Rich-poor divide

[dabong1]

Rich-poor divide


A report released by the government on Tuesday, which comes clean about rising socio-economic inequality across the country, indicates an unfortunate trend and needs to be addressed by policymakers. The report is an annual assessment of Pakistan's Poverty Reduction Strategy Papers (PRSP -- i.e. the strategy that has been employed by a country to "produce broad-based growth and reduce poverty") and is prepared by all member states in collaboration with the International Monetary Fund and the World Bank. The verdict of that assessment is telling: it says that the ratio comparing what the top 20 per cent of income earners in Pakistan earned to what the bottom fifth earned rose from 3.76 in 2000-1 to 4.15 in 2004-5. This also bolsters the controversial debate on the government's poverty alleviation strategy by providing solid proof that the gap between the rich and the poor has widened. The way that the government usually denies any such thing is to say that prosperity levels have risen although what is usually quoted in such cases are absolute figures and not figures (given population increases, absolute figures are bound to increase, but they increase for poverty levels as well).

While disparity between the top and bottom fifth of the country is, of course, to be expected, what is troubling is its widening. Other justifications often given, particularly relying on the trickle-down effect miss the point, which is that for the moment and the near-term, the number of those poor is rapidly increasing. Not only that, those already poor are getting poorer while the rich are getting richer. The question that then comes to mind is why the government does not have in place policies that allow the poor to increase their wealth instead of the already moneyed segments of society. As for the trickle down effect, when it will come around is anyone's guess, but the advisor to the finance ministry has stated it will come about if the growth continues. With years of 'economic growth' under its belt (as has been proudly pointed out by this government year after year) there still seems to be no benefit forwarded to the poor yet. Pakistan's PRSP clearly states that one of the "core elements" of the strategy is, "targeting the poor and vulnerable." To date, however, only the rich can be seen reaping the harvests of growth. There needs to be concerted effort in terms of a change in approach to policymaking and implementation to reverse this trend.

http://thenews.jang.com.pk/daily_detail.asp?id=41971

 

[niaz]

This is a topic close to my heart. Our long term national survival depends of alleviation of poverty. Most of economists ( incl. a close friend who recently retired from the IBRD aka world bank) that I have discussed this matter agree on the following:

1. Nationalization policy doesnt work. Economy actually shrank following Bhutto's nationalization in the 70's.

2. Our population increase at two percent per annum makes it worse. It means the 3- million mouths to feed each year in a population of 150-million.

3. Most of the increase in population is in the bottom half, where children have no access to health care and education facilities.

4. In any capitalist ( profit) driven society there is always a tendency to widen the gap between rich and poor. Western economies tackle it by graded taxation i.e. Higher income pay more tax than poor. Regrettably, our society has a culture of tax evasion. Tax base is still abyssmal in Pakistan. Result is that government relies on indirect taxation which affects rich and poor equally and thus increases the gap in disposable income.


There is no easy solution. There are not enough resources in the country; even if you take away all the cars from the people who own one and replace the same with a cycle; there wont be enough money in the kitty to provide every one with a bicycle and only effect will be that rich will also become poor. Also no thirld world government can generate sufficient jobs year after year to keep up with increased population as well as continue decreasing income disparity. Dr Mahbul Haq had suggested that best form of poverty allevation is to encourage self employment by provinding small loans without collateral (Gramane Bank in Bangla Desh).

IMO Mush/Shaukat's policies have been better than the previous regimes since 1990. Even though when the'Trickle down ' will actually trickle down is anyone's guess.

 

[sigatoka]

This is a topic close to my heart. Our long term national survival depends of alleviation of poverty. Most of economists ( incl. a close friend who recently retired from the IBRD aka world bank) that I have discussed this matter agree on the following:

1. Nationalization policy doesnt work. Economy actually shrank following Bhutto's nationalization in the 70's.

2. Our population increase at two percent per annum makes it worse. It means the 3- million mouths to feed each year in a population of 150-million.

3. Most of the increase in population is in the bottom half, where children have no access to health care and education facilities.

4. In any capitalist ( profit) driven society there is always a tendency to widen the gap between rich and poor. Western economies tackle it by graded taxation i.e. Higher income pay more tax than poor. Regrettably, our society has a culture of tax evasion. Tax base is still abyssmal in Pakistan. Result is that government relies on indirect taxation which affects rich and poor equally and thus increases the gap in disposable income.


5. There is no easy solution. There are not enough resources in the country; even if you take away all the cars from the people who own one and replace the same with a cycle; there wont be enough money in the kitty to provide every one with a bicycle and only effect will be that rich will also become poor. Also no thirld world government can generate sufficient jobs year after year to keep up with increased population as well as continue decreasing income disparity.

6. Dr Mahbul Haq had suggested that best form of poverty allevation is to encourage self employment by provinding small loans without collateral (Gramane Bank in Bangla Desh).

