Pakistan’s casino economy: a blueprint for inequality

[Chauvinist]

Pakistan failed to achieve any of the targets set out in the UN Millennium Development Goals (MDGs) from 2000 to 2015. An analysis of the factors responsible for its abject failure does not bode well for the prospects of any degree of success with respect to the newly adopted 17 Sustainable Development Goals (SDGs) One of the 17 goals, SDG 10 is focused on achieving income equality globally. And although, strides have been made to lift people out of poverty, much inequality persists. Hence, SDG 10 focusing on reducing inequalities by 2030 underscores the need for policies ‘to achieve and sustain income growth of the bottom 40pc of the population at a rate higher than the national average’ among other targets — all focused on inclusive economic growth.

While the reason for Pakistan’s non-performance with the MDGs can be traced to the political economy construct of society, the government has their work cut out if they want to meet the SDGs. There is a tiny upper class with bloated bank balances and a mass of poor with, literally, empty stomachs. The middle-class is effectively non-existent as a political force. The fact is that there are now two Pakistan’s: one of the elite, the ashraafia, and the other of the common people, the awaam. The ‘politically-in-control’ elite are insensitive to the plight of the ill-fed, ill-housed and ill-educated masses. This has also led to an apartheid-like situation with de facto separate housing, modes of commuting, and education and health facilities. Therefore, inequality is ingrained in the structure of the economy. The composition of growth is such that it tends to widen inequality: every one rupee expansion in national income places 36 paisas in the pockets of the rich and 3 paisas in the pockets of the poor. The tax regime is regressive, with 80pc of tax revenues derived from indirect taxes, the richest 10pc of the population paying 10pc of their income in indirect taxes, and the poorest 10pc paying 16pc, according to the Social Policy Development Centre’s (SPDC) latest annual report. Resultantly, the income share of the richest 20pc of the population increased by 12pc — from 43.5pc in 1987-88 to 48.7pc in 2010-11. And that of the poorest 20pc has shrunk by 21pc from 8.8pc to 7.0pc over the same period as noted in an SPDC publication.

There have been continuous attempts to pursue high growth as a vehicle for poverty alleviation, but no attempts have been made to address inequality; the sole exception being during 1972 to 1977, whence egalitarianism was pursued as explicit state policy. The lack of attention to inequality exists despite empirical analysis showing that an increase in GDP by one percentage point reduces poverty by 3.6pc, whereas a one percentage point decrease in inequality reduces poverty by 8.5pc.

Inequality is not a technical variable in economic formulation that can be dealt with by policy alterations at the margin, improving functioning of markets, or ‘safety nets’ appendages. It is a product of inherited and existing unequal distribution of assets. This inequality is starkly evident in ownership of rural land, with one percent of farms covering one quarter of agricultural land and 62pc of farms comprising five acres or less. For the country as a whole, 48pc of rural households are landless, with the highest incidence of landlessness at 62pc in Sindh. Other areas of high land ownership concentration are south Punjab and Nasirabad division of Balochistan.

In urban areas, private sector housing provision has created islands of luxury, while the state’s reluctance to provide low and middle-income housing has pushed over half the urban population into shanty towns. The comparative state of housing represents a graphic profile of inequality in this country. At one end, private sector property developers are advertising housing schemes with swimming pools, horse riding tracks and golf courses; and at the other end, there are families of 20 crammed into a 10x10 feet room.

Asset ownership and control represents the ‘stock’ factor in inequality. State policy represents the ‘flow’ factor; that is the manner in which the state’s social and economic policies generate and distribute income for and between the various income groups. Post-1980s, Pakistan’s macroeconomic and fiscal policy framework has moved to a position where it is manifestly anti-commodity producing sectors, particularly manufacturing. It now promotes speculative gains from stock markets, land markets and commodity markets — without generating production of goods, exportable surpluses, or jobs for people at large.

The new jagirdars of the economy and politics are no longer the traditional landowners and industrialists, but stock market brokers, property developers, and grain and fuel importers and traders. Pakistan is becoming a casino economy, where a wily few siphon off money from the pockets of the unsuspecting populace. This is a recipe for more inequality and more poverty.

Inequality is a global problem, fuelled during the last half century by the neo-liberal economic philosophy. Although the UN has included reduction of inequality as one of the goals, it continues to recommend a line of attack – “improving the regulation and monitoring of financial markets and institutions, encouraging development assistance, and foreign direct investment” – that is rooted in the failed neo-liberal market paradigm.

