Futility of Keynesian policies

LAHORE: In order to trigger growth and maintain the momentum, this government is passing out cheques and subsidies.

The Keynesian stimulus policies adopted by our government work in well governed countries, but in corrupt cultures like ours the possibility of free government money is very high. Economies cannot sustain growth based on consumption if the productivity remains stagnant because of general poor health of the population.

The government seems to be desperate to sustain its political and economic momentum by taking a wide variety of steps to prevent the economy from feeling the full brunt of the commodity price hikes. As a result, higher commodity prices are eating into fiscal cushions rather than curtailing demand.

No one disputes that the poor need government help, but the manner in which the help is being provided is adversely impacting the economy of our country. Planners know that hunger is the basic issue for the poor. Pakistan is lucky in the sense that only few spend a night without food.

It is however the quality of food which the majority take that is worrisome. The government of Pakistan should consume its resources in ensuring availability of nutritious food to the poor. The food that does not contain essential nutrients is available to most of the population. It may fill the tummies of the poor but impacts their health adversely.

This in turn impacts their productivity. Many manufacturing concerns hire additional multi task workers to cover the absence of a certain percentage of workers due to ill-health. In fact, the most efficient manufacturers now provide free nutritious meals to their workers (at dining halls where top executives and line workers are served the same food). This has paid off as they do not need to hire additional hands to cover absentee workers.

But the dilemma is that there are very few concerns that have realised the advantage of feeding their workers well. Since most of the population is engaged outside such industry, food that lacks nutrition and only serves the purpose of filling the tummy is playing havoc on general health.

The solution to this problem is inexpensive when compared with the huge subsidies doled out by our state for public appeasing. It has now been established that even in developed economies, the diet they take may not have some essential micronutrients necessary for health. In order to overcome this drawback, they have started fortifying their staple and frequently used food items with these micronutrients.

Wheat flour is fortified with iron that prevents anaemia, salt is fortified with iodine, oil is fortified with Vitamin A and D. Zinc is added in minute quantities in many processed foods. The cost of all these fortifications is extremely low.

Experts point out that there would be high benefits from providing micronutrients – particularly vitamin A and zinc – to undernourished children in South Asia and Sub-Saharan Africa. These help prevent neonatal death.

The cost is tiny as reaching 80 percent of the world's 240 million or so undernourished children would require a commitment of around $100 million annually, while the economic gains would be enormous.

For the undernourished children in Pakistan, the cost would be around $30 million or Rs4.8 billion. Providing iron and iodized salt is another top investment for enriching the food. Fortifying products with iron costs as little as three cents per person, per year. For Pakistan, the total iron fortification cost would be $64 million or Rs10.64 billion.

Anaemia caused by iron deficiency leads to cognitive and developmental problems. The

manufacturers charge higher prices for iodized salts and the cost of vitamins A and D is incorporated in the edible oils marketed in the country.

Prevalence of deficiencies of these vitamins speaks volumes about the competence of the regulators that are supposed to ensure that the manufacturers comply with the regulations. The story of iron fortification is sad and regrettable. In Pakistan, 56 percent of the women suffer from anaemia.

Wheat flour is our staple food. The micronutrient initiative was launched in Pakistan in 1997 and 24 years later we have not moved much because of one hurdle or the other. After successful testing of the iron fortified atta in some areas of Punjab, it was found that anaemia was almost eliminated in the population that consumed fortified atta for three months.

The programme was to launch this fortification in the entire country with government supplying the iron compound to the mills. Unfortunately, even the mills that started fortification have stopped producing fortified atta.

The government dolling out hundreds of billions in subsidies can easily spare Rs10-15 million for iron fortification. Alternatively, it should make fortification compulsory by all mills, allowing them to include the nominal charge of fortification which would not be more than Rs5 per 20kg.