For reasons more than one, it is true that every person of our country wants to see Adam Smith in Pakistan. Inflation, poverty, and dysfunctional economic policies enhanced severe impact on human minds, which quivered the public and are thinking to invite Adam Smith in Pakistan. Trivial economic policies, rampant corruption, and no seriousness for coming out of the economic crisis in the country, in addition to this devastated economic system insinuates that there is no economic system since its independence in 1947, similarly as there were no economic policies in the world before 1776. So, from here, we are assuming this is the mid of eighteenth century and are inviting Adam Smith to come to Pakistan for rescuing the economy.
The story of economic policies started in 1776 when the book “An Inquiry into The Nature and Causes Of The Wealth Of Nation” was written by Adam Smith. In this book, he gave descriptions about a stable economy for any state. Before Adam Smith, mercantilism dominated the public. The mercantilists believed that gold was the base of wealth and power. Hence, mercantilist’s slogan was more gold, more wealth and more power. Mercantilism was declining in the beginning of eighteenth century due to paucity of serious reservations about emerging complexities. They wanted to control the state by influencing the public policies.
Shortly after mercantilism, Adam Smith’s work gave birth to new explicit thinking about economy. He introduced iinvisible hand theory, meaning a hidden hand. The prologue of this doctrine was free trade and free markets in any state for the economy. The invisible hand theory means self-interest. When market would be free, people would buy and consume more and more for the self-interest and self-harmony. But here, he said that government should not be involved in the economic and marketing sectors.
This theory, on the other hand, is dedicated to the values of the division of labor. According to him, division of the labor would expand the market structure. He further said that if labor is divided according to their dexterity, it would increase the efficiency of work, save time, cause new inventions and stabilize the economy. All these factors would cause the capital accumulation; owing to capital accumulation, competition would be high; when competition is started in the market, it would increase the wages of labor; if wages of the labor are increased, it would lower the profit of the investors; this would cause the lowering of interest rate; when interest rate is low, the loan lenders would deny to pay loans. After this, they would go for investments and the state would be called a prosperous state. But this is only possible if government does not intervene in the economic policies.
Now consider this: economic crisis of Pakistan is neither new nor simple. It is the accumulation of mismanagement and corruption, over the seven decades in wide ranging areas. Pakistan’s economy is heavily dependent on the political situation, which more often remains precarious and unstable. Since the ouster of Mian Mohammad Nawaz Sharif, new government started the practice of plummeting rupee value and depleting industrial sector and exports.
Pakistan ranked 136th on “the ease of doing business index,” India ranked 77th, while China ranked 46th position. For Pakistan, a fledgling state in economic policies, Adam Smith has already given complete and serious reservations about how to start and maintain economic policies. To a considerable extent, we can assume that these reservations are only for Pakistan. As a distinct approach, we can also assume that Pakistan’s economy is that of eighteenth century. As in eighteenth century, Adam Smith devised the invisible hand theory of market, which was to give a freedom to market and economy, to maintain the business cycle efficiently, so that every person of the market and business would go for the self-interest and harmony. So after applying this theory, everything would get better. He was detestably against the government and political interventions in the economic sector of any state.
Adam Smith reiterated the division of labor, meaning when a state divides the labor according to their propensity, it would increase the workers’ dexterity, save time and create competition in market. This would encourage business sectors and the investors. In addition to this, investors could invest, lowering the interest rate, and this would again inspire the investors to invest more. This may stable the economy as well as the state. This theory is specially for Pakistan. However, here division of labor is quite inadvertent and anonymous. The former finance minister, Asad Umar, had completely discouraged the tendency of investors to invest more. These unscrupulous steps beleaguered the business sector, plummeted the rupee value, slumped the market and sank the investment.
Yet this was done by Adam Smith in order to gauge the depth and breadth of economic policies in eighteenth century. Imran Khan has to rendezvous with Adam Smith in Pakistan to improve the economic system. Adam Smith has to rescue the economy of Pakistan, otherwise hiccups in economy might push this country back to stone age.
The writer is the student of economics at the University of Balochistan Quetta.
Disclaimer: Views expressed in this article are those of the author and Balochistan Voices not necessarily agrees with them.
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