Weak governance constrains economic development

Controversies rage about democracy and economic growth and development from time to time and it becomes difficult to decide which is more important. However, there is no denying that, without governance there can neither be true democracy nor real economic growth

By Dr. Noor Fatima

There exists conflicting views and evidence on the linkage between democracy and economic growth and it is for a fact that we are heavily engrossed in this heated debate. However, one begins to wonder if there actually is a clear-cut support for the notion that democratic governance causes economic growth and prosperity for a country and its citizens. The success of a democratic government, no doubt causes economic progress, but do these two dynamics act simultaneously, in a harmonious manner?

With respect to Pakistan, we are all well aware of the incompetent leaders who have ruled the nation from time to time and have managed to challenge its sovereignty by implementing economic policies of the IFIs (International Financial Institutions), mainly the IMF (International Monetary Fund) and World Bank. Our leaders have virtually become powerless in governing their own nation and its people.

If the pre-election days are taken into account, then we will realise that all the politicians came up with favourable economic agendas to get rid of poverty, inflation and unemployment from Pakistan. However, post election, the economic policies that have been implemented so far are to the great dismay of the general public and are based on the conditionalities set by the IFIs for providing financial assistance to Pakistan. Even today, the policies that the PPP led democratic government has come up with have done no wonders for the nation.

Even so many years after independence, it is obvious and sad that democratic institutions, macroeconomic policy and even “good governance” are difficult to identify in Pakistan.

It is often witnessed that numerous controversies related to democracy and economic growth and development rage from time to time and it becomes difficult to decide which is more important, however, in real life situation, without governance, neither of these elements would perform.

This debate on the connection of democratic governance with economic growth is not new, infact it is rather quite an age old one. The dilemma, however is that when the so called democratic government makes vital decisions, donor agencies and policy makers interfere unnecessarily and say and do as they please, without giving much consideration to what the people want. Therefore in Pakistan, it has become like a saying or mere words only that a democratic government is important for a nation’s development, when people themselves have no clue as to what democratic governance is really like. It is an end and a means. Simply defining the method to exercise power or to govern a nation without description of its conclusion would most certainly not deliver the desired results and this is exactly what we are facing in Pakistan.

A recent report of Asian Development Bank stated that Pakistan’s internal economic outcomes will depend on the government’s ability to achieve the desired balance between fiscal consolidation and revival of growth. Externally, it will depend on the degree of improvement in the major trading partners’ financial positions, the consequent impact on Pakistan’s exports and on receipts of workers’ remittances, and international oil prices.

The point of concern is whether the public institutions would be able to perform their designated roles and would there be a political consensus to stabilise the economic system and to resolve the conflicts faced by the country, in order to attract high levels of investment supported by a safe environment where the rule of law exists. Only then can exist an environment which can sustain fiscal consolidation, trade expansion, poverty reduction and a government which would be capable enough to attract international communities to be resourceful and combat corruption. In reality, however, what is evident from the Global Competitiveness Report, 2008 is quite contrary as it shows that Pakistan’s ranking fell to the 101 position among 134 countries.

In 2008, there was a clear decline in the common man’s level of confidence in the performance of public institutions as compared to 2007, mainly due to lack of transparency and the general distrust of the general public in the nation’s politicians. The reason why the government’s democratic practices are so weak is because there is a lack of institutional control in the country and of the slow or no responsiveness by politicians to satisfy the public needs, which has virtually downgraded Pakistan’s politics to a great extent.

The current scenario of the public’s lack of trust on politicians and public policies did not come out of nowhere; it is an accumulation of erroneous policies adopted by the economic managers for the last one decade. For the last 10 years the role of the state’s three pillars has not been justified according to the Constitution and there was no balancing act between these pillars of state (democratic governance) due to their overlapping roles. A greater opportunity had been provided to the present democratic government to lead the economy in such a manner so as to take it out of this dangerous position, and to prevent a further reduction in the public’s confidence in public institutions. Though it seems that the PPP led democratic government has not availed this opportunity to their best interest.

On a positive note, when the governance is not proved to be ‘good’ and only democratic norms are adopted by law, it has brought some critical political-economic consequences for the country, thus the connection between democracy and economic growth does reflect ambiguous results. Thus, the debate should be on improving the quality of life, which generally calls for much more than economic growth because it is mostly observed that growth does not necessarily translate to economic development, i.e. access to quality education, higher standards of health and nutrition, a cleaner environment, equality in economic and social opportunities and greater individual freedom.

Obviously, like everywhere else, there is always a room for discussion or debate in Pakistan too, for the economic think tanks to ponder upon what went wrong and why, and how can the government’s role contribute to fulfill the economic needs and lead to the nation’s prosperity. Economic analysts do agree that democratic governance is a strong pillar of development, which is why donors have been placing a great emphasis on good quality governance in their development programmes. But, lack of linkage between a government’s democratic goals and economic growth makes the government itself accountable and responsible for it. If the government does not respond on time, then the citizens become less responsive towards their responsibilities of paying taxes etc and this reduces the overall trust in the democratic system.

It is highly essential that the very first step taken should be to ignore pessimistic views in favour of optimistic ones, such as successful transition of the society would take place in days to come. There is a requirement of not just academically qualified individuals giving their views, but an applied analysis from researchers and think-tanks is needed to propose how to turn around the vicious circle that has negatively affected the political-economic system of Pakistan in the past few years. The complex topics of the country’s political economy can be made more accessible for the general public to stimulate national policy dialogues. In a nutshell, we do not need an excessively controlling government which brings fear only and does not provide protection to the citizens. Infact, we need a “parental” government which is capable enough to play an active role in equal distribution of services and resources among all the country’s citizens. If the government fails to perform the proposed functions or extended its power beyond these functions, then negative consequences might be further expected.

Economic analysts do agree that democratic governance is a strong pillar of development, that’s why donors have been placing increasing emphasis on good governance in their programmes but lacking linkages is the distributive role of the government which in turn, makes citizens less responsive toward their responsibility of paying taxes and part of the development decision making process which undermines overall trust in the democratic system.

What is suggested here is that let us first ignore the initial pessimistic view of a collapse of society in favor of an optimistic view of successfully transitioning without collapse. There is requirement of input not academically but an applied analysis from researchers, and think-tanks to propose how to turn around “vicious circle” that negatively affected the political-economic system of Pakistan. The complex topics of political economy can be made more accessible for the general public to stimulate national policy dialogue. In nutshell, We do not need a ‘big brother’ & ‘all controlling’ governance which brings a fear of lack of protection from both but a ‘parental’ government which can play the role of equal distribution of services and resources in its provinces and citizens. If the government fails to perform the proposed functions or extended its power beyond these functions, then negative consequences might be further expected.