There has never been any school of economics which believed in the efficacy of the trickle-down mode. The term has been attributed to humorist Will Rogers, who said during the Great Depression that “money was all appropriated for the top in hopes that it would trickle-down to the needy.”

The reason why one should be examining this 'theory' is that it was presented as a panacea for Pakistan's economic ills under two of its military dispensations - first by Ayub Khan in the early 1960s and then under Musharraf almost four decades later. In both cases, while GDP showed good growth in some years, but the lot of the common man did not improve as anticipated. A distinction has to be made between economic growth and economic development. While one can argue about what our economic growth rate was during the Musharraf government, the UNDP's Human Development Index (HDI) gives a completely different picture about economic development. The index takes into account not only the GDP growth but also the quality of health and education coverage of citizens. This gives a fair idea whether economic development (as opposed to only GDP growth with few economic indicators) is taking place.

In 1999, the year of Musharraf's coup, Pakistan was placed 138 among 174 countries in HDI. In 2008, it was ranked 136 out of 177 countries. Clearly, the lot of the common man did not improve much during the Musharraf years.

The trickle-down 'theory' was first tried in the Ayub rule (1958-1969). This period with its unprecedented GDP growth was hailed as the “decade of development.” Pakistan was touted as a model for other developing countries. Then, in late 1968, Dr Mahbub-ul-Haq who was the chief economist of the government of Pakistan made a startling confession.

In a speech made in Karachi, he stated that the bank credit was mostly tied to 20 business prosperous families. The trickle-down effect had not materialised. The poor had not benefited in proportion to GDP growth rate. In admitting that Ayub's policies were flawed, Dr Haq came out as a visionary. Later on, he pioneered Human development therory and in 1989 led a team of international scholars to produce UNDP's first Human Development Report.

Dr Haq's speech gave credence to the PPP's slogan of roti kapra aur makan. The result of the 1970 elections was a stunning blow to the country's elite.

Abroad, based on Dr Mahbub-ul-Haque's findings, the community of development economists began to reconsider the efficacy of the trickle-down mode. This led to fresh thinking in human development. Many reverted back came to the belief that the state had to play a more proactive role in poverty reduction. Education, health cover, employment opportunities and a safety net for the downtrodden was the government responsibility. This could not be left to GDP growth alone to deliver. Development had to be people-centric.

In the last few decades, eminent economists have at best made the trickle-down approach highly controversial. Others have totally debunked it. In developing countries, no recent example really stands out where the trickle-down effect alone worked. If one looks at the recent experiences of the developed world, the US experiment can be looked at. The results there are no different.

Reagan years saw implementation of supply side policies and the basic premise was that ultimately the trickle-down effect would also benefit the poor. If the rich do well, benefits will trickle-down to the rest.

Joseph Stiglitz, the Nobel prize winning economist who served as the Chief Economist of the World Bank and later in the White House as Chairman of the Council of Economic Advisors and eminently qualified to comment on the trickle-down effect says “Those at the bottom saw their incomes actually fall in real terms during the two decades from 1973 to 1993. The Reagan view had no support in either economic theory or history.”

The question, we should ask ourselves in Pakistan is why have we depended exclusively on this fallacious approach?

In Pakistan, the level of poverty which stood at 17 per cent in 1977 now is at 40 per cent, according to the deputy chairman of the Planning Commission. Income inequality in itself becomes a serious impediment to faster economic growth in developing countries. Also, such inequality makes the ground extremely fertile for a radical ideology like that of the Taliban.

The rise of Taliban is as much about class war as it is about Islam.

For those 40-50 per cent living below the poverty line, the real issue is where their next meal is coming from. GDP growth figures will not impress them nor will they be in a mood to wait for the trickle-down effect to take place. If the economic issues relating to the poor are not addressed promptly, radicals will strike deeper roots in society.

Economic issues affecting the poor are needed to be addressed first. Poverty has to be tackled with direct subsidies. Public sector spending has to increase substantially on health and education. In the last 62 years, the elite has not let anything trickle-down!

Major political parties will have to rethink their approach. Because of our meagre resources, the tax net has to be widened to include agriculture and the stock market.

Expenditure heads including defence have to be rationalised. The focus has to shift towards job creation. Policies have to be made with the support of all the major political parties to implement those clauses of the 1973 Constitution which give a sense of participation to all. It is time to work for common good.

trickle-down approach has badly led us down in years leading to 1971. Let us not depend on it now. With the level of poverty at 40 per cent and rising, we are close to the tipping point.