Understanding Pakistan’s Socioeconomic Paradox

Let’s begin with this paradox: social crisis – embodying indiscipline, poor moral values, weak rule of law, economic mismanagement, etc. – translates into an economic crisis. This can be argued in reverse: economic crisis breeds social crises - poverty is the main evil. History may help us explain this paradox. During the 1920s, in Europe, the Weimar Republic was created, promising democratic institutions in Germany. The Allied forces made the Germans pay a heavy ransom after the latter lost the First World War. This resulted in significant anti-west sentiment in Germany, leading to the popularity of the Nazi Party. In 1929, the stock market crashed in the USA, leading to the Great Depression. The effects of this economic decline were felt all over the world, particularly in Germany that was already experiencing heavy international debt and inflation. This also helped Adolf Hitler’s political rise, as the Nazis deftly tapped into the public’s anti-west sentiments. In the USA, the social effects of this economic crisis are reflected in a film genre, called Film Noir – the dark movies. In these movies, the underworld, crime, deceit, and betrayal embodied the themes. Gangsters, hookers, ambitious men and femme fatales appeared as characters in these films. Poverty is a breeding ground for crime and moral impoverishment – both factors can play havoc on socioeconomic progress in combination – as we witnessed in the societies on the both sides of the Atlantic through these dark movies.

These events from the first quarter of the 20^th century sound quite familiar vis-à-vis our contemporary world, especially Pakistan.

This kind of situation increases xenophobia, and the popularity of conspiracy theories, all of which feed into populist politics.

One of the main reasons for the rise of the Nazi party was crumbling national pride, owing to the Treaty of Versailles, which Germany was forced to sign after World War 1. The Nazi party used resentment towards the treaty to incite nationalist sentiments that verged on jingoism, and gained support. This summary of the entire German affair in the interwar period is probably analogous to the political situation in today’s Pakistan. This kind of situation increases xenophobia, and the popularity of conspiracy theories, all of which feed into populist politics. An economically depressed population is easy to manipulate with slogans that promise an immediate solution to problems. As people, sick and tired of political games, want to see the politicians punished – whosoever may deliver it, a political messiah or a military dictator. This is like a typical melodrama, structured around the theme of injustice and punishment of the culprits. The end of this type of drama must restore justice and order in the world in order to bring relief to the audience. In such dramas, more often than not, the hero happens to be an outlaw – à la Sultan Rahi in the Punjabi movies of the 1980s. The manner in which the goal is achieved – the villain punished and justice served – does not matter. What matters is the satisfaction people gain from being able to hurl insults at those believed to be responsible for their suffering. This sense of justice also helps repair damaged individual pride – national pride on a wider scale.

Things are bleak: political instability, economic turmoil and an uneasy situation on the western and eastern borders as a constant factor.

Now, let’s take a look at today’s Pakistan. The per capita income is $1322, that has gone down by 7.9% in last 4 years, before the COVID-19 pandemic hit. Inflation stands at 19.5%, according to official figures, however the market reads it at above 40%. In the past decade, 2015 witnessed the lowest inflation rate, at 3.5%. On the social side, the divorce rate is at an all-time high. We don’t have any accurate data regarding this. However, a newspaper reported in August 2022, that 500 divorce cases were filed in Lahore’s courts in 10 days alone. This is maybe corelated to the economic pressure on maintaining a family or the lifestyle of married couples. The national GDP growth rate, according to Asian Development Bank, fell from 6% in 2022 to 0.6% in 2023. These changes also reflect in the increase in crime rate during the first quarter of 2023 – with 21,000 cases of car, motorbike and cellphone robberies have been reported. White-collar crimes, such as embezzlement of public funds, bribery, and money laundering, mostly go unreported and unpunished. The international financial institutions have refused to lend a hand to Pakistan’s fragile economy. They would rather collect the loans with interest as per schedule. Things are bleak: political instability, economic turmoil and an uneasy situation on the western and eastern borders as a constant factor.

But nothing happened over night. It’s hard to pin-point where things started to go really wrong. Let’s recall the 1980s. Pakistan was doing pretty well in sports - cricket, hockey, squash had world class players. State owned universities had a good standing and reputation in Pakistan and abroad. During the infamous martial-law regime of General Zia-ul-Haq, the inflation rate came down to 4.67% in 1987 from 11.94% in 1980. When Benazir Bhutto came into power in 1988, it went above 9%, and spiked up to somewhere around 12-14% during the Benazir- Nawaz governments in the 1990s, and witnessed a sharp decline in 1999, dipping to 4.14% when General Musharraf took over. What do we conclude in the light of this? In the words of T.S. Eliot, ‘Then how should I begin. To spit out all the butt-ends of my days and ways?’

The way forward is probably not so politically ideal, not so politically correct. It may hurt the feelings of many, but that perhaps is inevitable. We can see from the historical charts of GDP growth rate and inflation rate along the political trajectory of Pakistan. The economy looked better, performed better during the military regimes, because authoritarian as they were, they provided stability, security and confidence for businesses to flourish. The same can be achieved by a broad-based national government that promises long term stability. Only stability can save the country’s economy from further decay.