The people of Pakistan are not equally well off. There has been persistent growth in income inequalities. Our is the land of very rich and very poor people a great majority of the people, living at or below the poverty line, are extremely concerned about the presence of these difference. It was until late sixties when the less affluent people of the society used to accept their fate in silent submission. On the contrary, the present day picture shows desperation among the poor classes and a lot of hatred between different groups of the society. The poor people no longer simply accept the status quo, with all of its wide economic disparities among different classes. As a result there is considerable friction all around. If the things continue to go in the same fashion, we may see further widening of disparities among the different classes of the society through gaining more alliance by the rich and losing purchasing power/real income by the poor at ever increasing rates. This is likely to further give rise to corrupt practices, crimes, restlessness and resentment. Whether the free market economy can face this growing problem of income disparities efficiently, or whether it is an appropriate subject for direct interface by the Government? An economy like that of the U.S.A with G.N.P well over 2.5 trillion dollars, with the employment level over 95 percent of the work force, with the benefits of social security, unemployment compensation, extensive private pension and free public education, with a graduated income tax, and with many other fruits of the modern political economy has no problem of income disparities. However we people living in an under developed country have always to live with mass poverty on one hand, and a small group of elite with mass poverty on one hand, and a small group of elite/ruling class enjoying leisure and freedom from economic worries on the other end. What type of government’s role is necessary to narrow income disparities in Third World countries like Pakistan? If at all government role is necessary in narrowing income inequalities, then what criteria are to be used by it in distributing income, and whether the actual distribution of income is significantly our of proportion i.e. income inequality has grown to such an extent that some type of government action or inaction in economic affairs has an important effect on income distribution. Every political system accompanies an economic system which distributes its products/reward by one method or the other. As such political has become an essential segment of a political economic system or it may be only a by product of the system. The problem of distribution is innately associated with the distribution of the final product. Very small amounts of goods and services are exchanged without application of common currency, and very few economies fulfill process pursued by the government. Even in centrally planned diverse “welfare” schemes, such as “free” health care programs or in kind assistance to the people, these public sector schemes are financed by imposing income and sale taxes on the citizen just as they are in mixed or free market economies. Therefore the institution of private income is retained in socialist economies. Therefore the institution of private income is retained in socialist economies, even though a considerable segment of that income is actually not available for consuming by the individuals those selves. At the other end, in a free market system, money income is the one and the only instrument for distributing goods and services. The distribution of the produce takes place through independent choices made by the individual consumers in the markets. So income distribution/factor rewards can e regarded as good substitutes for the distribution of goods and services. The modern western political economy has no conscious policy of poverty, rather it believes that people should make their own way to earn means of subsistence, and that personal wealth is the recompense of toil, skill and creativeness, and that nobody has the right to subsist for good on the public cherty. People living under democratic society with free enterprise economic system have skeptical posture towards state interference in the economy. They do not like any external agency to meddle with income distribution process of the free enterprise system provided there is some persuasive ground to do that. The emphasis on individualism and self reliance yields an important conclusion i.e. we can not get something for nothing, or we can get anything if we try hard enough. This was the gist of social, political and economic policies towards income distribution which dominated during all of the nineteenth century, and also during most of the twentieth century. As a contrarily on individual initiative uninterrupted by any regulatory agency. History of economic development of the USA and many other developed nations has proved that the system has ample space for everybody. Through self made success was not within the reach of everybody during the nineteenth century, however, the affluence and riches of the emerging industrialists and entrepreneurs contributed a lot to the welfare of the middle and lower classes of the society through a kind of “trickle down process” i.e. opportunities to accumulate material gains frequently approached every nook and corner of the society owing to the magnificent achievements of the few expeditious and enterprising people. The remarkable thing about income disparities and poverty in Pakistan that, during “the people’s regime (1971-77) it had grown steadily, thereby disproving the socio economic political set up introduced by that regime. So far, government intervention in our economic set up on an extensive scale has been unsuccessful in eliminating poverty as well as in narrowing income inequalities. The western democratic world made great progress in the past in eliminating poverty as well as in narrowing income inequalities. The western democratic world made great progress in the past in eliminating poverty mainly without direct government intervention. In those economies, majority of the people got rid of poverty because of their own individual hard work and aggregate economic prosperity. Actually those people were fully aware of the real cost of poverty solutions of the public sector, i.e. tax burden of supporting huge public sector to eradicate poverty initiating so called welfare programs which they did not like. If we had free enterprise economic system with minimum degree of government intervention, the poverty (as defined by the minimum subsistence income) could be eliminated almost entirely, i.e. economic prosperity could lift people