32nd Senior Management Course (Mon 7th November 2022-Friday, 24th February, 2023) SYNOPSIS Topic : State-Market Relationship in Pakistan Reference : 3.14 Guest Speaker : Dr. Aqdas Afzal Sponsor DS : DS(T&C) Shagufta Waris Prepared by : Said Iqbal Dated : 17-11-2022 Dr. Aqdas started lecture with reference to eminent scholars of 15th century whose main discourse revolved round the basic question how to end chaos and turn it into social order for human existence. He state4d that there are two institutions which have played main role to turn chaos into order in human society. One is State and other is Market. The interplay of these two institutions bring equilibrium and bring about order in society. He referred to Hobbes, locke and Rousseau. Then he referred to Adam Smith and his book “ Wealth of the Nation”. According to Adam Smith if market forces are left to itself and state is barred from intervention, then it brings order to itself to which he referred as Invisible Hand. This hand does not appear but controls everything which lead to equilibrium and bring about order in society. Then he referred to brief analysis of historical developments which lead to distribution of world into blocks whereby one advocated state intervention whereas second group advocated market with least intervention by state. Capitalist group with its emphasis for liberal democracy and private ownership desired that market is required to be left to itself and state should stay away from private business and market. According to this school of thought it brings efficiency and is preferred. Whereas other group believed that efficiency is not sufficient justification to leave market to itself. State is there to bring equity in society through redistribution of resources. It advocated planned economy. Market based economy believed in private property rights and profit maximization and that state should keep itself away from business. State should not intervene unless it has eminent domain. This school advocates that let the economic hand either sink or swim without any sympathy from state to intervene. Whereas other school advocate planned economy and that efficiency should not be the sole objective of human endeavor and that state should intervene for ensuring equity through redistribution of resources. He referred to Hyke, Friedman and Fukuyama. For Hyke (book. The road to serfdom), State is slippery slope. Friedman in his book Free to choose (1980) say that Government is the problem. Fukuyama in his book in “The End of History (1992)” says that market capitalism is the peak of social evolution. He referred to Washington consensus whereby IMF-WB and USA prescribed economic policy measures. This policy mainly based on following three principles . Which even to the present day is visible from IMF policy while finalizing loan agreement with developing economies. 1. Privatization 2. Deregulation 3. Deregulation. IMF desired privatization of state owned enterprises to break monopoly of one institution and bring about efficiency through competition with other private entities. Through de-politicization , it wants the state to go for least intervention in market. With time, globally, control on resources by one percent population of the states fluctuated but ultimately fell down. Trend fluctuated from low to high and high to low during span of time from 1740 to 2010. The analysis lead us to infer that none of the extreme is desirable rather synthesis of both concept lead to welfare state which is mix of two. Scandinavian, Malaysia, Indonesia are example which believed in state control for equity and redistribution of resources and market based intervention for bringing efficiency. From this synthesis, welfare state emerged which contain both characterisitics. Then he stated that market do not exist in vacuum. Politics is mechanism where power is traded. Power politics which describe whom to be taxed and whom to be not taxed. Defense spending, all show power and its role in distribution of resources. Market want work and work. We have to take both. Market needed efficiency. State is to bring social policy for development. Then he referred to China which showed phenomenal development. It succeeded to bring 800 to 900 million of its popuulation out poverty. In Pakistan, 29(million) to 3(million) people live below poverty line. China is very impressive model for other to replicate as it worked. By combination of state and market property rights. China did not abolish the basic principles. Instead of private property ownership, it exercises it domain and gave private control rights of properties. China investment to GDP ratio rose from 12 % to 45%. China pursued policy of saving and investment which worked. One child policy left much resources for saving and investment. Similarly, East Asia countries pursued successful policies which provided cheap loan to export oriented sector which helped boosting export and earning foreign exchange. At the end of lecture, he divided all participant into seven different groups for work shop to read articles and suggest policy option for improving economy. Half of the total groups were given the topic to read article on BISP model of cash grant as social safety network whereas the reaming groups were asked to download article related to Independence of state Bank. He commended that BISP is opposed by many as it gives fish to the poor and do not teach it how to fish. This create dependency syndrome which is not a desirable phenomenon. At the moment, BISP has 9 million people under its umbrella which can be enhanced to 10 million through more grant in budget. He contended that state has a role to play. Being welfare state, state is required to take such steps for equity and justice. BISP grants almost Rs 2200 per month which may not be sufficient for poor family but it leads the family to have some relief. Some of the group were against the concept and pleaded that poverty is multifarious phenomenon which cannot be solved with such small measures. Poor health and low education also leads to poverty and these issues are required to be addressed if government is sincere to address the issue. Similar was the case with other group, some recommended independence of state Bank so that it is not used by government for raising funds for its budget from market which distorts it and makes people life difficult through inflation when currency is printed by government. He emphasized that Pakistan is in dire need to have sound policy options. It requires sound industrial policy. Soft loan be provided to industrial sector for growth and development. Participant asked questions. Jam shed Talpur from custom group stated that per acre production of agriculture land is very low as compared to other countries. Hence the sector also needs proper attention through policy option to bring it at par with best models to which the guest speaker conceded. To conclude his talk, he recommended model which contains both features. Both models have their positive and negative aspect. Mix of the two not only introduced efficiency but also ensure equity and justice through state intervention. It is high time for Pakistan to learn lessons from other countries and replicate them in its own milieu. Through persistent pursuit of saving and investment policies, Chine succeeded to bring 900 million population from poverty, Pakistan can do the same for 20 million population which sustain below poverty line. Pakistan needs to have some sound industrial and growth policies both in short and long term. In end , he left with votes of thanks and standing ovation from participants.
