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May 5, 2016

The real threat to democracy


May 5, 2016

After the Panama Papers scandal, the demand for accountability by the opposition and the threat of launching a mass protest campaign are believed by many in the federal government to be part of a sinister conspiracy to undermine the democratic order. The basis of such a belief is unclear, but the fact remains that in a democracy, when the existing leadership is alleged to have stolen public money, it is a right, indeed a duty, of the opposition to demand credible accountability through peaceful protest.

So, the threat to democracy cannot plausibly be imagined to emanate from the opposition exercising its democratic right to protest. It would be quite irrational for elected members of parliament to undermine the very democratic system within which their political existence is constituted. Yet, there is a very real and present threat to democracy in Pakistan. Here I will examine the nature of this threat.

For democracy to be sustainable, its ideals of “liberty, equality and fraternity” must be realised in the economic, social and political life of the people. This is not the case in Pakistan today. Most of the people are deprived of quality education and healthcare, while 60.1 percent of the population is living below the poverty line, defined in terms of two dollars a day. Thus the majority of the people are denied the freedom to develop what Amartya Sen calls their human capabilities. Not only the present but the future generation, to a considerable extent, faces this unfreedom. According to the National Nutrition Survey, over 43.7 percent of the children are “stunted” due to malnutrition. Consequently, their physical and mental growth is constricted and so, they do not have the freedom to develop, to lead a life they may consider to be of value.

Equality of opportunity is the second principle on which democracy is founded. The very fact that each citizen has equal right to vote in an election implies political equality. But for political equality to be meaningful, it must be accompanied by equality of economic and social opportunities. Indeed socioeconomic equality was a foundational principle of the state of Pakistan, as expressed by Quaid-e-Azam Muhammad Ali Jinnah.

In his address at the public meeting in Chittagong on March 26, 1948, Jinnah declared, “The great ideals of human progress of social justice, of equality and fraternity constitute the basic causes of the birth of Pakistan.” The constitution of Pakistan articulates Jinnah’s view as a constitutional stipulation in Article 38(a):

“The state shall secure the well being of the people irrespective of sex, caste, creed or race by raising their standard of living, by preventing the concentration of wealth and means of production and distribution in the hands of a few to the detriment of the general interest…”

In contrast to the foundational principle of equality, the prevailing institutional structure and the associated economic growth process in Pakistan systematically generates economic inequality. The institutional structure serves to generate rent (unearned income) for an elite coalition. Consequently, there is a highly unequal distribution of productive assets and the exclusion of the majority of the people from access to capital markets and high-wage employment. It is not surprising that the distribution of national income that flows out of an unequal distribution of productive assets is also highly unequal.

My estimate of the annual per capita income of the richest 0.1 percent of Pakistan’s population (about 20,000 people) is about $1 million. (This is based on World Bank data, adjusted for tax evasion). By contrast, the annual per capita income of the bottom 60 percent of the population is less than $730 (based on the figure provided by the Pakistan Economic Survey, 2013-14).

 Thus the per capita income of the richest 0.1 percent of the population is over 1,300 times the per capita income of the bottom 60 percent of the population. While the poor live in huts, packed with four family members per room, the rich live in mansions; the poor walk to work and the rich drive limousines.

In contrast to Western countries, the fiscal policy in Pakistan is regressive and serves to further accentuate income inequality. The tax policy is designed to generate the predominant proportion of revenues through indirect taxes. Indirect taxes place a relatively greater burden on the poor compared to the rich. An earlier study on Pakistan shows that the increase in the incidence of the tax burden as a percentage of income was highest, at 6.8 percent, for the lowest income group and lowest, at minus 4.3 percent, for the highest income group. Thus in Pakistan, as theory would predict, indirect taxation serves to increase the inequality of disposable income.

Not only does the government’s tax policy increase income inequality, but the public expenditure policies mainly benefit the rich. For example, government schools where the poor send their children are so poorly staffed and equipped and their standard of instruction is so low that children passing out from these schools are at a disadvantage when applying for a place at a university or entering the job market. The rich go to mainly private sector schools and universities, where standards may be higher and so, children from rich families are better equipped for high-wage employment.

The democratic ideal of fraternity is also defeated. The persistence of mass poverty and rising inequality are rupturing the fabric of society and creating fertile ground for armed militant groups to pursue their terrible agendas. This tends to undermine social cohesion, which is necessary for sustaining democracy as well as economic growth.

It is apparent that the majority of the people of Pakistan are deprived of the minimum conditions for a civilised human existence, while the elite live in luxury. Government policy, instead of changing the institutional structure and designing a fiscal policy to reduce inequality, serves to further reinforce it. It is a state of economic apartheid.

The indifference of successive governments to the foundational principle of providing equality of opportunity to the people is the real threat to democracy.

The writer is a professor of economics at the Forman Christian College

University, Lahore.

Email: [email protected]


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