Shame of inequality

Published November 20, 2015
The writer is a senior research fellow at the Institute of Development and Economic Alternatives and an associate professor of economics at LUMS, Lahore.
The writer is a senior research fellow at the Institute of Development and Economic Alternatives and an associate professor of economics at LUMS, Lahore.

JAVED’S mother insisted that we, the owners/managers of a motorcycle repair shop, hire her son as an apprentice even if it was with no pay. We refused as Javed was only eight years old. His mother’s logic was simple. “I cannot feed him at home, he cannot go to school as I cannot afford it, and we need any money that Javed can make. Even if you do not pay him for an initial period, he will get lunch here and will also learn a skill. That is enough.”

We made some arrangements for Javed. But there are millions of Javeds in Pakistan. Even though, and there is evidence for this, absolute poverty has gone down in the country, inequality has, by all estimates, increased significantly. This does not mean there are no poor people in Pakistan. There are still plenty of them. But the percentage of people living a life of absolute deprivation is lower than before.

Yet, not only has inequality increased manifold, it seems the progress we had been making on reducing infant mortality, maternal mortality, malnutrition in children and morbidity has slowed down significantly and, in some cases, disappeared. This is quite a paradox: poverty is down but why are child and mother health indicators not improving? Is it a case of time lags? Or is there something more to it?

The story is one about poverty and the extremes of inequality this society appears to be willing to live with.

There has been hardly any work on this in Pakistan yet. But there are some possible explanations. Child and mother outcomes depend a lot on the provision of safe drinking water and good sanitation facilities. Historically, in other countries, child and mother health indicators saw major jumps when the state started providing good water and sanitation facilities — most dramatically, after the 1854 cholera outbreak in London and the discovery that cholera spreads through tainted water (the fecal-oral route), London built its water and sewerage systems and has not had another water-related epidemic since. The same sort of results are seen wherever water and sanitation facilities are good.

But, in this department, our state has failed quite badly. The quality of drinking water, even in the larger cities, is quite poor. Solid waste management is inadequate. Waste water disposal, though present in the larger cities, is not good enough to give confidence that no leakage into the ground and drinking water has occurred. The story in villages and smaller cities is much worse. There are usually no safe water or properly designed sanitation facilities being provided to the citizenry.

But Javed’s story is more than just about the lack of water and sanitation. The story is also one about poverty and the extremes of inequality this society seems to be willing to live with. On the one side, our richest people are arguing for reducing taxes on large incomes, allowing the import of aeroplanes and very expensive luxury cars; on the other, we are struggling to provide safe drinking water, sanitation facilities, education, healthcare, and, most importantly, food to millions of Javeds. This situation can only be termed as shameful for a nation.

It is not the fault of an individual or a few individuals, it is a much broader and system-wide issue. Poverty and increasing inequality, if left unchecked, can have significant growth-lowering and political and social ramifications. So, even the most extreme of libertarians and market fundamentalists has to be concerned about poor outcomes in these areas and trends in inequality.

And, at the extreme, it is a matter of rights too. Citizens have a right to food security, safe drinking water and sanitation facilities, basic health facilities and, after the inclusion of 25A in the Constitution, access to education.

A certain degree of redistribution towards the poor and those who are being left behind for any reason is necessary. Our state has failed to do exactly that. Clearly, the Benazir Income Support Programme, though a very important institution, is not enough. We need redistribution through a much better taxation system that is based on progressive taxation. We need much better funding and provision for water and sanitation facilities, healthcare and educational provision, and food security for all.

This is easier said than done. Even where there is the willingness — and that is questionable — it is not a trivial issue to develop systems that deliver on higher taxation for the rich compared to the poor, provide decent quality health and education facilities to all and, most crucially, ensure food security for everybody.

We have been trying to reform our taxation system for some 30 years if not longer. And with what results? Our tax-to-GDP ratio stands at a paltry 9pc or so, one of the lowest in even developing countries. Our taxation system is based mostly on indirect taxes that tend to be regressive. A lot of the collection is through presumptive taxation and quite a bit is almost akin to extortion. Most of the rich, whether in agriculture or trading, do not pay taxes.

Our food security system is in poor shape too. Malnutrition numbers for children are quite bad, especially in the rural parts of Pakistan. But we have set wheat prices as well as procurement targets for as long as I can remember. The state has protected the farmer as well as the consumer through price floors under wheat and ceilings on flour prices. The state has maintained stocks of wheat to facilitate the latter. But, if the poor are malnourished, clearly policies have failed.

Extremes of poverty, increasing inequality, lack of food security, lack of access to safe drinking water and decent sanitation facilities, lack of access to quality education and health facilities should be the primary concerns of the state. If a state or country cannot provide these, and our Javeds have to work at the age of eight to fill their stomachs, can there be a justification for the existence of such a state?

The writer is a senior research fellow at the Institute of Development and Economic Alternatives and an associate professor of economics at LUMS, Lahore.

Published in Dawn, November 20th, 2015



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