Only equitable growth to end unemployment, poverty

LAHORE: The rising rate of unemployment, which is an important indicator of a country’s overall economic health, failed to ruffle the feathers of incumbent regime during their entire tenure.

The boom in construction and high domestic consumption may have nullified the negative impact of job losses in the exporting sector, but still the glaring as well as widening inequality exposes their development agenda.

Economists are concerned over the indifference shown by the rulers towards equitable growth. Yes, the development has sped up, but the burden on the poor also continues to increase, while the rich are readily well-positioned to lay claim to the lion’s share in this accelerating growth. Our history shows that high but exclusive growth does not please the majority of the electorate that is left out. Equitable distribution of resources is more important as it impacts the most.

Government after government has remained afraid of disturbing status quo fearing that any policy that hurts the rich and influential would deprive them of power. This regime for instance promised at the start of its tenure to withdraw all tax exemption within two years but 54 months on most of the exemptions are still in place. The rich are saving over Rs400 billion because of these exemptions. The problem of terrorism accelerated because of inequitable growth. Buffers, like social security, achieve a degree of social stability that is critical to growth. We can create resources for social well-being of all by taxing all incomes fairly and equally.

The fact that most of the taxes are collected indirectly proves that all governments lack the courage to collect direct taxes from the influential. Even the income tax, collected indirectly on import or supplies, is included in the cost and passed on to the consumers. There is no doubt that indirect taxes are meant only for the poor.

Most of our governments claim they are devising policies that promote inclusiveness. They cite higher budgetary allocations for education and health sectors every year. However, more allocation does not ensure better educational outcomes or better service delivery.

Issues such as land acquisition and compensation are as much a part of the agenda as are better schools and free medicines. Inclusive growth makes people feel they too are stakeholders in the growth. Low level jobs have been created in millions during past four years but there was drought of high-paid and white-collar jobs.

The major failure of the present government is to stop the rot of corruption and incompetence it inherited from its predecessor. We have successfully launched the China-Pakistan Economic Corridor (CPEC), and the power shortages are almost gone. In fact the power projects in the pipeline suggest the electricity shortfall is unlikely to haunt the consumers in the medium-term at least. However, inefficiencies and ever increasing in power sector have not been addressed.

Red tape has increased resulting in long delays at the bureaucratic level. The corrupt and incompetent are never held accountable. The businesses that grease the palms of decision-makers face get things done faster than the majority that has to go through the rigors of long red tape. Exclusive rights of imports (under-invoiced or smuggling) are enjoyed the by rich and influential.

The local industry suffers because it has to pass through a number of bureaucratic hurdles. The longer the length of red tape the higher are the chances of benefits going exclusively to those who can bribe to get the hurdles removed.

This has effectively denied level-playing field to all. It might look skeptical but the matter of fact is that the days of ‘jugaad’ –the South Asian approach of getting things done using quick-fixes, short-cuts, improvisation, and other, sometimes illegal, hacks- are over. The country simply needs more resources to move ahead.

No economy has ever attained maturity without promotion of competition. Competition ensures access to new technology, a trend that would accelerate over the decade in all areas like it did in cellular telephony.

In the 1990s, a cellphone was a luxury, a status symbol that was to be flaunted but used sparingly by the lucky few, who owned one. Now over 150 million people own a mobile phone and call rates have come down from Rs7 to Rs1.25.

Rates of home appliances even after 150 percent depreciation in the value of rupee are lower than what they used to be in late 90s because of a cut-throat competition in the market. Thus, policies restricting competitions in other sectors of economy would have to be removed to unleash the actual growth potential of the economy.