Economic illusion

August 23, 2019

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The writer teaches at Quaid-i-Azam University, Islamabad.
The writer teaches at Quaid-i-Azam University, Islamabad.

REMARKABLE, isn’t it, how major crises in Pakistan are forgotten when supposedly bigger crises displace them, whether by design or otherwise? So it is with the economy, which was and still is in dire straits. But over the past few weeks the Kashmir issue has become mainstream media’s almost exclusive concern, and so the economy is apparently not such a big deal anymore.

Tell that to the struggling millions who don’t read English newspapers and don’t have the means or wherewithal to influence corporate and social media debate. Those whose expenditures on food, utilities and other basic needs are shooting through the roof and whose livelihoods are at best becoming more precarious and at worst being destroyed. They don’t have a voice at the best of times, and even less so when heightened nationalist sentiment mandates they join in the anti-India chorus.

To understand the plight of the toiling classes it is necessary to consider that most economic activity isn’t accounted for in macroeconomic analyses — this is the ‘informal’ or shadow economy in which a majority of Pakistanis live and work. Characterised by fully functioning markets — for land and housing, labour and other goods and services — the informal economy becomes a ‘problem’ at times of formal crisis, because it is easy to explain away underlying structural issues by claiming that all would be well if the entire ‘informal’ economy was accounted for and contributed to the national exchequer.

But the way in which the ‘informal’ economy is represented is misguided. The entire debate on informality is reduced to polemic about politicians accumulating illicit, untaxed assets. An important matter, certainly, but the selective vilification of political opponents is motivated not by any long-term strategy for economic redistribution. In fact, this rhetoric is recycled time and again without any serious undermining of the class structure of society.

The debate on informality is reduced to polemic.

Most informal economic activity in Pakistan is generated by the tens of millions of unaffluent Pakistanis who earn their living by working as domestic servants, in small industrial units, vending on the street, and harvesting crops (among other occupations). Some of these tens of millions build shanty homes in towns and cities. All of these economic activities are blighted by massive rent-seeking on the part of private middlemen, and perhaps more significantly, government functionaries.

When push comes to shove, these economic activities are criminalised rather than integrated. Katchi abadis and informal vendors have their homes and enterprises bulldozed; domestic servants, workshop labourers and agricultural workers are fleeced by the nexus of private middlemen, thana and katcheri. To add salt to injury, the government subjects these teeming millions of working people who eke out a living despite the state’s class bias to more indirect taxes on basic commodities.

Much informal economic activity also takes place in our border zones; this too is hushed up and then subjected to the whims of nationalist posturing. The exchange of billions of rupees of goods and services takes place daily on the Indian and Afghan borders. There are thousands of traders who engage in this economic activity, allegedly overseen by some government departments.

When clarion calls are made for closing ranks against the ‘enemy’, this cross-border trade is conspicuously shut down. Inevitably, exchange resumes after a short hiatus, but the potential benefits to be gained from mainstreaming such activities are wilfully ignored.

So when the IMF and other bilateral donors ‘assist’ us in ‘stabilising’ our economy, nothing changes for the majority of working people who make their living in a heavily informalised economy. They remain subject to the arbitrary rent-seeking of private contractors and state functionaries. In fact, the demands made by such donors for austerity, dutifully accepted by our economic ‘experts’, translate into even more intense rent-seeking by private middlemen and government functionaries or even outright expropriation of the fruits of their labour. Working people in conflict zones are subject to even more ruthless exercise of power.

In short, private and state elites have institutionalised their class interests within a largely informal economic structure. Despite the government’s claims of doing away with corruption, the propertied classes are least interested in mainstreaming economic activities because this would eliminate the myriad opportunities for resource capture at the expense of the poor and voiceless. Arguably, the biggest beneficiaries of this economic structure are functionaries in the permanent state apparatus, which is perhaps why they are most likely to give cover to their rent-seeking through selective accountability drives.

But then again, the economy is no longer big news. Convenient, no?

The writer teaches at Quaid-i-Azam University, Islamabad.

Published in Dawn, August 23rd, 2019