Institutions, organizations, and markets | Pakistan Today

Institutions, organizations, and markets

  • Will anyone do the needful?

‘This nation asks for action, and action now’– Franklin D. Roosevelt’s inaugural address

There is crisis after crisis facing the people, may that be for instance, the sudden price hike of sugar, wheat, and more recently oil, at the back of either reportedly artificial disruptions in supply chains by cartels within each sector, or lack of policy response, or on the other hand inability of the government to improve the workings of state-owned enterprises (SOEs) or effectively deal with inefficiencies in power sector utilities.

Resultantly, the government continues to play the ‘nanny state’ by bailing out the inefficiencies of these sectors, through the use of precious public money, which should otherwise have been used for the welfare of the multitude of poor– with significant increase in their numbers, ushered in by the current pandemic. Instead, lack of policy, possibly at the back of collusion of politico-economic elites, leads to welfare of these rich!

The PTI came into power on the promise of bringing ‘change’– bringing a structural change, and even a break in certain ways, from the past. Change requires policy response; rhetoric alone does little. And there remains a serious lack of policy response. A better performance in this regard, would have even allowed better preparedness to deal with the current pandemic even.

One of the main differences between democracy and dictatorship, is the existence of working communication lines between the elected and the electorate. That ensures a two-way learning system, and a natural vent for grievances of the aggrieved parties. This is still very weak. Words go unheard, because otherwise there have been so many hue and cries, through both written and spoken words in media, and other interactions of economic and political agents, that a better listening government would respond. Volcanoes erupt, channels ensure flow.

Can the PM come up with a ‘New Deal’ reform for Pakistan, one that is also green? For this, among other thing, he will need to understanding the correct limits of the public sector– and not minimal, as the neoliberal mindset, to the great disadvantage of country after country, tried to do over many decades now. Moreover, he will have to remove the class system, in the shape of civil and government service, and push to approach one reformed public service. Once again, all will require policy, and before that, will. Yet before anything can make a roll-on, the PM will have to be more inclusive of others’ ideas

So what does an economic agent wants: better institutions, improved organizations, and efficient markets. Fall short on these in any significant way, and the result is frequent fire-fighting of issues of a similar nature; similar, because, the roots of all these crises are mostly in the same three origins– institutions, organizations, and markets. Fix the roots, and the fruits will be a lot better. It cannot be the other way round.

Institutions are the ‘rules of the game’. Institutions are embodied in the practical sense by ministries at the federal level, and departments at the provincial level. They make the policy– the environment– under which both organizations– the ‘players of the game’– and the markets operate to their optimal levels. Both the organizations and markets allow interaction of economic agents to reach ‘economic exchange’ of goods and services. Institutions therefore aim to ensure the least disruptive and costly exchange.

Now take some of the recent issues that made headlines. The wheat, sugar, and oil crises, apparently caused by inefficient institutional environment, did not upgrade organizations to ensure seamless economic exchange. Lack of policy, and non-neoliberal in that, kept institutions weak. That is the rot at the roots, which the government has not been able to fix through policy. Such policy vacuum, according to many, is even by ‘design’, of the likes that the PM likes to identify as ‘elite capture’.

Only needed policy could have weakened these politico-economic collusions of the elites, and thwarted their extractive institutional governance and incentive structures, that they have put in place over many decades. Yet the PM has remained unable to get around to creating a team of cabinet ministers and advisors that can deliver in this. So what will change this? is what the PM should ask himself. Like he is– an open and straightforward person, as much amplified by his very first speech after becoming PM– he should share with the public an honest declaration of how he will improve his team, and how, broadly speaking, the institutions, organizations, and markets be improved. He should enumerate main policy steps in terms of governance and incentive structures that will bring improvement in all three.

The current pandemic has all the more exacerbated the overall acute and chronic economic issues that were already facing the country. There is no more time to delay the policy response needed. Will the PM answer this loud and clear call, amplified all the more by the crisis, and rise to the challenge? In recent history, Franklin D. Roosevelt rose to the occasion, and changed the destiny of an entire nation suffering deeply by the Great Depression of the 1930s.

Can the PM come up with a ‘New Deal’ reform for Pakistan, one that is also green? For this, among other thing, he will need to understanding the correct limits of the public sector– and not minimal, as the neoliberal mindset, to the great disadvantage of country after country, tried to do over many decades now. Moreover, he will have to remove the class system, in the shape of civil and government service, and push to approach one reformed public service. Once again, all will require policy, and before that, will. Yet before anything can make a roll-on, the PM will have to be more inclusive of others’ ideas, like being made in this column.

Omer Javed

The writer holds PhD in Economics degree from the University of Barcelona, and previously worked at International Monetary Fund. He tweets @omerjaved



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