South Asia is home to roughly a quarter of the world’s population but accounts for only 1.8 per cent of the world’s GDP. Little wonder, then, that per capita incomes are low and the region is home to a large number of poor. The past two decades have seen a sharp transformation of the region’s economies: on an average, the share of agriculture in GDP declined during the 1981–99 period from 38 per cent to 29 per cent, whereas the shares of industry and services increased from 22 and 40 per cent to 24 and 47 per cent respectively. The region also receives a large amount of foreign aid.
Foreign aid is given to countries which firstly, seek a climate for the effective absorption of foreign resources, secondly, are willing to impose sacrifices on their people to the extent permitted by improvement in their economic situation; and thirdly, plan adequately for the kind of growth which in due course would be self-sustaining.
This poses a challenge to policy makers as they have to take in to consideration the demands of the donors when appropriating foreign funds. The classical narrative of economic development – poor countries are caught in poverty traps out of which they need a big push involving increased investment, leading to a takeoff in per capita income – has been very influential in foreign aid debates since the 1950s. This was the original justification of foreign aid. There is a widely held view that Pakistan’s success in the 1950’s and 1960’s was intimately linked to the amount of foreign aid the country received. The first half of the sixties witnessed simultaneous growth acceleration in growth rates of GNP, exports, investment and domestic savings. This was also a period of significant expansion in foreign aid inflows.
However, a few decades down the line and billions of dollars in foreign aid later, Pakistan is still far from being economically stable. The war on terror, insurgency in northern parts of the county and the recent outburst of violence in Karachi has definitely added a great deal to the economic woes of the country. Yet, we cannot blame these factors alone for our current economic condition.
In Pakistan, like most developing countries, governments, bureaucracies and armies seem to have the main initiative when it comes to generating political and social change. And the country’s history shows that often the pursuit of economic development makes the attainment of a relatively cohesive political system difficult. Given the limited resources and regional economic disparities, economic development generates such rising pressures on resources that the government finds it increasingly difficult to satisfy rival claims. In addition to this there is the problem of political miscalculations and ulterior motives of different political parties. This means that social goals like equitable distribution of national income or education are only given lip service.
Exorbitant amounts of foreign aid might help Pakistan in the short run but it cannot help the country become self sufficient. These funds need to be put to good use. Economies grow by accumulating productive resources and by improving the process through which resources are transformed into consumable goods and services. The concurrent growth of education and output in most economies has substantiated the causal link between education and productivity. Education is what we need to focus on.
A study by Robert Barro, Professor of Economics at Harvard, shows that much of the high rates of growth of East Asian economies can be explained by inordinately low levels of income in 1960 relative to their level of education, ie, as the levels of education (including technical education) improved, so did the growth rates.
Right now the Biblical prediction that “unto everyone who hath shall be given; and from that hath not, even that he hath shall be taken away” is perhaps best illustrated by Pakistan. Education is the only tool that allows some degree of social mobility to people. However, Pakistan does not have a standardised education system and as Tariq Rehman points out in his book we are grooming “denizens of alien worlds” with our current education system. If we are to actually make the lives of our poorest people better then policies need to be geared towards promoting and homogenising our education system and not just increasing the number of industries we have or the amount of foreign aid we receive.
The writer is an academic and freelance journalist
