Economic Bullshit

Published: March 3, 2017
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Even if the Pakistani middle class is 84 million strong how much purchasing power does it really have? PHOTO: AFP

Even if the Pakistani middle class is 84 million strong how much purchasing power does it really have? PHOTO: AFP

Even if the Pakistani middle class is 84 million strong how much purchasing power does it really have? PHOTO: AFP The writer is a Fellow at the Consortium for Development Policy Research in Lahore

A lovely little book came out in 2005 titled On Bullshit. Written by a professor of philosophy at Princeton, it remained a bestseller for months. Its principal message was that “bullshit is a greater enemy of the truth than lies” because “Liars at least acknowledge that it matters what is true.” Bullshitters, on the other hand, convey impressions “without being concerned about whether anything at all is true. They quietly change the rules governing their end of the conversation so that claims about truth and falsity are irrelevant.”

I recalled the book after reading two articles within a week talking up the Pakistani economy in The Wall Street Journal (WSJ) and The Washington Post. Both employed the classic bullshitter’s gambit of throwing out random facts to convey a favourable impression without caring in the least whether the inferences were in any way supported by fact or argument. Had a PR person been paid to write these articles, he or she couldn’t have done a better job.

At the heart of both articles is the blinding vision of a middle class ready to rocket the Pakistani economy into the stratosphere. The WSJ article summarises its thesis in its title: “Pakistan’s Middle Class Soars as Stability Returns: Consumer spending rockets as poverty shrinks, terrorism drops and democracy holds.” The title of the WP article is more bland — “Beyond the headlines of terrorism, Pakistan’s economy is on the rise” — but its argument is the same.

Observe how the impression is constructed. First the numbers — 38% of the country is middle class, while a further 4% is upper class. That’s a combined 84 million people.” Then a true fact which means nothing by itself: This size is “roughly equivalent to the entire populations of Germany or Turkey.” And then another less than relevant generalisation: “A study by the OECD forecasts that the bulk of the growth in the middle class in the years ahead will come from Asia, which will account for two-thirds of the global middle class by 2030.”

Comments culled from international agencies provide a favourable jumping-off point: “What’s more, Pakistan is winning plaudits from the International Monetary Fund, and its economy is forecast for a healthy 5.2 per cent growth rate in 2017, according to the World Bank.” That’s enough to conclude that “As Pakistan turns a corner… Three key factors are driving Pakistan’s economic awakening: an improved security climate even despite the most recent attack, relative political stability, and a growing middle class. These three interlocking pieces are fuelling Pakistan’s growth story.”

From here the autopilot takes over: “Robust middle classes are vital to healthy societies and growing economies, and Pakistan’s middle class may have reached a tipping point.” Throw in a couple of quotes by experts and the future becomes more than incandescent: “Pakistan’s consumer middle class market could hit $1 trillion by 2030” and “middle classes are driving impressive 25 per cent rates of return for large multinational consumer companies… middle class growth is sparking increased production of cement, steel, automobiles and the like… one of the key reasons for current bullishness on Pakistan.”

Let us now subject this bullshit to a stool test. First, what does the size of the middle class have to do with anything? Does a population as big as Germany’s mean that a tipping point has been reached fuelling Pakistan’s economic takeoff?

Consider several examples in comparison with Pakistan (population 200 million, income per capita $5,100). Singapore, with scarcely any natural resources, has a population of 5.8 million (less than that of Faisalabad) and a per capita income of $87,100. Ask how Singapore’s economy skyrocketed with a middle class that could not have exceeded 5.8 million? Or consider the tiny populations of Dubai and Abu Dhabi which have boomed in front of our eyes. South Korea and Pakistan had roughly the same per capita income in the 1950s (when Pakistan was billed as a model of development with a much smaller middle class). Today, the former with a population of 51 million has a per capita income of $37,900. Does this not suggest that the size of the middle class by itself has very little to do with economic growth? Very clearly it is economic policies and governance that matter much more.

The typical response to such examples is to blame overpopulation for the poverty in Pakistan. Now suddenly the large population has become the magic wand that will even make up for the absence of sound policies. The same fact can fuel very different stories depending on the occasion.

