The poverty debate
FOR the past several years, a debate has raged in the country regarding the ‘true’ number of people deemed to be below the poverty line.
While a healthy debate has been going on for a long time on the methodology used to assess the size of the poor population, including on the relevance of a nutrition-based approach (as opposed to more multi-dimensional criteria) and on the actual demarcation of the poverty line, of recent the discourse has taken a somewhat less-pleasant and non-academic turn.
The controversy revolves around the last official headcount poverty ratio estimate available, for the year 2007-08. Showing a dramatic decline to 17.2 per cent, from a peak of 35 per cent less than a decade earlier, the estimate produced in the Musharraf-era has been dogged by the same credibility issues that have clouded the reliability of much of the economic data pertaining to that period. As such, apart from the Planning Commission, leading poverty specialists in the country (such as Dr Akmal Hussain and Dr Sohail Jahangir Malik), have dismissed the poverty estimate as flawed and misleading.
This criticism has been rejected by the person responsible for overseeing much of the economic data for the Musharraf
period, the economic adviser between 1998 and 2008, Dr Ashfaque Hasan Khan. Dr Khan believes that since the World Bank has ‘validated’ the poverty estimate, it should be accepted. Ironically, Dr Khan as economic adviser had himself rejected the World Bank’s poverty assessment in the early 2000s — going to the extent of accusing the World Bank’s lead specialist on poverty at the time, Tara Vishwanath (of Indian-origin), of deliberately acting against Pakistan’s interests by reporting a higher poverty estimate under Gen Musharraf!
Unfortunate ironies apart, what are the specific reservations regarding the poverty estimate of 2007-08. These can be summarised as:
— No specific drivers of such a large purported poverty reduction are readily recognisable. While GDP growth was indeed reported to be very high for a three-year period (fiscal years 2004, 2005 and 2007), it is unprecedented for such a large poverty reduction to occur over such a small period — quite apart from the serious questions raised about the quality of the growth statistics.
— Doubts have also been raised for several other good reasons. Wage employment rose nominally during the period in question, given the capital-intensity of the growth (forcing the government to add ‘unpaid family help’ to the labour data in order to boost employment figures). In addition, real wages remained static (and quite possibly declined). In sum, it is difficult to square the data with the poverty estimate.
— In fact, at around the same time, an inter-agency assessment of the United Nations estimated that at least 77 million Pakistanis were food insecure (roughly 48 per cent of the population). Given that the assessment methodology used approximated the same core criterion used in the official poverty estimate, such a large divergence between the two is hard to explain.
In the light of such weak foundations, the halving of poverty in Pakistan would be unprecedented. However, doubts aside, the reduction could conceivably still be possible given the high concentration or ‘bunching’ of the population around the poverty line.
A period of ‘bubble’ growth in the economy could result in a large movement of people above or below the poverty line. If this indeed was the case, however, then it raises serious questions about not only the longevity and sustainability of the claimed poverty reduction in the country, but more importantly, about the desirability of the economic policies pursued that produced such transient gains.
The debate on poverty is extremely important — and has been surprisingly completely missing from the policy discussion for the past four years under a supposedly ‘awam dost’ government. Without placing poverty reduction and alleviation at the core of the country’s economic vision and any government’s economic programme, an unacceptably large number of Pakistanis will continue to fall through the cracks.
Policy drift on this count has been exacerbated by the ‘freshwater’ thinking of the Chicago-trained deputy chairman Planning Commission, who believes that unfettered markets and properly incentivised private economic agents are all that are required for an economic revolution (and ‘no government’, of course!).
Dr Nadeem ul Haq is in good company. This thinking is not new to Pakistan, where elitist policymakers since Independence have been growth-centric to the point where achieving high rates of GDP growth has been an end in itself. As a result, without addressing the weak and skewed institutional foundations of sustainable and inclusive growth, growth has been episodic with volatile boom-and-bust cycles, while largely favouring the ‘middle classes’ — leaving well over half the population untouched (actually, worse off in relative terms).
(Several years ago, when ‘India Shining’ was a hot political slogan, respected columnist and editor M.J. Akbar summed up the iniquitous nature of India’s economic boom with a heading for his column ‘India’s 9% growth for the 9%’). By and large, the narrow base or ‘capture’ of the benefits of growth has not been too worrying to our policymakers — much like the ultra-hawk general in the classic Stanley Kubrik film Dr Strangelove, who believed that 20 to 30 million Americans killed in a nuclear
exchange with the Soviet Union would be ‘perfectly acceptable’!
The only exception to this ingrained policy apathy was, not surprisingly, the period under Zulfiqar Ali Bhutto. Statist, interventionist and welfare-driven policies were pursued.
For all its fatal flaws, ZAB’s philosophy and economic vision delivered arguably not only amongst the biggest social welfare gains the country has seen, but has also managed to sustain his party through years of lacklustre performance in government subsequently.
The debate about the poverty estimate goes well beyond a mere statistic, and touches upon the fundamental nature of the social contract of the state with its people.
The writer is a former economic adviser to government, and currently heads a macroeconomic consultancy based in Islamabad.