VOL 17 NO 4

Abstract (This paper gives an overview of the idea of subjective well-being which has captured the attention of economists in the last one decade or so. The gist of the literature which has emerged on the subject is that income or GDP does not truly reflect human welfare and there is need to make use of interdisciplinary knowledge to develop a new metrics to measure it. Plausible explanations of income-happiness paradox are presented besides shedding light on the shortcomings of GDP as a yardstick of development. The determinants and building blocks of happiness, both at individual and societal level, are discussed and public policy prescriptions, in the light of lessons drawn from the World Happiness Reports, are prescribed for enhancing subjective well-being of the people with particular reference to Pakistan – Author). Setting the stage Research shows that objective well-being, approximated by income, does not necessarily correspond to subjective well-being. The revealed preferences i.e. the actual choices and decisions of the people may be inconsistent due to bounded rationality, so objective well-being is not a true reflection of people’s happiness. A study1 of 2001 examined data of 17 developing countries in Latin America and observed no obvious relationship between GNP per capita and happiness. Another study2 conducted in 2009, which covered developed, developing as well as transition economies, also found no significant relationship between improvement in happiness and the long-term growth of per capita GDP. The researchers of this study argue that at least three countries i.e. China, Chile, and South Korea, included in their sample of 37 countries have shown high growth rates in the recent past. China’s growth rate implies a doubling of real income in less than 10 years, South Korea’s in 13 years, and Chile’s in 18 years. With such high increases in per capita amount of goods in a short span of time, one might expect people ‘dancing in the streets’ in ecstasy but results suggest that this is not the case as no significant increase in levels of happiness in the citizens of the said countries has been observed. The idea of subjective well-being is now being advocated by some leading development economists as the ultimate objective of public policies. Several countries are exploring ways to embed happiness into public policies of the country. For example, the national policy3 of Bhutan emphasizes that people’s happiness should be the prime objective of all public policies and legislation. Every piece of public policy or legislation must pass the litmus test of whether it is happiness- enhancing. Gross national happiness (GNH) rather than GDP is taken as a measure of development in Bhutan since the last one decade or so. The concept of GNH has been used to guide public policy making for the country’s various 5-year plans. It was on the initiative of Bhutan that the UN General Assembly unanimously passed a resolution to recognize the pursuit of happiness as a fundamental human goal. The resolution also noted that the goal of pursuing happiness was not reflected in GDP. In 2008, Mr. Sarkozy, the then President of France, appointed a commission comprising of three economists—Joseph Stiglitz, Amartya Sen (both Nobel Laureates) and Jean-Paul Fitoussi—with the mandate to analyze the limitations of current indicators of well-being and assess the feasibility of alternative measurement tools of social progress4. The resulting report of the commission rejected reliance on production- oriented measures of progress in favour of a broad array of quality of life indicators. The key message of the report was that a multi-dimensional definition of well-being is required which takes into account both material and non-material factors as both objective and subjective dimensions of well-being are important. The report emphasized that policy decisions and welfare evaluations should use multiple dimensions of well-being. A growing interest in the theme of happiness is expected to reorient policies of states towards subjective well-being in the coming years and decades. The economics of happiness may be an anathema to hard-core economists due to an element of subjectivity but perhaps time is not far away when this idea gains wider currency among the economists and policy makers and the concept of utility does not remain confined to material things. The pursuit of happiness has always remained an objective with humans throughout history but in economics the idea of happiness in modern times seized attention of researchers due to ‘Easterlin paradox’. Income-Happiness Paradox The ‘Easterlin paradox’ or income-happiness paradox simply questions the relationship between income and happiness as generally