Poverty is not the problem

The Advisory Panel of Economists, ostensibly a body of experts in their field, seemed to have misdiagnosed the nature of poverty in Pakistan, treating it more like an acute problem rather than a chronic malaise.

In the report submitted to the Planning Commission on Saturday, the panel recommended that the government distribute 2.6 million acres of government-owned land to landless peasants. (That’s right, they still use that word.) In essence, the panel wants to eradicate poverty by asking a cash-strapped government to simply hand out money and property to the poor.

This mentality is wrong on several levels. First, it assumes that poverty is the disease. This is a serious misdiagnosis. Poverty is only the most glaring symptom of what is wrong with the political economy of Pakistan. Hence, any efforts that simply seek to eradicate poverty without addressing why it arises in the first place will be a colossally expensive boondoggle that will not achieve any long-term reduction in poverty levels.

It is disappointing that experts in the field have not been candid enough to tell the government so. If the government were to follow the advice of the panel, here is what would happen.

Several landless farmers would get a few acres of land to work on. Unfortunately, agriculture does not yield substantial returns without substantial investment, which in turn in not feasible on the small tracts of land that these farmers will be handed out.

They will then turn to local money-lenders to borrow money to begin cultivating the land that has been given to them and in turn will begin earning marginally above a subsistence level of income. One might argue that this is better than what they would normally be able to achieve on their own.

This is true but unfortunately these people will not become drivers of longterm economic growth but rather simply no longer poor in the abstract, statistical sense of the word. The government will have statistically reduced the number of poor people by handing out property worth billions of rupees but will not have created a rural middle class.

More importantly, it will do nothing to allow poor people to work their own way out of poverty without having to wait for a government handout.

It is that inequality of opportunity that is one of the primary underlying problems, along with inadequate documentation, insufficient access to financial intermediaries, etc. But a solution to those will require a broad-based approach that will yield results over a time-frame well beyond the attention span of most politicians.