Pakistan is currently sitting on a demographic bomb which could explode if some fundamental economic changes don’t take place. But economic changes and development occur within a facilitating social, political and external environment. Even the most conservative economists wedded to the basic principles of their discipline have begun to recognise that growth is not simply the consequence of capital accumulation and moving the work force from the less to the more productive activities. That was the assumption made by Arthur Lewis, one of the founding fathers of development economics. His suggested growth equation just had two contributing factors, capital and labour.
Now, with decades of experience behind them, economists have begun to recognise that they must go beyond the boundaries of their discipline to understand how economies succeed and fail. The number of factors contributing to growth continues to increase as more empirical work is underway in intuitions such as the World Bank that now has large amounts of economic, social, political and demographic data at hand to understand the relationships between the many different attributes of any society. This applies to both, developed and developing nations. The latter group is now euphemistically called ‘emerging nations’.
It is safe to assume in the case of a country such as Pakistan that politics and international relations will profoundly affect the structure of the economy and the rate of its expansion. Both in turn will have enormous social consequences. One of the disturbing things about the way the country’s economy has been managed has to do with the lack of attention given to statistics and the availability of information. The size and rate of increase in the country’s population are two important pieces of information that are critical for undertaking economic planning. There is other population related information that is needed. For instance: what is the gender division of the population, what is the rate of increase in the number of people living in large cities and towns, what is the rate at which people are leaving the countryside and moving to the urban areas, what is the size of the work force, how many women are now working and how many of them are working outside their homes? It is from population censuses that such information is obtained but Pakistan, mostly for political reasons, finds it hard to systemically count the people and collect information about their social and economic circumstances. A household survey was conducted which was to be followed by a population census. The latter has not taken place. In the absence of this information we have to proceed on the basis of guess work.
In mid-2012, the population of Pakistan stands at some 190 million. The median age is 21 years, one of the lowest of all major population groups in the world. This means that some 95 million people are below that age. The current rate of increase in population is adding close to four million people a year. Given the fact that the rate of population increase in the past was a little higher, the work force is increasing at rate of three per cent a year. This rate could be even higher if more women begin to look for work outside their homes.
Some of the analysts who have worked in this area of economics believe that employment elasticity in Pakistan is a bit more than 0.5, which means that for every percentage point increase in GDP, employment grows by half a percentage point. Based on this estimate, the GDP must increase by six per cent a year for the pool of the unemployed not to increase in size. The rate has to be higher than this in order to shrink the size of the pool of the unemployed.
With the rate of GDP not likely to be much more than 2.5-3 per cent a year for the next few years, Pakistan can count on social turbulence. What form it will take is hard to predict. The democratic system under development gives an outlet to those not being helped by the economy. The Benazir Income Support Fund which is believed to be reasonably well-managed and is said to be free of the types of leakages that are common for such programmes also helps in keeping the frustrations of the very poor for being articulated in violent ways. Pakistan will probably not see the kind of Arab Spring that shook the Middle East. What could happen though is that the unemployed youth may get attracted to extremist causes which pick up their recruits from among those who don’t see much of a future for themselves. For social peace, therefore, it is important that the Pakistani state works hard to increase the rate of economic expansion. But here politics and international relations are proving to be hindering forces.
For the rate of growth to increase, Pakistan must invest a larger proportion of its income, particularly in the areas in which the state must be involved. This means the ability to raise more resources by improving tax collection and bringing more people and sectors into the tax base. This has been hard to do. There are important political constituencies that won’t allow these changes to take place. In order to meet the resource gap, Pakistan could turn to the outside world but this has turned increasingly hostile. The country is, therefore, in a bind. Getting out of it will require political will, which those who hold the reins of power seem to lack.
Published in The Express Tribune, June 18th, 2012.
COMMENTS (30)
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@Riaz Haq:
Do you know that more often than not, figures in Pakistan are fudged and books cooked by almost all ruling government, be it civilian, military or milivilian?
