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An unequal country

One of the world’s great achievements of the past decades has been the significant fall in global poverty. Between 1990 and 2012, the proportion of humanity living under $1.90 a day fell from 37 per cent to only 13pc, driven in large part by the efforts of China. South Asia also witnessed a major decline in poverty, from 51pc to 19pc, with unequal progress across countries. Despite this tremendous achievement, income inequality has increased both within and across countries. Today, high-income countries with 16pc of the world’s population represent 55pc of income while low-income countries with 72pc of the population account just over 1pc. Inequality matters for moral reasons; it also matters because of its implications for growth and development outcomes. Persi­stent inequality hampers economic growth, impedes poverty reduction, fuels crime, squa­n­ders talent and human potential, and stifles social mobility. An unequal society is not only unfair, it is less prosperous and stable. Escaping this inequality trap is the 21st century’s most critical challenge that lies at the heart of the global agenda which has been enshrined in the Sustainable Development Goals (SDGs) that has two goals, including the first SDG on ending poverty in all its forms; and the 10th SDG on leaving no one behind.

In Pakistan, the challenge of inequality is equally daunting. While consumption-based poverty dropped from 57.9pc to 29.5pc between 1998-1999 and 2013-2014 and multidimensional poverty — which includes health, education and living standards — fell from 55.2pc to 38.8pc between 2004-2005 and 2014-2015, inequality has actually grown. In 1987-1988, the Gini coefficient, which measures income inequality, was 0.35; by 2013-14 it had risen to 0.41. Pakistan’s richest 20pc now consume seven times more than the poorest 20pc. Regional disparities are stark. Regional disparities are stark and slow down growth and development. The government’s Multidimensional Poverty Index released recently found that 54.6pc of rural Pakistanis experienced poverty compared to 9.3pc of those in cities. Multidimensional poverty stands at 31.5pc in Punjab but rises to 73.7pc in Fata. While multidimensional poverty in Islamabad, Lahore, Karachi, and Rawalpindi is below 10pc it exceeds 90pc in Killa Abdullah, Harnai, Barkhan, Sherani Kohistan. Hence, some Pakistani districts are as well-off as any developed country while others are on par with the poorest in sub-Saharan Africa.

Inequality’s insidious effects pervades families. As women are mostly engaged in unpaid family work, their very real economic contribution is unaccounted for. Women own less than 3pc of land which impacts on their economic empowerment. Their participation in the labour force is a mere 18pc compared to 71pc for men. This is the lowest in South Asia after Afghanistan. Back in 1968 the renowned economist Dr Mahbub ul Haq identified 22 families which then controlled two-thirds of Pakistan’s industrial assets. In a 1973 article in The Times, Dr Haq called for reforming Pakistan’s economic, social and political institutions to help prevent the concentration of such immense wealth amongst the few.

Although the landscape has changed considerably since then, his recommendations remain painfully valid. Pakistan’s institutions, incentives, laws and norms continue to conspire to create rent for the rich and burdens for the poor. These include tax exemptions on select sectors and indirect taxes which disproportionally affect the poor. The richest districts in Pakistan receive, on average, five times more public funds than the poorest, further aggravating inequality. The high cost of running for elections systematically excludes poor Pakistanis from political institutions. Discri­mination on the basis of gender, economic status, religion and social identity restr­icts upward mobility.

To date, Pakistan’s response to inequality has been superficial, focusing on symptoms rather than the root causes. As a result, inequality has persisted and even grown. To tackle inequality seriously requires a holistic approach, addressing both its structural and distributional dimensions. Key institutions need to be reformed, and fiscal, monetary and other policies made equitable. Regional inequality may be addressed by investing adequate public funds in lagging regions and districts, and particularly in rural areas. Governments should use the Multidime­nsional Poverty Index to inform allocations, especially under their Provincial Finance Com­m­i­ssion awards, which are long overdue. Gender responsive budgeting can help mainstream women’s priorities in budgeting processes.

Most important, however, is to bring the debate on inequality back into the public realm. Politicians, bureaucrats, civil society, the media, many development partners and the wider public all continue to ignore the cancer of inequality on Pakistani society and economy. It is time to recognise that this inequality is not inevitable. Today, nearly 50 years after Dr Haq wrote his seminal diagnosis, it is time to act so Pakistan can escape its inequality trap and create the just, stable and dynamic society envisaged by its founders.

The writer is the outgoing country director for UNDP in Pakistan.

Marc-andre Franche, "An unequal country," Dawn. 2016-08-09.
Keywords: Social sciences , Social aspects , Social issues , Economic aspects , Economic needs , Social mobility , Income inequality , Indirect taxes , Monetary policy , Society-Pakistan , Humanity , Politicians , Poverty , Dr. Mahbub ul Haq , Pakistan , Afghanistan