THOUGH 75 years may not be a long time in the life of a nation-state, it is definitely long enough to have a major impact on structures, institutions and outcomes within the nation-state. We have plenty of examples around us that show this. The story of the so-called East Asian Tigers is a truly impressive example. After World War II, the Tigers changed themselves completely in a matter of decades.

China continues to change at an astounding pace. It is now the second-largest economy in the world and may soon be the largest. In our neighbourhood, India has been showing remarkable development since the mid-1980s. More recently, Bangladesh has made strong progress in a matter of decades. It is, therefore, a good time to look at what we have been able to achieve, where we stand today and what the road ahead looks like. As part of such an effort, here below are snapshots from two important areas of the country’s social sector.

Education

The education section of the executive summary of the Economic Survey of Pakistan 2021-22 notes: “Pakistan is committed to transforming its education system into a high-quality global-market demand-driven system in accordance with Goal 4 of the Sustainable Development Goals (SDGs).” However, the reality is vastly different. The literacy rate in Pakistan in 2021 was only 62.8pc. Any gains in literacy rates over the last many years have been small, slow and marginal.

Though Article 25A of the Constitution, added as part of the 18th Amendment, says that all those age 5-16 years should have access to free and compulsory education, an estimated 20 million children remain out of school. We have not even achieved universal enrolment and completion at the primary level. The primary level Gross Enrolment Rate (GER) is currently 84pc, down from 91pc in 2014-15. The Net Enrolment Rate (NER), which tracks enrolment rates of the relevant age cohort at the primary level, is only 64pc, down from 67pc in 2014-15.

Will the economy grow in the absence of adequate allocations for health and education? Should we allow the ruling elite to indulge in their preference for short-term financial gains at the cost of social development.

Most children who enrol in grade one drop out before they finish higher secondary level of education. It is estimated that of every 100 children who join grade one, only about seven are able to enrol for undergraduate studies 12 or so years later. Dropouts are for a variety of reasons. One amongst them is the non-availability of schools at the higher level. We have, across Pakistan, some 283,700 educational institutions. Out of these, 187,900 are primary schools, 49,300 middle schools, 32,300 high schools, and only 6,200 higher secondary schools.

Not every child of primary school-going age is getting enrolled in school. Even for those who are enrolled in the 187,900 primary schools, there are only 49,300 schools at the middle school level. When children graduate from primary to middle schools, many have to change schools. Since we have fewer middle schools, the distance to school for many children increases even if these middle schools have the space to accommodate all of the children coming from primary schools. Research points out that distance to school is another strong factor explaining dropout rates.

The connection between distance to school and school attendance is much stronger for girls than boys. Primary to middle school transition also happens around the time when girls hit puberty (children, especially in rural areas, enrol in schools one-three years after when they should be in school). Questions of security and ‘honour’ become important here. It is no surprise then that a lot of children drop out when they are forced to transition from primary to middle schools. The same dynamics get repeated as children transition from middle to high and then to higher secondary schools. One could, therefore, say that dropouts are due to ‘policy design’. When we do not have the required number of schools in close proximity to students and do not have any provision of transportation for children who live at a distance from a school, how can dropout be avoided?

We have not touched upon issues of quality of education yet. However, it is as big an issue as access, if not bigger. The Annual Status of Education Report (ASER) gives a cross-sectional picture of learning outcomes of Pakistani children at the basic numeracy and literacy skill level almost every year. These reports, over the last many years, have been showing poor levels of learning for a majority of children, and no major improvement trends. In fact, the latest report shows some level of learning loss as well due to the disruption caused by the Covid pandemic.

ASER shows that almost half of the children enrolled in grade five in Pakistan are behind in learning terms than where they should be at that stage. Education sector researchers have been saying that there is a ‘learning crisis’ in many developing countries where children might be going to schools, but they are not learning what they should be learning and not at the pace at which learning should be happening.