out of poverty indefinitely through the “trickle down” mechanism. If the colossal and gigantic budgets of the public sector, strict control over the economy and central planning by Islamabad persistently fail to overcome the problem of income inequalities, unemployment, misery, stagflation and feeble growth in real national income, the it is unwise to hope anything better from it. How to improve the general conditions of the masses? Or how to eradicate poverty from our society? Or how to reduce the gap between “haves” and “have nots”? The overall acceptability of various measures to eradicate poverty is based upon the study of the precise characters of those people who subsist at poverty line. The characteristics of the poor divulge a lot about the efficacy of numerous poverty solutions relative to the ostensible causes of poverty. Concomitantly, general/public acceptability of these solutions should be given due importance as preferences and prejudices of the masses in general shape the political response to the general issue of poverty. The first important feature about the poor is that they are a blend of different sorts, being subjected to live in wretched poverty. They are poor to varying degrees and for various reasons. There are four major recognizable classes of poverty instead of a single homogeneous group: 1) Toiling Poor: They are poor on the following grounds: a) Their skill (i.e. productivity) levels are low; accordingly their salaries/ wages are scantly. b) They have large families. c) The jobs are available only sporadically. 2) Non-Toiling poor: They are poor owing to the following reasons: a) They have low skill levels to the extent that they are unable to get the job. b) They are unreliable and un-trust worthy. c) There is abundant supply of toiling people as compared to the available jobs in less developed countries. In consequence of that a great many willing toilers remain jobless. d) There are always many dropouts from the work force in view of the variations in the productive activities of the economy. 3) Handicapped poor: a) Their inability to work, owing to their permanent mental or physical disabilities, obliges them to remain poor. b) Those who can work are also prone to the conventional habit of lethargy and idleness, even through one percent employment quota was assigned to them by the military regime during early eighties. c) The work is considered unsuitable by many handicapped people. They prefer to rely on the benevolent schemes introduced by the military regime towards the close of the seventies, or on the generosity of many God fearing people. 4) Aged Poor: They are poor because of the following reasons: a) They are lacking in private retirement benefits. b) They are also deficient in social security benefits. c) There has been a drastic change in our social structure. The once established joint family system has lost its ground in a gradual process. A significant part of the subsequent generation feels its elders to be a liability rather than a blessing. As a result, in the absence of any sort of social economic security on the part of the government or the family, many aged people are destined to live in the state of destitution. If we suppose that each family from lower or lower middle class comprises six members on the average i.e. parents with four children, then it means that an average of five additional persons are left destitute for each earner of insufficient income. They have no alternative but to be destitute, except they join the work force them selves. It means that the entire population belonging to the lower income group and majority of the lower middle income group are poor even if family heads are in work force. In many cases. Even willing workers are not able to earn sufficient incomes to sustain their families simply on the bare subsistence level i.e. they subsist on the levels lower than an adequate standard of living. Many reasons can be advanced for this gloomy state of affairs: a) The family heads of many poor families work only part time or irregularly or regular jobs are not available; and if no other income comes, such part time employment drops a family into hard pressed poverty. b) Large family size is also one of the obvious reasons of poverty since an income level that was adequate for a family of three or four would fling a family of six or seven into poverty. There is no magic in the actual world that would raise the real wage rate of these people with out rasing their productive power. If somebody assured the nation that he/she will uplift the plight of the poor masses just by providing more jobs in the public sector, which is essentially a service industry and is extremely inefficient in its very nature, either he/she is living in fools’ paradise or he/she is misleading the nation. The only way out to eradicate poverty is to raise the productive power of the individual citizens. For this purpose we need to undergo a long run process of capital accumulation and proliferation of technological skill and know how. It requires huge doses of investment to be injected in the economy, which in turn demands rising of the level of real savings. Nothing will be more unfortunate and demeaning for a nation than the state of affairs in which major part of the hard earned income/saving of the people are confiscated by the public sector through diverse and huge indirect levies to maintain its ever growing unproductive activities, leaving thereby very meager resources for the rest of the economy to inject for the achievement of economic prosperity. There are many questions of this nature which need the attention of the true well wishers of the nation. Capital accumulation and advancement of technology will raise the productive power of the people not only because of the application of more capital and more sophisticated techniques to work with, but also due to the raise in demand for the workers thereby establishing the equilibrium wage rate at some higher level. So the short term survival strategy for the poor family subsisting at or below poverty lines is for the head of the family to work for more hours, or to held more than one jobs, or for other family members to work as well; while the long term strategy to uplifts the economic conditions of the poor above the poverty line involves raising of productive powers of individuals which in turn requires application of successive doses of capital accumulation and technology over a long period of time. For this purpose we need to release the huge burden of public sector form the feeble shoulders of the poor nation so that enough funds may be available for capital formation. The people of Pakistan are not equally well