The failed ‘trickle down’ theory

Sultan Ahmad

http://epaper.dawn.com/ArticleText.aspx?article=09_07_2007_606_003

A Second Poverty Reduction Strategy paper is under way to confront poverty directly instead of tackling it through the failed ‘trickle-down’ strategy.
In the trickle-down technique which the World Bank advocated earlier, wealth/welfare would have trickled down to the poor slowly. But the process has been found to be too slow and too little to counter the massive poverty or reduce the very large number of poor which now officially stand at 24 per cent of the population.The figure is however disputed by non-officials and many NGOs.
In many countries the failed trickling theory has only widened the gulf between the rich and the teeming millions of the poor.
The poor are too impatient to put up with poverty for too long, while the rich have become richer by earning through avenues like the stock exchanges and real estate’s rollicking transactions. All that has exasperated the poor excessively, particularly when the rich flaunt their wealth.
In Pakistan, 60 per cent of the people above the poverty line are not well off at all. The middle class is evaporating instead of expanding, thanks to excessive inflation and the exacting demands of life.
Poverty is not a matter of calorie consumption alone. The report that Pakistanis on an average consume 2350 calories a day- the highest consumer of calories in South Asia-- does not make them less poor judged by other criteria. About seventyfour per cent of the population is living below two dollars-a-day ..
Even when wages are going up-- as through official action-the living standards don't go up much because of the sustained inflation. Food inflation alone is over 10 per cent and rising all the time as prices of vegetable prices, fruit and other eatables are soaring . Wheat prices have touched the highest level at a time when the country has a bumper crop of 23.5 million tones and has a substantial exportable surplus. Profiteers and hoarders have grabbed the supplies and are manipulating the prices.
A law was to be passed to punish hoarders, profiteers and cartels/monopolies to strengthen the Monopoly Control Authority but was put off reportedly due to the elections so as not to offend the very rich.
Induction of the poor in private schools as opposed to the substandard public schools is too costly. Medical attention is very expensive as drugs are very expensive. Poverty reduction has to take all these factors into account. The larger approach to combating poverty is to provide employment to the unemployed-not necessarily through official institutions-- but through the private sector or the public private partnership, particularly in the areas of building/ rebuilding the infrastructure.
A large scale housing construction programme is what is needed for the middle income group instead of luxury building for the very rich. Steel and cement prices are shooting up along with land prices so the middle class has a real problem.
A great deal more has to be done to promote self-employment including through providing micro credit on a large scale and not with excessive caution when small amounts are involved. The setting up of more call centres has to be encouraged. There is plenty of scope in this area if the local participants are honest and fair.And of course far more has to be done to promote larger investment in farming. Farmers should be encouraged to employ modern methods to develop high yield crops so that our textile industry will have enough cotton and the sugar industry, enough sugar cane. Livestock farming should also encouraged involving a larger number of people in fisheries. Some moves are being made in that direction but they are not enough.
More banks are coming up to offer credit and promote self employment, some of them are the new Gulf banks. And now Tamasek of Singapore which is to op erate in a big way in Pakistan soon, is to come up with a self employment scheme. It wants to try in this area after its success in Indonesia, Malaysia and India. It has taken over the PICIC commercial bank.. Its success would encourage other banks.
But the large number of persons who seek micro or larger credits would also need commercial and technical advice to sell their products. Otherwise there can be a glut of substandard goods waiting desperately for buyers. Such advice should be coming forth officially. A workshop is being arranged on July 17th in Islamabad with international credit agencies and bilateral donors and other interested parties participating to draft the second poverty reduction strategy paper. It should try to avoid the pitfalls of the first paper and profit by the experience of making that paper work More meaningful scales for measuring poverty should be devised, instead of the faulty scale that we have which reduces the number of the poor statistically.
Excessive poverty has resulted in an in crease in hardcore crimes like kidnapping, murder and robbery. Corruption too is on the rise. Hence the reduction in poverty has many beneficial results while an increase in poverty has many harmful results, ultimately even swelling the ranks of the terrorists.
Foreign investment in the last financial year rose to a record $7 billion that should increase the range of economic activities and provide larger employment. Home remittances too have touched a record figure of $5 billion and if a part of that will be used for making investment that will increase the employment opportunities.
In spite of such measures there will be a large number of highly vulnerable people who need safety nets. For them, the Zakat funds should be effectively utilised instead of a part of that being used for political purposes. The Bait ul Maal funds should also be effectively used and help the truly vulnerable.
Despite of all the measures proposed, Pakistan is unlikely to achieve the UN millennium goal of the reducing poverty. Pakistan is committed to achieve that goal and it shows how difficult it is to reduce poverty if it is not confronted directly and sought to be reduced through such ineffective means as trickling down of the wealth to the poor.