Inequality, not poverty

Updated 01 Oct 2018


THE key social, economic and political concern of our times, both domestically and globally, ought to be inequality, not simply poverty. Poverty has been far easier to address and to reduce, inequality, far more complicated, almost near impossible. Poverty is seen by most, especially the well-to-do and privileged, as a moral issue, with some economic and social consequences. Inequality, on the other hand, is clearly a political issue, requiring far greater understanding and action.

One of the most remarkable developments and achievements over the last quarter century for the seven billion people living in the world has been the huge fall in poverty globally. Extreme poverty has fallen for the world, from a population of 37.1 per cent below the poverty line in 1990, to 18.8pc in 2012. The most striking fall in population poverty in this period has come about in South Asia, falling from 50.6pc in 1991 to only 12.7pc in 2012. Even in the case of Pakistan, evidence has shown the marked fall in poverty levels over the last two decades or more.

Evidence from the World Bank shows, quite clearly, that “Pakistan has seen a rapid, and consistent, decline in poverty since 2001, with the headcount poverty rate falling from close to 35pc to well under 10pc by 2014”. There are a large number of reasons why poverty has fallen globally and in Pakistan, and these include social and economic intervention in the form of targeted transfers and programmes, the rise in overall incomes, and social and physical infrastructure and development. In Pakistan’s case, while a number of factors have played a key role in the fall in poverty, remittances have been singled out as the most significant.

####What looks like poverty is actually inequality.

Moreover, according to the World Bank, in Pakistan, 18pc of the poorest households now own motorcycles, compared to just 2pc 15 years ago; the number of households without any type of toilet has been cut in half — from close to 60pc to about 30pc among the poorest; and even the least advantaged families in Pakistan have moved towards a more diverse diet, with a greater consumption of dairy, meat, fruit and vegetables. This has also brought the rural diet into much closer alignment with urban food preferences and tastes, as often happens with development.

For many Pakistanis, especially the privileged, this evidence is difficult to accept, for they think they see poverty everywhere. What they actually see is inequality, which they perceive, in a commonsense, common-parlance way, to mean poverty. Poverty, the way it has been defined and measured academically and by the government, simply means that people do not have a certain income to purchase a pre-designated bundle of goods, largely food and other items.

Academic evidence points to a very sharp fall in poverty in Pakistan, in that more of those who were poor have moved out of poverty and can now purchase better and more food and other goods, such as education, healthcare and better housing. Inequality, on the other hand, has grown markedly in Pakistan despite the fall in poverty.

Research on inequality in Pakistan is far limited compared to the hundreds of studies on poverty. Nevertheless, research by scholars and even government figures show that income distribution has clearly become less equal over the last three decades. In other words, the rich have become richer, and the gap between them and the rest of the population has increased. Even if what is commonly known as the ‘middle class’ has expanded over the last three decades, the income and asset differences between the richer 40pc of the population have grown at a faster pace than those of the lower 60pc. Again, to emphasise, only a few in this lower 60pc bracket are actually defined as being poor.

Although there are still a handful of people who believe in the myth of feudalism in Pakistan, data shows that inequality in the urban areas has been much higher than in the rural areas. This is on account of the existence of extremely rich and extremely poor households in the urban areas, where incomes and wages are much more diverse. In rural areas, most landowners are either small or very small, with inequality less extreme. In fact, rural inequality has actually fallen, while urban inequality has continued to rise. Pakistan is now urban, almost completely, and hence dominates such data.

It is not just income inequality which has worsened, regional inequalities in Pakistan have also worsened despite measures such as greater provincial autonomy and resources. While the more urbanised Punjab and Khyber Pakhtunkhwa are far more prosperous than rural Sindh, south Punjab and Balochistan, a surprising finding is that inequality levels in Punjab and Sindh are much higher than KP and Balochistan.

The only positive finding over the last three decades, one which needs to be much celebrated, is that the gender gap between women and men, while still unacceptable, has narrowed significantly. Despite the general perception of girls not going to school, the data for the last decade shows a huge shift, far greater than it does for boys. While boys outnumber girls in school, girls are catching up fast.

Moreover, in 2014-15, it is estimated that there are more girls enrolled in Pakistan’s universities than boys, 52pc compared to 48pc. Poverty alleviation simply requires cash transfers and remittances. Reducing growing inequality, on the other hand, requires a fundamental change in bourgeois property relations with their inherent power structure, which constitute the cornerstone of crass capitalism. With the rich getting richer, and the middle class expanding, with political control in the hands of both under the despotism of capital in the neoliberal present, inequality is only going to grow in Pakistan.

The writer is a Karachi-based political economist.

Published in Dawn January 24th, 2017