Victims of double inequality
"unless capitalism is reformed, the very democratic order will be threatened"
The writer is the Executive Editor of The Express Tribune
Developing countries like Pakistan have been consigned by the existing World Economic Order (WEO) to a state of perpetual inequality vis-à-vis the developed countries. Take, for instance, the crass practice of subsidising their farmers and farm products by the US and European governments causing, as a consequence, severe losses to poor countries’ farmers and their produce and in the process, making it almost impossible for the world’s indigent to eke out two square meals a day.
Even the aid which these rich countries so ‘generously’ offer to poor countries comes with attached strings that ensure reverse flow to the donors of, at least, 99 cents out of each aid dollar by way of various underhand conditions concealed in the fine print of aid documents. Functioning under the very same WEO, most of the multilateral aid agencies, like the World Bank and the Asian Development Bank and the lender of last resort, the International Monetary Fund (IMF), too practises policies that further deepen this inequality.
China and Brazil seem to have worked their way out of this trap and India also seems to be almost through. However, Pakistan continues to slide deeper in the quagmire. But we could still make a bid to escape if only we could take advantage of our comparative advantages like agriculture, our geographical location and our youth bulge. We are situated at the crossroads of trade routes that traverse from Casablanca in Africa to Urumqi in north-west China and from Myanmar in the Far East to Kazakhstan in Central Asia and Iran, Saudi Arabia and Turkey in the Middle East. We have continued to ignore this advantage and instead of establishing what is called the warehouse economy (trans-shipment) by importing raw material and intermediaries at very low import tariff and exporting them onwards after some quick warehouse value addition, we tried and failed miserably to buy our way into the league of exporters of finished goods with nothing but cotton as indigenous raw material and in this, too, we failed as miserably to achieve value addition of higher degrees.
Our third most distinctive advantage is our manpower. We became one of the leading manpower exporters of the world following the Middle East oil boom of the 1970s. But most of our manpower exports have remained confined to unskilled workers. The advent of knowledge-based society, which, perhaps, is no more than five years old, offers Pakistan and many other developing countries ensnared in a similar inequality trap a godsend opportunity to escape to greener pastures.
The fast-paced developments in the information and communication technologies have offered us new tools to jump start our education system. Now you don’t have to go all the way to the expensive universities like Harvard, Stanford, and MIT to acquire specialised knowledge. You can access the lectures by the top in their field the world over, sitting at home in Pakistan.
While we strategise our escape from the trap of inequality imposed by the WEO, we also need to plan to enable our nation to escape the miseries of domestic inequality, a direct consequence of following the diktat of the Washington Consensus. Two recent books, one by Joseph Stiglitz (The Price of Inequality, 2012) and the other by Thomas Piketty (Capital in the Twenty-First Century, 2014) have discussed this kind of inequality in great detail and offered their respective solutions to avert it.
In his book, Stiglitz shows how, left to their own devices, markets are neither efficient nor stable and tend to accumulate money in the hands of the few rather than engender competition, producing slower growth and lower GDP.
Thomas Piketty argues that the rate of capital return in developed countries is persistently greater than the rate of economic growth, and that this will cause wealth inequality to increase in the future. To address this problem, he proposes redistribution through a global tax on wealth. He shows that inequality is not an accident but rather a feature of capitalism that can be reversed only through state intervention. He argues that unless capitalism is reformed, the very democratic order will be threatened.
Published in The Express Tribune, June 11th, 2014.
Even the aid which these rich countries so ‘generously’ offer to poor countries comes with attached strings that ensure reverse flow to the donors of, at least, 99 cents out of each aid dollar by way of various underhand conditions concealed in the fine print of aid documents. Functioning under the very same WEO, most of the multilateral aid agencies, like the World Bank and the Asian Development Bank and the lender of last resort, the International Monetary Fund (IMF), too practises policies that further deepen this inequality.
China and Brazil seem to have worked their way out of this trap and India also seems to be almost through. However, Pakistan continues to slide deeper in the quagmire. But we could still make a bid to escape if only we could take advantage of our comparative advantages like agriculture, our geographical location and our youth bulge. We are situated at the crossroads of trade routes that traverse from Casablanca in Africa to Urumqi in north-west China and from Myanmar in the Far East to Kazakhstan in Central Asia and Iran, Saudi Arabia and Turkey in the Middle East. We have continued to ignore this advantage and instead of establishing what is called the warehouse economy (trans-shipment) by importing raw material and intermediaries at very low import tariff and exporting them onwards after some quick warehouse value addition, we tried and failed miserably to buy our way into the league of exporters of finished goods with nothing but cotton as indigenous raw material and in this, too, we failed as miserably to achieve value addition of higher degrees.
Our third most distinctive advantage is our manpower. We became one of the leading manpower exporters of the world following the Middle East oil boom of the 1970s. But most of our manpower exports have remained confined to unskilled workers. The advent of knowledge-based society, which, perhaps, is no more than five years old, offers Pakistan and many other developing countries ensnared in a similar inequality trap a godsend opportunity to escape to greener pastures.
The fast-paced developments in the information and communication technologies have offered us new tools to jump start our education system. Now you don’t have to go all the way to the expensive universities like Harvard, Stanford, and MIT to acquire specialised knowledge. You can access the lectures by the top in their field the world over, sitting at home in Pakistan.
While we strategise our escape from the trap of inequality imposed by the WEO, we also need to plan to enable our nation to escape the miseries of domestic inequality, a direct consequence of following the diktat of the Washington Consensus. Two recent books, one by Joseph Stiglitz (The Price of Inequality, 2012) and the other by Thomas Piketty (Capital in the Twenty-First Century, 2014) have discussed this kind of inequality in great detail and offered their respective solutions to avert it.
In his book, Stiglitz shows how, left to their own devices, markets are neither efficient nor stable and tend to accumulate money in the hands of the few rather than engender competition, producing slower growth and lower GDP.
Thomas Piketty argues that the rate of capital return in developed countries is persistently greater than the rate of economic growth, and that this will cause wealth inequality to increase in the future. To address this problem, he proposes redistribution through a global tax on wealth. He shows that inequality is not an accident but rather a feature of capitalism that can be reversed only through state intervention. He argues that unless capitalism is reformed, the very democratic order will be threatened.
Published in The Express Tribune, June 11th, 2014.