William Easterly on How Pakistan Got Too Much Poverty

 

    

William Easterly is one of our most distinguished development economists. He does not do the glitzy scientistic experiments on micro-questions that win Nobel Prizes. Those studies are good at establishing what worked “before” and “after” in contrasting villages. They often find useful policies. But, by design, they often ignore big-picture issues that are not easily subject to experimental manipulation.

    

William Easterly is a big picture kind of a guy. His big pictures often have important subject matter.

    

I focus here on one of his more obscure and less well-known contributions – a chapter he did for a reader edited by the legendary Dani Rodrik on case studies in economic development. His essay was the closing act. It was a bravura performance that brought down the house.

    

The citation, if you are feeling studious, is

 

Easterly, William. 2003. “Political Economy of Growth Without Development: A Case Study of Pakistan”. Pp. 439-472 in Dani Rodrik (ed.), In Search of Prosperity: Analytic Narratives on Economic Growth. Princeton, Princeton.

    

You will not find this book on the shelves at your local Barnes and Noble.

    

Easterly starts with a deep observation that most of us miss. We are so used to hearing about warfare, conflict, corruption and complicated politics in Pakistan that we forget that in principle the place ought to be richer than it currently is.

 

a. Economic growth usually requires a highly educated and competent upper class with technical skills, and an active and entrepreneurial middle class, and a productive working class. Pakistan has all that, and has had that for a long time. Its professionals are sophisticated and highly competent. It has a large and successful diaspora of small businessmen all around the world. It trains a large body of skilled workers who do construction work all over the world. Both groups send money home. At every level of the social pyramid, Pakistan is rolling in skills.

 

b. Pakistan gets massive amounts of foreign aid and development aid. Only India and Egypt receive more.

 

c. It has superlatively good cropland and a tremendous irrigation system.

    

So how is Pakistan doing economically and socially? Easterly argues that economically, it is on again off again. It grew well up to the 1980’s and then had stagnant growth. Since Easterly wrote the article, Pakistan had a booming early 2000’s and booming early 2010’s with decline and stagnation otherwise. In general, Pakistan has underperformed much of the rest of the world.

    

More importantly, and worse, social development lags far, far behind Pakistani GDP growth. For a country with that level of GDP, it has far more poverty than would be expected. Because income data is often highly questionable in many countries in the Global South, I tend to measure poverty and human misery with infant mortality. Easterly does the same. Infant mortality is caused by inadequate nutrition, inadequate access to clean water and basic sanitation, and inadequate access to medical care. Being hungry, living near open sewers, and being unable to see a doctor are good measures of poverty. In 2017, Pakistan had the 25th worst infant mortality rate out of 225 nations. It was outperformed by much of Sub-Saharan Africa, and by both Haiti and Yemen.  It was just as bad when Easterly wrote. This is majorly poor performance at poverty elimination.

(World Factbook https://www.cia.gov/library/publications/the-world-factbook/rankorder/2091rank.html)  

    

So what is the problem in Pakistan?

    

Actually, there are four of them. The big four.

1. Massive social inequality.

2. Patriarchy and hostility to women’s advancement.

3. Ethnic hostility.

4. Constant political instability

The big four problems lead to fifth and sixth problems.

5. Total under-provision of services to the poor.

6. Complete corruption in the programs meant to provide services to the poor.

As big a deal as 2 through 6 are, number 1 is the headline story here.

    

Inequality. Pakistan is amazingly unequal.  Easterly notes that in the 1960’s, twenty-two families controlled 66% of Pakistan’s industrial wealth and 87% of banking and insurance. This is an unbelievable concentration of economic and financial power. Large super-powerful rural landlords (latifundists to use the Latin American term) are politically powerful. control much of the land in the countryside. Pakistani land inequality is not as bad as that seen in the most unequal places in Latin America (which have their own terrible problems with poverty) but it is worse than most other nations in Asia – most of which outperform Pakistan on human welfare.

    

What effect does inequality have? The elite have little interest in educating or promoting economic growth for rivals from lower social formations. They already control everything and would like to keep things this way. So if the state gets soft and corrupt and fails to deliver educational or economic improvements, fine by them. They get to dominate whatever expenditure takes place. Easterly documents multiple cases of schoolteachers being hired by the elites in patronage positions of easy no-show jobs and simply not coming to school. He also documents school funds being used to construct animal sheds on elite property. Easterly notes the rural elite have notably resisted taxing themselves or agriculture in general, leaving Pakistani schools critically underfunded.

