Academic journal article The Lahore Journal of Economics

Costs, Capabilities, Conflict and Cash: The Problem of Technology and Sustainable Economic Growth in Pakistan

Academic journal article The Lahore Journal of Economics

Costs, Capabilities, Conflict and Cash: The Problem of Technology and Sustainable Economic Growth in Pakistan

Article excerpt

1.Introduction

The word technology derives from the Greek word technología, which means 'systematic treatment'; it is derived from the word tekhne, meaning art or craft. This paper uses a similar broad understanding of technology, defining it here as the 'application of practical sciences to industry or commerce.' The examples of technology discussed in this paper range from new dies used in producing soccer balls (footballs) to new seed types in agriculture and new management practices in textiles.

Long before the ancient Greeks derived the word 'technology', Pakistan was a global center of technological innovation. In the use of metal saws, drills and firing and glazing techniques, Harappa led the world in necklace technology between 3300 and 2800 BC (Kenoyer, 1997). Since then, Pakistan's technological record has been more mixed. The focus of this paper is to better understand that (contemporary) record of utilizing technology to boost productivity. The paper does not consider the impact of technology on, for example, working conditions, employment and the environment; the focus is more narrowly on growth rather than bigger questions of development and wellbeing.

This paper starts on an optimistic note. GDP growth in Pakistan has been surprisingly sustainable, averaging 5 percent per annum since independence. There has been no economic recession since (at least) 1960, according to World Bank data. This represents a creditable performance when compared to all but the most successful developing countries. Pakistan has significantly transformed the structure of its economy during these same decades: in 1950, 99 percent of its exports were agricultural goods and by the 1990s exports were largely manufactured goods. This very success indicates a potential constraint to sustaining growth into the future. Although there is scope for continued growth based on further structural changes (in particular, the large number of people still employed in agriculture or else the women not currently engaged in the labor force), for growth to be sustained, a shift to productivity-led growth will be necessary.

Section 2 outlines the statistical record of sustainable growth in Pakistan. Section 3 shows how economics represents technological change. Section 4 outlines the (poor) productivity record in Pakistan. Section 5 discusses four key constraints to technology adoption and absorption in contemporary Pakistan: resources (or cash), foreign direct investment (FDI) (costs), learning (capabilities) and conflict. Section 6 concludes by arguing that the outlook for Pakistan is pessimistic: it lacks the ability to mobilize resources or leverage FDI to transfer technology as well as the state necessary to either promote learning or control the conflict associated with technological change.

2.Sustainable Economic Growth in Pakistan

Contrary to the assumptions of many, economic growth in Pakistan since independence has been a model of sustainability. Since 1950, GDP growth has averaged around 5 percent per annum - almost exactly the same as in India. Table 1 shows that, over the last 20 or so years, GDP growth in Pakistan has not quite reached the levels of India and China, but compares favorably with other large Asian economies, including Indonesia, Thailand, Hong Kong and South Korea.

Figure 1 confirms that, while GDP growth has slowed on various occasions, particularly during the early 1970s, early 1990s and late 2000s, there has not been an economic recession (negative GDP growth) since at least 1960. India, by comparison, has had numerous recessions. Unlike most of the rest of the world, Pakistan has sustained positive growth through the 1973 and 1979 oil price shocks, the 1982 world recession and ensuing global debt crisis, the 1997 Asian crisis and the 2008 global financial crisis. The graph also demonstrates that GDP growth in Pakistan has fluctuated around a relatively narrow band, typically between 4 and 8 percent, and more recently between 2 and 4 percent. …

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