A key issue facing Pakistan and many other countries is how to redesign the state structure in order to unleash the potential of public goods and citizens’ welfare.

The two traditional schools of thought that dominate the national and international debate are about less government or more government. Given the state of governance, generally, one group advocates a trimmed and agile state while the other wants an empowered state, particularly in these turbulent times to address problems of increasing joblessness, rising poverty and surging inequality.

But usually, the role of the market in accelerating economic growth with the state acting as an enabler and facilitator is universally recognised, barring some noises from the populists groping for the right way out.

However, there is a third way suggested by the world-renowned scholar Paul Collier. He says “the state should be active both in economic and social spheres but should not overtly empower itself.” Instead, he writes in his book titled The Future of Capitalism that the state should empower those who suffer from the ‘creative destruction.’ He notes that for the jobless, capitalism is not working and the failure is outstanding.

In Pakistan too there is frustration and concern over the loss of jobs, rising unemployment and the high rate of food price inflation which have all worsened after the outbreak of the coronavirus and the subsequent lockdown. The corporates, but for information technology and information and communication technology (ICT) firms, are shedding labour as they want to be thin, lean and agile to cut costs and survive and grow in the current depressed markets.

Unemployment benefit is not a productive use (of money) and it is no remedy to replace the demand for work by demand for maintenance

In pursuit of pubic goods and welfare, Collier, however, advises policymakers to desist from attempting to frustrate the very process that gives capitalism its outstanding dynamics. In Pakistan, the PTI’s initial policies have shaken business confidence which is still not fully restored.

However, the scholar reiterates that “we need an active state that accepts a more modest role and we need the market harnessed by a sense of purpose securely grounded in ethics.” In fact, he lays a lot of stress on the imperative need for reciprocal mutual obligations to ensure that the new right is married to its new obligation among individuals, communities and firms.

Paul Collier, who is a professor of economics at Blavatnik School of Government, Oxford University, recognises that “many activities such as regulatory, the provision of public goods and services and redistribution of income are best organised by the state.” In some ways, this is what the cash-strapped PTI–led government is temporarily trying to do in the current corona-sparked crisis: provide relief to both firms and households. It is also trying to widen the scope and the reach of the Ehsas project. But there is a tilt towards centralisation in social safety programmes and severe constraints on resources.

The development of labour-intensive economic activities have come under renewed focus and sectors such as construction, housing, and small and medium enterprises (SME) etc have been offered various kinds of incentives.

As 64 per cent of the country’s population consists of youth, the Youth Entrepreneurship Scheme, labelled as Kamyab Jawan Programme (KJP), has assumed crucial importance in any effort to create jobs, reduce poverty and inequality. The prime minister’s advisor on revenue Dr Abdul Hafeez Shaikh told a news conference recently that the scope of the KJP and its operations are being widened on a large scale.

The number of banks financing the KJP has been increased to 21 from three state-owned banks when the KJP was launched in 2019 with seed money of Rs100 billion. The limit of lending has been enhanced from Rs5 million to Rs25m.

So far he says the government had disbursed Rs1bn to 2,900 youths while approval had been given to provide loans to 7,500 youths. According to the prime minister’s special assistant Usman Dar, one million applications were received but most of them lacked practical ideas. He says about 50,000 jobs may be created by the end of 2020 through the disbursement of Rs5bn to an estimated 10,000 registered SMEs under the Youth Entrepreneurship Scheme.

Investment in human capital is essential to develop entrepreneurial and other technical skills among the youth required for boosting productivity. According to the International Labour Organisation, Pakistan’s output per person during 2009-2019 rose 32pc as compared to Bangladesh’s 109pc, India’s 177pc and China’s 389pc.

The PTI’s Digital Pakistan project includes training schemes for imparting ICT skills that, according to a Chinese corporate executive, would empower the youth and enable them to become the driver of the country’s economic growth. However, the Overseas Chamber of Commerce and Industry is of the view that progress in digitalisation is very slow.

Dr Hafeez Shaikh says the government gave relief of Rs200bn to the industrial sector affected by the coronavirus and 15m families were given relief under the Ehsas programme. Here, it would be pertinent to recall what the Economic Planning Committee (EPC) set up by Quaid-e-Azam had to say about the social security system operating through unemployment allowances in Great Britain as far back as 1945.

The implications of the system were spelt out by the ECP report as follows. It implies enforced idleness and it cannot be conducive to self-respect for persons who are capable of contributing to the general welfare to live on a charge on the community. Unemployment benefit is not a productive use (of money) and it is no remedy to replace the demand for work by demand for maintenance. Nor can social order be maintained for long under such a process. It is only to a limited extent that a state can be an instrument for transferring income from the rich to the poor. With independence from British rulers around the corner, the EPC was established in August 1944.

Currently, but for occasional short-term improvements, the country’s chronic problem of fiscal deficit is not expected to be resolved on a durable basis any time soon. But funds spent on helping the distressed poor increases domestic demand for goods and services in a sluggish market.

In an outline of principles and objectives, the EPC recommended that “the right to work, adequately enumerated and appropriate to the physical and mental capacity, training and aptitude should be guaranteed.”

Addressing the first EPC meeting held in November 1944 the Quaid had said a country which uses the peoples’ power need not be poor.

Published in Dawn, The Business and Finance Weekly, September 7th, 2020

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