The spectre of inequality

February 9, 2020

Is disparity between the rich and the poor, our biggest global challenge? How does uneven distribution of wealth and income affect Pakistan’s wellbeing?

As the cityscape develops rapidly, a woman and her daughter collect cowdung for fuel.

In their ongoing campaign against rising global inequality, the international NGO, Oxfam, has recently published a series of shocking statistics documenting the growing gap between the rich and the poor worldwide, with the massive burden of unpaid care work being shouldered by women, particularly from the Global South. The report provides a series of disturbing statistics about the rapidly increasing wealth gap between the world’s wealthiest and the poorest. It tells us that the world’s richest 1 per cent have more than twice as much wealth as 6.9 billion people. Contrast this with the fact that almost half of the world’s population lives on less than $5.50 a day. A major reason for this is the wealthiest class’s ability to exert an inordinate influence over their respective governments, thus avoiding fulfilling their social responsibility to give back a part of their wealth, in the form of taxes. Oxfam’s report tells us, for example, that only 4 cents in every dollar revenue comes from taxes on wealth. This is also because the wealthy are able to hide much of their wealth by avoiding their tax responsibilities – 30 per cent of their tax liability to be precise.

The report also delineates that the effects of this inequality are unevenly felt even amongst the poor, with women and girls suffering its consequences the most. For example, for every 100 boys out of primary school, 121 girls suffer the same fate. Furthermore, much of the work performed by women globally is unpaid, which means women’s ability to move out of the poverty trap is further hindered. Oxfam’s report tells us that the estimated value of women’s unpaid labour is $10.8 trillion a year—three times the size of the tech industry.

For many of us, reading such statistics has become so common that we are almost numb to their implications. For example, how does one wrap one’s head around the fact that 22 of the richest men in the world own as much wealth as all of the women in Africa? The numbers are so staggering as to become almost impossible to grasp. Furthermore, until we talk more concretely about how or whether these growing inequalities are being experienced in our contexts, such statistics remain within the realm of distant and abstract figures.

Is inequality a problem in Pakistan?

There is a great deal of confusion about the nature and extent of inequality in Pakistan. Part of this is due to a lack of comprehensive administrative data on income and wealth. According to the World Bank, the Gini coefficient, which measures the rate of income inequality in a country, rose by 1 per cent between 2001 and 2015, which demonstrates a slight widening of the gap between the rich and the poor in the country. Data shows that the top 10 per cent of the population consumes on average three times more than the bottom 10 per cent, and their incomes are five times as large. Given the skyrocketing rate of inflation in the country as a result of the IMF’s latest austerity programme, one can deduce that the rate of inequality would have worsened even more over the past year.

Under the IMF’s austerity measures, inflation has reached an all-time high in Pakistan, with the costs being overwhelmingly shouldered by the poor. As of January 2020, inflation stood at 14.6 per cent, the highest it has been in nine years. The cost of basic foodstuffs has been particularly high, which hits the poor the hardest. In the last year alone, the cost of tomatoes rose 157.72 per cent, onions 125.32 per cent, vegetables 93.6 per cent, potatoes 87.3 per cent, sugar 26.29 per cent, wheat flour 24.06 per cent, eggs 18.05 per cent, cooking oil 15.44 per cent and meat 13.43 per cent. It is a wonder how the poor are able to put food on their tables given such staggering increases.

Inequality is seen globally through a gendered lens. It should also be approached as such in Pakistan. With only 26 per cent of Pakistani women engaged in paid labour, the vast majority of women are dependent on their husbands or male relatives for their material well-being. Most often, male earnings are shared unevenly within the household, which means that amongst poor households, the female members are doubly disadvantaged. Even when women are earning their own incomes, they are not paid at the same rate as men for the same work. The gender pay gap in Pakistan is reported to be 34 per cent, which is more than twice the global average and is reportedly the highest in the world. Furthermore, the effects of cutting spending on social services such as health and education, are borne inordinately by women. For example, one can guess that the introduction of higher fees for various medical tests in Punjab’s public hospitals, and the termination of free diagnostic care in indoor departments will mean both that women and girls are at risk of being denied medical treatment by already-struggling families and that the increased burden of care work for sick patients will be carried by women in their homes.

Why is inequality a problem?

Growing inequality is not only an ethical problem, inequality has very real detrimental social consequences. In terms of health, studies have found that the higher the rate of inequality, the higher the rates of various health problems including obesity and mental illness. In the context of Pakistan, there has been a shocking increase in suicide rates in some of the most deprived parts of the country with women and youth amongst those most affected. For example, 1,300 cases of suicide have been recorded in Sindh over the past five years. In 2018, 81 per cent of those committing suicide belonged to the lower income groups with most suicides blamed on poverty, unemployment, ignorance, economic conditions, lack of basic facilities of life, debt, forced marriages, violence, and drug abuse. In cities too, poverty has reached crippling levels. A few days ago, a 45-year old man committed suicide by setting himself on fire in Orangi Town, Karachi following a similar incident last month when a father of four took his own life because he was unable to provide for his family.

