One question my fellow Pakistanis have asked me many times is, “If economists know how to develop the economy, why is Pakistan not yet developed?” To answer this, I would like to use the example of Yan Fu and China.
Yan Fu (1854-1921) was a prominent Chinese thinker who significantly influenced China’s reformatory movement. In 1895, in his essay “On Strength,” he wrote:
“When hearing about the huge riches the Western countries possess today, the people of the East doubted and did not trust what they heard, and after having seen it with their own eyes, they believed it but were unable to understand the source of these riches. Only after having seen with their own eyes the variety of methods of entrepreneurship and manufacturing in the West did they begin to understand that this important development is the fruit of the book by Adam Smith; it is conventional wisdom among the educated people of the West.”
When Smith’s book, ‘The Wealth of Nations’, was published on March 9, 1776, China was ruled by the Qing Dynasty (16441912), which implemented protectionist economic policies with devastating effects, as Yan Fu’s statement highlights. It took nearly 125 years for The Wealth of Nations to be translated into Chinesefinally done by Yan Fu in 1901. China joined the WTO 100 years after this translation in 2001 and became the world’s second-largest economy in 2010, largely thanks to international trade and market-led policies, which Smith had advocated.
This raises the question: Why did it take so long for The Wealth of Nations to be translated into Chinese, and why did China take so long to embrace international trade despite understanding that Western economic power stemmed from international trade and market-oriented policies? The answer to the first question lies in the lack of willingness to learn from international experiences and keeping doors closed to foreign knowledge. The answer to the second question is rooted in political economy, which also applies to Pakistan.
Pakistan is relatively underdeveloped in terms of understanding international development experiences. While some individuals are aware of how developed countries achieved their status, this knowledge is limited to a small segment of society and, as a result, has little impact on policymaking and public opinion. The reluctance to learn from international sources poses a significant challenge, as it can clash with national pride and nationalism.
Scientific (evidence-based, in an economic sense) knowledge is typically disseminated through a top-down hierarchy. Intellectuals who comprehend a phenomenon communicate it to the general public in a more digestible manner. This process can also work from the bottom up, where ground realities influence social scientists. However, scholars must rationalise these realities using scientific methods and share the knowledge in a way that the public can easily grasp.
What happens when intellectuals refuse to learn and continue promoting failed narratives? This creates a lack of understanding of sound policies and fails to generate enough public demand for changing the status quo.
Even when intellectuals and the public understand better policies, policymakers can still take time to adopt them, as was the case in China. The delay is often due to the political economy of the status quo, supported by the economic and political interests of the elites. However, the status quo usually only changes after it fails economically or politically, alongside a substantial public demand for reform.
For instance, China’s reform and open-door policy began in late 1978. The reform movement, led by Deng Xiaoping, was driven by the people’s demand for change and occurred when Mao Zedong’s government had utterly failed to deliver favourable economic results. At that time, the Chinese were clear about what needed to change to secure the future of their country.
In Pakistan, the status quo has similarly failed to produce better economic outcomes. However, the likelihood of economic reform is low due to a lower level of intellectual development, and the entrenched status quo is resistant to abandoning its rent-seeking model. Pakistan remains one of the most protectionist states in the world.
Pakistan’s ruling elites reinforce a blind nationalism, promoting the belief that the country does not need to learn from developed or emerging economies, as this serves their interests. Understanding this dynamic is essential to better grasp why Pakistan continues to face economic failure.
THE WRITER IS DIRECTOR RESEARCH AT THE PRISA INSTITUTE LONDON AND A LECTURER OF ECONOMICS AT THE UNIVERSITY OF BEDFORDSHIRE
