Low cost of living can give Pakistan advantage on global level

[313ghazi]

In this thread I want to discuss matters in the long term, not the short to medium term. I believe that by generating an environment with a low cost of living Pakistan will get more "bang for it's buck" and will be able to progress faster, and cross the threshold from developing country to developed country a lot easier.

In every developed country in the world, the cost of living is quite high and the wealth is in the hands of a few. Although the citizens of these countries have comfortable lives, they don't always have wealth. For example in the UK, particularly the south east has quite a high percentage of income to rent/mortgage ratio.

I think if in Pakistan we can put in curbs to control the cost of housing, food, energy, education, healthcare and transportation we can have residents with money in their pocket to invest/spend.

This will benefit our society as;

• it will drive the purchase of luxury goods and services,
• it will create small industries and businesses locally, such as cafe's, hotels, leisure activities
• it will encourage people to invest in savings accounts or in the stock market or SME's
• it will reduce brain-drain as there will be less reasons to leave Pakistan
• it will allow for higher taxation to provide better facilities and governance

Finally and crucially,

• it will also make it cheaper to fund R&D which will help close the tech gap between us and developed countries
• it will reduce the influence of the mega wealthy in our society and create a stable society

I want to concentrate on these last two points.

Cheap R&D - to push the barriers of science and technology you need great minds and money to keep those great minds motivated. Right now if you excel at anything as a Pakistani, you can find more opportunities abroad and you will be able to have a better lifestyle abroad. If we can keep the cost of living lower here, whilst being able to provide the facilities of a developed society, it means that your best minds are incentivized to remain in Pakistan. It also means you don't have to pay as much to hire them as you would in the west. Which means we can fund more research at lower costs.

Influence - Right now our society (as with many others around the world) is hamstrung by the whims and fancies of the mega wealthy who can buy all the influence they need. These people do invest in the country, they are drivers of the economy, but they are no replacement for the consumers and the workers, who are ultimately the economy. If we can create an economic environment where the workers can also afford to be consumers, then this creates much more wealth than the Malik Riaz types of the world.

I guess what I don't want is what is happening in India where the wealth has predominantly gone to a billionaire class and everyone else is reliant and limited by trickle down.

Rich men drive economies, but we must draw the line at the point where they are driving countries. A natural way of doing that is by keeping cost of living down, so that the common man also has access to wealth and is able to spend it, just like western economies of 20 years ago.

 

[peagle]

In this thread I want to discuss matters in the long term, not the short to medium term. I believe that by generating an environment with a low cost of living Pakistan will get more "bang for it's buck" and will be able to progress faster, and cross the threshold from developing country to developed country a lot easier.

In every developed country in the world, the cost of living is quite high and the wealth is in the hands of a few. Although the citizens of these countries have comfortable lives, they don't always have wealth. For example in the UK, particularly the south east has quite a high percentage of income to rent/mortgage ratio.

I think if in Pakistan we can put in curbs to control the cost of housing, food, energy, education, healthcare and transportation we can have residents with money in their pocket to invest/spend.

This will benefit our society as;

• it will drive the purchase of luxury goods and services,
• it will create small industries and businesses locally, such as cafe's, hotels, leisure activities
• it will encourage people to invest in savings accounts or in the stock market or SME's
• it will reduce brain-drain as there will be less reasons to leave Pakistan
• it will allow for higher taxation to provide better facilities and governance

Finally and crucially,

• it will also make it cheaper to fund R&D which will help close the tech gap between us and developed countries
• it will reduce the influence of the mega wealthy in our society and create a stable society

I want to concentrate on these last two points.

Cheap R&D - to push the barriers of science and technology you need great minds and money to keep those great minds motivated. Right now if you excel at anything as a Pakistani, you can find more opportunities abroad and you will be able to have a better lifestyle abroad. If we can keep the cost of living lower here, whilst being able to provide the facilities of a developed society, it means that your best minds are incentivized to remain in Pakistan. It also means you don't have to pay as much to hire them as you would in the west. Which means we can fund more research at lower costs.

