We live in an increasingly challenging world of two existential threats: the climate change crisis, and the likely Pandemicene phenomena. Pakistan is reportedly among the ten top most climate-challenged countries, which puts great burdens on the country to make a quick green economic transformation, while the Covid-19 pandemic exposed the deep cracks in the economic resilience of the country, especially in terms of the public health sector, and fiscal space to meaningfully meet health, stimulus, and welfare needs.
Having said that, in line with the overall global trend, Pakistan has undergone an aggressive neoliberal assault during the last four decades or so, which in the favoured mantra of market fundamentalism, has reduced the leadership, and regulatory capacity of the public sector to mainly fixing market failures, and facilitation of the private sector. This resulted in overall increasingly non-inclusive economic growth, along with weak capacity of the government to significantly influence economic growth to be appropriately diversified, and resilient.
One of the first resolutions that the public sector, which otherwise is also looking to attract foreign investment, and increase exports, is to see a much greater role of government, away from the neoliberal tradition, and more on the lines of social democracy.
This means the government should look to become an entrepreneurial state. In her book The Entrepreneurial State: Debunking Public Vs. Private Sector Myths internationally renowned economist, Mariana Mazzucato pointed out about an entrepreneurial state as ‘…the State has been key to creating and shaping markets not only ‘fixing’ them. …Transformational public investments were often fruits of ‘mission-oriented’ policies, aimed at thinking big: going to the moon or fighting climate change. Getting governments to think big again about innovation is not just about throwing more taxpayer money at more activities. It requires fundamentally reconsidering the traditional role of the State in the economy. …First, it means empowering governments to envision a direction for technological change and invest in that direction. Creating markets not only fixing them. …Second, it means abandoning the short-sighted way public spending is usually evaluated, …[which] should be measured by its courage in pushing markets into new areas… Third, it means allowing public organizations to experiment, learn and even fail! Fourth, precisely because failure is part of the trial and error ways for governments and taxpayers to reap some of the rewards from the upside, rather than just de-risking the downside.’
Moreover, rather than leaving the economy primarily to the private sector, and in turn, mainly on the profit signals, the government should provide a mission-oriented industrial policy, which rather than picking one sector over the other, brings together various sectors of the economy towards achieving goals such as more diversified and productive domestic production, along with more competitive exports base.
A 2019 IMF working paper ‘The return of the policy that shall not be named: principles of industrial policy’ for instance, highlighted the importance of industrial policy as ‘Based on theoretical, empirical, and historical evidence… we argue that the development paths of the Asian Miracles as well as Japan, Germany, and the U.S. before them, provide us with important clues to their success. We contend that standard growth policy prescriptions are not sufficient. We find strong commonalities in policies pursued by the Asian Miracles, and one cannot ignore the preeminent role of industrial policy in their development. Not only did they succeed at catching up with the advanced world, the Asian miracles’ economic model resulted in much lower market income inequality than that in most advanced countries.’
An important reform to increase the capacity of the government to deliver on the much-needed role as an entrepreneurial state, would require reforming the public service, which in turn could be another economic resolution this Independence Day
An important reform to increase the capacity of the government to deliver on the much-needed role as an entrepreneurial state, would require reforming the public service, which in turn could be another economic resolution this Independence Day. Moreover, given the polycrisis situation the country faces on the economic front– and exacerbated by the fast-unfolding climate change crisis, and the urgent need to prepare for a possible Pandemicene phenomenon– in terms of building up otherwise low foreign exchange reserves, creating debt sustainability, and a reducing an otherwise very difficult income inequality, and poverty situation, it is important approach policy reform and implementation in a mission-oriented way.
As an example, it may help to learn from some ways in which mission-oriented approach has been adopted in the European Union (EU) to improve the capacity of the public sector, as pointed out in the chapter ‘Neoliberalism, innovation bureaucracies and the reinvention of missions’ from the book How to make an entrepreneurial state: why innovation needs bureaucracy published in 2022 as ‘Thus we can see a typology of mission-oriented policies and practices emerging in the EU: [1] Top-down coordination approach to better align existing policy mixes for incremental upgrading. …this approach to missions is oriented towards stability and long-term agreements in investment strategies and other policy aspects. [2] Sectoral coordination and implementation approach takes missions as a way to recharge essentially corporatist or coordinated market economy type sectoral coordination mechanism. In this iteration, missions as an approach enable the widening of sectoral policies to include non-traditional policy goals and stakeholders. [3] Design-led approach reframes siloed policy goals and builds deeper civic and stakeholder engagement. In this approach, missions are a tool to build new capabilities within innovation agencies… focused on rethinking the policy design process. [4] Smart specialisation-based approach to missions is found in predominantly regional policies, building on smart specialisation policies developed during the 2010s in many European regions. Key to such missions is a focus on ‘just transitions’, regions moving from carbon-heavy specialisation to a greener and more sustainable specialisation.’
In the light of the above, especially given the successes of for instance, China, and the Scandinavian countries, of the public sector in implementing a meaningfully inclusive, resilient, and sustainable economy, it is important that economic results should extend to seeing a more balanced role of the public sector in terms of the extent of the privatization process, and the running of state-owned enterprises (SOEs). The neoliberal mantra, over the years, of excessive privatization, and weak regulation of the private sector has created deep cracks in terms of economic resilience, especially when it came to preparedness to deal with existential threats like climate change, and the Covid pandemic, perpetuation of the ‘profit-over-people’ mindset in the private sector, and increasing income and wealth inequalities.
Another important resolution on the economic front, and which flows from building the capacity of the public sector, is to significantly reduce the practice of ‘outsourcing’. In her book 2023 published book ‘The big con: how the consulting industry weakens our businesses, infantilizes our governments and wraps our economies’ pointed out in this regard ‘Consultancies are often used by governments (as well as businesses) seeking to avoid blame for failures. Of course, the irony is that even if the reputational damage does land with the consultancy – which it often does not – the financial costs of failure remain the responsibility of the government… And the greatest cost of outsourcing is that in the end it is much harder to learn from failures when they are the fault of third-party actions – the blame may be outsourced, but so is the learning-by-doing. The broader costs are similarly borne by the society… A critical reform that follows from recognizing the state as a value creator and risk taker would be to move away from all large-scale prime contracting altogether. …Eliminating the intermediation by consultancies that prime contracting creates also helps to ensure that governments are able to develop purposeful, direct relationships with businesses, and are able to recognize when that partnership is no longer valuable.’
