Perks of protectionism

LAHORE: Inequality is enhanced when the price of any item increases, but the producers and manufacturers, as well as the government are not hurt. Not only is the higher cost passed on to the consumers, but the profit on that additional cost is also added.

Pakistan possessed a relatedly equal society in the first four decades after independence. Inequality started increasing in the 1990s when the investors were over pampered to accelerate industrialisation in the country.

This experiment unfortunately failed as investments were encouraged on high protections. Protection even on raw materials needed by export industries booted Pakistan out of global competition, as the protected enabled supply of locally made raw materials at higher than global rates.

Going a step further, the governments lured investments on guaranteed rate of return to the investors, particularly the foreign ones. The profit promised on investment was much higher than an investor could earn in any business venture.

In the beginning, investors too were provided protection from all taxes for the life of the projects. That protection mantra is still going on.

But in its wake, it enabled wealth accumulation for the elite. The state insured them against all losses. This is not business. It is patronisation. Something that the kings used to grant in the past for their pleasure.

Along with protectionism, imports were managed in such a way that finished products could come in at a very low trade price, the same price at which government levies were imposed.

This over years has restricted the number of importers. Newcomers cannot dare to venture into imports, because even if they get a very competitive price the landed cost is always higher than the selling price of that product in the market (because of under-invoicing).

Small and medium local manufacturers of numerous products face the brunt of this import practice and many industries are closed.

This thirty-year process enlarged inequalities in the society. Imports and manufacturing sectors are now monopolised by few.

The only way to compete with them was to go a step further, and indulge in smuggling, which many did, until it was also institutionalised. Now this practice also needs patronage.

The rich are becoming richer, and the poor continue to get nominal share in the national growth. That nominal share is not enough for the poor to cope with the inflation prevalent in the country be it 4 percent or 14 percent. In case of low inflation, the adverse impact on lives is low but is still there. In case of higher inflation, the impact is unbearable.

Economy looks great when we look at the number of cars being sold in the markets or on eaters thronging posh restaurants; it looks pathetic when only a few of hundreds of daily wagers sitting on the roadside get engaged.

Wellbeing is a relative term. A family enjoying all amenities with no worries for food would consider itself well off, and a family managing three square meals would feel satisfied even without most of the amenities like transport, air conditioners and other electronic gadgets.

Then there are families that hardly afford one nutritious meal a day or families where the grown up starve to ensure some meal for the younger ones. These families are not well off.

National leaders should feel pride when majority of the population is enjoying life, and should be extremely worried if most of them are living a miserable life.

They should refrain from highlighting the sales of cars or the surge in large-scale manufacturing when the unemployment rate remains stubbornly high and food prices have gone out of hand for the poor.

Going has never been good for majority of Pakistanis, 40 percent of whom are poor. Of the remaining 60 percent, around 30 percent belong to the lower middle class, 20 percent to affluent middle class and 10 percent are highly paid executives who draw incomes and perks which enable them to enjoy life like the rich.

In such an unequal society, it is not possible to make life tolerable for ordinary citizens. The Oil Marketing Companies for instance charge the profit on the landed cost of oil at its landed cost in percentage terms, the petrol pumps also get commission in terms of percentage.

As prices increase their net income also increases. This stands true for all other products.

Consumers are the ultimate sufferers. Since most of the trades are now monopolized, there is little chance that some commoner can challenge them.

The level playing field to ordinary citizens and the poor has been denied due to the unethical alliance of vested interests with the bureaucracy and the rulers. Going looks good to the rulers as they only meet people that are having a field day because of government policies.

The poor are invisible and not worth granting an audience till the next election. Even during election days, the poor are the herds managed by the feudal in rural areas and rich in the cities. They go the way their masters order them to.