Elitist economy keeps Pakistan poor

LAHORE: Pakistan remains poor, because neither are we a capitalist economy nor a socialist, but an elitist economy where interests of the elite are protected by the successive governments.

The public at large distrusts the government that intervenes heavily and regulates the businesses instead of providing a level playing field. This is a dilemma of all poor countries of the world.

In Pakistan, we protect inefficient manufacturers in the name of protecting the local industry. Our economy is built around a system where huge discretionary powers, corruption and exemptions provide advantage to the influential.

Almost all countries protect their nascent domestic industrial sectors for a period of 5-7 years; thereafter these sectors are required to compete with other global producers. In Pakistan, the domestic industry gets lifelong protection. Polyester fibre manufacturers and car makers have been enjoying this protection for more than two decades.

Instead of technology-based check and balances, the state of Pakistan strangulates many industries through over regulations. Pharmaceutical industry is one example in this regard that has made this sector the most backward in the region.

In 1960s, the pharmaceutical industry in Pakistan was the most modern in this region. For almost 15 years, the prices of pharmaceutical products have been frozen, resulting in discontinuation of many essential drugs. Now, whenever the government deregulates this sector, the prices frozen for 15 years would sky rocket. The blame would be put on capitalism.

The misery of the poor is not the consequence of unrestrained capitalism, but of a capitalism that has been restrained in just the wrong way. In restrained capitalism, the production is allowed in such a way that leaves the vast majority of the labour force outside state-control. Those working outside the documented economy, far outstrip workers in the documented sector. Of over 59 million workers in the country, hardly two million are registered in the social security by the employers.

The remaining are either self-employed or work in the unregulated sectors having no social safety networks. The numbers are astounding. In contrast, only one in nine people in the United States are self-employed, the proportion in India is 19 out of 20.

When Karl Marx advocated the socialist-case, the production at that time was an accumulation of buildings and equipment owned by the capitalist and operated mechanically by fungible workers. The situation in the 21st century is different where there is a coordinated network of people that possess different types of Das Human-Kapital. In the developed economies, operating on the principle of capitalism, almost everyone has been transformed into a wage labourer, but it also lifted them out of poverty and made them more prosperous. This has not happened in Pakistan, where majority of the wage workers live in poverty, despite extreme hard work.

Father of open market economy, Adam Smith had warned that open market economy would be barbarous if not accompanied with proper regulation. Proper regulation does not mean over-regulation or no regulation, as is happening in Pakistan. The mentality of profit at any price, with no concern for social exclusion or the destruction of nature, along with a crude and naive trust in the goodness of those wielding economic power is what we are seeing in our country.

In market economy, we are obliged to be concerned about the needs of others. Our livelihood depends on the acceptance of our goods and services at a price determined by the market forces and not our greed. Open market economy is all about free and fair competition where the elite and the poor enjoy a level playing field.