    

Patriarchy. Rae Blumberg, a prominent writer on gender and development, notes that the patriarchal control of women is markedly associated with low rates of economic development. Female education lags. Female entrepreneurship lags. Microenterprise lags. Plus, patriarchy is often associated with a machismo warlike culture that fosters feuding, violent crime, and regional uprisings. Pakistan has all of the above. Despite the education of women figuring prominently in national planning documents, female education attainment levels are low. Low concern with women’s health issues leads to low levels of provision of reproductive services. This leads to low usage of contraception and high rates of fertility. Population growth absorbs much of the economic surplus that would otherwise have gone into increased standards of living. Much of the funding that could go for women’s education and health goes to military spending. In Easterly’s period, military spending more than doubled while spending on economic and social development stagnated.

    

Ethnic Hostility. Easterly covers the numerous, numerous ethnic conflicts that exist in Pakistan – and this is more than Hindu-Moslem or Sunni-Shia. There are some twenty linguistic groups in Pakistan and they do not get along. There is a history of conflict between the Pakistani Moslems and the Moslems that migrated to Pakistan from India after the Partition of 1948. Easterly reports on a number of cross-national studies that correlate ethnic diversity with low provision of educational services. He reports on another body of studies that correlates ethnic diversity with corruption. Putting Pakistan into a cross-national equation and controlling for ethnic diversity eliminates any gap in scores between Pakistan and other nations. Easterly suggests that ethnic struggles over the language of instruction of schools has slowed down the rate of expansion of education. In countries that are ethnically polarized, the government often spends less on education in regions with ethnically subordinate groups.

    

Constant Political Instability. Governments in Pakistan often do not complete their terms of office. There have been many violent transitions from democratic to authoritarian rule and back again. In the first eleven years of Pakistan’s independence, there were seven different governments. This is not to mention the civil war that led to East Pakistan breaking away to form the nation of Bangladesh. Such constant transitions gut any attempt by public administrations to do any form of long term economic planning. Yes, plans do get created, but those plans also get obliterated with every change of regime. Furthermore, political instability leads to substantial increases in political corruption. Politicians have to gain supporters by any method they can. Administrations who wish to stay in power are under pressure to allow political allies to “capture” government ministries and funds. Those ministries and funds are then subverted for private gain.

    

Easterly’s tale is a gloomy one.

    

What are the implications for the readers of this website who are not necessarily residents of Pakistan – and who may be more concerned with the issues of their own countries or the issues of the world as a whole?

a. Social inequality leads to economic stagnation for nations as a whole.

b. Patriarchy leads to economic stagnation for nations as a whole – if it leads to lower female education or diminished labor force activity by women.

c. Ethnic conflict leads to economic stagnation for nations as a whole. And so does warfare for that matter.

d. The best economic planning comes from strong stable governments. Administrations that change personnel frequently often get little accomplished. Consider that Eisenhower, one of the most effective Republican presidents in the twentieth century, had nearly the same cabinet at the beginning of his administration and the end.

    

Does Pakistan offer any lessons for the United States?

    

Well, I know what I think about that matter.

     

And kudos to William Easterly for putting together this entire analysis in terse but convincing form.

For More Information

The Easterly reading itself has a first rate bibliography on Pakistan for readers looking for book-length treatments. Easterly’s bibliography is slightly dated – but not by much since most of the classics had already been written when he published his piece. If you absolutely positively have to have something brand new, you could try Akbar Zaidi’s Issues in Pakistan’s Economy: Political Economic Perspective.

On the adverse effects of patriarchy on economic growth, see Rae Blumberg’s essay in Gregory Hooks’ Handbook of Development Sociology, “Magic Potion/Poison Potion: Impact of Women’s Economic Empowerment versus Disempowerment for Development in a Globalized World.”

The land inequality statistics cited here come from Ewout Frankenma’s 2010 “Colonial Roots of Inequality: Geography, Factor Endowments or Institutions?” in the Economic History Review.

On the adverse effects of conflict on growth, Paul Collier is informative and insightful. Almost anything he writes is somehow linked to this, but you could try his Wars, Guns and Votes, or his Bottom Billion: Why the Poor Countries Are Failing and What Can Be Done About This.