Making the status quo work

Published: August 31, 2012
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pervez.tahir@tribune.com.pk

pervez.tahir@tribune.com.pk

The economic policy document released by the PTI does not measure up to the promised change. It reminds me of what economist Clark Kerr famously said: “The status quo is the only solution that cannot be vetoed”. A concrete set of actions is required to change it. The document naively assumes that a strong, personally-clean leadership can make the status quo work. Instead of converting its slogans of justice, humanity and self-esteem into actionable agenda for social change, it has worked out five-year projections for an optimistic scenario. If the Federal Board of Revenue (FBR) can add five percentage points in tax-to-GDP ratio, if the wasteful expenditure of the government and losses of public-sector enterprises can each be reduced by two percentage points, if the resulting nine percentage points of GDP can be spent on the social sector and if total investment can be doubled in a matter of five years to deliver a GDP growth of seven per cent per annum to generate 10 million jobs, we are almost there.

No tsunami is deemed necessary for this revolution to take off. To mobilise revenue, the FBR is to be made autonomous like the State Bank of Pakistan, although the document admits that the State Bank itself has to be made autonomous! Actually, many of the public sector enterprises are autonomous and yet, inefficient. Autonomy given to the present ‘revenuecracy’ will also make the FBR something of a loss-making entity, no matter how much more is spent on information technology. The tax structure remains the same except for the return of a form of wealth tax, which would be adjustable against income tax and a questionable proxy for agricultural income tax. When the going is good by the third year, the sales and corporate tax rates will be reduced. Reducing current expenditure by two percentage points of GDP is not possible without massive lay-offs or salary cuts. Controlling white collar corruption is a laudable objective but it cannot be a serious revenue measure. Declaring educational emergency has been given a new meaning by making higher education its focus. Growth projections are based on a dubious capital-to-output ratio. Job creation is based on unobserved employment elasticity.

The idea of justice is lost somewhere. Not a word has been said about feudalism, unless it is presumed that the strengthening of the capitalist class will ring the death knell for the feudal system. A surrogate agricultural income tax and the resurrection of the unimplemented village councils of General (retd) Pervez Musharraf’s devolution plan cannot even scratch its surface. Inequality results from a skewed ownership of assets. The most direct measure to reduce inequality is to redistribute assets. Towards this end, rural and urban populations are on different planes. In rural areas, land is the main asset. Give people land and they will take care of themselves. A beginning could be made by distributing state land. This would require vacating its occupation by influential landlords, bureaucracy and military. In the second phase, the 1977 land reform could have been implemented in letter and in spirit. But a Shariat Court verdict stands in the way. Is this the reason to avoid the ‘F’ (for feudalism)? In urban areas, there are no physical assets to distribute. The focus ought to be on social assets. These include education, health and skill formation, backed up by credit and knowledge dissemination. The PTI does promise something here for its youthful constituency. For the rest, there will be the Benazir Income Support Programme under another name.

Published in The Express Tribune, August 31st, 2012.

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Reader Comments (25)

  • Falcon
    Aug 31, 2012 - 12:59AM

    Pervez Sahab –
    Aren’t you being a little too harsh? Why not give out suggestions to PTI to help them make things better? Increasing tax revenue by 5 – 6% is not just dreams, there is detailed documentation available on what steps to be taken administratively and through reforms will bring in how much additional revenue. Now for land reforms, of all the people, Akbar Zaidi has provided the most detailed account of the reality in his book. Previous land reforms have failed because feudals used it for money making business by selling under-productive land for higher prices. On top of it, the land was re-sold out mostly to bureacracy and military. Land re-grant was also politically manipulated. Furthermore, significant portion of the land from land reforms of 1970s is still sitting with the Govt. So, there is not much hope to the process other than increasing dis-incentives such as taxation for big land holdings (as PTI is proposing). Having said that, from what I have heard, PTI is still evaluating the feasibility of land reforms as part of their agricultural policy proposal.