off. There has been persistent growth in income inequalities. Our is the land of very rich and very poor people a great majority of the people, living at or below the poverty line, are extremely concerned about the presence of these difference. It was until late sixties when the less affluent people of the society used to accept their fate in silent submission. On the contrary, the present day picture shows desperation among the poor classes and a lot of hatred between different groups of the society. The poor people no longer simply accept the status quo, with all of its wide economic disparities among different classes. As a result there is considerable friction all around. If the things continue to go in the same fashion, we may see further widening of disparities among the different classes of the society through gaining more alliance by the rich and losing purchasing power/real income by the poor at ever increasing rates. This is likely to further give rise to corrupt practices, crimes, restlessness and resentment. Whether the free market economy can face this growing problem of income disparities efficiently, or whether it is an appropriate subject for direct interface by the Government? An economy like that of the U.S.A with G.N.P well over 2.5 trillion dollars, with the employment level over 95 percent of the work force, with the benefits of social security, unemployment compensation, extensive private pension and free public education, with a graduated income tax, and with many other fruits of the modern political economy has no problem of income disparities. However we people living in an under developed country have always to live with mass poverty on one hand, and a small group of elite with mass poverty on one hand, and a small group of elite/ruling class enjoying leisure and freedom from economic worries on the other end. What type of government’s role is necessary to narrow income disparities in Third World countries like Pakistan? If at all government role is necessary in narrowing income inequalities, then what criteria are to be used by it in distributing income, and whether the actual distribution of income is significantly our of proportion i.e. income inequality has grown to such an extent that some type of government action or inaction in economic affairs has an important effect on income distribution. Every political system accompanies an economic system which distributes its products/reward by one method or the other. As such political has become an essential segment of a political economic system or it may be only a by product of the system. The problem of distribution is innately associated with the distribution of the final product. Very small amounts of goods and services are exchanged without application of common currency, and very few economies fulfill process pursued by the government. Even in centrally planned diverse “welfare” schemes, such as “free” health care programs or in kind assistance to the people, these public sector schemes are financed by imposing income and sale taxes on the citizen just as they are in mixed or free market economies. Therefore the institution of private income is retained in socialist economies. Therefore the institution of private income is retained in socialist economies, even though a considerable segment of that income is actually not available for consuming by the individuals those selves. At the other end, in a free market system, money income is the one and the only instrument for distributing goods and services. The distribution of the produce takes place through independent choices made by the individual consumers in the markets. So income distribution/factor rewards can e regarded as good substitutes for the distribution of goods and services. The modern western political economy has no conscious policy of poverty, rather it believes that people should make their own way to earn means of subsistence, and that personal wealth is the recompense of toil, skill and creativeness, and that nobody has the right to subsist for good on the public cherty. People living under democratic society with free enterprise economic system have skeptical posture towards state interference in the economy. They do not like any external agency to meddle with income distribution process of the free enterprise system provided there is some persuasive ground to do that. The emphasis on individualism and self reliance yields an important conclusion i.e. we can not get something for nothing, or we can get anything if we try hard enough. This was the gist of social, political and economic policies towards income distribution which dominated during all of the nineteenth century, and also during most of the twentieth century. As a contrarily on individual initiative uninterrupted by any regulatory agency. History of economic development of the USA and many other developed nations has proved that the system has ample space for everybody. Through self made success was not within the reach of everybody during the nineteenth century, however, the affluence and riches of the emerging industrialists and entrepreneurs contributed a lot to the welfare of the middle and lower classes of the society through a kind of “trickle down process” i.e. opportunities to accumulate material gains frequently approached every nook and corner of the society owing to the magnificent achievements of the few expeditious and enterprising people. The remarkable thing about income disparities and poverty in Pakistan that, during “the people’s regime (1971-77) it had grown steadily, thereby disproving the socio economic political set up introduced by that regime. So far, government intervention in our economic set up on an extensive scale has been unsuccessful in eliminating poverty as well as in narrowing income inequalities. The western democratic world made great progress in the past in eliminating poverty as well as in narrowing income inequalities. The western democratic world made great progress in the past in eliminating poverty mainly without direct government intervention. In those economies, majority of the people got rid of poverty because of their own individual hard work and aggregate economic prosperity. Actually those people were fully aware of the real cost of poverty solutions of the public sector, i.e. tax burden of supporting huge public sector to eradicate poverty initiating so called welfare programs which they did not like. If we had free enterprise economic system with minimum degree of government intervention, the poverty (as defined by the minimum subsistence income) could be eliminated almost entirely, i.e. economic prosperity could lift people out of poverty indefinitely through the “trickle