IN 1973, Chilean military dictator Augusto Pinochet rolled out neoliberal economic policies with the promise of reforming the economy. Backed by top minds from the influential University of Chicago’s School of Economics and their patriarch, Milton Friedman, Pinochet began ‘opening’ the economy by removing duties on imports, dismantling labour unions, eliminating price controls and privatising SOEs.

While international organisations hailed the aporophobic reforms as a miracle, the proletariat suffered due to historically high inflation and unemployment rates and worsening inequality. Thirty per cent of Chile’s wealth accumulated in the hands of 1pc while the masses were told that their suffering was a necessary evil to cure the ‘economic disease’. Friedman’s students who led the reforms and held key government positions were dubbed ‘the Chicago Boys’ and their methods described as ‘Shock Therapy’.

For Pakistanis, this sounds familiar. After the 1999 coup, Musharraf used the nation’s shock to carry out similar reforms. Backed by neoliberal international organisations, he attempted to ‘open’ Pakistan’s economy to the rest of the world by imposing a harsher ban on unions, lowering import duties, increasing incentives for foreign investors and privatising SOEs.

The economic reforms were led by Shaukat Aziz, a Citi Group executive in the US who came to Pakistan with 40 ‘financial experts’ to help revive the economy. Pakistan too had its own Chicago boys. While some outcomes of Musharraf’s economic policies may be debated, few can deny that the economy grew on the back of the working class while the rewards were reaped by the capitalists. Further, the methods of privatisation of SOEs opened doors for large-scale corruption as the state’s favourite investors plucked large enterprises at fire sale rates.

Why do we end up in the same boat every few years?

This period was not Pakistan’s first bout with economic shock therapy and would not be the last. In an interview right before his appointment as finance minister, Miftah Ismail described himself as a disenchanted ‘Chicago-style economist’, though his actions lay doubt to the claim of disenchantment. After a startling change of power, the new government rolled out major changes by slashing subsidies, eliminating price controls, reducing public expenditure and devaluing the currency. The political crisis, the fears of default and the harrowing images from Sri Lanka gave the new leaders an opportunity to make swift policy changes while the public reeled from one shock after another. In essence, this was Pakistan’s umpteenth round of shock therapy.

Whether it was the fiscal policy during the pandemic or the economic liberalisation policies during the political turmoil of the 1990s, the method and result of ‘reforming’ the economy was the same. This time it is no different. Most economists have claimed without a doubt that meeting IMF conditions is the only option for Pakistan at present but what is completely disregarded is where that will lead us. History tells us it is towards higher unemployment, lower growth and public spending and significantly greater inequality. For a country such as Pakistan with a young population prone to radicalisation, this will further damage its delicate social fabric.

So why do we find ourselves in the same boat every few years? Most experts will have you believe it is because there is no alternative, but the truth is that we have not looked for one. After banning student unions in the 1980s, most intellectual debate on political and economic systems has receded and any alternate ideas to Friedman’s laissez-faire ideals have died out. Whether it is right-wing religious groups that denounce capitalism or left-wing socialists, the economic policies pursued are continuous and so with each turn of events, Pakistan goes through a new series of old reforms.

The continuous im­­plementation of these policies, specifically in developing nations, can be attributed to the methodology best described by Milton Friedman himself: ‘‘Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.” The challenge then to developing nations is to present a technically viable alternative policy that prioritises public welfare.

The path to developing an independent economic policy is long and wearisome. It can only be achieved through the free and independent development of the country’s intelligentsia, promotion of education, and resumption of sociopolitical debate in our schools and colleges so that when we face the next crisis, there will be many future leaders who’ll have better ideas and stronger ideals to rely on.

The writer is an engineer and does research in the fields of sustainability, energy & manufacturing.

Published in Dawn, October 16th, 2022