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  • sabi
    Aug 31, 2012 - 1:30AM

    Author,.
    In rural areas, land is the main asset. Give people land and they will take care of
    themselves. A beginning could be made by distributing state land. This would require vacating its occupation by influential landlords, bureaucracy and military.
    Can you pin point the exact areas.second who is working on this land and third under which law other than socialist agenda which has died its natural death since long
    As a matter of fact land has not remained an asset for many because of its distribution and and has on many places reduced to such a low as not workable.As a result of that people are either migrating to urban areas or those who can afford, to foreign countries.This country needs huge industrialistion to stop this migration of rural population to urban areas.We should learn this lesson from industrialised nation.
    Regards

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  • John B
    Aug 31, 2012 - 1:54AM

    To change from status quo and circumvent the difficulties of land reform, PAK needs a massive infusion of capital to spur economic growth in technical, manufacturing, construction, energy and service sectors.

    I don’t see any policy toward this goal

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  • Sameer
    Aug 31, 2012 - 1:56AM

    Very well analyzed Sir. Thank you.

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  • Ch. Allah Daad
    Aug 31, 2012 - 2:12AM

    One of the best analysis of PTI’s economic policy. Whatever PTI and other parties add or subtract in their economic policies, first priority should be security, law and order, peaceful business and working environment. Without these safe guards all policies are doomed to fail.

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  • HotShot
    Aug 31, 2012 - 5:30AM

    Dr. Pervez Sahab, in one your next articles you should delineate what should be part of PTI’s economic policy? Or for that matter any other political party?

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  • Obvious
    Aug 31, 2012 - 8:24AM

    Every ‘analyst’ that comes out trying to trash PTI’s economic plan conveniently subtracts and ignores the very details that are central to the economic roadmap.
    .
    Pity that…their state of denial forces them into pessimism.

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  • No BS
    Aug 31, 2012 - 9:47AM

    Sound criticism, but please take a step foward and give plausible recommendations to ‘redistribute assets’. As you mentioned, there are hurdles in the way of land reforms, so what suggestions to deal with these hurdles including Shariah Courts.

    Also please show evidence that land reforms actually work, there is nothing in international literature to suggest that it works….

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  • Hammad
    Aug 31, 2012 - 9:50AM

    I wasted my 4 minutes reading this!

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  • Adnan Ali
    Aug 31, 2012 - 10:09AM

    Perhaps this is the reason that none of the other parties dare come out with their policy documents. It is nevertheless heartening to see a debate on policy.

    I do have some reservations about Dr. sahib’s analysis. Autonomy of state owned enterprises is worthless if political influence is not removed. The heads are still handpicked by head of the political government. PTI proposes to create independent boards of professionals who then advertise and hire the heads of these enterprises. PTI’s government will declare policy and the boards will be held accountable for the performance of the enterprises.

    I do not know how Dr. sahib missed this information and wrote otherwise. It is clearly present in the document. There are many others that seem off in Dr. Sahib’s analysis.

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  • Ch. Allahdaad
    Aug 31, 2012 - 11:35AM

    Pervez saab is right. Only PML-N have the vision to make sound economic policy. Nawaz bhai always comes up with best policy in interest of country. Take example of yellow-cab scheme, laptop scheme, and many other like these. No comparison with PTI plan.

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  • HH
    Aug 31, 2012 - 11:41AM

    If the Federal Board of Revenue (FBR) can add five percentage points in tax-to-GDP ratio, if the wasteful expenditure of the government and losses of public-sector enterprises can each be reduced by two percentage points, if the…….

    It’s like manipulating the assumptions in a valuation model to make a “SELL” a “BUY”…Lolzzzz

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  • Faiz Economist
    Aug 31, 2012 - 12:18PM

    Criticism is very easy but no suggestion given in the piece.

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  • Riaz Khan
    Aug 31, 2012 - 12:29PM

    Tsunami or no Tsunami nothing will change in Pakistan!

