Irrelevant economists

By S. Akbar Zaidi | From DAWN, 16 September 2011


A LARGE majority of economists in Pakistan are completely irrelevant to issues related to Pakistan’s economy. This is not to deny that they are exceedingly well-trained or well-qualified. They have the finest degrees from the best universities in the world: the University of Chicago, Stanford, Cambridge and numerous others lower down the pecking order of merit.

These economists understand numerous theories of economics and probably still remember how to run sophisticated regressions, yet, they have little understanding of how Pakistan’s economy really works, and hence are irrelevant to Pakistan’s economic issues.

For economists who teach or do their own independent research, being irrelevant might matter little, but for those who are in the highest spheres of public policy, this unfamiliarity with basic issues in Pakistan’s economy, is criminal.

There are a number of reasons for their irrelevance. Having studied at the best universities in the world, from Nobel Laureates in many cases, several among Pakistan’s economists have learnt the general principles and rules of economics fairly thoroughly. However, economics is not simply an abstract science raised on very general universal principles which apply to all situations in all conditions. Much of what constitutes actually existing economics differs markedly in different settings and circumstances. Of course, many general principles of economics apply to many contexts, but many do not. Their theoretical understanding is not always relevant — and at times is counterproductive and counterintuitive — in the Pakistani context.

General theories and real-life understanding are two different spheres altogether, and may not always overlap. They have failed to translate their vast theoretical knowledge into local conditions and circumstances.

A second problem with those economists who have been appointed in high offices is that they have spent their learning and formative practical years not in Pakistan, but in international organisations such as the IMF, World Bank, the Asian Development Bank and suchlike. While this has allowed them to gain wide ‘international experience’, as their CVs show, they have been too far away, and for too long, from Pakistan. They fail to understand how the micro economies of Pakistan work, because neither have they studied them nor have they spent enough time getting their hands dirty in the actually existing
real-life economies of Pakistan.

Many of their suggestions based on their postings in other countries sound alien and downright comical when they start: ‘When I was posted in Singapore (or Sri Lanka or Saudi Arabia)….’ They simply do not know how Pakistan’s economy works.

Of course, they are well versed in the main statistics of Pakistan and they can list a number of broad key problems: low investment, low savings, low tax-to-GDP ratios, a balance of payments problem, high inflation and a host of other economic indicators and headline statistics. But this we know even non-economists can do pretty well.

Look at our print and electronic media. One can see a host of TV anchors, political experts and others holding forth on economic themes of which they do not have the simplest understanding. This is not very difficult. What is difficult is to explain how Pakistan’s economy runs, why it averts crises and collapse, in other words, ‘actually existing economics’.

For the last three years, one has become tired of the claim that Pakistan’s economy is in a crisis and now that it is about to collapse. This is utter nonsense of the highest order. The reason why journalists and economists repeat this mantra is because they do not step out of Islamabad, and top government economists only visit capitals around the world in meetings which achieve nothing.

They do not go to small towns and villages, or meet traders and associations who would tell them what the real issues are. And if any research by academic institutions and individuals on the actually existing economy is carried out, it is seldom evaluated or considered by government economists who deal only in headline data.

Despite the presence of exceedingly well-trained economists, the irony is that a number of non-economists have a far better understanding of Pakistan’s real-life economic issues, because they do research or consulting on these themes. Two who immediately come to mind are Arif Hasan and Shahid Kardar. One is an architect and urban planner and the other trained as a chartered accountant.

Through their research and extensive understanding of institutions, markets and what are called ‘ground realities’, they have a far better understanding of how Little Pakistan works. Importantly, unlike most other consultants, they make their work available in the public sphere for all to read.

Of course, there are others, some of them even economists, who undertake research in the field and understand how Pakistanis survive, live and thrive at times of supposed crises and collapse — Prof Mahmood Hasan Khan is a superb example — but those who have returned from the IMF, World Bank and the ADB after decades, ostensibly to serve Pakistan, need a basic course in Pakistan’s economics to be able to be effective and relevant.

While high theories from any discipline are essential for one’s learning and understanding, location, practical experience and local knowledge are critical as well, perhaps even more so. This is a general rule which applies to most of the social sciences, but particularly to economists who make public policy. Pakistani economists, especially those who devise public policy, and even those who write columns in newspapers, need to spend more time understanding how the actually existing, everyday economy really works. Only then will they be somewhat relevant.

The writer is a political economist.