Urban Middle Classes And The Limits of 'Honest' Economics

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Urban Middle Classes And The Limits of ‘Honest’ Economics

Urban middle classes in Pakistan believe that an honest leader can fix the crises faced by the country. Raza Habib Raja argues that these myths have foundered in the past few months since Imran Khan, an ‘honest’ politician, assumed power last August. 

Before the 2018 elections PTI supporters offered many reasons why Imran Khan was the right choice for Pakistan. But the most touted reason was his “honesty”. Literally, all PTI supporters with whom I interacted in those days on social media as well as real life, constantly cited his honesty as the reason, as to why Pakistan should give Imran a chance.

It also became the main “defense” of Imran, by his supporters against severe criticism on his various reactionary stances of the past. Hassan Nisar, himself an Imran supporter, perhaps summed the collective sentiment all of Imran’s supporters, when he said, “Imran jo bhee hai, Chor naheen hai”. Consequently “At least, he is not corrupt” became the defense, when everything else failed.

In order to convince the skeptics, the party as well as its supporters, came up with a narrative that tried to rationalize as to how having an honest leader would bring material change in key areas of the economy.  According to this narrative, once we have an honest leader, things will improve rapidly through the following mythical mechanisms.

Myth 1: Once an honest person is at the helm, Pakistani diaspora will send billions of dollars

One of the biggest problems of Pakistan is external imbalances, particularly the current account deficit. According to PTI supporters, once an honest person is at the helm, Pakistani diaspora will send billions of dollars. They had always loved Pakistan but since they mistrust “corrupt” politicians, they were reluctant to send billions they have.

When Murad Saeed, claimed that 200 billion dollars would be sent in two days, his claim was believed by many, albeit with some qualifications. Of course, many doubted the veracity of the two days claim or the colossal amount of 200 billion dollars, but at the same time they genuinely believed that “honesty” of the great Khan will persuade the diaspora to send in huge remittances that will stop Pakistan from “begging” other countries or seeking recourse to IMF.

Myth 2: Honest leadership will lead to higher tax revenues 

Many also believed that once an “honest” leader is at the helm, tax revenues will drastically go up, as Pakistanis give so much in charity but evade taxes due to their mistrust of “corrupt” leadership. So when an “honest” leader is at the top, many would willingly pay taxes.

Myth 3: No money laundering when an honest man rules the country

Supporters also believed that once an “honest” leader is in power, money laundering, which in their heads amounted to billions of dollars (a highly unrealistic amount) annually will be eliminated, thus injecting that cash into our cash strapped economy.

Myth 4: Honest leader matters, dishonest electables don’t

Since many so-called “electables” had also joined PTI prior to elections, the honest leader example was given to justify that. The official stance adopted by the party was that it is the leader who really matters and since Imran is honest and respected by the population, therefore the electables won’t be able to blackmail him and in fact, will be encouraged to change their traditional way of politics. Some of the supporters also argued, that even if the electables don’t change, at least we will have an honest leader at the top, who will not embezzle funds.

Popular myths are dangerous

This narrative was not merely harmless election rhetoric. An overwhelming number of the PTI supporters believed that due to Imran’s honesty, miracles were possible and therefore were ready to overlook perhaps the worst and most blatant electoral engineering in contemporary times.  Even those supporters, who were more level headed and truthful enough to acknowledge that elections were being manipulated, insisted that it was the need of the hour. They tried to rationalize the electoral engineering by referring to “Ends Justify Means” philosophy.

But the strange belief that honesty of Imran could perform miracles was not just restricted to impressionable PTI supporters. Many sympathisers of PTI, otherwise experienced and educated, believed that turning around the economic situation was possible through the above mythological mechanism. Once Imran came into power, the party based its initial economic policy upon it, and with devastating consequences.

 

Reality Check 1: No extraordinary remittances and IMF loans inevitable

In his first speech as a Prime Minister, Imran appealed to the Pakistani diaspora to send in remittances, as he did not want to “beg” either IMF or other countries. Let me be clear: there is nothing wrong in asking for the Pakistani diaspora to help, but the PM explicitly ruled out alternatives in that speech. His main contention was that those who gave loans also usurped the independence of the borrower. In some ways, he was just reiterating his past claim that “Imran Khan kudkhushi ker ley ga magar IMF naheen jai ga” (Imran Khan will commit suicide but won’t go to IMF). In that speech he also said that, “It will be shameful for me and you if I ask some other country for money”.

