It’s all about jobs

The biggest problem faced by millions across Pakistan is unemployment. I am constantly bombarded with requests to get a son or nephew a job, preferably in a government department. Recently, a clerk at my bank in Karachi got seriously upset when I told him I couldn’t help his son.

And if a nonentity like me can get so many requests, think about politicians. Their staff must face a veritable blizzard of applications and CVs. If they want to get elected, they must find jobs for their constituents. Thus, the biggest task for our representatives is to persuade colleagues and civil servants to hire some of the three million young Pakistanis hitting the job market every year.

How can governments generate employment? The path taken by industrialised nations was to provide security, an infrastructure, and a level playing field to encourage entrepreneurship and job creation. This needs competent lawmakers, judges and civil servants.

None of these elements are present in Pakistan. So how do politicians get jobs for their constituents? Simple: they just stuff government departments and state enterprises with poorly qualified people.

This is what has happened in PIA and the Pakistan Steel Mills, to name only a couple. And at EOBI, the state pension fund for industrial workers, hundreds were hired, allegedly after paying the absconding ex-chairman, Zafar Gondal, large amounts for their appointment letters. I know about this scandal because, apart from wide media coverage, ex-colleagues I worked with during my stint at the institution have been giving me details about the shocking corruption there.

Government departments have a certain number of sanctioned posts for which annual budgets are provided; hence they cannot hire more than their allocated strength. State enterprises, however, have more flexibility and independence, and so can absorb greater numbers of jobless people who have either paid their sponsors, or are well-connected.

This is why so many politicians are against privatisation of loss-making white elephants in the public sector. Despite years of multi-billion losses, entities like PIA, Steel Mills and the railways continue receiving subsidies to simply exist. Their performance continues to deteriorate, and yet politicians go on resisting the obvious solution of privatisation.

The PPP is the biggest culprit here, as it launched its massive and thoughtless nationalisation spree in the 1970s when even small enterprises like rice-husking mills were placed under state control. The party now opposes privatisation on the grounds that many workers would be thrown out of work.

So? It is not the task of state enterprises to serve as employment agencies. They are supposed to provide services or goods that the private sector cannot. The idea of state intervention is to invest in areas where entrepreneurs lack capital, know-how or the desire to enter.

Thus, when the government established PIA, no businessman at the time had the money or the skills needed to set up and run a modern airline. But once it was a going concern, the state ought to have pulled out and sold at a profit.

The Steel Mills are a similar example. In the 1970s, this was a significant investment that introduced a wide range of engineering and technical skills. But by filling it with generals and bureaucrats, successive governments ensured that it could not remain competitive. Its privatisation under Musharraf was blocked by the ex-chief justice on flimsy grounds, and since then, it has swallowed hundreds of billions.

The late, unlamented Soviet Union is an illustration of the fate of state capitalism. Bureaucrats would set unrealistic targets, and managers would try to meet them by producing shoddy goods. China’s rapid growth is often cited by the left as an example of successful state controls. But the Chinese economy is being driven by the private sector, while many state enterprises are a drag on development.

Nawaz Sharif is the most pro-business prime minister we have had, and he has begun the task of selling off public-sector enterprises. I am no admirer of the capitalist model, but am realistic enough to see that it is far more efficient than the state when it comes to running businesses.

When an entrepreneur is inefficient or just unlucky, he has to bear the losses, rather than passing them on to taxpayers. Currently, the national exchequer has to pay hundreds of billions in subsidies to keep its loss-making enterprises afloat. This money could have been far better utilised for education and health.

Banks, too, lend to failing enterprises because they are backed by the state, and so loans are considered safe. This money could have gone to the private sector where more jobs could have been created.

The reality is that apart from providing a few thousand people with jobs, there is little purpose served by the state owning and operating business enterprises. We would be better off if these employees are paid at home.

irfanhusain@gmail.com