Karachi – August 4, 2025
Back in 1936, British economist John Maynard Keynes made an observation that feels eerily relevant today. In the final chapter of his landmark book The General Theory of Employment, Interest and Money, he wrote:
“Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”
Decades later, that quote could easily describe Pakistan’s economic policymakers, many of whom have clung to outdated economic dogmas handed down by international institutions like the IMF — dogmas rooted in what is known as the Washington Consensus.
This framework, first introduced by economist John Williamson, was never meant to be a one-size-fits-all blueprint. Williamson himself envisioned it as a flexible set of ten principles meant to guide developing countries toward reform — including fiscal discipline, privatization, trade liberalization, and deregulation. But what was once meant as guidance became dogma. In the hands of the IMF and World Bank, the Washington Consensus hardened into orthodoxy — a rigid policy package applied across the developing world, often with little regard for local context.
Pakistan, unfortunately, has been one of its most consistent test subjects.
A Story Told in Numbers
To understand where these policies have taken us, it’s useful to rewind to the early 1960s. In 1962, Pakistan’s GDP per capita stood at $90, comfortably ahead of China’s $70. That lead remained into the 1970s and early 1980s. But things began to shift rapidly by the early 1990s. China surged ahead — and never looked back. Today, China’s GDP per capita is more than eight times higher than Pakistan’s.
This divergence wasn’t an accident. It’s the result of two very different economic approaches: Pakistan’s IMF-guided reforms versus China’s state-led, gradualist strategy — now commonly referred to as the Beijing Consensus.
How the Washington Consensus Played Out in Pakistan
Over the past few decades, Pakistan has implemented nearly every pillar of the Washington Consensus — often at the IMF’s urging. And yet, the results have been disappointing:
- Fiscal discipline: Despite repeated attempts to rein in deficits, debt levels remain unsustainable and development spending has suffered.
- Tax reforms: Efforts to broaden the tax base have floundered in the face of a massive informal economy and weak enforcement.
- Privatization and deregulation: These reforms have had mixed outcomes. While some industries saw improved efficiency, others were plagued by corruption, job losses, and social unrest.
- Trade liberalization: While tariffs were lowered, domestic industries were left vulnerable to cheaper imports without sufficient support to compete.
- Foreign investment: FDI remains elusive, hampered by political instability, policy inconsistency, and weak infrastructure.
Despite adhering to these prescriptions, Pakistan’s economy has grown at an average of just 3%, far below the 7% needed to create jobs and reduce poverty.
A Different Path: The Beijing Consensus
In contrast, China followed a markedly different playbook. The Chinese model is built around state control of strategic sectors, gradual policy reform, and a relentless focus on poverty reduction and infrastructure development.
- Rather than liberalize overnight, China reformed its economy step by step, allowing time to adapt and stabilize.
- The state maintained control over key industries, using them as tools for long-term planning and growth.
- Export-led industrialization became the backbone of economic strategy, fueled by targeted subsidies, special economic zones, and human capital investment.
- Perhaps most importantly, officials were held accountable based on performance — a merit-based bureaucracy that incentivized efficiency and innovation.
The results speak volumes: since 2000, China has lifted over 400 million people out of extreme poverty. Its poverty rate has plunged from around 40% to below 10%. In the same timeframe, Pakistan’s poverty rate has risen, from 35% in 2000 to 45% in 2025.
The Bigger Lesson
What Pakistan’s experience tells us — and what China’s rise confirms — is that economic success cannot be achieved through blind adherence to imported ideologies. The IMF’s rigid application of the Washington Consensus has arguably done more harm than good. Reforms that ignore local realities, institutional capacity, and social cohesion are destined to fall short.
It’s time for Pakistan to reconsider its path. Growth should not come at the cost of deepening inequality. Policy must be rooted in pragmatism, not orthodoxy. And most of all, the country’s economic future must be designed not dictated.