Denial, not Islam is the state religion of Pakistan and fudging of figures is so rampant that no one (other than Riaz Haq types) believe figures submitted by Pakistan anymore.
Case in point: WB was not allowed to released the figures for poverty level in Pakistan in 2009-2010 as the civilian government had questioned the figures submitted by the previous regime.
@BruteForce: "You have quoted UNICEF in the past, now that the figures are too saddening you have switched to a report which is more positive about Pakistan."
First, the link to UNICEF you have provided does not work.
Second, UNICEF data is not relevant for 15+ age population's educational attainment which is what Barro-Lee deals with.
Third, Barro & Lee offer deep and specific research with data as recent as 2010 about primary, secondary tertiary education. They are considered highly credible by the UNDP on issues related to educational attainment.
On poverty rates, Pakistan has and continues to do better than India. Just look up the World Bank report titled "Perspectives on poverty in India : stylized facts from survey data" released in 2011.
@You Said It: Unfortunately a lot of us have this mindset, we are more interested in who will win the India vs Pakistan match at the Olympics. Never mind we land up at no7 & 8 in a game that was once OURS
You Said It: "Please spare those of us actually here in Pakistan this silly mindset."
There's nothing more silly than to talk about an Arab Spring in Pakistan.
Pakistan has had many many springs like the Arab Spring and is much farther on the path to democracy than any Arab country. The model Pakistanis need to seriously look at is the Turkish model where the military supremacy has given way to a very competent civilian govt that is actually delivering for the people and earning their respect and support in the process.
@Riaz Haq:
You have quoted UNICEF in the past, now that the figures are too saddening you have switched to a report which is more positive about Pakistan.
Me and my fellow Indians have been right about Pakistan all along, while you have painted a rosy picture since the past 5 years day in and day out on your blog about Pakistan and spread gloom about India.
Guess what, India still one of the fastest growing economies in the World, Pakistan is no where near. UN MDG report says India is the only country in South Asia to meet its goals and poverty will reduce to 22% by 2015, halving from the levels of 1991..
@Riaz Haq: Burki's article is about Pakistan, and its unique problems. Our growth rate in the past decade has been stuck at 2-4%. Let's keep this a seriour forum to debate challenges facing Pakistan and its possible solutions. It would be best to leave out this sick obsession you have with India. Please spare those of us actually here in Pakistan this silly mindset.
All others: The author raises a good point in that Pakistan needs more investment capital. This can come from internal or external sources. Unfortunately, not only do we have far too many vested constituencies that demand their pound of flesh, there is far too much internal dissent. This means that the state has to spend its precious free resources in suppressing this dissent or buying off the dissenters. Thus the only real short-term hope of investment for Pakistan can be external. This requires a more flexible and humble foreign relations.
@Ejaaz: " Our kids cannot do simple maths and cannot write a simple sentence."
Yes, it's true in some cases. Quality issues do arise as access to schooling grows rapidly in South Asia and elsewhere. For example, students in neighboring India rank at the bottom among 74 countries that took international tests like PISA and TIMSS.
@ayesha_khan: There is an option. A different foreign policy which can allow for a much smaller defense budget.
Whilst I agree with this in principle,it won't work as things are at the moment.Blackhole of corruption,misgovernance and financial misappropriation will simply suck it up,without any benefit to ordianry citizen.
@gp65: "Obviously UNICEF does not agree with the conclusions of the Harvard researchers you quoted."
Robert Barro & Jong-Wa Lee are far more credible than anything that contradicts it. They are serious researchers whose data is used and often quoted by UNDP.
As of 2010, there are 380 (vs 327 Indians) out of every 1000 Pakistanis age 15 and above who have never had any formal schooling. Of the remaining 620 (vs 673 Indians) who enrolled in school, 22 (vs 20 Indians) dropped out before finishing primary school, and the remaining 598 (vs 653 Indians) completed it. There are 401 (vs 465 Indians) out of every 1000 Pakistanis who made it to secondary school. 290 (vs 69 Indians) completed secondary school while 111 (vs. 394 Indians) dropped out. Only 55 (vs 58 Indians) made it to college out of which 39 (vs 31 Indians) graduated with a degree.
