Let Them Eat Cakes!
The macro-economic indicators of the nation are looking good, this has been confirmed by all credible monitoring institutions, both domestic and international. The micro-economic indicators are far more realistic because of the pell-mell rush towards a free market economy, inflationary tendencies at the ground level have put enormous pressure on the socio-economic well-being of the masses. The poor are not the only ones badly hit, so are a vast percentage of the middle class. A fair percentage of those classified as middle class on paper are rapidly joining the ranks of the poverty-stricken. While this unusual situation is not uncommon in developing countries, the rulers have a moral responsibility to take sound command decisions to ensure that the gap between the rich and the poor does not increase further as is unfortunately now the case. Whoever is privileged to be the ruler of the nation, for whatever reasons and by whatever means he or she has become the ruler, they must not only be ready to face the unpalatable truth about the miseries visiting the population, but to do something about it.
The reports filtering out of the last National Security Council (NSC) Meeting suggest that the President Gen Pervez Musharraf gave economic salvation of the poor and middle class his maximum attention to the exclusion of almost everything else. The only sop to the poor has been the decision to sell Atta (wheat flour) at a controlled price through the “Utility Stores” to bring down the price of Roti (bread) within the reach of the common man. Grand rhetoric aside, there is no real sensitivity to ameliorating (if not eliminating) the miseries of the poverty-stricken. Relief has been given only in areas specific to the rich. What good is the reducing of custom duties on luxury cars going to do for the poverty-stricken, for that matter why should those who cannot afford one square meal a day be so hot about the communications revolution? Cellular activity is in an area where taxation does not hit the realm of necessity. Even if the mobile companies were able to sell 10-15 million mobile sets in the next 5 years, will the 50-60 million of the populace that worries about their daily bread eat mobile telephones? On the other hand, a 20% built-in tax on all calls (with a bare minimum of Rs 1000 pm as the monthly average) will fetch the exchequer Rs 12 billion annually with 5 million sets activated only.
In all fairness, planners do face Catch-22 problems in coalescing the conflicting demands of a free market economy with the dire need of controlling prices from spiraling out of the reach of the common man. For developing countries, it is extremely necessary to get the right public sector-private sector mix. Some sectors of mass public need cannot be privatized, the poor have to be protected against price gouging. However private sector companies should be allowed to break the public monopoly and create healthy competition. Our planning is not done within the ambit of a comprehensive overall strategy but is short-term and media-oriented (to gain short-term popularity), looking after the welfare and comfort of the rich and comfortable. Every time the government tries to levy tax of any note on the sales of shares, strong protest from the major players and the brokers makes the government back down. The ups and downs in the share prices have little relevance to the state of the economy, it is pure and simple speculation. These “gambling dens” involve at the very maximum only about 10000-12000 players with about 10 major players (less than 0.1%) accounting for (and manipulating) 60-70% of the transactions. Every time the government tries to impose some sort of turnover tax on the stocks the gamblers protest by letting the stocks go into a free fall. Terrorised about their economic image in the world of potential investors, the government backs down. All over the world, governments make maximum revenues from lotteries and sports-based gambling, forbidden because of religious reasons why can’t we impose a reasonable withholding tax on such “gambling transactions” of the very privileged few? The Stock Market will react but how long will compulsive gamblers stay away from the action? A calculated risk must be taken to call their bluff. Pakistan’s economy is presently hostage to various “special interest groups”, the slightest hint of protest from them is enough to scuttle any proposed reforms.
While the privatization process itself is transparent and profitable, is it sustainable security-wise? Would an objective “National Security Strategy” allow the ownership of vital natural security sectors like telephone communications, oil distribution, etc pass to foreign hands in totality? Given the level of involvement of the Armed Forces in commerce and industry, should we privatize the Defence Services? Even in the crucible of capitalization, some vital items remain under state control in the US as “strategic reserves”. Let any foreign company take over an airline, a telephone or a media company in the US on the national level. Privatization being a necessary evil, the proposed privatization of cash-rich PTCL defies logic and also potentially compromises security. Similarly why privatize PSO when it has become so profitable? Security considerations aside, it is also bad economics. The foreign owners will repatriate almost all profits, leaving little for re-investment locally. Like it happened with MCB and Allied Bank, the so-called “investors” will buy PSO with its own money, deferred perhaps. It is far better to sell shares in small lots with the public sector retaining the strategic majority shareholding, the Privatization Commission has already completed this successfully in some cases, in fact brilliantly.
The government machinery claims we are the fastest growing economy after China, quoting “Bloomberg” as a definitive source. Such hyperbole is not only laughable it is wholly unnecessary, it is counter-productive as it undercuts the credibility of what is certainly a significant economic success story, at least for the rich in Pakistan, and who cares about the poor anyway? This government does not need to shoot its own economic success in the foot by overkill in rhetoric. At this moment, the Government’s stance is very much like that of Marie Antoinette (not so long before she was beheaded). When told that the poor protesting outside the Versailles Palace were doing so because they did not have bread, she gained ever-lasting recognition in history by the famous comment, “let them eat cakes!”
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