The economics of stateless nations: Sovereign debt and popular well-being in Pakistan

Abstract

This paper seeks to examine the meaning and validity of the conventional narrative in which persistent fiscal deficits, leading to rising public debt, are held to be the cause of falling investment and growth and rising poverty in Pakistan. The paper seeks to move beyond this tautological explanation to a more behavioural one by asking the question why governments persist in behaviour that is so patently against the national interest. By distinguishing between the state, the government, and the administration. the paper argues that the state, in any meaningful sense of the term, does not exist in Pakistan. This has far reaching consequences, explaining better the seemingly illogical behaviour of the administration in incurring all the debt that is available, to enrich the few at the expense of the many. This also has relevance to the conventional discourse on governance which would be richer for making the sort of distinctions that are made in the paper. This theoretical scheme is then applied to the historical record of Pakistan. Finally, policy directions are examined on the basis of a clear distinction between restatements of the problem masquerading as policy solutions, and genuine policy prescriptions. None of the policy proposals on debt or poverty currently under discussion are found to meet the paper's definition of genuine policy prescriptions.