Widening income gaps

SOME of us have been worrying about the growing disparity in the distribution of incomes in Pakistan. Income inequalities have increased in several different ways. They have widened among different segments of the population.

The share of total incomes being claimed by the top 10 per cent of the population has increased significantly while that of the poorest 40 per cent has declined.

The income gap has also widened among different political jurisdictions. Although Pakistan does not have good data on provincial gross output and income per head of the population in the various provinces, it is my guess that the income gap between Punjab, the country’s most affluent province, and Balochistan, its poorest, has widened over the last several years.

There is also a growing gap in income distribution within the provinces. Income per capita in Punjab’s southern districts has lagged behind that in the province’s central districts. The same is true for Sindh. There is a yawning gap between Karachi and rural Sindh. In spite of the problems Karachi has had to deal with in recent years, the income per head of the city’s citizens has increased at a rate significantly higher than that of rural Sindh. In the country’s more backward provinces — the North West Frontier Province and Balochistan — the capital cities have done much better than the rural districts.

The income distribution trends in Pakistan are part of a global phenomenon where the well-to-do have done much better than the average citizen. An unprecedented distribution of income and wealth is occurring at this time. This involves both individuals and nations.

According to David Rothkopf, who has been investigating these developments, the growth and reach of “of international finance has been one of the transformational trends of our times — in just over a quarter century, capital flows became massive, instantaneous and controlled by a new breed of traders representing a handful of major financial institutions from a few countries. The concentration of power has also steadily grown. The top financial institutions control almost $50 trillion in assets, roughly a third of the global total. Ten thousand hedge funds are estimated to account for 30-50 per cent of all equities trading worldwide, but the top 100 control 60 per cent of hedge fund assets.”But financial rewards have not only gone to financial institutions and those who control and manage them. Corporate bosses have also done very well. “Multinational chief executives 30 years ago made 35 times the wages of an average employee; today it is more than 350 times … the world’s 1,100 richest people have almost twice the assets of the poorest 2.5bn.”

These changes have had their impact on the developing world as well, including Pakistan. In Pakistan’s corporate sector, top salaries are now 200 times the government-mandated minimum wage. Entry-level managers now demand and get 10 times the minimum wage. These differentials are a multiple of what was possible, say, during the time of Ayub Khan, another period in the country’s history that was marked by rapid growth and increased inequities.

Then, a person entering the corporate world could expect to receive emoluments three to four times those offered to entry-level managers in the few multinationals that were then operating in the country. An individual selected for the elitist Civil Service of Pakistan (CSP) in 1960 was paid Rs350 a month while a junior executive recruited by Pakistan Tobacco Company, then the largest multinational, could expect to be paid Rs1200. The multiple of three that was common then has increased to six in the early 2000s.

The differentials are much more pronounced at the top levels of the civil services and the private corporate world, especially when non-salary benefits are factored in. A senior government executive has a gross compensation of Rs200,000 a month; a senior corporate manager receives 10 times as much i.e. two million rupees. These differentials have two consequences, both damaging to public service.

First, sharp differences encourage migrations from public to the private sector at all levels. This seriously affects the quality of the public sector. Second, it leads to corruption. Even when the private sector has begun to play a leadership role in economy, the government still wields enormous authority over private enterprises. This leads to rent-seeking behaviour among public servants.

Let us now consider the redistributive feature of the emerging global economy which involves the world’s nations. In the last one decade, the Persian Gulf, Russia and China have accumulated vast amounts of financial reserves. These are the consequence of both the increase in the price of oil as well as redistribution of industrial production around the globe.

The first phenomenon has transferred a significant amount of wealth from large oil-importing countries such as the United States, the European Union and Japan to Russia, Venezuela and the Gulf, the areas that continue to dominate the oil market.

The second development has done the same for the new centres of industrial production in East Asia, particularly China. If oil prices remain high and Asian economic growth is strong, sovereign wealth funds, which are concentrated in these countries, are forecast to increase their accumulated assets four- to five-fold; from an estimated three trillion dollars now to $15 trillion within a few years. The top creators of great new personal fortunes are now in China, India and Russia.

What are the public policy imperatives of these developments for a country such as Pakistan? Policymakers cannot ignore the distributive consequences of these developments. Their mindset must change from promoting growth to making it inclusive. They must deal with the growing gap between incomes and wealth in the public and private sector. The most effective way would be to use fiscal policy to tax the rich and to use development policy to aid the poor.

There is also the need to drastically restructure public services, cutting down their size while allowing larger compensations to those who remain with the government. Another area of public policy should be to encourage sovereign wealth funds to invest in the domestic economy.

This has begun to happen as the funds in the Middle East and East Asia take prominent positions in such modern services as banking and telecommunications. While this helps the economy such investments do little for the poor. It is important to get them to invest in the real sectors of the economy. Policies aimed at improving distribution must become part of the strategy to develop the economy.

Shocking, sad but not surprising

Dr Muhammad Naim Siddiqi & Dr Abdul Wahab Yusafzai

ON May 14, three dacoits who were trying to escape after committing a robbery in an apartment in Karachi were held, beaten and then burnt to death by the people of the locality. The same scene was repeated a few days later in another area of the city when two dacoits robbed bus passengers at gun point.