Markets are not neutral vis-à-vis income groups and regions. They respond to purchasing power, not to need; thereby serving the rich. The distribution of income and wealth is a product of political power configuration between different sections of the population and between different regions. Bridging the structural divide between the Pakistan of the ashraafia and the Pakistan of the awaam is essential to achieving any of the goals of social development.

http://www.dawn.com/news/1286226/pakistans-casino-economy-a-blueprint-for-inequality

 

[VCheng]

"In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of." - Confucius.

 

[Articulate]

"In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of." - Confucius.

So true.

Though India changed from socialistic society to capitalistic in 1991 (launch of India's economic reforms) - In India till 2000's, the words 'profit' were considered dirty words by almost everyone.
And those who were wealthy looked down upon, it was considered shameful for Govt officials to be seen along with Industrialists.

It was considered far more honourable to have a job than have a business.

Fortunately in the last 15 years there has been a tremendous change in public attitudes. Now the society is divided, half of it thinks its a good thing to make profits, run your own businesses and earn a good life, the other half still has the old notions about money.

Our Govt is certainly promoting it now, launching and more importantly publicizing extensively its total support to entrepreneurs and new businesses.

I am hoping that the coming 15 years changes the attitudes of the remaining 50% as well.

 

[wiseone2]

So true.

Though India changed from socialistic society to capitalistic in 1991 (launch of India's economic reforms) - In India till 2000's, the words 'profit' were considered dirty words by almost everyone.
And those who were wealthy looked down upon, it was considered shameful for Govt officials to be seen along with Industrialists.

It was considered far more honourable to have a job than have a business.

Fortunately in the last 15 years there has been a tremendous change in public attitudes. Now the society is divided, half of it thinks its a good thing to make profits, run your own businesses and earn a good life, the other half still has the old notions about money.

Our Govt is certainly promoting it now, launching and more importantly publicizing extensively its total support to entrepreneurs and new businesses.

I am hoping that the coming 15 years changes the attitudes of the remaining 50% as well.

there are winners and losers from the monetary standpoint

the only beef I have is that ultra-rich benefit from political connections
it is true both in India and Pakistan

 

[Articulate]

there are winners and losers from the monetary standpoint

the only beef I have is that ultra-rich benefit from political connections
it is true both in India and Pakistan

That is called crony capitalism. That must be reduced.

And that is only reduced based on clear and transparent laws and workings. Like how recently Govt of India changed coal mine allocation from discretionary allocation to a clear, online, auction.

This is what removes crony capitalism.

In my opinion, the only thing Congress does is give crony socialism and crony capitalism. They are against any rule based endeavour which has been our bane.

 

[wiseone2]

That is called crony capitalism. That must be reduced.

And that is only reduced based on clear and transparent laws and workings. Like how recently Govt of India changed coal mine allocation from discretionary allocation to a clear, online, auction.

This is what removes crony capitalism.

In my opinion, the only thing Congress does is give crony socialism and crony capitalism. They are against any rule based endeavour which has been our bane.

i cannot blame the congress per se. other political parties were happy to play along

 

[SBD-3]

The article seems more philosophical than economic. Fact one:You can only reduce inequality but cannot achieve income equality until you force it for social justice. But this will result in economic injustice and The society will ultimately turn into a transfer payments society I.e. Those who earn more will stop it knowing that their extra earnings will be taken away. Those who earn less will stop making efforts to earn more since they'd know that they will always be equal off to others through administrative intervention of the government. So the fiscal and economic structure will collapse I.e. incentive to earn more and invest more will be replaced with incentive to not work.
Fact 2: Pakistan has a thriving middle class. If Pakistan had a slim elite class and all others being poor, we would only have some mentions and slums in urban areas. The rapid urbanization, unprecedented housing demand. Record retail spend, record tourist counts on Eid suggest that there is a healthy number of middle class in the country now. Afterall these are not the elite who shop in middle-middle upper tier shops and go to northern areas. Elites go to Europe/Dubai/US to spend time and money.
Fact 3: If income tax regime is indeed regressive then it's poor who should have been forming off shore companies not the rich. It's an unfair argument that rich should pay more. It's just like penalizing the ability to earn more which may not necessarily be coming from unjust practices. Progressive taxation has led to rich having the least disposal income to gross income ratio, meaning taxes are more punitive for them than the rest. So you see rich all across the globe finding ways around taxation by forming off-shore assets. To adress this we need a proportional taxation with a crackdown on the black economy (which is being driven by none other than the middle/lower income class). Everyone should pay equal proportion of their income as tax.

