Undemocratic, unconstitutional, illogical; regardless, of what you may call the on-going dharnas in Islamabad by the PTI (Pakistan Tehreek-e-Insaf) and the PAT (Pakistan Awami Tehreek), the emanating message from the fiery speeches of Imran Khan and Allama Dr. Tahir-ul-Qadri seem to be striking a chord with millions of Pakistanis. What the government or primarily the PML(N) needs to realize is that if they truly want to counter the ruckus being raised by these parties then they will need to start performing. In a democratic system while it almost always the prerogative of the opposition parties to raise a noise, the sitting government can only do its talking through its performance. Regrettably, the government’s performance thus far has been lacking and the perception that the gap between the haves’ and have-nots’ is widening – the rich getting richer and the poor getting poorer – is fast gaining ground. Some may argue that it is not unusual when we follow the global trend on the pattern of inequality over the past decade, but in Pakistan the challenge is exacerbated by a general belief (which is fast gaining currency) that the people who are responsible for ensuring equitable distribution of resources and opportunity are in fact the ones responsible for the rampant inequality in the country. And this is not only on an individual level, but is visible now from a demographic perspective.
To understand this phenomenon it will be good for the government functionaries to read the latest best seller from Thomas Piketty, “Capital in the Twenty-First Century.” Nearly all relevant passages that perhaps relate to us can be found in the first 26 pages and in the chapter denoting ‘conclusions’ towards the end of the book, which runs 685 pages long. More importantly, it may give heart to our leadership that they are not alone in this fight to overcome inequality as developed and emerging economies like the US, Britain, Australia, India all seem to be struggling with the same phenomenon. On a positive note, once a leadership decides to act, half the battle is won only by sincerely recognizing that there is indeed a problem at hand and that the remaining half can be tackled by professional focus and by using documented policy tools that can make a difference. The rush to purchase Piketty’s book suggests that people from all over the world genuinely want to understand inequality. Here is a guide to the five main points put forward by Thomas Piketty: first, that economic inequality has worsened significantly in the United States and some other developed countries but in his index of inequality, South Asian population falls amongst the worst sufferers. The richest 1 percent in the United States now own more wealth than the bottom 90 percent. Oxfam estimates that the richest 85 people in the world own half of all wealth. The situation might have been tolerable if things were improving, but the global situation is getting worse. For example, in 2010, 93 percent of the additional income created in America went to the top 1 percent. Secondly, inequality in any country is destabilizing. While some inequality is essential to create incentives, we seem to have reached a point where inequality actually becomes an impediment to economic growth.
Certainly, nations grew more quickly in periods when their people were more equal, including in the golden decades of the West after World War II when growth was strong and inequality actually diminished. Likewise, a major research paper from the International Monetary Fund (IMF) in April 2014 found that more equitable societies tend to enjoy more rapid economic growth. Inequality causes problems by creating fissures in societies, leaving those at the bottom feeling marginalized or disenfranchised. This benchmark is also used as one of the classic problems in defining so-called ‘banana republics.’ Ironically, the US has a Gini coefficient (a standard measure of inequality) which is nearly the same as some of the traditionally poor and dysfunctional Latin American countries.
Third, disparities reflect not just the invisible hand of the market but also the manipulation of markets. For example, financiers are wealthy partly because they may be highly educated and hardworking – and also because they have successfully lobbied for the carried tax loopholes that allow their income to be taxed at much lower rates than that of others. Likewise, if you are a pharmaceutical executive, one way to create profits is to generate new products. Another is to lobby for government to fix lucrative drug prices or from not looking to strike alternate price bargains for like-to-like medicinal options. Fourth, inequality does not necessarily even benefit the rich as much as we think. At some point, extra incomes do not go to fulfil desires but to attempt to buy status through “positional goods” – like the hottest car on the block.
Fifth, progressives probably talk too much about ‘inequality’ and not enough about ‘opportunity.’ Some academics are turned off by the tirade about inequality because they say it connotes an envy of the affluent; there is in fact more consensus amongst economists today on bringing everyone to the same starting line than resorting to mandatory distribution on an equitable basis. Unfortunately, equal opportunity is now a mirage. Indeed, researchers find that there is today less economic mobility in the perceived havens of equal opportunity like America than in the presumed class-conscious Europe. But whether or not you read Piketty, there is one overwhelming lesson any government - especially the Pakistani government – should be aware of: inequality and lack of opportunity today constitute a national infirmity and vulnerability, and unless a government consciously resorts to the ‘available’ policy tools that can make a tangible difference, it will always run the risk of being embarrassed by rivals who decide to exploit this weakness in a society.
The writer is an entrepreneur and economic analyst.
kamal.monnoo@gmail.com