Another important point to note in Barro-Lee dataset is that Pakistan has been increasing enrollment of students in schools at a faster rate since 1990 than India. In 1990, there were 66.2% of Pakistanis vs 51.6% of Indians who had no schooling. In 2000, there were 60.2% Pakistanis vs 43% Indians with no schooling. In 2010, Pakistan reduced it to 38% vs India's 32.7%.
@Riaz Haq: Obviously UNICEF does not agree with the conclusions of the Harvard researchers you quoted. Still, Dil behlane ke liye ye khayal acchha hai.
@Riaz Haq:
Please stop being selective about reports. UNICEF is the best judge.
"About a third of Pakistani children aged between five and nine are enrolled in primary education. Only 51 per cent of girls are enrolled in primary school, compared to 60 per cent of boys. Of those enrolled, two-thirds of girls and almost half of boys do not complete primary school. Only 42 per cent of Pakistani women are literate, and the proportion falls to 7 per cent in the Federally Administered Tribal Areas."
Says the UNICEF.
http://www.unicef.org/infobycountry/pakistanpakistanbackground.html
I do not know whom you are trying to deceive by pointing to wrong data.
Why no suggestion of REDUCING polulation growth rate - one of the root cause?
@Ejaaz: Please watch this video at 1.04 http://www.youtube.com/watch?v=1Lg0kUtS8i, though the entire video is a great thought provoking watch . Mr Riaz Haq is of the mind set beat India even if you loose to every other country in the world, as you will see we too in India have many with this mind set but mercifully most people laugh at them.We have to come closer and develop in spite of these people.
@Riaz Haq, No harm in dreaming (especially when one does not have to live in Pakistan). So dream on.
@RiazHaq: Are you in Pakistan? Our kids cannot do simple maths and cannot write a simple sentence. A minuscule previliged minority is being educated properly. What demographic dividend can we reasonably expect? Did those Harvard researchers actually do field work in Pakistan or they relied upon the fairy tales the GOP spins all the time?
"The country is, therefore, in a bind. Getting out of it will require political will, which those who hold the reins of power seem to lack". Fully agree with you but will the establishment allow this to happen? They do not understand the fundamentals of economics otherwise we would never have been in this mess. I see terrible times for Pakistan not due to political leadership but due to establishment isolation policies.
The author claims that "Pakistan will probably not see the kind of Arab Spring that shook the Middle East".
I couldn't disagree more. Pakistan has already seen many a springs like the Arab Spring. And I fully expect Pakistan to reap a huge demographic dividend.
Contrary to the oft-repeated talk of doom and gloom, average Pakistanis are now taking education more seriously than ever. Youth literacy is about 70% and growing, and young people are spending more time in schools and colleges to graduate at higher rates than their Indian counterparts in 15+ age group, according to a report on educational achievement by Harvard University researchers Robert Barro and Jong-Wha Lee. Vocational training is also getting increased focus since 2006 under National Vocational Training Commission (NAVTEC) with help from Germany, Japan, South Korea and the Netherlands.
http://www.riazhaq.com/2012/05/educational-attainment-in-india.html
What Pakistan needs for development is peace , rule of law and and a employable young work force.
This is a very important article that sheds light on some very critical points. As the author points out, Pakistan's GDP growth has to be much higher than 6% a year to just hold the current unemployment and poverty numbers considering Pakistan's big population bomb. WIth Pakistani establishment's preoccupation with playing strategic games against the neighbors and the consequent need to spend a very large share of the GDP and national income on the military, things are only going to get worse with exploding population, increasing inflation, terrorism, reduced investment to GDP ratios, vanishing foreign cash inflows and dying economic activity.