perceived. Richard Easterlin studied statistics over time on the reported level of happiness in USA. The results were startling which suggested that richer individuals were happier than poorer ones but over time society was not happier as riches grew5. How can the Easterlin Paradox be explained? Why do people not attain happiness as they get wealthier? One plausible explanation perhaps is that peoples’ happiness depends less on their absolute wealth than on relative wealth. Individuals compare themselves to others. They are happier when they are comparatively higher on the social or income ladder. A second explanation is uneven distribution of gains from economic growth and riches which have disproportionately been captured by the top 1%, thus making the majority of 99 %, who did not share the gains of growth, unhappy. A third explanation of ‘Easterlin paradox’ lies in societal factors. Insecurity, bad governance, low social trust, etc. might have nullified the gains of growth and riches. The fourth possible factor may be adaptation. When income rises, people initially feel elevated levels of happiness which eventually revert to their original levels. Moreover, income levels matter to a certain point, particularly when basic needs are unmet, after which relative income differences matter more and diminishing returns to income set in. Comparisons and relative incomes matter. This point is not a new one. Pigou, more than a century back, in 1920, justified redistributive taxation on the ground that satisfaction would not be reduced if incomes of all the rich were diminished at the same time because the rich derived

Abstract (The main focus of the piece is on Nazimuddin’s innings as prime minister, an insight is also provided into his family history and the remainder of his long and distinguished political career. However, there is no intention to pen a panegyric; on the contrary, the mistakes and errors of judgment made by Nazimuddin are also objectively discussed, so that the readers can gain a full view of the man who undoubtedly ranks among the five titans of the Muslim League during the Pakistan Movement. – Author) When Pakistan’s third governor-general, Malik Ghulam Mohammed, passed away in Karachi on 29 August 1956, the first person of note to promptly visit the deceased’s residence for condolences was Khwaja Nazimuddin. In normal circumstances, the veteran leader’s condolence visit would not have caused any comment, since not only had he been Ghulam Mohammed’s predecessor as the country’s second governor- general, but he had also served as Pakistan’s second prime minister. Therefore the two men had known each other all too well. But on 17 April 1953, Ghulam Mohammed had unjustifiably dismissed Khwaja Nazimuddin from the prime minister’s office, even though the latter enjoyed the confidence of the constituent assembly, as evidenced by the smooth passage of the government’s budget only a few days earlier. Although Nazimuddin had been hurt to the quick by what he described as the “rape of democracy”, he had decided against challenging his dismissal in the courts or at the altar of public opinion, because he felt that the last thing which the fledgling state needed was infighting and discord at the highest level1. Nazimuddin’s approach in this matter had reflected selfless patriotism of the highest level. Bearing this tortuous background in mind, the former prime minister’s immediate appearance for condolences at the residence of the man who had wronged him and Pakistan so grievously, was indeed noteworthy and reflective of the gentleman’s large-heartedness, decency and high morals. Sadly, few in Pakistan today know much about Nazimuddin. I suspect the overwhelming majority of Islamabad’s residents may not even be remotely aware of the life and times of the man after whom one of the city’s main roads is named. Therefore, this article seeks to make a few amends and to honour the memory of the late leader. While the main focus of the piece is on Nazimuddin’s innings as prime minister, an insight is also provided into his family history and the remainder of his long and distinguished political career. However, there is no intention to pen a panegyric; on the contrary, the mistakes and errors of judgement made by Nazimuddin are also objectively discussed, so that the readers can gain a full view of the man who undoubtedly ranks among the five titans of the Muslim League during the Pakistan Movement2. Family Background Nazimuddin was a member of one of the most prominent and prosperous families of Bengal, namely the House of the Nawabs of Dhaka. Ironically, while the family dominated the politics of Dhaka in particular and Bengal in general, it was not ethnically Bengali; instead it was of Kashmiri