Notes in Circulation # 6: The exile of political economy from Pakistan

Politics in Pakistan has achieved something truly special. While economics and its practitioners have been taking a continuous beating the world over since the the Great Financial Crisis of 2007-08, Pakistani politics and its most prominent public faces have dragged themselves through so much mud that nobody wants anything to do with them. Politics is toxic, they say. So toxic, that while economists remain firmly within the crosshairs of anyone investigating social disorder, crisis and breakdown in many other countries of the world, people want more economics and less of politics in Pakistan. We’ll just have pure economics, thank you very much. No politics for us, please, and no political economy either.

Consider a few instances. Reza Baqir, former governor of the State Bank of Pakistan, argues in an op-ed in Dawn for a “non-partisan plan” to be prepared by a group of non-partisan (read apolitical) economists working out of a university providing a “neutral, non-partisan space”, while they are “chaperoned by a credible non-partisan leader to bring them all together.” Ariba Shahid, business journalist at Profit, tweeted her approval of this article: “The real enemy are the politicians, partisans- people that can’t think beyond political binaries.” Nadeem ul Haque, vice chancellor at the Pakistan Institute of Development Economics, tweeted that “Student unions are for student events. Universities are places of learning not political vendetta clubs or for religious zealots. Let us keep politics and religion out of universities and focus on learning, Creating a work force for the future.” This rejection of politics at universities is not an equal or equitable proposition. It tips the scales of power further in the favor of people who will come to universities from social backgrounds where they don’t rely on student unions for their political capital, and whose networking will deepen their political agency regardless of student unions.

This is a specific manifestation of a more general problem: rejection of politics in any sphere of social life is in effect the rejection of the politics of the weak. It keeps the politics of the powerful hidden from view. Make no mistake: the politics of the powerful continues to exist and function, no matter how loud the anti-politics voices get. A rejection of politics by economists, vice chancellors, or by anyone else merely helps throw a veil over political processes. In doing so, it worsens the very problems which people are sick of, e.g. politicians using public office to line their own pockets.

The rejection of politics also comes from the commonly repeated view that political instability is bad for the economy. While not incorrect, this view ignores the flipside of the coin: that competing and conflicting claims on economic resources between different power centers need management and resolution. The easiest way of doing this is to acknowledge and abide by the constitution as the national-level rule-book for our political economy. Our inability to take this route directly leads to political instability. There are various complex connections and feedback loops going back and forth between the economy and polity. Economic crisis and impoverishment may be a consequence of political instability, but that instability is also shaped by powerful economic actors competing over resources.

It is important to keep in mind that the rejection of political economy and the yearning for a pure, technical economics which will lead us to prosperity is not neither new nor specific to Pakistan. The transformation of political economy to economics has a long history. Adam Smith was the first great exponent of the political economy of the “classical economists” in the late 18th century. Important contributions by Ricardo and Malthus followed, and 19th century political economy reached its zenith with Marx. The transformation towards a less political economics began in the late 19th century but was resisted by the work of economists like Veblen and Keynes. Veblen was one of the figureheads of institutional economics while Keynes is arguably the single most important economist of the 20th century and one of the founders of macroeconomics. The apolitical economics stream carried on moving in parallel with the evolution of Keynesianism with economists like Milton Friedman, whose 1953 essay on the methodology of positive economics was important in setting the tone for what would become the neo-classical economics of the second half of the 20th century: an economics more “pure” and “scientific” but far removed from old school political economy. Many of those ideas of a pure, apolitical economics continue today, and the idea that economies and economists left alone by politics and politicians can help secure growth and prosperity is commonplace. (Many of the great economists of the past would today not be considered legitimate economists if they were alive today.)

But many economists recognize that even an area of economic policy as seemingly apolitical as central banking is not really so. Just last week, Clara Mattei and Aditya Singh have written about the current politics of central banking and how the US Federal Reserve is practically undertaking class-biased monetary policy. Compare and contrast this with Reza Baqir’s op-ed. The rejection of politics and political economy is of course not unanimous in Pakistan either. There remain, thankfully, numerous voices which are attentive to politics, political culture, political process and the effects thereof. The people who turned up to vote in the by-elections in Punjab on Sunday to lend the PTI their support certainly care about politics — as they should. The small community of heterodox economists might also have something to say about the matter, and there are also progressive-left forces in the country which are attuned to the need for attention to politics and hence to political economy. But they have issues of their own which need attention.

The relationship between the political sphere and the functioning of the economy is deep and well established. Economic policy is shaped by political culture as well as state-society relations (See Peter Evans’ Embedded Autonomy (1995) and Frank Dobbin’s Forging Industrial Policy (1994)). The economy has a political basis. Private property, so central to a capitalist economy, is protected by a legal and judicial system (not to mention the threat of violence by the state) which in Pakistan’s case is guided by the constitution of Pakistan which is also a political document. Contracts which help quell uncertainty in the economy rely on the same legal, judicial and political factors. Furthermore, the twin problems of production and distribution don’t just constitute the economic problem when taken together; they are also issues of power. The central relationship in capitalism — the employment relation between the worker and capitalist — is a relationship of power in which the capitalist holds power over the worker by virtue of their ownership of private property; property which the worker does not own, hence the need to go seek employment with someone who does.

Political economy, like the constitution and like former prime ministers, has been sent packing. It is in exile from its proper place in the practice of citizenship in Pakistan and this is a problem. It’s time to bring it back. Without giving politics and its implications for the economy their proper due regard and consideration, we will continue to try to convince ourselves of the efficacy of dead end solutions. The idea that we will solve our problems by side-stepping politics and throwing our weight behind a pure apolitical economics is wrong. Societies and economies are messy. So are economics and economic policy. We may not like the muddied politicians, but we will have to muddle through anyway if we want to move forward.