The World Bank has even worked out quality-adjusted ‘years of schooling’ indices. Pakistan does quite poorly on them. Here, if a child is in school for eight odd years, their quality-adjusted learning level amounts to only four or 4.5 years. It may be hard for us to get all our children into school, but it is a tragedy that even those fortunate enough to attend are not learning as they should be.

In 2021-22, we spent only 1.77pc of GDP on education-related expenditure at both the federal and provincial levels. Most UN agencies recommend that the minimum expenditure on education should be 4pc of GDP. In recent years, the highest percentage of GDP we have spent on education was in 2017-18, when education expenditures were raised to 2.12pc. The usual argument given for lack of spending on education has always been and still is that we do not have the resources.

The lack-of-funds argument is a tricky one. Does Pakistan not have the money to be able to give every child an education of a certain quality, or is it the case that we have other priorities and the education of our children is not a high enough priority? Many countries do provide education to all of their children, and in most places, education, at least till high school, is state-funded and usually state-provided. Why has this been hard to do in Pakistan?

When examples of other countries are cited, it is often mentioned that developed countries have a lot more resources and can afford to spend a lot more on education, and it is difficult for developing societies to be able to prioritise educational provision. However, it should be kept in mind that it is not just the developed countries that are managing to educate all of their children. Many developing countries are also spending more on education, health and social sectors than Pakistan. Sri Lanka and Bangladesh are examples from our own neighbourhood. Both have higher literacy rates, and both countries have made very impressive progress on the education front in the last few decades. Neither of these countries is much ‘richer’ than Pakistan. As mentioned, the issue is of prioritisation.

In addition, it should also be borne in mind that when the countries called ‘developed’ today started investing in education, they were not considered ‘developed’. They were, at that time, developing themselves and had resource constraints that probably were not much different from what many developing countries face today.

They still started investing more in educating and upskilling their citizens. We have plenty of evidence that their investments in education contributed to where they are today in terms of economic and social development. The issue remains: what priority do you want to give to education? It seems to be a pretty low one for Pakistan, and this has been consistent for a fairly long time now.

Health

The story of health is not very different from education. SDG 3 is to ‘Ensure healthy lives and promote well-being for all at all ages’, and the government rhetoric has always been that the health sector is a high-priority sector. Yet the achievements of this sector leave a lot to be desired. With regard to SDG goals, “Pakistan is on track for 3 out of 14 indicators ...” says the Economic Survey of Pakistan 2021-22. “All other indicators are either moderately improving or stagnating.” Compared to education, Pakistan spends even less on health. Even in a Covid year, Pakistan spent only 1.2pc of GDP on health.

Larger hospitals are concentrated in the larger cities, as are better-quality private health providers. The quality of care provided at Basic Health Units (BHUs) is quite poor. One of the most telling comments on our ability to manage healthcare provision continues to be the fact that Pakistan is still one of the few countries, along with the likes of conflict-torn Afghanistan, that have not been able to eliminate the polio virus. This year, too, we have had multiple cases of polio. We cannot even organise to get every child inoculated against polio.

Health services are concentrated in cities and are more focussed on curative services than preventive ones. Curative medicine tends to be more expensive. There are many diseases that can be prevented if inoculation and/or vaccination is available; if people have awareness and knowledge about preventive measures; and if they have access to the right preventive technologies and/or interventions. But health services are organised around providing curative services.

To take one example, surveys clearly show that more young people would like to have access to better information and services on reproductive health issues, but they do not have that. Though the government claims that family planning is a priority area, and that managing fertility issues is important for the country if we are going to manage the demographic transition more effectively, the level of services offered to young people is quite poor, and the coverage is very patchy, incomplete and insufficient.

