Advocacy for inclusive growth

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By Dr Abdul Saboor

Economic growth has always been dubbed as good news both for economists and politicians. It may be regarded as a necessary condition for poverty reduction provided that national statistics are not fabricated and manipulated. But, most of the juggling with facts and figures is merely meant for setting the estimates of economic growth for ceremonial purposes to get the attraction of voters and satisfaction of donors. How and from where the economic growth is being generated and who is enjoying the major chunk of this fruit? These fundamental questions are hardly touched. Policy makers least bother for whether the growth is being trickled down to the poor or not. Historically, we have witnessed good or bad growth scenarios during the last seven decades. Most of the time, even a reasonable economic growth, has not been fairly pro-poor partly due to skewed pattern of resources particularly land and partly due to lack of distributive policies.

The inclusive growth is both an outcome and a process. It is cognizant to the seminal philosophy of Amartya Sen, the Noble Laureate. It is actually a policy response to Sen’s capability and functionality ideas. When the instruments of human capabilities and institutional functionalities are missing in the system, the fruit of growth is consolidated in few hands. Inclusive growth also refers to a typical growth process that provides equality of opportunity both in terms of employment and access to essential services like that of education and health. Sustainability acts as a key denominator of this kind of growth where everyone is to participate in the growth process and share the benefits equitably. It can be actualized by including the deprived masses through creating a level playing field and provision of equitable opportunities.

Dr. Mahboob-ul-Haq, the pioneer of Human Development Index (HDI) and the staunch advocate of inclusive growth, in his famous address of 1968 in Karachi narrated that we have been told to take care of Gross Domestic Product (GDP) it will take care of poverty but it has been realized with the passage of time that we should take care of the poor, it will automatically take care of GDP. This intellectual wisdom has never been honored in the policy making of Pakistan. Resultantly, we see our HDI rank at 147 in spite of being 26th largest economy in the world. This reflects the fact that our performance on important social indicators is significantly below the level of our income. A huge proportion of public goods particularly in the health and education sectors are not reaching to the poor. Moreover, they do not have access to opportunities neither of employment nor of credit. Very poor farmers have to play with a very poor technology, extension services and other expensive inputs.

There is always a silver lining in dark clouds. Present government is fortunate enough that it still has the intellectual legacy of Dr Haq in the shape of Dr Sohail Jahangir Malik, a top class Development Economist who remained rigorously involved in public policy formulation at national and provincial levels with a very patriotic and blunt voice. This weekend, on voluntarily basis, he launched a national social entrepreneurship project (UMEED-Hope) to kick start inclusive and sustainable growth. In Islamabad Club, there was a rich gathering of top notch economists, academicians, sober legislators, journalists, serious minded policy makers, committed bureaucrats and a good chunk of Pakistanis who have served in high echelon at national and international levels. In this intellectual session, it was clearly stated that urgency is required for taking the ownership of the economy without leaving everything to the government where there is serious issue of individual and institutional capacity.

A commitment beyond love for Pakistan is required to address the issue of non-inclusive growth. According to him, poor analysis backed by poor data and lack of change management are leading us nowhere but anti-poor growth. There are serious information asymmetries along with huge elite capture of public institutes and state organs. Bureaucracy is not truly backed by technocracy. The difference between right and wrong does not exist at the level of state machinery. He added that the whole state system has become hierarchical where there is severe deterioration on ethical norms. It would be criminal not thinking on rational lines as growth and revenue targets of the budget are always missed. Decency and dignity are the key attributes of a public man which we need to profess for making a rapid inclusive growth possible. There is good number of listeners and thinkers in the ruling party who can pay heed to such wise voices.

Empirical evidences across countries indicate that growth is a pre-requisite for poverty alleviation. But this process of poverty reduction is contained when there is income inequality. Two results of such studies are quite apparent. One is that the income and wealth inequality are the stumbling blocks in the transmission of economic growth to the poor. The dream of inclusive growth remains immaterialized. Secondly, economic growth does not remain stable and durable amidst unequal distribution of income. The dream of sustainable growth remains immaterialized. Ownership of resources is neither equal across population nor productive and efficient across their employments. Besides natural and initial level of inequality, there are deep rooted discriminations in the economic, social and political systems that further weaken the likelihood of inclusive growth. Ironically, the access to economic opportunity has to be achieved through vested interest groups. Access to education, credit, health, land, and public services is not of identical nature. Political economy is oddly operated in the whole system.

There are a variety of drivers including cultural, economic, geographical, political and social for making the growth inclusive and pro-poor in Pakistan. There is huge challenge of undocumented economy which should be formalized through appropriate use of technology. This would strengthen the resource as well as tax base of the economy. As per World Development Report (2019), there is changing pattern of workers and firms due to advancement in technology. Under such changing dynamics of the labor markets and allied businesses, there is lifelong learning required to be started at the childhood level. In that respect, three skills are important which include advanced cognitive skill, socio-behavioral skill and a combination of such skills with ample adaptability. Higher the emphasis on these skills in early stages of life would divert the direction of growth to the inclusive trajectory.

For further ensuring inclusive growth, it is not only land reforms but some rigorous agrarian reforms which are required in rural areas in such a way as the distribution system is fine-tuned through institutional development and pro-poor regulatory arrangements. Agriculture tax can be applied initially to big and “absentee landlords” by organizing a computerized land accounts and revenue system. Similarly, in urban regions, a progressive taxation policy can be implemented initially for manufacturing and corporate sectors at least for first couple of years. This should be coupled with continuous decrease in proportion of indirect taxes. Slow and steady shift of economic resources from public to private sector would give a boost to deprived segments of population. It is direly needed to avoid discriminatory wage policy in some public organizations. Gender discrimination in terms of access to economic opportunities can also be controlled through special incentive mechanism. Structural changes in the economy are equally good if these are focused to deprived masses.

Entrepreneurial orientation of youth in various stages of their education is the stamp of inclusive economic growth. Entrepreneurial ability of women should be enhanced both for the rural and urban poor. Skill development centers and vocational training institutes should be set up in collaboration of private sector through the jargon of corporate social responsibility. The targeted provision of social safety nets should be practiced for extremely deprived masses. One should not forget the formal installation of charity software in our social protection system. Switching on the Zaqat button with full zeal can marvelously be a pro-poor instrument. For that matter Pakistan’s growth and development strategies need to be revisited and rationalized. Major structural reforms are required to improve tech-based labor productivity and efficiency particularly in public sectors of the economy. Creating trade buoyancy may be the leading driver of inclusive growth in the years to come.

Last but not the least, the government may kick start from the growth philosophies of Dr. Haq and the link minded development thinkers and top notch intellectuals by allowing them freedom to offer their policy products. They are neither asking any recognition nor any kind of monetary benefits. Such a free intellectual resource is a blessing for the government if our busy politicians, bureaucrats and technocrats honor them by offering time and by listening their true voices of wisdom. Welcoming such a legacy in public policy making would itself be a step towards inclusive growth. Let us respect them who are ready to surrender everything for the welfare of Pakistan. They are true patriots whose deep love for the country is beyond simple love.

Dr Abdul Saboor is professor of economics and Dean of Faculty of Social Sciences at PMAS Arid Agriculture University, Rawalpindi