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The reality was that we had to go to the IMF because the current account deficit was getting precarious. Instead, Mr. Khan, perhaps partly constrained by his own past claims and partly believing in his own prowess as an “honest” person, decided to explicitly rule out alternatives. This proved to be costly as the requested remittances did not come in the required amount and current account deficit persisted. According to State Bank report, there was some bump in the remittances, but was mainly due to improvement in economic performance of economies of USA and UK ( where a large number of Pakistani expats live) and not because of Imran ’s appeal as a credible leader. Even that increase was too meager to address the colossal amount of deficit Pakistan is facing.

What the over-enthusiastic supporters of PTI completely forgot was that merely having a supposedly honest person is not going to increase remittances. Eventually, despite his tall claims, Imran was forced to beg the friendly countries and also seek the IMF’s help. The delay cost Pakistani economy dearly and all the economic indicators started to go down.

Reality Check 2: Tax revenue deficit is a record high for past nine months

Likewise, the assumption that tax revenue would improve as a more “credible” person was in power also proved to be false as the revenue deficit is a record high for these nine months. The situation is so precarious that FBR has extended the tax filing deadline several times. Instead of undertaking tax reforms and improving the tax collection mechanism, the onus so far has been to rely on artificial austerity measures (such as selling of cars and buffaloes) and banking on the “honest leadership” appeal.

The government is also considering yet another tax amnesty scheme, once again reversing its earlier claims. Also to cover massive shortfalls, it has constantly taxed consumer goods making life miserable for the low-income groups.

Reality Check 3: Anti-money laundering equals harassing political opponents

The claim that Imran’s government would be able to stop supposedly billions of dollars of money laundering which in turn would inject cash into the economy, has also been proven false. All which the government has done is to use NAB to harass its opponents.

What PTI government and its impressionable supporters completely overlooked was that people don’t pay taxes out of the emotional appeal. Tax payment is a quasi-voluntary act which is dependent on a host of factors of which the efficacy of the tax collection mechanism is most important. Yes, the credibility of the government is important but even if we have the most honest government, tax collection ultimately boils down to devising a collection mechanism which is efficient and unaffected by petty political considerations.

Reality Check 4: Electables are way too influential

To improve tax revenues, we need to increase agriculture tax, but the fact that PTI government has so many electables, most of whom are influential landlords, makes it difficult to impose that. Development funds for elected representatives are back even though Imran Khan had promised that he would end this kind of ‘corruption.’ Powerful lobbies part of PTI and its government have given tax breaks to the rich and there has been little change in policy.

Reality Check 5: No go areas remain for the honest leader

Likewise, in order to cut the budget deficit, we need to reduce our defense budget, but the fact that PTI government is allegedly brought by establishment severely constrains its ability in this regard.  In fact, under the PTI government, the defense budget has witnessed an increase at the cost of the development budget.

The tireless projection of this narrative that all we need is an honest leader has led to dire consequences. We have ended up with a dubiously elected and seemingly incompetent government. The manner it was installed has undermined the democratic process and will have adverse repercussions for a long time.

But then Imran has also been facilitated by our textbooks and media, which for years have been creating a mindset, particularly in the white collared urban middle class, through perpetuating a romantic, naive narrative. According to this narrative, in reality, we are a blessed country, full of resources and a very talented population. If only we had an honest and determined leader, things would miraculously turn around. 

This is what I call “Honest” Economics, which like Woodoo economics is devoid of any sense. It literally assumes that all that matters is, “honesty”, and once we have an honest messiah, things will be sorted out.

The reality is that complex problems cannot be resolved by simplistic solutions. Pakistani urban middle classes, that ironically mock supporters of PPP and PML (N) as Jahils and Patwaris, need to realize that it is them, not the ordinary masses, who are the problem.

And that problem is here to stay.

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Raza Raja

The author is currently pursuing his Ph.D. in political science at Maxwell School, Syracuse University. His research interests are the political economy of development, civil-military relations, and political Islam.

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