Generalisations

One can continue to quote facts and figures from other social sectors, but they usually tell the same story as that of the education and health sectors. William Easterly, in a 2001 paper titled, The Political Economy of Growth Without Development: A Case Study of Pakistan, made some pertinent points that encapsulate the dilemma we have, and so it is worth quoting in detail: “Pakistan is an intriguing paradox. It has a well-educated and entrepreneurial Diaspora who thrive as small business owners in industrial economies, skilled workers in the Gulf States, and as high officials in international organisations. The professional elite within Pakistan is at a similar level to those in the industrialised world. Pakistan benefited from $58 billion of foreign development assistance … adjustment loans from the IMF and the World Bank … a lucrative Cold War alliance with the United States, and multiple government development programmes. Pakistan is the third largest recipient of official development assistance in the world over 1960-98 (India and Egypt are first and second). If it had invested all the official development assistance from 1960 to 1998 at a real rate of 6pc, it would have a stock of assets equal to $239 billion in 1998, many times the current external debt.

“The World Bank alone provided $20 billion in loans from 1952 to 1999 … Pakistan is blessed with fertile cropland watered by rivers that flow down from the Himalayas; it inherited the world’s largest irrigation system from the British at independence. It has even had per capita growth – on average 2.2pc per year from 1950 to 1999. Pakistan’s tripling of its per capita income over this period, and the concomitant poverty reduction, was an important achievement while many low-income countries were stagnating. Pakistan’s PPP per capita income was higher than a third of the world’s countries by 1999.

“Yet, after all this, social indicators like infant mortality and female primary and secondary enrolment are among the worst in the world in Pakistan. Female literacy ranges from 41pc in urban Sindh to 3pc in rural [Khyber Pakhtunkhwa] and Balochistan, with a nationwide average of 29pc. Despite a major effort to increase services under a donor-supported eight-year campaign called the Social Action Programme, Pakistan is only spending $2 per capita on health. In contrast, the government is able to find the money for big-ticket items, like nuclear weapons and the $1.2 billion six-lane expressway between Lahore and Islamabad…”

Easterly’s argument that for its level of income and given the growth path it has had, Pakistan does poorly on development indicators is worth dwelling over a bit. The growth also has, since Easterly wrote the article, become a lot harder to sustain. We keep having cycles where an external or manufactured stimulus allows us to have a bit of growth recovery, but within a couple of years or less, the recovery becomes non-sustainable, and the fiscal and current account deficits force the entry of another stabilisation programme. So, we have moved into the era of little growth and little development where, clearly, the ambition is to be on the path of sustainable high growth with development.

The key here is to understand why Pakistan had ‘growth without development’. Now that the growth seems to have faltered as well, there is talk, all the time, of Pakistan defaulting and/or needing loans and handouts to avoid default. Is it the lack of investment in human capital that is holding Pakistan back? Is it the lack of strong institutions that guarantee property rights, rule of law, and make the environment predictable for economic activity to thrive that is making Pakistan falter in terms of growth and development? Probably both.

Acemoglu and Robinson in their important book, Why Nations Fail: The Origins of Power, Prosperity and Poverty (2013), made a case for institutions, arguing that institutions, just understood as ‘formal and informal rules of the game’, definitely play an important role in ensuring paths to growth and development. But one of the key questions still remains: why have some countries been able to develop the right institutional structures, and others, like Pakistan, have been struggling?

There is plenty of evidence on the importance of investments in human capital: the health of the nation, the education and skill levels of the people in a country and their general wellbeing and welfare are important instrumental variables for ensuring the country is able to develop at sustainable rates. Of course, these human capital variables are not just instrumental variables, they are also ways of judging the state of development of a country. They are the ends development works for. A lot of work of scholars like Amartya Sen has shown, both theoretically and empirically, that a country cannot be ‘developed’ if its human development indicators lag behind, and, equally importantly, it is hard to see how a country can develop if it does not invest in its human capital.

Again, the question is: why have some countries been able to find the right combination of policies for macroeconomic management, institution building and investments in human capital and social welfare and have been able to sustain these policies and, as a result, have developed rapidly in a matter of decades, while others have continued to struggle? Why has Pakistan not been able to find such a policy combination?

