People have voted for a new government to have a clear break from the economic policies of the past eight years.
The predominant concern in the recent past was economic growth rate with the ruse of trickle down that is an obsolete and an archaic premise. The trickle-down thesis stands refuted empirically. The state-of –the-art borne out in late developers is growth-with-equity. If it can happen there, why can Pakistan not have growth-with-equity too?
As the previous government boasted of high rates of GDP growth, food and other prices soared, current account deficit widened, energy shortages worsened despite the pet prescription of privatisation, unemployment increased as people were ruthlessly retrenched, GDP grew but not job opportunities, and poverty, as measured by incomes, education and health facilities and living conditions showed no signs of abatement for bulk of the population.
Surplus continued to flow from the lower to the upper income groups that stood better off. As food became scarce, incomes of the farmers increased, as this remained the prime concern of policy makers. While there are other factors that also feed into higher agricultural output, focus was on farmers’ income. Clearly, the past government’s decision-making was heavily tilted towards the rich farmers and the rich investors who acquired public enterprises. It was the lower tier that suffered by losing out on jobs, food, and living conditions.
This lower tier was asked to wait for their trickle of benefits. Instead of waiting, they voted that government out to bring in a new one. The previous government had, therefore, bet on the wrong horse. While the upper echelons served as their political base, they did not have power enough to retain the then incumbents in the office. As it turned out in the general elections, power was with the common people. The commoners’ concerns should be dominating the next economic agenda if the mandate of the electorate is respected..
One of the issues, however, is that, once in power, the office lobbies get crowded by the influential asset owners in various segments who alone are provided access by the system of governance. The electorate gets shunted out and away from the government that has actually been thrown up by the ones who can no longer or with extreme difficulty access their representatives holding position of power.
The agenda is thus dominated by the haves who wish to have more. The decision-makers play to the tunes they hear in the vicinity. Since human memory is short, the tunes of the common electorate begin receding into the background. Once out of active memory and amidst the splendour of high government offices, they are likely to be forgotten. The concerns of the “crowd”(electorate) thus get crowded out of the agenda.
Even before the next government would take charge, the concerns of the farmers have been trumpeted a lot more than the concerns of the ones who are behind the victory of the winners in this election. It is being demanded that the wheat support price should be increased by more than 100 per cent as the international prices are rising. So, it is said that unless support price is brought up significantly, farmers will not have incentive to produce more. While more production also depends upon inputs and techniques, emphasis only on the support price makes the entire issue of wheat output underspecified.
The question is that when oil prices decreased in the international markets, did our petroleum prices also move in the downward direction? Have our sugar and cotton prices always moved in tandem with international prices for the same? Do people, in general, get international level salaries? Since, for sure, wages and salaries are nowhere near and cannot be at the international level, people can certainly not afford to pay a price of wheat determined in the light of international price for this basic food item. They will be further impoverished if wheat price goes further up as increase in wheat price has a ratchet effect on the overall price level.
Also, to jack up wheat support price for reasons of efficiency is to neglect the issue of equity. In the interest of equity, there should be a trade-off between efficiency and equity. Responsible elected governments determine the extent of surplus that must flow to the consumers most of whom are poor or around it. Support price should then be fixed accordingly and in line with the promises of equity made during the election campaign. Overall price level in general and wheat price in particular will be a significant distributive factor in this tension between the producers and consumers.
The new government will also need to pull out of the GDP growth rate hang-up. In the recent past, much of it was fuelled by creating credit-financed demand for consumer durables. In our country, higher production through better capacity utilisation is deemed as satisfactory growth. Strictly speaking, we should aim at economic growth that takes place when the production possibilities grow beyond what is being produced with full utilisation of resources a country is endowed with.
As far as we are concerned, full resources are far from full utilisation. Our land, human capital, machinery and equipment are all grossly under-utilised as is evident from the land mass that is not cultivated, labour power unemployed or under-employed, and installed machinery that does not operate at capacity. Yet, there is a tendency to be jubilant over growth rates when despite growth the economy remains inside the production possibility frontier. Real growth is to pull the production possibility frontier outwards after all the resources have been deployed.
So, the pre-occupation ought not to be only with figures and quantities. Rather, pre-occupation ought to be with ideas for utilisation of the resources that exist but remain un-/under-utilised. This will generate output and employment. The quality and character of growth need to be targeted so that the goal of growth-with-equity is approached. Who benefits is the key question here.
Lasting solutions to the issue of employment need to be sought failing which the symptom will re-appear. Infrastructure projects provide employment only during the life of the project. Yes, this route was taken in the US and China. It worked there because the economies were ready to absorb the workers freed from infrastructure projects. It is not likely to work here unless the economy generates the same labour-absorbing capacity.
This will happen only if decision-making weighs boldly in favour of the deprived in both the rural-agricultural setting as well as in the urban-industrial areas. If surplus labour is expected to be absorbed in the urban informal sector, the policy will continue to be dualistic instead of being integrative and inclusive. Discontent and resentment will continue to simmer beneath the surface.
Exports will follow as a logical consequence when existing human and material resources are intensively utilised. Equally important will be to build the values of honesty and hard work that under-girded the capitalist revolution in the past. Only then will good managements be found in public, private, and agricultural set-ups. In the absence of these basic values, a case cannot be made for less government yet. For, most economic activity requires the visible hand of the government for supervision and regulation failing which the tendency to hog the resources might exacerbate thus leaving the electorate worse off.
People have voted for a new government to have a clear break from the economic policies of the past eight years.
