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Friday March 29, 2024

Growth for the rich

By Khalid Bhatti
June 07, 2021

A heated debate is going on between the government and opposition over the state of the economy, and a controversy has developed over the GDP growth rate. Both the government and the opposition are coming up with half-truths to support their arguments, with both sides using selective figures to prove their respective case.

The PTI government is celebrating the news of a 3.94 percent growth rate of Pakistan’s economy during FY 2020-21. The projected growth rate of 3.94 percent has beaten all predictions including that of the State Bank of Pakistan. The IMF and the World Bank had predicted a 2 percent growth rate during this financial year. The government was expecting a growth rate around 3 percent. But it suddenly jumped to 4 percent.

The government wants us to believe that the worst is over as far as the economy is concerned. The stablisation period is over and it is now entering into a period of high economic growth. The economy is healthy and soon people will feel the trickledown effect of this healthy growth. The government is also claiming that its economic policies have turned around the economy. Finance Minister Shaukat Tarin has claimed that the “economic growth has appeared along with stabilization due to the government’s focus on certain targeted sectors such as housing, agriculture, industry and exports”.

The opposition is continuing to cast doubts on the projected growth rate. For them, this figure of 3.84 percent growth is not realistic and seems inflated. The opposition is pointing to the fact that last year Pakistan’s economy growth rate was in the negative. The government provided the figure of negative 0.4 percent, while the IMF projected a negative 1.5 percent growth rate for the last financial year.

The government tells us about increased remittances, current account surplus, rising foreign exchange reserves and increase in exports. There is undoubtedly improvement in all these economic indicators. Some sectors of the economy are growing at a reasonable rate. But the problem is that this story doesn’t end here. When it comes to unemployment, poverty, falling incomes, stagnant wages and high inflation then the government simply shifts the burden on previous governments and their flawed economic policies.

An interesting fact is that the government continues to follow most of these same flawed policies. All Pakistani governments since the late 1980s have been working within the framework of neoliberal economic policies. The issue is that economic growth based on neoliberalism is enormously beneficial for the rich and ruling elite, who continue to amass wealth at the expense of working people and sections of the middle class.

The experience of the last four decades clearly shows that neoliberal economic growth hardly trickles down to the poorest sections of society, and is not inclusive. The prosperity is not shared. A handful of elite and ruling class enjoys the fruits of growth, since they own the means of productions like industries and lands. They also have access to loans and other incentives offered by the government. Noam Chomsky calls it ‘socialism for the rich’.

I am not going into the controversy of figures. I am ready to accept the claims of the government that the economy is growing at 4 percent. My concern is that this growth is mainly benefiting Big Business and the elite. Yes, the economy is growing for the rich elite, and Big Business is making record profits.

According to a report of Topline Securities, the net profit earned by the top 94 Pakistani companies surged 82 percent to a record high of Rs243 billion in the January-March 2021 quarter compared to the profits earned during the same period last year. The clubbed profit of the 94 companies in the quarter ending March 31 increased by 11 percent compared to the Rs220 billion earned in the previous quarter ending December 31, 2020.

On a quarter-on-quarter basis, the top contributors were banks, oil marketing companies, oil and gas exploration and production companies, cement, and textiles. Most of these companies belong to the industrial and services sectors. The same companies earned a net profit of Rs220 billion in the October-December 2020 quarter. Just 94 big companies earned a whopping Rs463 billion as profits in the last six months. This clearly shows that the corporate sector in Pakistan is earning record profits but there is hardly any increase in the wages of workers. Lower wages for workers and government incentives in fact contributed to the increase of record level profits of big companies.

The incentives given to the corporate sector during the pandemic also helped Big Business increase profits. Many big firms and industries took full advantage of government incentives, including cheap loans, to pay salaries to workers during lockdown. Despite these incentives, millions still lost their jobs during the lockdown.

This growth rate is joyless for the working class and the poor. Their incomes are not rising compared to the profits of Big Business. They bear the burden of an economic crisis but hardly enjoy the fruits of growth. This growth will not automatically reduce poverty, unemployment, food insecurity, high inflation and increase the wages, incomes and living standards of the working class and the middle class.

Just look at another report released by the State Bank of Pakistan in collaboration with the Pakistan Bureau of Statistics (PBS). The report analysed the impacts of the coronavirus lockdown imposed in March-June 2020 on employment and incomes. According to this report, total employment was at 55.7 million workers before the imposition of lockdowns, and fell to 35 million when the constraints on movement were at their peak, a decrease of 37 percent. Nearly 22 million people lost jobs. However, since then, with ease in restrictions and gradual restoration of economic activity, total employment recovered to 52.5 million. This means some 3.2 million workers who lost jobs during the lockdown are still unemployed.

The same report revealed that around 6.7 million employees experienced a fall in their income due to Covid-19 and imposition of lockdowns across the country. Many people are still struggling to go back to pre-pandemic levels.

The vast majority of people enjoy and celebrate economic growth when they feel the effect of that growth in their lives. When they feel that they are better off now than they were before. People celebrate growth when they have more money in their pockets to meet the needs of their families.

Employment creation is important to reduce poverty and unemployment but equally important are jobs with decent wages. Low-wage jobs create working poverty. The government needs to realise that and focus on reducing poverty, inflation and unemployment.

Pakistan needs growth that can lift millions out of poverty, reduce unemployment and raise incomes. Without real inclusive growth, with shared benefits, figures alone will not satisfy the majority of people.

The writer is a freelance journalist.