October 02, 2006	Monday	Ramazan 8, 1427

THE World Bank is beginning to show concern for social security nets in less developed countries. Strictly speaking, provision of social security and social insurance is a concept that gained ground with the rise of welfare state in the developed countries.

In the USA, it was being introduced slowly since 1880 and was firmed up with Franklin Roosevelt’s New Deal that he gave in the 1930s. Since then the welfare state has been firmly entrenched, however socialistic and distasteful it appeared to many capitalists in the beginning.

As a result, social security, unemployment insurance, medicare for the elderly and the poor, cash assistance, and food stamps have been parts of the American welfare programme, criticism from conservatives’ camp notwithstanding. The concept of social security is also rooted in Keynesian prescription as these safety nets would help the economy bounce back from the rock bottom of the recessionary part of the business cycle.

Welfare, therefore, saves not only the poor but also capitalism from sliding into a depression and social upheaval that all capitalists would much rather guard against through a system of social security.

In Pakistan, social upheaval is preempted by creating clientele groups at all levels in most segments of the society who are not only fed by the patrons but the co-opted clients act to ensure that discontent does not grow into an upheaval. These very traditional patron-client networks perpetuate status-quo with the naysayers also humbled into submission to toe the line of the vested interests and the powers-that-be. Those who retain their own mind operate with extreme caution.

The upshot is that there hardly is a groundswell for transformational change that would upset the apple-cart to the extent that distributive policies would come to take centre-stage on the national agenda. Distribution, if any, is to be amongst the rich groups with the clients hoping to be fed from the palm of their patrons. In this is found “security” by the clients, if at all.

People never expected social security nets of the kind that are provided by developed democracies. First, people are caught in the above exploitative webs in various strata of the society. Second, people do not expect much from a resource-poor government whose expenditure priorities are still reflected in defence, debt-servicing, and now also in infrastructural development to fuel growth.

Even in the US, transfer payments are funded by payroll taxes to which both the employees and the employers contribute. Payroll taxes have been a fast growing source of US federal revenue. Pakistan’s record is least encouraging in this respect.

With hardly a tangible source to fund social security benefits in Pakistan, how will these welfare programmes be financed? The idea behind these programs is that active workers pay for the benefits of the elderly, the retired, the disabled, and the deprived. Social security is a “social contract” between generations and between the various socio-economic classes that is honoured in developed countries for as long as it is enacted, wide-ranging debates for and against notwithstanding.

The tax culture is hidden from none. It is still considered smart to evade than to pay taxes. With this mindset, will people be inclined to pay social security taxes that will benefit another generation or another class or even themselves at a later point in time?

As for the elder generation, the families are still close-knit enough to take care of their own elderly. A social security measure is to have enough children that would provide the safety net in old age. This aspect also feeds into the high population growth rate in the country. For, greater number of children would not be viewed as an investment for old age if social security benefits would be arranged by the state.

As for benefiting another class, people think that they are absolved of their responsibility after they have given 2.5 per cent zakat plus khairat. After the taxpayers have paid their federal and local taxes as well as zakat and khairat, will they be inclined to pay social security/payroll taxes also? While many evade their existing tax liability, the tax payers might rejoined by saying that they look after their elderly themselves, they pay their zakat, and as for their own old age, they are saving up and having children.

Unemployment insurance might then be the next promotional point. But, the question will be, unemployment insurance payments to whom and to how many? The government’s rate of unemployment is understated. Will the existing employed be able to contribute a large enough amount by way of social security taxes that will provide for the unemployed?

First, numbers need to be known to determine if it is even a feasible enough proposition. Second, in developed democracies, unemployment is not only a small single-digit fraction of the labour force but it is also a short-lived stage and the unemployed are expected to join the labour force soon. Unemployment is a prolonged period of time with some joining the informal sector and many others taking to begging. For how long then will unemployment insurance be given and to whom? To dispense unemployment insurance, a proper authentic record of the unemployed is required. How will this record be developed and on the basis of what criteria?

Unemployment insurance in Pakistan might translate into almost permanent givings to a very large number of people for which funds mobilization may not even be a feasible proposition in an economy likely to grow but exclusively for the privileged few. If the bulk remain bypassed, unemployment insurance payments will become a permanent feature when they are supposed to be transient and not for the many but for a few.

Hypothetically speaking, even if we are able to mobilise huge amounts of funds that will be needed for the welfare of those who are not absorbed by our small economy, their disbursement in our corrupt culture will be a major challenge where even zakat funds are pilfered and do not reach the needy.

None can dispute the significance of social security system. But, the economy has to be big enough and the target group small enough to execute welfare programmes like they are in developed countries. In these countries too, dole carries a stigma that people want to get rid of sooner rather than later. Can social security alleviate deprivation by putting a vast segment of the population on the dole? Our challenge is to crank the economy in a way that it distributes from growth to not just the rich but to all societal segments.

For this, wide ranging reforms are required beginning from land reforms so as to begin including people in the economic process so that they eventually begin to take charge of their own lives. Then, we may have social security for those who still fall by the wayside. To have social security for all those who would like to contribute but cannot because of an economic system that is of the rich, is run by the rich for the rich is to be grossly neglectful of the immense human potential that must be productively harnessed for individual and collective human and economic development.

It is towards the above end of a self-propelled inclusive economic system that the IFIs should be driving the less developed world. Unfortunately, their neo-liberal prescriptions have benefited the beneficiaries more than the ones on the periphery. Their endogenous growth model has failed to include all. Now they show concern for the welfare of the deprived that their prescriptions failed to address.

Did they not anticipate the shortcomings of their recipes? Knowing their economic acumen for their own people, it is hard to believe that they do not know what prescription they are writing for us. So, why a concern for our deprived now who are also potential fuel for the current upheaval, if you will, in the world?

Could this idea of welfare for the bulk of the population be coming from the immense support enjoyed by the Hamas and Hezbollah on the basis of their social work? Could the world financiers led by ex-US deputy defence secretary be contemplating going the same route to win hearts and minds in their war on terror that is also being attempted on the economic turf?