Jun 132008

Huzaima Bukhari and Dr Ikramul Haq

After hearing the speech of the finance minister on June 11, one is forced to conclude that budget-makers of the new government are the same bureaucrats, who are responsible for our existing pathetic politico-economic situation. It transpires from the budget that the PPP merely indulges in slogan-mongering (roti, kapra and makan) to hoodwink its voters, but has no programme for improving the economic lot of the poor. Food subsidy or “cash card for the poor” schemes are no substitute for creating jobs for all and ensuring judicious distribution of national resources amongst all the strata of society. The budget by the new government shows no thinking for redistributive social justice and making Pakistan an egalitarian state. The glaring issues of poverty and economic development cannot be seen in isolation as has always been done by all the governments in Pakistan. These are symptoms of an ailing system. Curing the system is the answer and not healing the symptoms.

Budget 2008 is based on prescriptions suggested by so-called economic experts (sic) having vested interest and no regard for masses of the country. It reflects intellectual bankruptcy of political leadership. Political parties should have short-term as well as long-term economic plans, prepared by their own select committees, after taking direct input from party workers. But they also consult western-trained economists, who have no idea about our mundane realities as they are completely alienated from the masses. Their approach is bookish and unworkable, offering no solution for social mobility. Budget 2008 is undoubtedly is an handiwork of bureaucrats sitting in the Ministry of Finance and Federal Board of revenue (FBR), who are least concerned with the welfare of the common people.

It is tragic that even the newly-elected government, consciously or unconsciously, has followed the American Model of economic development instead of the European while dealing with various classes within the society. The European governments, in general and Scandinavian in particular, deplore the idea that people should remain mired in poverty. So, they have initiated a number of welfare programmes to help those lagging behind enabling them to move up economically and socially. They also resent the sight of rich families staying at the top and thus impose high taxes on them to redistribute wealth and income in their societies (this is what the Quran asks the rich to do voluntarily, to please Allah Almighty). On the contrary, the American approach is that of free-for-all meritocracy, which has been followed by our successive governments and the present budget, is no exception.

The present political regime has shown no interest to reverse the policies of the last government of selling income-earning assets on the nation at throw-away prices to so-called foreign investors to the disadvantage of the poor workers. It wants to continue with the same old policies in the name of promoting foreign investment (sic). Nobody has done any cost-benefit analysis: in most cases of foreign investment (sic) equity (repatriable with profit) is much more expensive than low-cost borrowing for projects. For rapid industrial growth with local resources, no incentives have been announced. It is thus clear that national agenda for economic growth and social justice is completely missing in the budget 2008.

In these circumstances, one hardly expects that the budget will bring any tangible relief for the poor, lower-middle class or the middle-class, especially when new harsh tax measures have been proposed. The economic team of Zardari has not introduced any fundamental economic restructuring to get rid of the current donor-induced consumer-oriented economic growth. No effort has been made by the economic wizards of new regime towards production-oriented growth and making the economy self-reliant.

Insurmountable inflation is making life harder and harder for the common people of this country and no substantial measures have been taken to bring it down. There is a general consensus that inflation is twice as high as quoted by official quarters, but there is no admission to this effect on the part of our budget-makers. It just shows how shallow their approach is! How can they devise long-term policies when their statistics remain incorrect? The extremes of rich and poor are squeezing out a true middle class – a sizeable segment is being pushed below the poverty line on a daily basis, but our budget-makers are not privy to this reality as they have shown no intention to address this issue.

In the agricultural sector which was once the mainstay of the economy, productivity has fallen, creating joblessness and frustration, but nothing in the budget is announced to reverse the trend. The lack of political will to tax rich absentee landlords (the prime minister is one of them) exposes all tall claims of pro-people budget of the new government. The mundane reality is that due to rising tide of inflation and increase in gasoline prices, ordinary people cannot afford even everyday food consumables, but rulers are expending millions of taxpayers’ money on their comfort and for VIP travel and facilities. No austerity measures have been announced to check the persistence of unprecedented wasteful non-development expenditures. The budgetary scheme, under the new government, remains inclined towards promoting interest of the rich and mighty, which is highly lamentable.

The new government, while preparing budget, could have followed the policies of Nordic countries which are emerging far more vibrantly both socially and economically compared to America and others. Recent studies confirm that if one compares the incomes of children with those of their parents, or consider how long people in one income group stay there, Nordic countries emerge as far more mobile than America. Britain shows more class stability than its northern neighbours, but it is still much closer to them than it is to America. The Nordic countries are distinctive in one further way: the sons born at the bottom (into the poorest fifth) earn roughly the same as those born a rung above them (the second-poorest fifth). In other words, Nordic countries have almost completely snapped the link between the earnings of parents and children at and near the bottom. That is not at all true of America. Social mobility is a product of high public spending, a bit like the low incidence of poverty or longer life expectancy (on both of which Europe also does better than America). But greater public spending also tends to be associated with less economic flexibility – which is why Nordic countries have sought to limit the more arthritis-inducing features of their tax-and-spend programmes. Education has long been recognised as the most important single trigger of social mobility – and all the Nordic countries do unusually well in the school-appraisal system developed by the Organisation for Economic Cooperation and Development (OECD). In budget 2008 nothing concrete is announced towards overhauling useless, outmoded and purposeless education system.

Budget 2008 is oblivious of redistributive fiscal policies and social welfare programmes for social mobility. The poor have been insulted by giving so-called “economic relief package” by way of charity. Relief (sic) of a cosmetic nature cannot be a solution to anything. We need short-term and long-term polices that can help the poor to move upwards. Priority-wise, education should have been number one, but for us defence spending is more important because that is what the military complex wants. Complete overhauling of education system – by not only spending more money but how to use the entire system as an effective tool for social mobility and to improve the quality of human fabric – is the need of the hour. In budget 2008, there is a complete lack of understanding of this perception on the part of our rulers. Thus, the poor segments of society are condemned to remain mired in abject poverty and their children will have no chance to move up as education is either not available to them or is of no practical use for them.

The writers are visiting professors at LUMS. Emails: huzaima@hotmail.com and ikram@huzaimaikram.com


Source: The News, 13/6/2008

 Posted by at 8:57 am

  One Response to “Pak Economy: Federal budget — no concern for economic justice”

    I JUST *************HATE********** THIS ECONOMY


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