False signals

October 27, 2019

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The writer was dean of the school of humanities and social sciences at Lums.
The writer was dean of the school of humanities and social sciences at Lums.

THE prime minister has praised his economic team for an ‘economic turnaround’ that comprises declines in the current account and fiscal deficits and increases in FDI and remittances. All these are misleading indicators but one is especially egregious and contradictory.

Why is the increase in remittances considered part of the economic turnaround and something that governments consider worthy of praise? Consider an airport conversation with a Pakistani working in Italy and supporting a wife and two children in Pakistan. He used to send the equivalent of Rs50,000 per month in lira for family support; now the equivalent of Rs80,000 is needed to sustain the same expenditures. The increase in remittances is an outcome of greater economic distress in Pakistan. It is a false signal reflecting economic failure, not success.

Before patting themselves on the back for ever-increasing remittances, policymakers should think through this phenomenon with understanding and empathy. Remittances grow for two reasons: individual migrants send back more money and the stock of migrants increases as more Pakistanis emigrate. The explanation for the first component has been provided above; it reflects the economic distress inflicted on working-class families by rapid inflation in Pakistan. But what is the explanation for the increasing number of Pakistanis seeking work abroad? It is the inability of the domestic economy to generate a sufficient number of jobs paying enough to sustain families of individuals entering the labour market. It is again a reflection of economic failure, not success.

Why do the rulers consider increase in remittances praiseworthy?

Consider the miseries inflicted by this phenomenon celebrated as a success of economic policy. In human terms, it involves young men separated involuntarily from their families — parents, siblings, wives, children — for long stretches, often living abroad in poor, exploitative conditions.

Many low-income workers abroad have paid huge amounts to unscrupulous middlemen. A recent ILO estimate puts the amount paid in bribes by South Asian workers in the Gulf at $15 billion. This does not include payments by individuals who are duped and fail to emigrate, inflicting huge liabilities on their families.

Even more tragic is the fate of those who get smuggled abroad and are either abandoned in remote places to be incarcerated in camps or left to suffocate in airless containers or sink aboard flimsy ferries. The stories of those who make their way back to Pakistan are harrowing — a devastating indictment of an economy and society that consigns its young to such fates.

There is yet another contradictory and ironic aspect of this phenomenon. If labour is Pakistan’s biggest exportable commodity (in 2018, remittances were $21bn versus a $14bn contribution from textiles, the largest commodity export) and our measure of success is an increase in remittances, why don’t we export even more bodies than we are doing at present? Why then make such a hue and cry about overpopulation? Should we not produce even more children and export them to earn abroad and send back remittances?

This is a rhetorical question to highlight the fact that our policymakers talk through their hats but there is a serious aspect to it as well. If we are reduced to exporting human beings for our survival, wouldn’t it make sense to invest in them to increase their productivity and market value abroad? That would mean investing in their health, education, and training as a conscious policy to increase remittances. Shouldn’t governments work to upgrade vocational skills of individuals instead of being obsessed with their moral piety, especially when all the money spent on the latter has yielded little in return besides dogmatism?

Isn’t it a hugely puzzling occurrence that in a country with a population ex­­ceeding 200 million with serious problems of underemployment, it is impossible to find a reliably competent plumber or electrician or mason? Or that Pakistani doctors working abroad are sent back as improperly certified? A programme to upgrade the skills and certifications of those wishing to emigrate would have a beneficial spillover effect on deficiencies in the local market too.

The Pakistani economy is in intensive care and the indicators the prime minister has cited as evidence of an economic turnaround have behaved in exactly the same manner as they have after almost each of the previous 22 or so IMF hospitalisations. The real turnaround requires the creation of decent jobs which, in turn, calls for structural reforms and a framework for economic growth. While this may take time, progressively driving remittances down by providing jobs at home should be adopted by the government’s team as a leading measure of the success of a real economic turnaround. Involuntary migration forced by economic desperation is a blight on the face of the nation, not something to celebrate.

The writer was dean of the school of humanities and social sciences at Lums.

Published in Dawn, October 27th, 2019