Pro-rich growth

Published September 17, 2021
The writer teaches at Quaid-i-Azam University, Islamabad.
The writer teaches at Quaid-i-Azam University, Islamabad.

THE price of petrol has increased again, returning to what it was before the pandemic hit. Combined with consistently increasing prices of basic utilities like electricity, as well as historic levels of food inflation, post-Covid the cost of living for most working Pakistanis has become prohibitive. In the mythical world of textbook economics, government can either control inflation or unemployment. Keeping prices in check means holding back on policies designed to stimulate employment. On the other hand, attempts to boost growth, and hence employment, involve accepting greater circulation of money, and thus likely inflation.

The actual relationship between inflation and unemployment hardly ever conforms to textbook theory, especially in formerly colonised societies like ours. Rather than wage labour, self-employment is the defining feature of our economic landscape. In effect, macroeconomic orthodoxy, revolving around the principle of compound growth, is premised on official figures that exclude large sections of our population. Populist sloganeering has reached fever pitch under the hybrid regime fronted by the PTI. At the height of the pandemic, the government made hay about protecting ‘daily wage workers’. As the PM’s well-choreographed visits to some Islamabad bazars clarified, by ‘daily wage workers’ the government actually meant self-employed vendors.

The regime’s primary growth-stimulating policy since March 2020 has been to encourage investors to direct (illicitly gained) money into the construction sector. While some short-term employment is generated by such investment, construction workers generally get hired by subcontractors on a job-to-job basis, which effectively equates to zero long-term employment effects. Welfare states of Western metropolitan societies that presided over the so-called ‘golden age’ of capitalism from the end of World War II till 1970 could provide long-term employment guarantees in a burgeoning manufacturing sector. It’s been at least 40 years since the heyday of industrialisation, and permanent waged employment passed in those societies. China became the industrial workshop of the world in the 1990s, absorbing large proportions of its workforce in low-waged, yet relatively stable employment. In India, it was software and in Bangladesh the garments industry that generated jobs. To the extent that any of these non-Western economies enjoyed a ‘golden age’, evidence suggests they’ve also passed their sell-by date.

Spin doctors will continue to tell tales of prosperity.

Pakistan’s economy has never enjoyed a similar ‘golden age’. Ayub Khan’s so-called decade of development generated some jobs in manufacturing but not nearly enough to absorb the mass of working people displaced from the agrarian sector. Nationalisation of some industries under the first PPP government too generated some permanent waged employment but neoliberals spent the next 40 years blaming the failure of state-owned enterprises on over-entitled workers and trade unions.

In today’s Pakistan, investors and government officials would rather build gated housing schemes and profit from real estate speculation than set up a factory and hire waged workers for production. Cutting-edge investors who seek to benefit from digitisation in general, and automation in particular, employ educated, white-collar segments, not the proverbial working masses.

Read: Unravelling the growth paradox

An intellectually honest prognosis of our political economy for the working class makes for grim reading. Food and other basic types of inflation will continue to rise alongside energy prices, while utilities will become even more expensive as donors demand further slashing of pro-poor subsidies. The incomes of the self-employed labour force will remain volatile, as even the notion of permanent waged employment in public-sector enterprises becomes an anachronism — case in point is the SC’s recent judgement effectively firing 16,000 government employees. The plunging rupee makes a bad situation worse, the government’s monetary policies another example of how ostensibly growth-stimulating initiatives are good for the rich and bad for everyone else. This, of course, is capitalism in a nutshell — but there have been variants of capitalism to have thrown up far less inequality than we see in the current conjuncture.

The hybrid regime’s spin doctors will continue obfuscating the real dynamics of Pakistani capitalism and instead tell tales of prosperity. The PTI and its establishment overlords are not to blame for the economic fallouts of a global pandemic. But this is a government that bends over backwards begging for money for its own economy, and now for the purportedly ‘friendly government’ in Kabul. Such actions reflect its priorities — so-called national security, and an assortment of benefits for high-profile foreign investors as well as plain-clothed and uniformed elites within the country. They sell us hateful ideologies to keep their pro-rich growth cycle intact.

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

Published in Dawn, September 17th, 2021

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