Second, even if the Pakistani middle class is 84 million strong how much purchasing power does it really have? Note that Pakistan’s per capita income of $5,100 is below poverty level income in the US. Add to that the phenomenon of inequality which is the major issue of the moment. The latest Oxfam numbers inform that in India just 57 individuals own more wealth than the bottom 70% of the population. Isn’t it likely that most of the wealth in Pakistan is concentrated in the hands of the 4% that comprise the upper class. If things were indeed so rosy for the middle class why would almost every member of it want to move to a stronger economy? Can’t they see that Pakistan has turned the corner?

Yes, of course, more cement and steel is being purchased but is it consumption per capita that is going up or simply a reflection that the population of Pakistan has skyrocketed — from 61 million in 1971 to 200 million today. Just keeping up with the additional needs (food, clothing, houses, schools, colleges, hospitals, roads, electricity, etc.) means that commodity sales would increase. And yes, many companies providing these commodities are profitable. But does one see foreign investment rushing into new projects? Even the Chinese have to be guaranteed exorbitant returns to be tempted. In fact, Pakistanis themselves are avoiding new investments preferring to put their money in land or buying property in the Middle East or parking cash in tax havens. Some are even shifting existing manufacturing capacity to foreign countries where costs of doing business are lower.

Ask the middle class if the skyrocketing economy is generating enough acceptable jobs to accommodate those entering the labour force every year let alone the poor who are still in a majority? Is that the reason why more and more people wish to leave to send back money for their families to consume and keep the bleeding economy on life support?

Snake-oil will continue to be sold and there will never be a shortage of buyers. Allah be praised. 

Published in The Express Tribune, March 4th, 2017.

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Reader Comments (9)

  • Greg
    Mar 4, 2017 - 2:17AM

    Lol. Just a tiny bit of research on people who wrote the article, their SME’s, their previous work
    would have helped clear many a doubts… :) Recommend

  • Sabi
    Mar 4, 2017 - 3:33AM

    Where there is a success there is also a jealousy . Three minutes of mine wasted.Recommend

  • Khurram
    Mar 4, 2017 - 5:40AM

    Our national discourse is full of lies and propaganda on many issues including economics and geostrategic matters. But ET should maintain decorum and should not have allowed this title. What next?Recommend

  • Toti Calling
    Mar 4, 2017 - 10:49AM

    A good news is good news. I hope the country carries on the right path of stability and economic growth is the majpor aim by all.Recommend

  • PrakashG
    Mar 4, 2017 - 11:12AM

    The point author is trying to make is valid: no country has progressed because of the size of its population alone. Rising population is a drawback for a developing country, and not an asset. It is only after China came to grapple with population rise, and imposed the one-child policy to bring it under control, that it could focus on industrialization and development.
    India and Pakistan too will soon need to adopt measures to check their population growth, else their dream of becoming a developed country will remain a dream.Recommend

  • Mohsin Ahmad
    Mar 4, 2017 - 9:38PM

    The government should invest on people and provide them with the required education and skills, so that the population becomes productive. In this way we can benefit from our large population with high rate of return for investment done by govt.Recommend

  • Sandip
    Mar 6, 2017 - 6:58AM

    Pakistanis are a special lot. They go through the same cycle of breaking out and then collapsing within a couple of years of the “break out” and yet never question those making the tall claims. Those that dare to question, like this gentleman, are promptly dubbed “enemy agents”.Recommend

  • gp65
    Mar 7, 2017 - 2:09AM

    @PrakashG: India’s total fertility rate is dropping sharply. I was 2.3 in 2013. A rate of 2.1 is considered a prerequisite for zero population growth. Most likely that rate has already been reached. This does not mean the population will stop growing right this moment because there is still demographic momentum to deal with.Recommend

  • Omar
    Mar 11, 2017 - 10:10AM

    What a stupid article. The idiot is trying to compare Pakistan’s GDP per capita with that of highly developed economies like US, Singapore, Germany. That’s a ridiculous comparison. In fact most of the stats in the article are meaningless and out of context. The author is the one bullshitting. If you want to see how a burgeoning middle class can boost the economy you have to look no further than our neighbor India. The WSJ article and the PWC reports did not claim that Pakistan’s economy was all rosy, they are simply commenting that Pakistan’s economy is growing and has the potential to grow even further.Recommend

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