 

[Faiez]

Fact 3: If income tax regime is indeed regressive then it's poor who should have been forming off shore companies not the rich. It's an unfair argument that rich should pay more. It's just like penalizing the ability to earn more which may not necessarily be coming from unjust practices. Progressive taxation has led to rich having the least disposal income to gross income ratio, meaning taxes are more punitive for them than the rest. So you see rich all across the globe finding ways around taxation by forming off-shore assets. To adress this we need a proportional taxation with a crackdown on the black economy (which is being driven by none other than the middle/lower income class). Everyone should pay equal proportion of their income as tax.

Absolutely agreed.

Not only should there be a flat percentage (proportional tax), taxation should be minimal.

Especially in a developing country such as Pakistan, where a government is elected by a mass that is almost completely illiterate. Under such circumstances, the people can never possibly put in place a government that not only has the skills to effectively allocate resources but also does that in an honest way. How ever, even if that IS possible (that the masses are highly educated as in many western countries), government enterprises can never achieve the same competitiveness and efficiency that the private sector can and does (it has to, or businesses go bust).

The socialist model is a complete pipe dream.

BTW:
For people who think taxes in Pakistan are low:

Corporate Taxes : 25% for companies below Rs.250m revenue, 34% for companies with more than Rs.250m revenue.
And this law makes absolutely no sense. And btw, these are amongst the HIGHEST IN THE WORLD and I know for a fact highest amongst developing nations.

Income taxes : Highest tax bracket at 35% for businesses, but 30% for salaried individuals. Again makes no sense. As if making money doing a business is somehow easier than making money working for someone else.

Capital Gains Tax : The fact that it EXISTS at all is a complete injustice. It's a double tax, any half decent accountant will tell you that !

Sales Tax : 17% basic, 2% further for unregistered businesses. This is an extremely high tax rate, no matter what. No wonder companies commonly dodge sales taxes. If they start collected this tax strictly, not many businesses will remain feasible in Pakistan. And then you have the provincial taxes with similar rates (nawa shosha...). And then there's the useless zero rating on exports, just lol, enough said.

Customs duties : why are they restricting trade !!!??? why is trade their enemy !!!???

EDIT : Forgot to mention heavy taxes on luxury goods(200%+ duties on car), shutter down policy to save power (so where the hell do we go to spend our money then when shops close so early??), "two dish policy" (so I've made a little bit of money and want to spend on a wedding, nope can't do and for no real reason).

In short, if you are someone whose managed to make a little bit of money working hard and smart in Pakistan, you can't buy a decent car(it's more than thrice the price abroad), can't go anywhere to shop(shops are forcibly closed) and can't even have a good decent function. So what do you do? You keep your business here, but shift family abroad and spend profits there.

And these are just the things I can think of right now, there's probably a lot more...

 

[problemfreeleader]

Pakistan failed to achieve any of the targets set out in the UN Millennium Development Goals (MDGs) from 2000 to 2015. An analysis of the factors responsible for its abject failure does not bode well for the prospects of any degree of success with respect to the newly adopted 17 Sustainable Development Goals (SDGs) One of the 17 goals, SDG 10 is focused on achieving income equality globally. And although, strides have been made to lift people out of poverty, much inequality persists. Hence, SDG 10 focusing on reducing inequalities by 2030 underscores the need for policies ‘to achieve and sustain income growth of the bottom 40pc of the population at a rate higher than the national average’ among other targets — all focused on inclusive economic growth.

While the reason for Pakistan’s non-performance with the MDGs can be traced to the political economy construct of society, the government has their work cut out if they want to meet the SDGs. There is a tiny upper class with bloated bank balances and a mass of poor with, literally, empty stomachs. The middle-class is effectively non-existent as a political force. The fact is that there are now two Pakistan’s: one of the elite, the ashraafia, and the other of the common people, the awaam. The ‘politically-in-control’ elite are insensitive to the plight of the ill-fed, ill-housed and ill-educated masses. This has also led to an apartheid-like situation with de facto separate housing, modes of commuting, and education and health facilities. Therefore, inequality is ingrained in the structure of the economy. The composition of growth is such that it tends to widen inequality: every one rupee expansion in national income places 36 paisas in the pockets of the rich and 3 paisas in the pockets of the poor. The tax regime is regressive, with 80pc of tax revenues derived from indirect taxes, the richest 10pc of the population paying 10pc of their income in indirect taxes, and the poorest 10pc paying 16pc, according to the Social Policy Development Centre’s (SPDC) latest annual report. Resultantly, the income share of the richest 20pc of the population increased by 12pc — from 43.5pc in 1987-88 to 48.7pc in 2010-11. And that of the poorest 20pc has shrunk by 21pc from 8.8pc to 7.0pc over the same period as noted in an SPDC publication.

