Editorial
Pakistan’s economic journey has been marred by inconsistent policies, driven by external economic thought processes that have failed to address the country’s unique challenges. From the inception of Pakistan, there was a lack of focus on developing indigenous economic acumen, despite the global shifts in economic thought post-Bretton Woods. While the 1960s saw the implementation of Keynesian economics promoting government intervention and welfare policies, Pakistan continued to struggle with a fragmented economic structure.
The Keynesian approach during the 1960s sought to encourage sustainable growth by fostering public-private partnerships, yet neoclassical policies emphasizing market fundamentalism soon overshadowed these efforts. The latter promoted deregulated markets and minimal state intervention, which, while attractive in theory, failed to address domestic challenges like income inequality and underdeveloped market structures. The government made no concerted effort to analyze and improve economic institutions, leading to the perpetuation of a “trickle-down” economic model that deepened wealth disparity.
The issue worsened in the 1970s under Zulfikar Ali Bhutto, who implemented socialist policies, nationalizing industries and banks without addressing the underlying structural problems in agriculture and industrial productivity. The lack of land reforms and inefficiencies in public sector enterprises only worsened economic stagnation.
By the time of General Zia’s rule and subsequent governments, the country returned to market-based, neoliberal economic policies, largely under the influence of the International Monetary Fund (IMF). These policies, however, contributed to frequent boom-bust cycles, rising poverty, and an economy trapped in dependency on foreign aid. IMF programs, rooted in market fundamentalism, pushed austerity measures that ultimately hurt the most vulnerable populations while benefitting the elite.
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Instead of following external neoliberal models, Pakistan must evolve a homegrown economic approach, much like China did in the 1980s. China’s success lies in its gradual, domestically-driven reforms, such as the dual-track pricing system, which allowed selective regulation alongside market liberalization. Similarly, Pakistan needs to address its structural disequilibrium by focusing on improving supply-side bottlenecks rather than relying on austerity measures that suppress demand.
For long-term economic stability and growth, Pakistan must develop its economic institutions and prioritize education, professional expertise, and technical governance. The country should cultivate a diverse pool of economists, not only in the public sector but within specialized areas like agriculture, trade, and healthcare. Aligning domestic economic thought with the country’s unique needs will create a more resilient, sustainable, and equitable economy.
The path forward is clear: Pakistan must shift away from externally imposed neoliberal policies and instead chart a course based on domestic economic realities, much like China did decades ago. This requires embracing gradual, well-thought-out reforms and rejecting the “Big Bang” approach of rapid market liberalization that only exacerbates inequality and inefficiency. Only by creating an environment where markets work for everyone, not just the elite, can Pakistan build a prosperous future.