A number of researchers working on Pakistan have argued that the Pakistani elite have been in capture of the state, its resources and its policies for a long time. They are a small percentage of the Pakistani population, yet have made policies that have been extractive in nature and have benefited them at the cost of society at large. Institutions function to serve the interests of the elites. Investments in health, education and so on also favour a very small segment of society. These elites have been milking the country for their benefit and, irrespective of who has been in power, all of them have been playing the same game. Individual beneficiaries have been changing, but class interests have dominated overall policy making and policy outcomes.

These elites are mentioned in Easterly’s paper as well. Dr Ishrat Husain made the same argument in his 1999 book, Pakistan: The Economy of an Elitist State. Kazim Saeed made the same argument about the division between the elites and the rest, in his extensive and well-argued book Dou Pakistan (2020). Most recently, this is the argument that has been made, at the global level, by Stefan Dercon, in his book Gambling on Development: Why Some Countries Win and Others Lose.

Though there are variations in details, we know, roughly, the policies, if they are pursued for sustained periods, that can lead to sustained growth and development. Many countries have been able to transform themselves over just a period of decades following such policy combinations. These policies are context-specific, but they have significant overlaps: macroeconomic stability, reward for entrepreneurship and risk-taking, institution-building, rule of law, investments in health, education and welfare. But the key is the ability to sustain the policies till rewards start coming for all. Then the rewards themselves provide legitimacy for the policies.

Pakistan has not been able to create this policy combination and sustain it for long enough. Dercon argues that in some countries, the elites have been able to curb their greed for short-term gains and “gambled on development” by investing in a “development bargain” that allowed society to pursue policies for overall growth and development. As the benefits from this development bargain started to come through, these benefits themselves became the legitimising factor for the policies as well as the regimes in question. This allowed these countries to move to sustainable high growth and development paths.

Pakistani ‘elites’ have not been able to do that. Instead, they have had, in the past and to date, a preference for policies that give short-term gains to whosoever is in power. The ‘milking’ of the country for short-term benefits of the few has not allowed optimal investments to take place in any productive sector; it has not allowed human capital to develop and has also not allowed space for optimal development of institutions. It is not a surprise that Pakistan has had a period of ‘growth without development’, and now even that has become unsustainable. The chickens are truly coming home to roost.

Though it is hard to explain why the elites in some countries choose to gamble on development, while others do not or are not able to, one explanatory factor mentioned by a number of researchers, including Dercon, is that of a crisis. In some countries, crisis situations have led to re-evaluation of policies and a move towards more inclusive policies.

China, in 1979 and after, is often given as an example. Though Pakistan has had its share of crises, it has not led to a change in the equilibrium. We have had wars in 1965 and 1971; East Pakistan separated to become Bangladesh; we have lived through the Afghan wars and their fallout in terms of terrorism, to name but a few. None of these have ‘forced’ the elites to alter the structure of the economy to make it more inclusive and to re-orient policy-making towards the masses.

We are in a crisis situation currently as well. Many commentators are talking of default on international debt obligations as a distinct possibility for Pakistan. Even now, the attempt from the elites is to borrow against the future and avoid default. But there is no indication that there is any willingness to think deeper about the structural issues we are facing. Therefore, the crisis may sustain for some time. Will this crisis change anything at the deeper level? In the language of Dercon, will the crisis force the elites to ‘gamble on development’ and create a new ‘development bargain’ for the society? This remains to be seen.

Pakistan has been in existence for 75 years now, which is time enough to change and/or transform societies quite substantially. We have seen this through the example of other countries. More worrying is the fact that despite our poor performance historically and the difficult place we are in currently, there does not seem to be any major rethinking going on within the elites of the country.

The quest is still for short-term fixes through international bailouts and/or a growth spurt through projects like CPEC. If deeper thinking on structural reforms does not happen, the future decades will be worse than what we have seen in the past, and this is not a good prospect for a country to face up to or live with.

The writer is a senior research fellow at the Institute of Development and Economic Alternatives, and an associate professor of economics at Lums.