There have been continuous attempts to pursue high growth as a vehicle for poverty alleviation, but no attempts have been made to address inequality; the sole exception being during 1972 to 1977, whence egalitarianism was pursued as explicit state policy. The lack of attention to inequality exists despite empirical analysis showing that an increase in GDP by one percentage point reduces poverty by 3.6pc, whereas a one percentage point decrease in inequality reduces poverty by 8.5pc.

Inequality is not a technical variable in economic formulation that can be dealt with by policy alterations at the margin, improving functioning of markets, or ‘safety nets’ appendages. It is a product of inherited and existing unequal distribution of assets. This inequality is starkly evident in ownership of rural land, with one percent of farms covering one quarter of agricultural land and 62pc of farms comprising five acres or less. For the country as a whole, 48pc of rural households are landless, with the highest incidence of landlessness at 62pc in Sindh. Other areas of high land ownership concentration are south Punjab and Nasirabad division of Balochistan.

In urban areas, private sector housing provision has created islands of luxury, while the state’s reluctance to provide low and middle-income housing has pushed over half the urban population into shanty towns. The comparative state of housing represents a graphic profile of inequality in this country. At one end, private sector property developers are advertising housing schemes with swimming pools, horse riding tracks and golf courses; and at the other end, there are families of 20 crammed into a 10x10 feet room.

Asset ownership and control represents the ‘stock’ factor in inequality. State policy represents the ‘flow’ factor; that is the manner in which the state’s social and economic policies generate and distribute income for and between the various income groups. Post-1980s, Pakistan’s macroeconomic and fiscal policy framework has moved to a position where it is manifestly anti-commodity producing sectors, particularly manufacturing. It now promotes speculative gains from stock markets, land markets and commodity markets — without generating production of goods, exportable surpluses, or jobs for people at large.

The new jagirdars of the economy and politics are no longer the traditional landowners and industrialists, but stock market brokers, property developers, and grain and fuel importers and traders. Pakistan is becoming a casino economy, where a wily few siphon off money from the pockets of the unsuspecting populace. This is a recipe for more inequality and more poverty.

Inequality is a global problem, fuelled during the last half century by the neo-liberal economic philosophy. Although the UN has included reduction of inequality as one of the goals, it continues to recommend a line of attack – “improving the regulation and monitoring of financial markets and institutions, encouraging development assistance, and foreign direct investment” – that is rooted in the failed neo-liberal market paradigm.

Markets are not neutral vis-à-vis income groups and regions. They respond to purchasing power, not to need; thereby serving the rich. The distribution of income and wealth is a product of political power configuration between different sections of the population and between different regions. Bridging the structural divide between the Pakistan of the ashraafia and the Pakistan of the awaam is essential to achieving any of the goals of social development.

http://www.dawn.com/news/1286226/pakistans-casino-economy-a-blueprint-for-inequality

BAN INDIAN MOVIES CHANNELS COMMERCIALS DISH TV GIVE THEM WHAT THEY DESERVE BECAUSE SINCE DAY ONE INDIA ROOT CAUSE OF CREATING BLUNDERS FOR PAKISTAN,Pakistan need changes in corrupt politicians foreign policies ,need only Patriotic media, icbm, naval war ship, missile shield, also nuclear sub marines, these crook cunning wicked modi supporter hindu devils root cause of all criminal activities in asia need a life long lesson pthan kot mumbai blast uri attack all self made propagandas just support all that organisations which need freedom from india kill modi if he dies the whole asia will be in peace all goons criminals will die which india spread on daily bases in neighbouring countries gujrat butcher u can never trust back stabber hindus till they are alive, so if they ever gonna target pak so pak must target all three countries so people remember them in history,FINISH MQM COMPLETELY, india israel afghanistan common interests against pak because today all india is doing on the signals of usa who don't see atrocities of india in balochistan tribal areas of pak kashmir srilanka burma but see even very minor things of pak even not did clear discrimination must be stopped nawaz sharif can do several speeches to cover his thefts of panama but no speech on LOC issues indian raw criminals and constantly shouting there could some thing happen in imran khan gatherings all game of noon party to harm army and imran GOD bless Pakistan.