origin, hailing from the Banday clan of Srinagar. In the early 1730s, two brothers, Khwaja Abdul Wahab and Khwaja Abdullah, set out from Kashmir to chart their destiny. Fate brought them over 2500 kilometres away to Dhaka, a city which they made their home. Having commenced a modest trading business dealing with gold, animal hides, salt, spices and jute, in a few decades the family had become East Bengal’s leading traders. With abundant cash on their hands, the Khwajas next turned to the acquisition of land and by the early part of the 19th century they had also become the leading zamindars of Bengal. Undoubtedly it was a testament to their industriousness, diligence and determination that the family was able to achieve such great wealth and influence in an alien province, far away from their ancestral home of Kashmir. In the 1857 War of Independence, the then head of the family, Khwaja Abdul Ghani, bet on the winning side by rendering loyal service to the British government, which in turn expressed its gratitude to the Khwajas by granting Ghani the title of Nawab of Dhaka in 1875, raising it to hereditary status in 1877 and upgrading the position to Nawab Bahadur in 1892. However, it is pertinent to mention that the story of the Nawabs of Dhaka was not just all about their flair for wealth-creation and their dedicated service to the British Empire. On the contrary, they had an impressive penchant for philanthropy and the financing of public works on a grand scale, which made them a rarity among Indian aristocrats. Whether it was the supply of filtered water free of charge to the residents of Dhaka in the 1870s, the provision of electricity to the city in 1901 or the establishment of several schools, mosques, hospitals and institutes of higher education, the Dhaka Nawabs distinguished themselves on all of these counts. Early Life It was in this privileged background that Nazimuddin opened his eyes in August 1894 in the house of his father, Khwaja Nizamuddin. The then Nawab of Dhaka, Nawab Khwaja Sir Ahsanullah, was Nazimuddin’s maternal grandfather, while the famous future Nawab, Khwaja Sir Salimullah, was his maternal uncle. Initially schooled at home, and subsequently at Aligarh Muslim School, Nazimuddin completed his secondary education at an English private school, Dunstable Grammar. After gaining a BA degree from the Aligarh University, he proceeded to Trinity College, Cambridge for an MA (his fellow students there included Sir Sikander Hayat Khan and Nawab Chattari), following which he was admitted to the bar at the Middle Temple. Political Career in India Upon returning to Dhaka, Nazimuddin plunged into the city’s civic affairs and politics and it was not long before he had become the Nawab of Dhaka family’s main standard-bearer in the political arena. In the two decades from 1922 to 1943, Nazimuddin served as the Chairman of the Dhaka Municipal Corporation from 1922 to 1929, a

Abstract (This is the second part of a two-part paper which highlights some recommendations to stabilize and bring Pakistan’s economy back on track, creating an essential base for a more sustainable future, especially for Pakistan`s teeming millions who are currently on a knife’s edge due to an eye-watering cost of living crisis. Ideas formulated in this report can be used as a foundation to form a broader dialogue involving the government, civil society, policy experts, IMF, key donors, the private sector and other stakeholders – Author) This report highlights the economic challenges faced by Pakistan and recommends actionable initiatives to bolster the country`s economy, currently on life support. The proposals can form a “solid base” from which the country can fiscally course correct, catapult and grow. Pakistan`s economic malaise might be inevitable but is certainly not inescapable. The recommendations in this paper need to be part of a much broader national dialogue and roadmap spearheaded by financiers, economists and policy practitioners seeking to rectify Pakistan`s manifold financial ills. Robust coordination among policymakers, public authorities, donors and lenders is paramount. All key stakeholders must be brought to one platform to develop a future roadmap with consensus for ramping up the economy, in order to address the challenges facing Pakistan, now and in the future. To stabilize the economy and align policy implementation with the IMF-supported program, donors, the private sector and other key stakeholders this paper recommends actionable urgent priority areas that need to be further addressed, bringing Pakistan`s economy back on track and creating an essential “economic base” for a more sustainable future. In order to come out of the current economic abyss, Pakistan must undertake the recommendations