7. IMO Mush/Shaukat's policies have been better than the previous regimes since 1990. Even though when the'Trickle down ' will actually trickle down is anyone's guess.

There is no reason why Pakistani families must sleep without shelter, there is no reason why Pakistani's are in bondage, there is no reason why Pakistani children should be without schooling, there is no reason why Pakistan's families must be without decent sanitation, water and electricity. This statement is said with the full knowledge that Pakistan is not a wealthy state, but the fact that extreme absolute poverty still persists is a choice made at the highest levels, not destiny.


1. In today's economic environment with current technology the only industries that can claim economic justification for national ownership is roads managment, water management and healthcare. The first two due to economies of scale and the last due to information failures in private markets.

2. The next person who says that, im going to take a broom stick and wack their teeth out, Iran and China with extremely fast growing populations have managed to improve greatly their results in education, infrastructure and health care in a manner which has resulted in a sharp reduction in absolute poverty.

People keep forgetting when a population increases it not only means 3- million more mouths to feed each year but also means 6 million more hands and feet to produce food to feed the mouths. The blaming of rising population for absolute poverty is a great way for policy makes and leaders to shirk the heat on poverty since it then appears the only way to reduce poverty is forced abortions and sterilization. If fast rising population was the reason for poverty why isnt the U.S. govt. running around sterilizing its population?

3. Why does the government exist? At its very core, its duty should be about increasing the supply of education than would exist in a purely private market, Why you ask? Beause education has very strong positive externalities. A person who educates themself benefits all those around them with new inventions, ideas and (hopefully conduct?).

The government building more schools or health clinics in impoverished districts or at least providing the funds to do so to the locals would certainly not cost more than the billions it spends on defence. The problem in Pakistan is that help is not well targetted, a rich Pakistani family sending their child to a public school receives in absolute monetary terms probably the same subsidy that a dirt poor family in a rural village in sending their child to a crumbling madarsa. If the government can not increase the amount it spends on education, at the very least it should practice first degree price discrimination in favour of the poor which will perversly also improve efficiency (by increasing quantity of education consumed(invested in)) Why isnt this great idea implemented? Because the rich urban politically connected Pakistani has a far louder voice in the debate than the poor rural peasant.

4. Thats actually an incorrect statment that income distribution in capitalist society always tends towards increasing the gap. The marginal value of skill distribution all over the world has changed, university (college) educated labour gets a far greater premium than unskilled labour compared to a decade ago.

It also is wrong to suggest that graded western taxation was created to destroy absolute poverty, a lot of the tax revenue is used for actually the middle and upper class who actually pay the taxes (and a lot also goes to lobby groups like farmers)

Indirect taxes are also good in the sense that they dont double tax savings and investment and hence are less distortionary than income taxes. The fundamental problem in Pakistan is not the tax revenue collected nor the manner in which it is levied in relation to destroying absolute poverty, rather the problem is the way in which poverty allievation programs are designed and implemented.

5. There is enough resources in Pakistan that the very poor dont have to live like dogs, no one can or should attempt to deny this.

Thirdly China is creating much more jobs than the increase in its population, so that statement is also wrong (as has Singapore, Malaysia and Korea in the past).

6. An great idea which will have insignificant impact on the aggregate poverty levels, any doubts? catch the next plane to Bangladesh the pioneer in microcredit.

7. The Pakistani economy is not growing fast enough to ensure that trickle down effects will significantly lower grinding absolute dog living level poverty soon. (if Pak. was growing 10% like China maybe then a different story). Therefore maybe Pakistani government can actually make a pledge to provide 10 years of education to every Pakistani citizen and actually stick to it (and implicitly use the eduction sector as a redistributionary tool for income). The pledge could be funded by significantly raising fees for wealthy and middle income families while simultaneoulsy making free schooling for the very very poor (which not only means waiver of fees but also provisions for uniforms and travel and food). Also Pakistan could enter the foreign debt market and actually borrow five billion over the next ten years to fund this program if it can not find domestic funding. At least it will be far more useful than more F-16's.

 

[HASEEB66]

there will be always be a divide in a capitalist economy but not as much and as visable just like in europe..but it will only happen when the policy makers are themselves from the lower stratas and it is close to their heart to solve this matter...but it can only be solve with time..the only medium that government can impose is taxation but effecient taxationa and provide basic amneties like health education justice shelter as guarantee.

 

[HASEEB66]

the government is already roviding free education and i have proof of punjab and sindh..people from the most backward villages actually tell that...and the government is also giving rupees 200 to every girl..and it is actually happenigng now the things are going in the right direction but more time and resources is requires..responsibility also falls on us...the parents are still not sending their children to schools...becaus ethey still earn more than rs200 with child labour..what can the government do now??