- Increasing GDP growth by one percentage point reduces poverty by 3.6pc, whereas a one percentage point decrease in inequality reduces poverty by 8.5pc .
- The richest 10pc of the population pay 10pc of their income in indirect taxes, and the poorest 10pc pay 16pc.
- 48pc of rural households are landless, and the highest incidence of landlessness is at 62pc in Sindh.
Pakistan failed to achieve any of the targets set out in the UN Millennium Development Goals (MDGs) from 2000 to 2015. An analysis of the factors responsible for its abject failure does not bode well for the prospects of any degree of success with respect to the newly adopted 17 Sustainable Development Goals (SDGs) One of the 17 goals, SDG 10 is focused on achieving income equality globally. And although, strides have been made to lift people out of poverty, much inequality persists. Hence, SDG 10 focusing on reducing inequalities by 2030 underscores the need for policies ‘to achieve and sustain income growth of the bottom 40pc of the population at a rate higher than the national average’ among other targets — all focused on inclusive economic growth.
While the reason for Pakistan’s non-performance with the MDGs can be traced to the political economy construct of society, the government has their work cut out if they want to meet the SDGs. There is a tiny upper class with bloated bank balances and a mass of poor with, literally, empty stomachs. The middle-class is effectively non-existent as a political force. The fact is that there are now two Pakistan’s: one of the elite, the ashraafia, and the other of the common people, the awaam. The ‘politically-in-control’ elite are insensitive to the plight of the ill-fed, ill-housed and ill-educated masses. This has also led to an apartheid-like situation with de facto separate housing, modes of commuting, and education and health facilities. Therefore, inequality is ingrained in the structure of the economy. The composition of growth is such that it tends to widen inequality: every one rupee expansion in national income places 36 paisas in the pockets of the rich and 3 paisas in the pockets of the poor. The tax regime is regressive, with 80pc of tax revenues derived from indirect taxes, the richest 10pc of the population paying 10pc of their income in indirect taxes, and the poorest 10pc paying 16pc, according to the Social Policy Development Centre’s (SPDC) latest annual report. Resultantly, the income share of the richest 20pc of the population increased by 12pc — from 43.5pc in 1987-88 to 48.7pc in 2010-11. And that of the poorest 20pc has shrunk by 21pc from 8.8pc to 7.0pc over the same period as noted in an SPDC publication.
There have been continuous attempts to pursue high growth as a vehicle for poverty alleviation, but no attempts have been made to address inequality; the sole exception being during 1972 to 1977, whence egalitarianism was pursued as explicit state policy. The lack of attention to inequality exists despite empirical analysis showing that an increase in GDP by one percentage point reduces poverty by 3.6pc, whereas a one percentage point decrease in inequality reduces poverty by 8.5pc.
Inequality is not a technical variable in economic formulation that can be dealt with by policy alterations at the margin, improving functioning of markets, or ‘safety nets’ appendages. It is a product of inherited and existing unequal distribution of assets. This inequality is starkly evident in ownership of rural land, with one percent of farms covering one quarter of agricultural land and 62pc of farms comprising five acres or less. For the country as a whole, 48pc of rural households are landless, with the highest incidence of landlessness at 62pc in Sindh. Other areas of high land ownership concentration are south Punjab and Nasirabad division of Balochistan.
In urban areas, private sector housing provision has created islands of luxury, while the state’s reluctance to provide low and middle-income housing has pushed over half the urban population into shanty towns. The comparative state of housing represents a graphic profile of inequality in this country. At one end, private sector property developers are advertising housing schemes with swimming pools, horse riding tracks and golf courses; and at the other end, there are families of 20 crammed into a 10x10 feet room.
Asset ownership and control represents the ‘stock’ factor in inequality. State policy represents the ‘flow’ factor; that is the manner in which the state’s social and economic policies generate and distribute income for and between the various income groups. Post-1980s, Pakistan’s macroeconomic and fiscal policy framework has moved to a position where it is manifestly anti-commodity producing sectors, particularly manufacturing. It now promotes speculative gains from stock markets, land markets and commodity markets — without generating production of goods, exportable surpluses, or jobs for people at large.
The new jagirdars of the economy and politics are no longer the traditional landowners and industrialists, but stock market brokers, property developers, and grain and fuel importers and traders. Pakistan is becoming a casino economy, where a wily few siphon off money from the pockets of the unsuspecting populace. This is a recipe for more inequality and more poverty.
Inequality is a global problem, fuelled during the last half century by the neo-liberal economic philosophy. Although the UN has included reduction of inequality as one of the goals, it continues to recommend a line of attack — “improving the regulation and monitoring of financial markets and institutions, encouraging development assistance, and foreign direct investment” — that is rooted in the failed neo-liberal market paradigm.
Markets are not neutral vis-à-vis income groups and regions. They respond to purchasing power, not to need; thereby serving the rich. The distribution of income and wealth is a product of political power configuration between different sections of the population and between different regions. Bridging the structural divide between the Pakistan of the ashraafia and the Pakistan of the awaam is essential to achieving any of the goals of social development.
The writer was a former advisor for planning and development to the Sindh chief minister
Published in Dawn September 29th, 2016
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