Rising inequality has also been linked to decreasing social cohesion and an increase in violence of all forms. Numerous studies have demonstrated a link between inequality and an increase in various forms of conflict from the household, to locality and even the national level. This creates a vicious cycle with poverty leading to increased conflict, and conflict leading to more spending on security rather than social welfare. For example, according to government estimates, the cost of acts of terrorism to the national exchequer between 2001 and 2017 is estimated to be $123.13 billion according to the 2016-2017 Pakistan Economic Survey.

Last year the government gave away Rs 20 billion in tax relief to the wealthiest class, which was 40 per cent of the amount of tax it would collect from middle classes. The largest banking, cement, car manufacturing, textile, fertilizer and food companies were the main beneficiaries of these cuts, and the owners of these corporations were amongst the wealthiest individuals in the country.

Furthermore, inequalities in terms of development between different parts of the country lead to increasing tensions between ethnic groups and a sense of alienation amongst those who are most deprived. While poverty is a national problem, it is spread unevenly across the country. A staggering 62 per cent of Balochistan’s rural population is living in poverty, and 80 per cent of the poor overall live in rural areas leading to a rapid rate of urbanization and an increasing strain on the resources and infrastructure of our cities. Such spatial disparities have serious political and social impacts and pose the greatest threats to the peace and stability of the country overall. Regional disparities lead to an increase in resentment amongst those who are sidelined by development. If we are attentive to the follies of the past, it was the unequal distribution of wealth between East and West Pakistan that eventually led to the bloody schism between the two in 1971.

What can be done?

While there is no simple solution to the problem of growing inequality, one of the most effective means of reducing the wealth gap is through a more progressive tax structure—one in which the wealthiest citizens contribute the most to the country’s exchequer. A study of inequality in the United States over the last 50 years found that the periods in which taxes were most progressive corresponded with those in which income inequality was the lowest. Currently, the tax structure in most countries is heavily skewed towards privileging the wealthy. According to Oxfam, one of the reasons inequality is growing at such an exponential rate is because governments tend to undertax corporations and wealthy individuals under the guide of protecting business and ensuring growth. In actuality, this allows wealth to be concentrated in the hands of the wealthy and prevents re-distribution amongst the rest of the population. In our own context, we have seen the PTI government provide Rs 20 billion in tax relief to the wealthiest class last year, which was 40 per cent of the amount of tax it would collect from the middle classes. The largest banking, cement, car manufacturing, textile, fertilizer and food companies were the main beneficiaries of these cuts, and the owners of these corporations were amongst the wealthiest individuals in the country.

Even the IMF, which is generally conservative in terms of its policy recommendations, advises countries to increase social spending in order to decrease the harmful impacts of income inequality. In particular, they recommend reducing defence spending and reallocating those funds to social protection. Pakistan has one of the lowest ratios of spending on social services with less than 5 per cent being spent on health and education. If one compares this to the relative size of the military budget, which it is estimated absorbs roughly 20 per cent of the annual budget and keeps wealth concentrated in the hands of a privileged class within the military, the imbalance in priorities becomes even starker.

Apart from specific policy changes, tackling inequality at its root would mean shifting our national approach to poverty alleviation and development more generally. The dominant approach in the current and previous governments has focused on a model premised on charity in order to deal with the problem of poverty. This is evidenced by the Benazir Bhutto Income Support Programme, which provides small cash transfers to women and by the expanded Ehsaas Programme of the current government, which focuses on such measures as soup kitchens and scholarships for the poor. While such programmes provide much-needed safety nets for the poor, they do not challenge the structural reasons poverty exists in the first place and arguably keep the poor in a perpetual state of dependence and marginality. Rather than responding to poverty with charity, the state should approach poverty as an issue of social justice and as a failure of the system overall. Furthermore, the current growth-driven model of development is not only unsustainable from an environmental perspective, it also does not deal with the question of distribution and equity. In order to reverse the process of growing inequality at national and global levels, governments including our own, will have to shift their priorities away from growth and towards a model premised on social justice, fairness and sustainability.

Finally, none of this can happen without a robust and functioning democratic process, which as we know has come under increasing attack in recent years in our context. If governments respond to the needs of the wealthiest at the expense of the vast majority, the income gap and all of the problems that come along with it, will continue to grow.

The autor is an associate professor of sociology at LUMS and faculty director of the Saida Waheed Gender Initiative

Pakistan and spectre of inequality: World’s richest 1 percent wealthier than the rest of 6.9 billion