Pakistan’s Crippling Economy

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The case of Sri Lanka shows that global turmoil that cuts our low remittances and exports bases may trigger a currency, and thus, economic collapse. That may be very chaotic for a nuclear-armed 200 million-plus state facing extremism, external threats and ethnic strife.

Many economists now support pro-poor or inclusive growth as poverty harms not only the poor but also national progress via conflict and small economic size. But going beyond such models, PLP sees investing in the poor not just as an ethical or anti-conflict concern but actually as the main driver of national progress. Economists oppose policies that penalize the rich and cause capital flight. But PLP shows how reducing poverty ignites win-win growth that also benefits the rich.

Our internal market is small, despite a large population, given the low incomes of the majority. Increasing their incomes expands the market size and profits for producers. This in turn expands jobs and incomes for the poor and ignites a virtuous cycle of national progress. The poor spend more on local goods than the rich, benefiting local producers and the external account. So investing in the poor, largely seen as a moral aim, can actually be the main national growth engine under trickle-up economics that puts those at the bottom at the top.

A seven-step approach (COMPASS ,  credit, organizations, market power, protection, assets, skills and social services) that goes beyond giving only cash handouts serves as the compass for PLP.

One, we must expand the poor’s ownership of assets. This includes land reforms, key to the East Asian progress. Two, we must expand easy credit for the poor. Three, we must expand the access of the poor to appropriate skills and technology. Four, the government must ensure the rule of law to protect them from economic and physical abuse, evictions, false cases and labor abuse. Five, the state must expand locally devolved quality education, health, family planning, disaster and other social services for the poor. Six, there is a need to support community-based groups which mobilize, link and advocate for the poor. Seven, increasing the bargaining power of the poor in markets is key. Minorities, women and people in far-flung areas must be prioritized. All this may require the state to invest a trillion-plus rupees yearly on the poor above current funding which it can do by increasing agriculture, property, retail, transport and wealth taxes; and cutting state enterprise losses, elite subsidies, defence outlays and tax evasion.

 

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