Is there a way out?

We need high growth in an egalitarian socio-economic framework to eliminate poverty and reduce wealth inequality

Is there a way out?


akistan is currently witnessing institutional decay and political and judicial polarisation. Each of these can lead to a disaster. A combination of these factors is particularly dangerous.

Finding a remedy for the current mess in our country is an uphill task. There are no shortcuts. Some painful decisions are needed. Even the most competent, honest and transparent planners, fully empowered, will take years to steer the country towards sustainable development.

We have compounded our problems over the years. We have a confused bureaucracy feeling threatened by rival interest groups with grave consequences if they obey the orders of the ruling elite. If they do not, they face severe disciplinary action. Many of the senior bureaucrats live beyond their means. Many are politicised.

Political polarisation is high. Rival politicians are not prepared to sit together even to discuss matters of national interest. We have a society divided as never before. Most regulatory institutions are performing below par. For the first time we are seeing a clear and regrettable divide in the superior courts. Corruption has crossed all limits. The cost of living has gone beyond the means of the common man.

These are the realities of the current situation in Pakistan. Some people argue that some nations in the past have bounced back from similar or worse situations. So why can’t we? The problem with our nation is that we want quick fixes. Temporary relief is often more welcome than measures promising long-term prosperity. That suits the status quo elite.

The elite want long-term prosperity for themselves but not for the poor. Instead, they suggest doling out subsidies in cash and kind to divert the masses from seeking jobs to seeking alms. A lot of people, for instance, currently waste whole days queuing up to receive free flour bags instead of going to work.

The elite suggest lower tariffs for low-income power consumers that use up to 300 units a month. The benefit of this concession mostly goes to the rich. Some of the landlords are reported to have installed 10-24 single-phase meters at their palatial residences. Their servants manage the power use in such a way that consumption for each meter remains below 300 units.

Moreover, peak hours charges are not collected from consumers having single-phase meters. Instead of paying their household servants reasonable salaries they provide them residence on their premises and arrange for them to receive stipends from the Benazir Income Support Programme. They misuse all subsidies. This is the reason that economists call subsidies counterproductive. If these subsidies are withdrawn or made conditional the elite arrange agitations as such withdrawals hurt them more than the poor.

Then there are tax exemptions. Some people have accumulated wealth from these exemptions. The real estate developers, shareholders in the capital market and big landlords do not pay taxes according to their income. Inequitable taxation has forced even die-hard industrialists to invest in real estate and stock markets, instead of upgrading their industrial technologies.

The government needs to ensure that no sector has any advantage over the other and income tax is imposed equally on the same incomes, irrespective of the sector from which the income was generated. There must be no exemptions or waivers.

How can we expand the local market for our manufactured goods? How can we provide employment to our fast growing workforce? Will an elitist state be able to solve such deep-rooted problems? Does this not call for a change in politico-economic order?

Economic growth is a complex process. It requires consistent efforts, long-term planning and deliberate measures to overcome various challenges. The sustainability of economic growth depends on several factors, such as political stability, investment in human capital, infrastructure development, sound monetary and fiscal policies, technological advancement and international trade.

These factors have a direct impact on the growth potential of an economy. Therefore, the government needs to implement appropriate policies and introduce reforms to address the underlying issues and create a favourable environment for sustainable economic growth. The process may take several years but significant improvement may be witnessed over time if the right policies and strategies are implemented.

In Pakistan, national politics is led by the super-rich (the financial elite) who have somehow accumulated immense wealth. Big landlords and tribal chiefs also command influence. The super-rich, leading the state, are building an iniquitous economy and are planning to invest in constructing physical infrastructure, etc, that primarily serve the larger interest of the capitalist order. We need to mitigate the miserable conditions in an economic strategy that serves the poor and the millions of the unemployed.

Knowledge-poor developing economies having a large population, such as Pakistan, are likely to face a difficult situation in the years to come. The goods such economies produce may not find a market in high-tech/ rich countries in future. Many rich countries are bringing manufacturing back with a view to providing jobs to their growing unemployed populations.

The high-tech countries are perfecting technologies (such as robots) that will produce many goods in small quantities at low cost. These countries in future may not import goods which the developing economies specialise in. Millions of workers of the developing countries may, therefore, lose jobs. Besides, many in the EU, suffering from economic hardship, now resent Asian and African immigrant labour.

Changes are taking place in the political and economic policy of the leading countries after Covid-19 and Russia-Ukraine war. We need to review the whole matter in the light of the emerging situation: how to increase foreign exchange earnings in the years to come? How to expand the local market for our manufactured goods? How to provide employment to our fast growing workforce? Can an elitist state solve such deep-rooted problems? Does this not call for a change in politico-economic order?

Economic growth brought gradual change in many countries. Education, knowledge and skill help increase productivity of the factors of production increasing GDP, tax revenue and exports. These are necessary conditions for growth and to a degree in societal development regardless of the economic system.

In Pakistan, there are strong institutional impediments to the process of high growth. The ruling classes are reluctant to undertake necessary reforms in administrative and economic fields essential for high growth. In enacting and implementing any reforms they prioritise their own interests. Rather, the ruling classes impoverish the poor by levying taxes on goods and services they consume while they themselves enjoy privileges and evade taxes. The prevalent system as a whole is corrupt, unjust and aggravates inequality.

Historically, high growth in Pakistan has depended on foreign resources and foreign investment. High growth in a system, described above, aggravates inequality — class-wise, ethnicity-wise and region-wise. Gross inequality is unacceptable for many reasons. It aggravates grievances of the common people, ethnic groups and regions and strengthens hereditary aristocracy which is antithetical to democratic evolution. We need high growth in an egalitarian socio-economic framework that simultaneously eliminates poverty and reduces wealth inequalities.

The writer is a senior economic reporter

Is there a way out?