Why is there so much disagreement on the prescriptions and strategies to achieve the aspired goals of growth and poverty reduction? And why are perceptions and interpretations of economic growth and outcomes, so different? It is too simple to argue that those opposing official themes will invariably debunk government achievements and never give credit even when it is well earned.

This article attempts to examine why perceptions vary on outcomes of government policies and actions.

In this writer’s view, this is because interpretations and some official data may not be consistent with people’s own experiences. Disagreements between the viewpoints of the government and the governed need to be understood in terms of the different perspectives from which each side defines an issue, analyses policies and examines outcomes. And that the aggregate macro results when disaggregated into smaller components that more clearly reflect people’s experiences may help explain the passionate manner in which differences in points of view are expressed and argued.

Official data may not be consistent with people’s daily experiences.

Disagreements are reinforced by doubts about the credibility of government-generated data, as brought out poignantly by recent controversies. Critics are labelling it ‘data fudging’ with the government disingenuously defending it as mere typos!

Observers believe that poverty has increased in terms of larger numbers (as opposed to percentages of population) of the poor. The claim of a declining incidence of poverty is not held out by their daily experience, eg when they see more beggars at traffic lights. This is compounded by their own experience of a widening gap between incomes and goods and services purchasable from this income, eg, education, health, utilities and housing.

Averages tend to be deceptive and whereas income- and expenditure-based poverty may be falling, this ‘average’ may not be capturing how some members of the household, especially women and children, may be facing malnutrition as a result of the rising share of family spending on food.

Also, this poverty measure may not be fully reflecting the changing consumption basket, which would render people’s experience of being worse off at variance with official statistics (on inflation and the proportion of households below the poverty line) that suggest a decline in the incidence of poverty and the rate of inflation.

Consumer preferences could be changing with a growing middle class — its rising affluence forcing it to shift away from traditional to modern goods. But then weaker household members may be worse off and increases in utility prices absorbing a greater share of household spending. Resultantly, the official poverty line may well be underestimating the true cost of attaining calorie requirements, especially considering the accusations that the government is manipulating inflation-related data.

However, incidence of poverty must have reduced with the growing size and proportion of a more visible middle class, reflected in the increasing number of cars, motorcycles and mobile phones. And this expansion in the middle class must have come from those graduating out of the ranks of less privileged households and not from affluent segments falling in middle-class status; that is, the proportion of the poor in the population must have declined.

Moreover, the decline in the proportion of the poor on the basis of calorie intake could have resulted from households cutting their expenditures on education and health to meet their calorie requirements. And from the quantity and quality of services in education, health, safe drinking water, etc, provided by the government having worsened but without this deterioration showing up in the poverty measure. Income- and expenditure-based measurements of poverty are not designed to capture the ‘quality’ aspect of services.

The rise in cardiovascular disease, diabetes and strands of cancer (all more expensive to manage) are making greater demands on scarce government health services as well. With a stagnant, if not falling, ratio of health spending to GDP, the public perceives, not surprisingly, a weakening in the quality of health services provided by the government.

There has also been a steady decline in the quality and efficiency of civil servants and government institutions and, resultantly, the coverage and quality of public services available to the citizenry. The deterioration in the quality of utility services (particularly of electricity and gas) has accentuated negative individual experiences. None of this is picked up by income- and expenditure-based poverty indicators.

Furthermore, individual and collective experiences suggest that ‘markets’ in Pakistan are characterised by pockets of monopolistic or oligopolistic power structures. These structures do not allow the free functioning of markets. The losers are consumers with little voice.

Examples repeatedly highlighted include: money lenders and arthis in rural areas; cartels formed by fertiliser, cement and sugar manufacturers who regularly and freely manipulate prices; motor car assemblers — Toyota, Honda, Suzuki — that are having a field day with little exposure to competition; Wapda for its high tariffs partly because of corruption and inefficient operations, cellular phone operators with consumers being charged for a busy network; the large gap between the lending rates of banks and what they pay to depositors — even after the privatisation of most of the banking system, etc.

Economic policies of governments are influenced by these agents, who have market power and operate in a structure that is not competitive and does not function freely. Hence, the theory, and the rhetoric, underlying government policy appear to be flawed and out of line with practices and reality.

In a system in which most state actors appear to be personally prospering, and the lifestyles of public representatives and civil and military bureaucrats financed from the public purse are becoming more lavish (newer and more expensive cars, official housing, grants of developed urban plots for military and civil bureaucrats, etc), it becomes difficult for the public to accept that their belts be tightened to lower the level of the government’s budget deficit.

The writer is a former governor of the State Bank of Pakistan.

Published in Dawn, Aug 5th, 2014