down” mechanism. If the colossal and gigantic budgets of the public sector, strict control over the economy and central planning by Islamabad persistently fail to overcome the problem of income inequalities, unemployment, misery, stagflation and feeble growth in real national income, the it is unwise to hope anything better from it. How to improve the general conditions of the masses? Or how to eradicate poverty from our society? Or how to reduce the gap between “haves” and “have nots”? The overall acceptability of various measures to eradicate poverty is based upon the study of the precise characters of those people who subsist at poverty line. The characteristics of the poor divulge a lot about the efficacy of numerous poverty solutions relative to the ostensible causes of poverty. Concomitantly, general/public acceptability of these solutions should be given due importance as preferences and prejudices of the masses in general shape the political response to the general issue of poverty. The first important feature about the poor is that they are a blend of different sorts, being subjected to live in wretched poverty. They are poor to varying degrees and for various reasons. There are four major recognizable classes of poverty instead of a single homogeneous group: 1) Toiling Poor: They are poor on the following grounds: a) Their skill (i.e. productivity) levels are low; accordingly their salaries/ wages are scantly. b) They have large families. c) The jobs are available only sporadically. 2) Non-Toiling poor: They are poor owing to the following reasons: a) They have low skill levels to the extent that they are unable to get the job. b) They are unreliable and un-trust worthy. c) There is abundant supply of toiling people as compared to the available jobs in less developed countries. In consequence of that a great many willing toilers remain jobless. d) There are always many dropouts from the work force in view of the variations in the productive activities of the economy. 3) Handicapped poor: a) Their inability to work, owing to their permanent mental or physical disabilities, obliges them to remain poor. b) Those who can work are also prone to the conventional habit of lethargy and idleness, even through one percent employment quota was assigned to them by the military regime during early eighties. c) The work is considered unsuitable by many handicapped people. They prefer to rely on the benevolent schemes introduced by the military regime towards the close of the seventies, or on the generosity of many God fearing people. 4) Aged Poor: They are poor because of the following reasons: a) They are lacking in private retirement benefits. b) They are also deficient in social security benefits. c) There has been a drastic change in our social structure. The once established joint family system has lost its ground in a gradual process. A significant part of the subsequent generation feels its elders to be a liability rather than a blessing. As a result, in the absence of any sort of social economic security on the part of the government or the family, many aged people are destined to live in the state of destitution. If we suppose that each family from lower or lower middle class comprises six members on the average i.e. parents with four children, then it means that an average of five additional persons are left destitute for each earner of insufficient income. They have no alternative but to be destitute, except they join the work force them selves. It means that the entire population belonging to the lower income group and majority of the lower middle income group are poor even if family heads are in work force. In many cases. Even willing workers are not able to earn sufficient incomes to sustain their families simply on the bare subsistence level i.e. they subsist on the levels lower than an adequate standard of living. Many reasons can be advanced for this gloomy state of affairs: a) The family heads of many poor families work only part time or irregularly or regular jobs are not available; and if no other income comes, such part time employment drops a family into hard pressed poverty. b) Large family size is also one of the obvious reasons of poverty since an income level that was adequate for a family of three or four would fling a family of six or seven into poverty. There is no magic in the actual world that would raise the real wage rate of these people with out rasing their productive power. If somebody assured the nation that he/she will uplift the plight of the poor masses just by providing more jobs in the public sector, which is essentially a service industry and is extremely inefficient in its very nature, either he/she is living in fools’ paradise or he/she is misleading the nation. The only way out to eradicate poverty is to raise the productive power of the individual citizens. For this purpose we need to undergo a long run process of capital accumulation and proliferation of technological skill and know how. It requires huge doses of investment to be injected in the economy, which in turn demands rising of the level of real savings. Nothing will be more unfortunate and demeaning for a nation than the state of affairs in which major part of the hard earned income/saving of the people are confiscated by the public sector through diverse and huge indirect levies to maintain its ever growing unproductive activities, leaving thereby very meager resources for the rest of the economy to inject for the achievement of economic prosperity. There are many questions of this nature which need the attention of the true well wishers of the nation. Capital accumulation and advancement of technology will raise the productive power of the people not only because of the application of more capital and more sophisticated techniques to work with, but also due to the raise in demand for the workers thereby establishing the equilibrium wage rate at some higher level. So the short term survival strategy for the poor family subsisting at or below poverty lines is for the head of the family to work for more hours, or to held more than one jobs, or for other family members to work as well; while the long term strategy to uplifts the economic conditions of the poor above the poverty line involves raising of productive powers of individuals which in turn requires application of successive doses of capital accumulation and technology over a long period of time. For this purpose we need to release the huge burden of public sector form the feeble shoulders of the poor nation so that enough funds may be available for capital formation.
Posted on: Mon, 08 Jul 2013 06:49:17 +0000
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