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May 29, 2018

Beyond the panacea of the free market


May 29, 2018

Although Imran Khan’s plans to create 10 million jobs may have amused some and raised doubts among some other detractors – who may be justified in asking how many jobs have been created in Khyber Pakhtunkhwa – the PTI chief deserves some appreciation for triggering a debate over an important issue.

In Pakistan, around 40 million people are living below the poverty line and 67 percent have no roof over their heads. Millions of people have no access to pure drinking water and more than 20 million children are out of school. Instead of debating these problems and finding ways to address them, politicians have stoked communal feelings, appeased fanatics and resorted to nationalistic slogans. Through his 100-day agenda, Imran Khan has at least mainstreamed an issue that has been on the peripheries.

Rampant unemployment has threatened to tear the social fabric of our country. In the recent decade, more than 20,000 industrial units were closed down in Faisalabad alone, leaving millions of working class people jobless. In Karachi, the decline in industrial activity has led to the growth of housing colonies and schemes. In addition, the existence of more than 5,000 sick industries, which have been non-functional for decades, flies in the face of the tall claims made by the ruling elite about creating jobs for our burgeoning youth population.

The rest of our industries are struggling to survive in an increasingly competitive market, where Bangladesh, Vietnam, China and a number of other countries are fiercely contending for their pound of flesh. It is difficult to name even a single sector of the economy that is not plagued by overproduction.

This is why it is heartening to see that the problem of unemployment has finally taken centre-stage in a society where killing people over sectarian differences, caste and political affiliations seem to have been the most pressing issue. The PTI deserves appreciation for drawing attention to unemployment. But the panacea of the free-market economy that Asad Umar has suggested in his recent article, ‘Ten million jobs’ published in these pages on May 27, is flawed. Even highly advanced capitalist countries have never been able to tide over unemployment completely. Asad Umar has declared the private sector to be an engine of growth that restricts the role of the state to a silent spectator, which should only try to fulfil its constitutional duty without intervening in the country’s economic affairs. His article creates the impression that the state cannot provide full employment since it is not the engine of growth.

The only countries that have managed to attain full employment are those that have previously operated under planned economies, which accord a greater role to the state in economic matters. The USSR, East Germany, Hungry, Poland, Czechoslovakia, Bulgaria, Romania, Yugoslavia, Albania and China under Mao have, more or less, attained full employment for all citizens. We can debate the type of employment that existed in these countries. But such questions can also be raised about capitalistic methods of calculations – GDPs, per capita incomes, trickle-down effects and zero-hour contracts.

After the planned economies were dismantled in these countries, the rate of unemployment increased, rising to 40 percent in Poland while the situation was not rosy in other former socialist states. Workers of these states were forced to take up jobs in advanced European countries. But the recurrent financial crises in capitalist countries made it difficult for them to gain their share of jobs from the ever-shrinking market. Today, zero-hour contracts are on their peak – even in England. Workers in advanced capitalist countries are facing retrenchment, low wages and the withdrawal of social security by the state.

Socialist states have eliminated joblessness through state intervention. Capitalist states have mostly witnessed higher rates of employment due to active state intervention. During World War I, it was the active intervention of the state that helped American businessmen to make money. The state once again came to the rescue of the US during the Great Depression. The New Deal created millions of jobs and no one can deny that this initiative was the brain child of the state rather than any business tycoon. Even during the World War II, it was the state’s policy that ensured every American had a job.

Even today, the state sector is the largest source of employment in the world. The armed forces of the world are the biggest job providers. The police in various countries are also another major source of employment. Private companies, according to some statistics, are the second largest providers of jobs. With 2,083,100 active and reserve army personnel, the US armed forces are believed to be the largest employers in the country. If you add the number of indirect jobs affiliated with the defence department, then the state sector is unmatched in terms of providing jobs. In China, the People’s Liberation Army seems to be the largest employer with 2,183,000 active and 510,000 reserve army personnel. In India, the situation is not too different as the country’s army employs 1,362,500 active and 2,844,750 reserve personnel.

In our own country, all institutions that employ a large numbers of people are state-run. These include the army, the police, Pakistan Railways, and Wapda. So, it is only the state sector or state-run concerns that can be instrumental in providing jobs to a large number of people.

It is wrong to assume that a society can generate a huge number of jobs by minimising the role of the state in economic affairs. Private entrepreneurs would never like to see 100 percent employment in any society, let alone in our own. If there are more job opportunities, wages are likely to increase. The spectre of high wages haunts capitalists as their gargantuan appetite for profit can never be satiated if wages are strong.

Why did a plethora of companies rush to China in the 1980s? An important factor was cheap labour. Why are they thronging to urban centres of Bangladesh? Vietnam is also attracting investors, partly because of the availability of the labour force at a meagre rate. It is a fallacy to assume that the private sector can be the largest source of employment.

Asad Umar’s claim that the private sector is the engine of growth is also not entirely true. Of the 500 largest corporations of the world, around 72 are from China and, of these, two-thirds are state-owned companies.

The USSR, which was poorer than developing countries in 1917, emerged as the second largest industrial country of the world in 1956 within a short span of 39 years. It was virtually destroyed twice, losing more than 3.3 million in World War I and 28 million World War II. The country also pumped a whopping S192 billion in the conflagration that also incinerated more than 3,800 cities and towns of the socialist country.

Even the detractors of the Soviet Union have admitted that it demonstrated miracles in economic fields. A research paper by Robert C Allen claims that “from 1928 to 1970 the USSR did not grow as fast as Japan, but was arguably the second most successful economy in the world”. It is an open secret that the private sector – “the engine of growth” – didn’t play any role in the Soviet economy.

This shows that it is a deeply flawed to assume that the private sector will create many jobs. In fact, the privatisation process, which was launched in the 1980s in Pakistan, has added to the problem of unemployment. For instance, more than 35,000 employees in the banking sector were rendered jobless because of privatisation while many others were terminated following the privatisation of KESC, PTCL and other state concerns.

We need to investigate what happened to all our privatised industries. In some cases, the land on which these industries were set up has been converted into housing societies. The PTI might need to strengthen state-run entities and direct their profits towards education, health and other components of the social infrastructure. This might create a few millions jobs – though not exactly 10 million.

The writer is a freelance journalist.

Email: [email protected]

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