Influence - Right now our society (as with many others around the world) is hamstrung by the whims and fancies of the mega wealthy who can buy all the influence they need. These people do invest in the country, they are drivers of the economy, but they are no replacement for the consumers and the workers, who are ultimately the economy. If we can create an economic environment where the workers can also afford to be consumers, then this creates much more wealth than the Malik Riaz types of the world.

I guess what I don't want is what is happening in India where the wealth has predominantly gone to a billionaire class and everyone else is reliant and limited by trickle down.

Rich men drive economies, but we must draw the line at the point where they are driving countries. A natural way of doing that is by keeping cost of living down, so that the common man also has access to wealth and is able to spend it, just like western economies of 20 years ago.

I like the idea of this thread, but if you won't mind, I do have a suggestion or two.

I think it might be better if you narrow the definition of cost of living, yours is too broad, it covers the cost of life rather than living. Please feel free to correct me if I am mistaken, but generally, cost of living covers the three categories of Roti (food), Kapra (clothing) oor Makaan (housing).

The rest are important but how essential can be argued from different perspectives. If people have a roof over their heads, clothing on the backs, and food in their stomachs, the basics of life are met, the rest comes later.

The Western countries success is based on controlling the costs of food, clothing, and housing, if you check the percentage of income that's spent on these items, it tends to be lower than developing countries, as a result, it allows citizens to throw their energies on productive matters that generate economic activity.

That was the historical perspective, but as part of modern life, it can be argued that health, education, and electricity are also an essential part of the cost of living but they need to be classified as a different need. Because we can live without any of those, but it is very hard to survive without food, clothing, and housing. I think it is important to recognise this essential difference.

 

[peagle]

Cheap R&D - to push the barriers of science and technology you need great minds and money to keep those great minds motivated. Right now if you excel at anything as a Pakistani, you can find more opportunities abroad and you will be able to have a better lifestyle abroad. If we can keep the cost of living lower here, whilst being able to provide the facilities of a developed society, it means that your best minds are incentivized to remain in Pakistan. It also means you don't have to pay as much to hire them as you would in the west. Which means we can fund more research at lower costs.

This is an extremely good and workable idea.
I personally have had the idea that we should open R&D parks, whereby we introduce a suitable legislative and policy framework, providing complete physical and intellectual security to foreign companies investing in this sector. Even if we do not gain anything from this sector other than employment, the human resource skills generated by having our citizens involved in research will pay off many folds in the long term.

The people who are employed at such facilities will go on to develop national and multinational companies, it will take time, no other country in the world has such a framework in place, as far as I am aware, and we should. Companies already conduct R&D in other countries, but to have a specific policy that targets the sector and provides the facilities on demand is not being done anywhere.

Just like export processing zones, industrial zones and other zones existed, China took advantage by developing SEZ's with a specific purpose, thus attracted the right kind of investments, we could do something similar in the R&D sector. Obviously, companies would prefer to be away from their competitors, so we could declare a city as an R&D city, that would have extra privileges and administrative structures in place. And, you could have a dozen or more small R&D parks in the same city so each company could choose one location, just for itself. The educational infrastructure would be aligned to producing the right talent for the needs of R&D requirements.

Influence - Right now our society (as with many others around the world) is hamstrung by the whims and fancies of the mega wealthy who can buy all the influence they need. These people do invest in the country, they are drivers of the economy, but they are no replacement for the consumers and the workers, who are ultimately the economy. If we can create an economic environment where the workers can also afford to be consumers, then this creates much more wealth than the Malik Riaz types of the world.

Here I would have to disagree because this is an example of chicken or the egg, who came first, the industrialist or the consumer.

What you suggested has already been tried in Pakistan, and it has cost us dearly, we suffered. In the 1960s there was a lot of talk about 22 families who controlled all the wealth, but there was economic growth, but after nationalization in the 1970s, combined with the war in Afghanistan, Pakistan went downhill.

