‘Crisis is a terrible thing to waste’
By Shahid Javed Burki
Monday, 23 Aug, 2010
Those who know and have studied Pakistan’s history are comparing the floods and the destruction they have wrought with what happened right after the British hastened their departure from India. — File Photo
WITH so much destruction around after what were one hundred year floods, it is difficult to talk about hope and opportunities. But there are opportunities in crises only if those in positions of power are prepared to work for bettering the country’s future.
Those who know and have studied Pakistan’s history are comparing the floods and the destruction they have wrought with what happened right after the British hastened their departure from India. After accepting Muhammad Ali Jinnah’s demand for the creation of a separate homeland for the Muslims of British India, the colonial rulers left the new country to its own devices.
It would have been difficult to create a new country even in ordinary circumstances but when Pakistan was born what it had to deal with were many extraordinary developments. Among them was the mass killing of people on the basis of religion. Pakistan had then only 30 million people. To these were added another eight million who came from India with no possessions but only hope about the future.
There was a net addition of two million people since six million Hindus and Sikhs left in the opposite direction, leaving Pakistan for India. When Pakistan took its first population census in 1951, 25 per cent of the people were born outside the country. This was the largest movement of people in human history and Pakistan then had the largest proportion of refugees in its population.
But there are a number of important differences between the situation today and the situation in the summer of 1947. There was a huge movement of people then but not much destruction of physical capital. Then there was little capital to destroy.
Now, more than 60 years later, the economy is much larger and structurally very different. There are also almost six times as many people cramped into the same amount of space. The loss of life this time around has been much less that was the case in 1947. No firm estimates are available but it has been speculated that about a million people were killed or injured in the civil disturbances that accompanied the transfer of population. But the proportion of the population affected is comparable.
Then, as already indicated, one quarter of the population was directly impacted. The proportion at about 30 million people directly or indirectly affected by the floods is one-sixth of the total population. The people who then left did so with practically no assets; that is also the case with the people on the move today. However, then millions of displaced people were settled on the lands vacated by the Sikh peasantry or on the properties left by Hindus and Sikhs in the urban areas. Today’s displaced people don’t have that option available to them unless the government, as discussed below, creates it for them.
One important outcome of the crisis of 1947 was that it created a major structural change in the economy and in the political system. Within a few years, Pakistan was less dependent on agriculture and became more reliant on industry and modern services. It also went through a dramatic reorientation in international trade
Before independence, the areas that became today’s Pakistan traded almost entirely with India. By 1950, India was no longer the dominant trading partner. New markets were found in the West and in Japan. There were also changes in the structure of politics. As the refugees settled down they were able to wield power that was disproportionate to their numbers. This happened at the expense of the landed community.
It is reasonable to expect that similar structural changes will occur as a result of the current crisis. Once the last amount of flood water has flown into the Arabian Sea, Pakistan will be a transformed place. The question is whether this transformation can be managed by those in power or will it be forced on them? There will have to be changes in three areas: a move away from dependence on foreign flows, providing opportunities to the displaced people in the economy, and changing the structure of the government so that it becomes more responsive and adapt at handling crises.
As has happened so many times before, the policymakers during crises turn to the world to provide help. The same approach has been adopted once again. But the response has been less satisfying from Pakistan’s perspective. There are a number of reasons for this. Pakistan is not a popular country these days in the West. Fareed Zakaria has called it the supermarket of terrorism. He and other people have estimated that 80 per cent of the recent acts of international terrorism can be traced back to Pakistan. Also, there is an aid fatigue.
Pakistan has turned up with a begging bowl in hand so many times before. And, there is an impression that the government was slow to respond unlike the situation in some other countries – China is an example – that are also dealing with natural disasters. Those who give – and this includes governments, non-government organisations and people in general – would like to see that those who are in charge are doing everything they can in addition to asking for foreign help.
Some economists who have studied crises maintain that they are an essential parts of the way economies progress. “Crisis is a terrible thing to waste” said Rahm Emanuel, President Barack Obama’s chief of staff. He was, of course, referring to the financial crisis the Obama administration inherited from the Republicans. When the history of the Obama administration gets to be written, it will be recognised that it introduced a number of important structural changes that would not have happened in ordinary times. There are lessons in this for Islamabad.
By far the most important lesson is the need to become self-reliant. That can only happen if the rate of domestic savings increases and the tax-to-GDP ratio is improved. This will require the rich and the upper middle classes to begin to pay taxes and augment the resources of the government so that in difficult times it does not have to resort to the begging bowl. The upper income groups will have to give more to the economy and the society.
Much of the displacement of people has occurred in the areas where there are large land holdings. There is an opportunity to introduce a meaningful land reform in the affected areas and settle the displaced people on the land the government should acquire. There is also a lot of government land in various parts of the country. Some of this should be used to settle the affected and the practice of giving land grants to the senior military officers should be discontinued. And incentives should be given to the private sector to set up labour using industries to provide employment to the people who have lost all they had as a result of the floods.
A good government would turn this crisis into an opportunity for bringing about structural changes in the economy and the society that will not only reduce the pain being suffered by the people who have been terribly hurt. Such structural changes will also help the country in the long run. But a good government must have the capacity to think strategically.