It looks like the Indians don't have to fire a single bullet. Pakistan has been busy shooting itself in the foot accelerating the process of national disintegration. It may be too late for the Deep State to turn a new leaf and save the Pakistani nation.
Please note that "Those who hold the reins of power" ALSO hold fat foreign bank accounts and foreign estates, and when the country collapses THEY will already have fled the country, leaving the rest of Pakistanis holding the (empty) bag!
Burki sahib you are an academic and therefore you write in a measured dispassionate language. Let translate what you wrote for the rest of us: . Pakistan is headed for a catastrophe. Anyone Pakistani who understands basic arithmetic should realize if population growth is greater than economic growth than this is a disaster in the making. This means the average Pakistan will have a LOWER standard of living. Let me correct myself. We are in a catastrophic situation and it is going to get much worse. Wake up you fools !!
"In order to meet the resource gap, Pakistan could turn to the outside world but this has turned increasingly hostile" Pakistan has always been turning to outside world, read US and IMF, for its resource gap without proper economic management. May be the situation now will be a blessing in disguise to show case its economic management skills, it has any,
"For the rate of growth to increase, Pakistan must invest a larger proportion of its income, particularly in the areas in which the state must be involved. This means the ability to raise more resources by improving tax collection and bringing more people and sectors into the tax base. This has been hard to do. "
There is another option. If Pakistan changes its mission to protecting its own borders and taking care of its own people instead of trying to alter India's borders, it should be able to meet that mission with a much smaller defense budget which can be invested in the social sector as you are suggesting.
Not much can be done,on population front,once a certain number are reached,then the inevitable other consequences follow,income disparity,health care,mal-nutrition,unemployment,crowding,housing shortage, and their twin sister corruption and bad govt. are not behind.Then the slide begins then only famine and war can help.This the story of all countries in Africa,middle-east and the south Asian lands.Whether religious extremism is the side effect or religion ,the cause?.One thing is common denominator,in Islamic countries,Islam is the main religion.How much,blame you can put on its door step?,one can not be sure.Turkey,Malaysia and to some extent Indonesia seems to do all right,then some argue,they are following more tolerant form of Islam.There may be some truth to that argument,but in the case of Pakistan,there is clamor for more rigid and orthodox form of Islam,all most Talibanique.Should Pakistan go that rout more?I do not think so,but who am I to say?Wasted 65 years,may be one more try for 5 years,may satisfy hard liners?Arab spring seem to have lost its starch of late.I happen to believe there are no short cut to hard work.It is decades of hard slog before there is some sign of progress.No pain ,no gain.
But, but, but we wanna be more like the arabs.
"For the rate of growth to increase, Pakistan must invest a larger proportion of its income, particularly in the areas in which the state must be involved. This means the ability to raise more resources by improving tax collection and bringing more people and sectors into the tax base. This has been hard to do. "
There is an option. A different foreign policy which can allow for a much smaller defense budget.
@Author, "In mid-2012, the population of Pakistan stands at some 190 million."
Recently there was a survey that estimated total population of Pakistan including the areas of Kashmir under its control (AJK & GB) but EXCLUDING FATA and two districts of Balochistan, is almost 197 MILLION in end of 2011.
If FATA is included, population is estimated above 200 millions.
One must not ignore, the fudging of figures that goes on in Pakistan.
Some of us had been crying for almost half a century that growth has to be holistic. Just economic change does not do much other than creating income inequality, and resultant social disruption. Pakistan, like other parts of the developing world is a classical example of failure of developmental assertions. Pakistan has to do a lot of work and on all fronts from containing population growth, women empowerment, supply of clean water and nutritional food, and more important diffusing religious radicalism. Pakistan does not need a similar of Arab Spring as it is far advance on political scale than its Arab counterparts. Where it fails is its social structures fused by religious currents. Pakistan has to sit back, think, and take a rational approach. The pursuits of dogmatic thinking will not take it anywhere but back to the caves.