Right now, Samsung, a single company accounts for over 20% of South Koreas GDP, that's just one company. As soon as you place limitations on people and companies you restrict economic freedom, which automatically leads to stagnation because it constricts economic activity.

Let people make as much money as they can, those who are capable, that can only happen in a free environment. We can only find out who is capable if the environment is free. Their wealth will trickle down over time, and the state can introduce relevant policies to ensure the wealth does trickle down to every section of society, which will result in the consumer base on which to continue our economic growth.

It is time we start learning from our past, we have made mistakes, let's not repeat them for sake of certain ideals.

 

[VCheng]

think if in Pakistan we can put in curbs to control the cost of housing, food, energy, education, healthcare and transportation we can have residents with money in their pocket to invest/spend.

So how would such curbs work exactly? The gubbermint just declares the sanctioned prices of everything and all of a sudden the prices drop?

The Western countries success is based on controlling the costs of food, clothing, and housing, if you check the percentage of income that's spent on these items, it tends to be lower than developing countries, as a result, it allows citizens to throw their energies on productive matters that generate economic activity.

There are no cost controls generally to determine the costs of goods, which are determined by market forces of supply and demand. Thus, prices of food and housing are higher in Europe than they are in USA because of tighter supply. Economic activity benefits from disposable income only in discretionary areas such as entertainment and travel, but not in other areas such as industrial production.

 

[peagle]

So how would such curbs work exactly? The gubbermint just declares the sanctioned prices of everything and all of a sudden the prices drop?



There are no cost controls generally to determine the costs of goods, which are determined by market forces of supply and demand. Thus, prices of food and housing are higher in Europe than they are in USA because of tighter supply. Economic activity benefits from disposable income only in discretionary areas such as entertainment and travel, but not in other areas such as industrial production.

I don't understand how your statement relates to anything I've said?

 

[VCheng]

I don't understand how your statement relates to anything I've said?

Obviously, the fact that Western success is NOT based on controlling costs, but rather on creating open markets with fair competition, has escaped your attention.

 

[313ghazi]

So how would such curbs work exactly? The gubbermint just declares the sanctioned prices of everything and all of a sudden the prices drop?

Social housing, Public transport, SOE's providing a bare bones service at cost. Mix it up with over supply in the market.

Easily do-able.

 

[313ghazi]

As an American I don't expect you to get it, but Europe, New Zealand, Australia and Canada have all reached thier success by both encouraging businesses and keeping the cost of living low whilst providing loads of services to the citizens.

In the UK it was only in the last 20.years we broke system and ended up with wealth being hoovered up from the middle and upper classes into the hands of the elite.

 

[peagle]

Obviously, the fact that Western success is NOT based on controlling costs, but rather on creating open markets with fair competition, has escaped your attention.

I think what has escaped your attention is that there is no single answer, and that is what I had said.
It helps to read properly before you reply to a statement.

Without the social welfare aspect of western societies, they would not have the kind of development and social stability they have achieved.

Looks like that has also escaped you attention.
Next time, please concentrate.

 

[Indos]

Of course, it is why government around the world try to make inflation low.

 

[VCheng]

Of course, it is why government around the world try to make inflation low.

Inflation is just a measure of the future value of a country's currency, is it not? Keeping inflation low has much to do with managing currency supply and demand, based upon what a country produces vs what it consumes. It cannot be controlled without paying attention to the basics.

Social housing, Public transport, SOE's providing a bare bones service at cost. Mix it up with over supply in the market.

Easily do-able.

Actually, not so easily doable. Is the supply of any of things mentioned in the OP - housing, food, energy, education, healthcare and transportation - anywhere near commensurate with the demands for each one of them? Where and how can the gubbermint get the resources to even begin to deliver what is needed, let alone produce enough to create enough supply to drop down the prices? The private sector can only work within the environment created by the government policies.

Without the social welfare aspect of western societies, they would not have the kind of development and social stability they have achieved.

And what do you think came first? The social welfare, or enough development to make said social care affordable?