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  • Saloo Bhai
    Aug 31, 2012 - 1:18PM

    Who says State Bank of Pakistan is independent ???!

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  • Aug 31, 2012 - 1:27PM

    @No BS:

    I do not know much much about other countries’ land reforms program but it has certainly worked well in Russia and India.

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  • affan dawood
    Aug 31, 2012 - 1:55PM

    As a citizen of Pakistan and a PTI follower i am very happy that people are taking the notes out of PTI Economic plan . . .the more they do it the better for PTI . . Credit must be given to them to open their Economic Plan and if there are flaws it should be delted with . . I think that Asad Umar will definately respond to this as he did in DAWN . .but as for Land reforms he said that it will be the part of Agriculture Policy . .

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  • Nadia Tahir
    Aug 31, 2012 - 3:13PM

    @Adnan Ali:
    Who can guarantee that a fully autonomous institution will monitor and pursue public not private interest? What if an autonomous central bank indulges in profit making business and ignores long run public interest. What is the incentive for a central banker to purse a public interest? So Autonomy or no autonomy is not the issue, It is accountability and credibility which are missing links.

    @affan dawood:
    PTI please tell me where is the creature “market” exist which allocates resources “efficiently”? Trade led growth with efficient markets again neo liberal paradigm which takes care of the capitalist ruling elite not the working class poor. Is the change means to make status quo work?

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  • Dr Pervez Tahir
    Aug 31, 2012 - 3:36PM

    @Adnan Ali:

    Who can gurantee that a fully autonomus Central bank will not pursue private agenda? What are the incentives for an autonomus central bank to take long term decisions rather than short term view? It is not autonomy but credability and accountability which are more important.

    @affan dawood:

    PTI please tell me where is the creature “market” exist which allocates resources “efficiently”? Trade led growth with efficient markets again neo liberal paradigm which takes care of the capitalist ruling elite not the working class poor. Is the change means to make status quo work?Recommend

  • Fahad Hasan
    Aug 31, 2012 - 4:31PM

    It is easy to discredit a good effort from PTI. It is totally viable economic program and could be done with little commitment from political leadership.Recommend

  • Waqar
    Aug 31, 2012 - 5:07PM

    Its too convenient to criticize. We need constructive feedback. Dr. Sahib, please come up with a concrete economic plan which is better than that of PTI. I am sure Asad Umar and rest of PTI will be all ears…

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  • taz
    Aug 31, 2012 - 6:50PM

    shows you did not read the full policy papers. i would be waiting for your article once (IF) other parties give their policy.

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  • Madeeha
    Aug 31, 2012 - 9:20PM

    I admit performance of the PPP government was not ideal, but it has set new standards ofpolitics in a feudal society. Millions of hardcore poor have been awarded by employee’s stock scheme. First time in the history of Pakistan the poor workers became partner in the profit oforganization. Countless homeless got free piece of land for a shelter. Education, first time in history got in to access of underprivileged. The bureaucracy became answerable to people and first time traditional power centre shifted from feudal to masses. As people got voices and realization of their right, the democracy became a platform where they can share power. This support base is purely an outcome of party performance and pro-poor policies which still makes its major vote-bank. This party does not has any direct conflict with Socialists, rather it acts in their support for secular, liberal and more equitable society.Recommend

  • Ghulam Mustafa
    Aug 31, 2012 - 9:42PM

    Wealth Tax is vital to Pakistan’s survival and revenue generation, PTI must work on bringing wealth tax back.Recommend

  • elementary
    Sep 1, 2012 - 5:57PM

    @Madeeha: You said:”Millions of hardcore poor have been awarded by employee’s stock scheme. First time in the history of Pakistan the poor workers became partner in the profit oforganization. Countless homeless got free piece of land for a shelter. Education, first time in history got in to access of underprivileged. The bureaucracy became answerable to people and first time traditional power centre shifted from feudal to masses. As people got voices and realization of their right, the democracy became a platform where they can share power”

    All this happened in which country???.

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