highlighted hereunder (many of which have already been underscored by the donor agencies, economists and policymakers alike). Unwavering Implementation of the 2023 Budget Pakistan’s 2023 budget is far from perfect. However, we must remember that the current coalition government presented its first budget on June 10, 2022. While drafting the budget, the government encountered manifold economic challenges ignited by an increase in fuel prices, tenuous delays in IMF negotiations for budgetary support, a free fall of an ever-weakening rupee and an alarming rise in the cost of living. A resolute and unfaltering implementation of the FY2023 budget is necessary as per IMF requirements. The budget aspires to reduce the government’s huge borrowing needs by targeting an underlying primary surplus of 0.4 percent of GDP, underpinned by current spending restraint and wide-ranging revenue mobilization initiatives targeted towards higher income taxpayers. Development spending must be protected in future budgets and more financial leeway created to further widen essential social support schemes. For the FY2023 budget the provinces have agreed to support the federal government’s efforts to attain fiscal targets, and Memoranda of Understanding have been inked by provincial stakeholders to this effect1. Growth indicators exhibited by the Economic Survey of Pakistan (Ministry of Finance) do show hope for (moderate) optimism with a more balanced outlook. The GDP growth rate for FY 2021-22 is positively forecasted at 5.97% versus 3.94% for the previous year. Revenue therefore increased by 17.7%2. Source: Asian Development Bank, 6 April, 2022.3 “Pakistan’s economic recovery after the COVID-19 crisis indicates that the country has enormous potential to overcome challenging economic situations,” said Najy Benhassine, World Bank Country Director for Pakistan. “However, sustaining the economic recovery requires addressing long-standing structural weaknesses of the economy and boosting private sector investment, exports and productivity.”4 On the back of high base affects and recent monetary tightening, real GDP growth is expected to moderate to 4.3 and 4.0 percent in FY22 and FY23, respectively. Thereafter, economic growth is projected to slightly recover to 4.2 percent in FY24, provided that structural reforms to support fiscal sustainability and macroeconomic stability are implemented rapidly, and that global inflationary pressures dissipate5. The current account deficit unhealthily peaked at USD 13.2 bn which was not contained in spite of a 7% rise in expatriate/diaspora’ remittances. The current account deficit was spawned by an increase in imports. In the first nine months of the FY 2021-22 (July-Mar), the goods import increased by 26.6% to USD 23.7 bn, and the trade deficit alarmingly grew to 55.5% or USD 30.1bn, as the current account deficit is now at a staggering USD 13.2bn. The Current account balance during Jul-Apr, for 2020-21 had been in surplus of USD 0.8 bn6. Source: KPMG Taseer Hadi & Company, Economic Brief, KPMG, June, 2022.7 The most exorbitant problem is the rising burden of debt servicing on the fragile economy. Annually, around 70% of the total Federal Government’s resources are consumed by debt servicing whereas the permissible limit is 60% of the GDP as set by the Fiscal Responsibility and Debt Limitation (FRDL) Act, 20058. The total debt servicing for the next year will be PKR 3,950 bn. Another PKR 2,632 bn (USD 23.5 billion) will be required to repay the debt due in 2023. Worse still, Pakistan will alarmingly have to repay on account of amortization and mark-up amount owed by the public sector alone to the tune of USD 49.23 billion over the next five years period from 2022-23 to 2026-279. Boosting Exports Pakistan`s exports must be made more competitive, it`s exporters must leverage Artificial Intelligence and Big Data to harness the potential of online marketing platforms. Export routes and destinations need to diversify. Businesses should be facilitated to comply with international standards under a one shop window operation. The Board of Investment, Trade Development Authority of Pakistan, State Bank of Pakistan and Ministry of Commerce should develop an interoperable online platform to facilitate exporters in all these respects and more. Owing to pro-business initiatives and recent rupee depreciation, exports underwent an impressive rise of 25% during Jul-Mar FY2022 amounting to USD 23.3 billion as compared to USD 18.7 billion in the same period last year10. A significant amount of this uptrend emanated from the high value-added segment of the textile sector, whereby Pakistan’s textile exporters benefited from the SBP’s concessionary refinance schemes for working capital and fixed investment,