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Economic cost of protests

August 16, 2014
The writer is an economist and presently director at the Collective for Social Science Research, Karachi.
The writer is an economist and presently director at the Collective for Social Science Research, Karachi.

In this season of protests and marches, it is useful to reflect on the economic costs of democratic protest. After all, in Pakistan’s noisy democracy, protest — in all its manifestations — will continue, at times turning violent and more often than not creating a logjam.

Those in power will always remind us that protests result in economic suffering of the people and as such, those protesting are opposing them at the cost of the broader public good. How much of this is fact and how much fiction? Also, can we pin down the extent of economic costs that different forms of protest entail?

Perhaps the most common form of protest, particularly in Karachi but also frequently resorted to in smaller towns of Sindh and Balochistan, are strikes which result in a complete shutdown of the city for the day (more frequently reduced to the first half of the day). As the bulk of production and service activity is shut down, this is a deadweight economic loss, at least for the inhabitants of that town or city.

In the case of Karachi, the impact resonates for the rest of the country because of the port and the fact that it is the financial nerve centre of the country and even after a fair amount of de-industrialisation, the city still houses a significant proportion of the country’s industry.


There are several factors to consider when calculating the economic impact of protest marches


The other instance of deadweight loss to the economy is spontaneous (or spontaneously contrived) mob protests, such as those witnessed on more than one occasion by namoos-i-risalat elements and at the time of Benazir Bhutto’s assassination. These flare-ups have been accompanied by violence that has not only shut down towns and cities but has destroyed public and private property also.

Marches (whether long or short) and sit-ins are, however, a different proposition altogether. A sit-in or a march from one place to another need not, in principle, result in a deadweight loss to the economy. If the sit-in is confined to a designated place or the march is on a designated route, the only direct cost is that of lost labour time of those participating in the sit-in or march.

Labour market trends in Pakistan show that more than two-thirds of those participating in the labour force are in the informal sector. There is also evidence from Pakistan as well as other developing countries that a large chunk of workers in the informal economy (and a fair number in the formal economy too) are underemployed, ie the productivity of these workers is low. There will be a loss to output but much lower than if, say, equivalent labour time was lost in a developed country.

Moreover, if the sit-in is in and around an area where there is significant commercial activity, there will be a loss to those traders, but industrial and trading activity in the broader vicinity will continue. Since sit-ins usually take place near press clubs or assembly buildings, they create more inconvenience than economic loss.

The march or sit-in modes of protest can, paradoxically, have a beneficial impact on the economy also. Depending on the number of people participating, there is considerable activity generated for transporters, food vendors, lodgers, publishers, banner makers and, increasingly, entertainers.

This spurt in aggregate demand can only have a positive impact, albeit limited, in an economy which is perennially confronted with the problem of excess capacity.

Also, if the protest is sponsored by a political party, there is a transfer of resources from the political bigwigs to ‘worker’ level cadre as the tendency is for the political bigwig to pick up the tab for transporting, feeding and putting up participants he or she is taking in the march or sit-in. Such protests are thus no different from political activity witnessed during election campaigns.

As things unfold before us, the ‘azadi’ or ‘inqilab’ marches and subsequent sit-ins are not normal protests described above and entail significant economic cost.

The Punjab province and Islamabad are in a state of virtual lockdown. Barricaded by containers, large swathes of the area are inaccessible for routine transport, not only of people but also for the movement of goods to and from the province.

There are already issues of shortages of food items in Karachi, export deadlines are being violated, factories in Karachi are starved of raw materials coming from upcountry, and essential items docking at the port and industrial and agricultural output from Karachi and the rest of Sindh cannot go through to Punjab and KP. It should be clear that this economic cost is being inflicted on the people not because of the protest marches or the promised sit-ins per se, but due to the ham-handed and politically intransigent response of the governments in Islamabad and Lahore.

Protest is a democratic right and cannot be denied to citizens and their representatives. Also, Pakistan is not the only country in the world where groups opposing the government resort to protests. In developed countries, such protests are contained across time and space and policing is of a higher standard than that witnessed here.

In developing countries, the intensity of protests is much greater as it is perceived — and with some merit — that unless protests are disruptive, spanning across a large number of people and over days, there will be no response from the government of the time.

In the short run, the onus of limiting the degree of disruption to the economy will depend largely on the sensitivity and political savvy of the government of the day. In the medium to long run, hopefully as democratic norms become entrenched, the state and sitting government as well as those opposing them will exercise their democratic rights and obligations in a manner that will minimise economic and social disruption.

The writer is an economist and presently director at the Collective for Social Science Research, Karachi.

Published in Dawn, August 16th, 2014