Memo to Hafeez Shaikh: Do Not Be Afriad of Thinking

Posted on April 2, 2010
Filed Under >Nadeem Ul Haque, Economy & Development, Education
15 Comments
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Nadeem ul Haque

At a recent meeting with the Hafeez Shaikh, the new Finance Minister of Pakistan, some of our best economists came up with the refrain that “Research and inquiry is not necessary, we know it all. We need to act and not think.” Alternatively, “we know it all! The only problem is that no one will implement what we are suggesting.”

I found this a little disturbing. So I asked some “what is it that we know?”

The usual answer the World Bank or some donor report knows it all. This raises a number of issues that need to be understood and discussed.

  • All the donor recommendations are excellent and can be fully implemented off the shelf.
  • All donor consultants who completed those reports are of the best quality.
  • All donor consultants know all local conditions.
  • All solutions can be borrowed there is no local innovation possible.
  • There is no need for a domestic review, critique or discussion of this excellent work.

Let us count some donor successes for these people:

  • Social Action Program which the Bank itself would like to forget.
  • The foreign currency debacle that the both the World Bank and the International Monetary Fund would like to leave behind.
  • The civil service reform program that sent people to Harvard at great expense with no end in mind.
  • The National School of Public policy that merely changed nomenclature at great expense.
  • The Access to Justice that spend millions on the Project Implementation Unit.

I could go on but let us leave it at that.

The proponents of ‘no think, follow the donor’ approach’ would say, the fault was not in the design but in the implementation. Convenient!

Even if I accept that let me ask should we not then do a study to apportion blame on where the fault lies in the design or the implementation? After all a failed policy could be due to poor design or poor implementation or both! Only research could determine what weight should be placed on design or implementation or policy failure.

So no matter where we go there is a need for study and research. To leave all thinking to the donor and all implementation to the locals is a poor approach to policy can in no way lead to good policy. After all, cookbooks alone do not make Michelin chefs.

No matter that in this rush to act, we created the Foreign Currency Deposits (FCD) problem, created a half chewed local government scheme, protected car monopolies, created hotelling monopolies, built up housing scheme scams and so on and so forth. This simplistic approach has led us to crisis after crisis.

Donors who are pre-eminent in policymaking tend to fuel this creed. Donors define the agenda for these activists and the agenda seems to be heavily in favor of activism. Donors argue that “prescriptions are easy” mimicking the activist creed in the country. The donors know it all. Unfortunately we are not implementing it. According to them, the problem has always been the implementation capacity in the country and not their prescription.

Yet the advanced countries do not agree that prescriptions are easy. They have an enormous infrastructure for generating policy research and discussion. Unlike us, they have deep teams for developing policy thinking. Whatever policy initiative is taken is well researched frequently debated. Political parties, even in opposition maintain think-tanks for the development of policy initiatives to be used when they come to power.

Why is it that the policy in the industrial countries has been following academic thinking and not activism? Keynesianism prevailed for a long time and when it lost the academic debate to the market based system, policy changed. It seems that research leads policy and that policymakers do not seem to rush into the most easily available prescription.

Why should prescription and implementation be separated? A good analysis will take into account the prescriptive and implementation aspects of the particular situation. All analysts worth their merit will examine the practical aspects of their prescriptions. To separate the two is, at the minimum, naive.

Given our current state of understanding of socio-politico-economic processes, we should be more humble and inquiring and not claim that ‘prescriptions are easy.’ On the contrary, the hypothesis can be advanced that the reason that change is so slow may be because of our cavalier attitude towards prescriptions and the prescription-making process.

Yet, simplistic schemes are bandied about by our esteemed columnists: fix the deficit, get the macro right, increase development expenditures, get education right! Yes these are all truisms that no one can disagree with. But the issue is doing any of these will require a lot of thinking research, planning, and maneuvering. And all these activities will require a large number of very competent people involved in basically research, implementation and evaluation at various levels. Even implementation has to be based continuous evaluation and revision which in itself is research.

What should be done? There are no shortcuts.

  1. First, we must build up thinking and debate into policy.
  2. Second, we must build teams in institutions. Most institutions remain one-man affairs with no coherence or depth to the team. These heads remain totally insular and are not subject to any form of peer review. Why is there no policy debate in Pakistan and why are their no teams in various institutions that will define and debate policy in their sectors?
  3. Finally, our thinking community must write more well-researched and informed critique of policy rather than blame it all on Musharaf, Shaukat, NS or BB. What happened in the FCD crisis? Who was responsible and why? How did the IPP’s happen? Why was such a strange pro-monopoly policy on cars and hotels developed? Why are our urban development laws so archaic? What is wrong with the archaic cooperative law that it continues to plague us in the current housing scams and in the past coop society frauds?

Dear Mr. Hafeez Shaikh, certainly we need deeper thinking than our current crop of technocrats recommend!

Dr. Nadeem Ul Haque was the former head of the Pakistan Institute of Development Economists (PIDE). He blogs at Development 2.0 where this was first posted.

15 responses to “Memo to Hafeez Shaikh: Do Not Be Afriad of Thinking”

  1. Riaz Haq says:

    While it’s a good idea to develop serious long-term economic research capability and promote policy discussions and debate, it is even more important for the top leadership to accord the highest priority to the economy to build a foundation for a stronger Pakistan.

    It’s important for us to learn from our past experience as a guide to decide what works, and what doesn’t work for us.

    We have the experience of several decades now, and we have seen that the economy grew was 6.8% in the 60s (Gen. Ayub Khan), 4.5% in the 70s(Zulfikar Bhutto), 6.5% in the 80s (Gen. Zia ul-Haq), and 4.8% in the 90s (Benazir Bhutto and Nawaz Sharif). Growth picked up momentum in the 21st Century under General Musharraf, and from 2000-2007, Pakistan’s economy grew at an average 7.5%, making it the third fastest growing economy in Asia after China and India. There were 2-3 million new jobs created each year from 2000-2007, which significantly enlarged the middle class, and helped millions escape poverty.

    Hafeez Shaikh was himself part of the Musharraf era economic team as a minister, and he should draw upon his own experience to determine what policies should continue, and which policies need to change.

    http://www.riazhaq.com/2009/12/pakistans-decade-of -1999-2009-in-review.html

  2. SEM Pakistan says:

    He will have a great opportunity to put things right. The good news is that we are now looking at qualified professionals for this post and that means at least some sense of economic sense will be in our economic policy……!!!

  3. Jamshed says:

    Two years ago,the dollar was around sixty rupees,it is now hovering around eighty five rupees.Every few months,the power tariff increases,oil prices increase,CNG prices increase,the price of everything increases…
    Some out of the box thinking is required and quickly.

  4. ASAD says:

    The real problem is the economy, fix that and everything else will be OK.

  5. Suddle says:

    The odd thing is that the biggest problems in teh country are all economic (energy, water, etc.) and yet no one is interested in talking about economy, only on petty politics and party baazi!

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