THIS writer has argued in these columns that on the one hand low rates of economic growth in the last decade have resulted in 700,000 to 800,000 youth every year being unable to find productive and gainful employment, threatening social cohesion. And on the other hand, the inequalities between provinces and between social classes have magnified.

For those with limited skills (owing largely to the indifferent commitment to education of all regimes) much of the employment has been created in the informal sectors of the economy, characterised by poor quality and low levels of productivity. The distribution of the benefits of growth and improved employment opportunities has been uneven, with Punjab and a small segment of the population cornering them. Resultantly, the vulnerability of those not well endowed with property, education or skills has worsened and the gap between them and the more privileged has widened.

This article restricts itself to a discussion on inequalities at the individual/household level and does not extend to a discussion on regional disparities within the country — for a variety of reasons fast becoming a serious issue. It also does not discuss political and social inequalities. It is also not clear where we are on inequality in the historical process.

There is not much that can be done with respect to certain types of inequality, ie the natural kind:

Our lopsided priorities have made social mobility impossible for society’s marginalised sections.

a) The talent and ability with which some are born and then the effort they put into the achievement of their ambitions. Somehow we accept the earnings and wealth of those who excel in sports on the basis of their talent and hard work but cannot seem to accept the same in the case of talented entrepreneurs, even when we acknowledge their success, thereby making inequality more of an ethical issue.

b) The family to which some are born without inheritance or gift taxes in place, especially if it gives control over an asset like land. And land reform after the Federal Shariat Court ruling has become difficult, if not impossible. Moreover, the process of inheritance has resulted in fragmentation of land holdings into small, financially unviable farms with rather low rates of productivity per acre.

Inequality in Pakistan is also systemic because of state policies, instruments and institutional structures that reinforce these inequalities, many of which have historical underpinnings. For example, government policies of concessions and exemptions, licences and protection against competition (under legislative cover or the instrument of SROs), skewed prioritisation of state support to different sectors and groups, patronage involving non-merit appointments, grants, perks and privileges (urban plots to retired bureaucrats, urban plots and agricultural land to military personnel) etc create inequalities.

Our lopsided priorities with hardly any investment in quality education and skill development have made social mobility impossible for the marginalised sections (although a significant percentage of such households have benefited from overseas migration). This is in sharp contrast to the integrating principle of all civilised societies which rewards those for the talent they are born with rather than the family in which they are born. This writer is a supporter of privatisation precisely for this reason — that it recognises merit.

An inequitable tax structure, rampant evasion, protection of corruption and a dysfunctional administrative system reinforce these inequalities in favour of the propertied classes, particularly with the employed being captive taxpayers.

This slanted distribution of incomes and assets then determines the size of the economy and the consumption pattern and thereby the industrial structure, production technology and the nature and level of employment. The free play of market forces reinforces these inequalities.

The evolving structure of the economy, with the rising share and higher growth rates of the telecommunication, financial, motor vehicle assembly, oil and gas and IT sectors has meant that the less affluent, who lack access to the quality of education to acquire the requisite skill set, cannot participate effectively and meaningfully in the process of economic growth that we are experiencing presently.

The demographic and social pressures and the blowback of a mindset bred by 30 years of policies have intensified at a time when disparities in income and wealth have sharpened. This has resulted in the country being polarised between the haves and have-nots and between modernists and traditionalists with their different worldviews, fuelling bitterness against the pillars of the state and iniquitous systems and structures.

With increasing polarisation the resentment of the poor is growing. They compare the sub-human conditions in which they live with the increasingly fancy lifestyles of the more well-heeled members of society. Anger is building up against those who are building fortunes but not paying their due taxes. There is anger that whereas the incidence of increased taxation has been the heaviest for the least affluent, public expenditure on services used largely by them is being diluted rapidly in real terms.

The poor see the privileged loot and plunder and engage in conspicuous consumption, putting all the burden of adjustment and redeployment on the less prosperous. While the well-to-do default merrily on tax obligations to society, the leadership winks and maintains a studied silence, resulting in a further loss of faith in the established systems of government and business. Such conditions can hardly be conducive for political and social stability, without which high and sustained growth will remain a distant dream.

A callous, uncaring society should not expect any better. Without an enlightened elite presiding over and implementing the better alternative of a fair and just society providing adequate opportunities of social and economic mobility to those from less advantaged backgrounds it would be foolish to expect any outcome other than the present divisiveness.

Going forward, a major challenge will be the management of excessive expectations and aspirations, aroused by exposure to the internet and cable TV in a highly interdependent, interconnected world that has induced greater convergence of norms for organising equitable, inclusive and cohesive societies. But then, can a state under the influence of rent-seekers be expected to suddenly change course and opt for fundamental adjustments? Why should individuals/groups controlling the state suddenly stop milking it for their own good?

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

Published in Dawn, June 23rd, 2015

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