's economic stagnation, according to the speaker, is the decay of governance institutions, which played a critical role in the country’s early development but have become increasingly ineffective over time.

Which institutions does the speaker highlight as being crucial for Pakistan's early development?

The speaker highlights several key institutions from Pakistan's early development, including the Planning Commission, the Pakistan Industrial Development Corporation (PIDC), the Agriculture Development Corporation, and WAPDA. These institutions were instrumental in industrial growth, agricultural development, and infrastructure, contributing significantly to the country's early economic success.

What happened to these institutions in the years following 1990?

After 1990, these institutions faced significant decline. The Planning Commission lost its effectiveness, PIDC and the Agriculture Development Corporation were dissolved or became ineffective, WAPDA's efforts in managing water resources slowed down, and Pakistan International Airlines (PIA) suffered from significant financial losses and mismanagement.

What role did the Planning Commission play in Pakistan’s early development?

The Planning Commission played a vital role in formulating and overseeing the country's Five-Year Plans, which guided Pakistan's economic growth during its first decades. It was responsible for setting development goals, allocating resources, and coordinating projects that contributed to industrial and infrastructural progress.

How does the speaker contrast Pakistan's performance with that of PIA?

The speaker contrasts Pakistan's early performance in sectors like aviation, where PIA was a leading airline in the world, with its current state, where the airline is struggling with a debt of 450 billion rupees and has deteriorated significantly, reflecting broader institutional decay in the country.