They were captured by the public and one was burnt to death and the other suffered grave burn injuries. People tried to burn two more robbers who had snatched mobile phones in Lahore the same week.Human rights activists, religious scholars, legal experts, intellectuals and mental health professionals expressed shock, disapproval and alarm at these incidents. They argued that this behaviour was unjust, against religion, unlawful and violated the principles of humanity. A few legislators and politicians also condemned the act. The observations of state functionaries were significant.

‘People should give us time rather than taking the law into their hands’; ‘People do not trust the institutions anymore’; ‘People are fed up with the previous government’s policies and have huge expectations from the present government’; ‘It is plausible that some outside elements, terrorists or elements wanting to destabilise the system capitalised on the situation taking advantage of the charged emotions of the crowd. They must be stopped’, were some of the sentiments expressed.

What is more alarming is the fact that a significant section of the general public which gave its comments on TV channels or newspapers supported this ‘mob justice’. Their argument ran: ‘If dacoits kill people while snatching their mobiles, why should we be concerned about their lives?’ ‘What is the point of handing them over to the police who will soon free them to repeat their crimes and threaten us with revenge’? This opinion is based on the perception that the police are corrupt and accept bribes to release dacoits. It also takes a share in the loot or is helpless because the dacoits are well connected.The big question is what has driven people to such extremes? Just three years ago, we witnessed the biggest tragedy our nation had seen in recent years: earthquake 2005. The response it evoked was unprecedented. The helping hand extended by Karachi was striking. We got thinking. Why did Karachiites respond so overwhelmingly when they had no geographical proximity, linguistic affinity and cultural commonality with Kashmir? In fact, Karachiites are perceived to have become so accustomed to daily tragedies and violence that their response was unexpected. We conducted a study. Among many other factors, one worth mentioning here is: ‘We (Karachiites) felt that we could make a difference’.

It is this sentiment, ‘we can make a difference’, that has empowered the people of Karachi. What relevance does this analysis have for the above horrific course of action taken by some people against the dacoits? A lot. The fact is that we live perpetually in the hope that the state will provide us with security of life, assets and honour. We believe that if anyone tries to snatch away our basic rights, some higher authority will provide us justice. This is the basic principle underlying the rule of law. But is this principle applied to everyone? The media has done a commendable job by highlighting the injustices people face in society. But by the same token it has made people aware of who is responsible for the failure of justice to reach those who need it.

This has given rise to a sense of hopelessness, helplessness and anger. Small wonder we are not alarmed by the rising incidence of suicide. One just has to observe the helplessness and desperation of a mother of four children or a brother of three sisters to understand why people are taking their own lives.

Can’t we see the connection between the mental states of extreme desperation of that mother and brother and those who killed and burnt these dacoits? Perhaps hopelessness, helplessness and anger drove them to this extreme. We can argue about the justification of this action on the basis of religion, morality, legality or culture. I don’t have any argument to defend either of them.

We are very clear that if a widow cannot pay her debts of Rs95000, her house should be confiscated. If the banks do not get their loans back, how will they run? The system will collapse. But, would the system collapse if a sum of Rs95000 is not repaid or when Rs54bn is waived? Take the example of the sugar, rice and flour shortage or even the collapse of the Sher Shah bridge. People know who the culprits are and who protects them.

What message are we giving to the people of Pakistan? A painful but simple one. Might is right. If you have the power of the gun, money and connections, you get away with virtually anything and also get justice of your choice.

There is plenty of evidence that violence on the media affects children. It should not be incomprehensible that what is happening in real life will affect people’s minds. Sadly, it is not just observational learning; it is day to day learning as well. Believing that this experiential learning won’t have any effects would be like hiding our heads in the sand.

We are robbing people of the hope that their lives, possessions and honour will be protected and justice will be provided to them. For them the only option left is to take the law into their own hands and catch the criminal red-handed and dispense summary justice then and there. They are learning new but horrific ways of creating an impact.

Will the people of Pakistan be willing to wait when we keep on taking away their hopes that things can be different? This writing is not in justification of the actions of the public. It is only to explain why this is happening.

The writers are practising consultant psychiatrists.

naim.siddiqi@hotmail.com

A new drugs crisis

AFGHANISTAN, struggling with a huge indigenous drug problem, has a new crisis. Its drug treatment centres — particularly in the capital, Kabul — are being inundated by heroin-addicted former refugees, many forcibly expelled from neighbouring Iran and Pakistan.

The new dimension to Kabul’s spiralling problem of opiates abuse is most visible in the war-ruined shell of the city’s Russian Cultural Centre, a warren of rubble and faeces-strewn rooms, where each night hundreds of addicts and street children come to sleep.

It is a place of disturbing images. Outside, men play cricket while addicts lie dozing. Inside, users gravitate to the dark places, crawl into disused turbine pipes to smoke heroin from foil or crowd into tiny rooms underground. The youngest and most nimble scale the walls like rock climbers to reach places beneath the roof where they sleep for safety. The most far gone inject their wasted legs and arms in full view of the passing traffic.

Of the dozens approached about how they came to be addicts, only one man was not a returnee from Iran, while the rest had first taken heroin there. The stories were strikingly consistent: they had fled the violence of the civil war or the Taliban era with their families, often being required to work long hours in Iran doing tough jobs.

Many told how unscrupulous employers offered them the drug, telling them it would make their work seem easier — and how in the end they had been rounded up and thrown back across the border, some after brutal treatment in Iranian detention.

At Kabul’s Nejat treatment centre a few can qualify for one of the handful of beds after attending a series of awareness workshops. Mohammed Wali, 30, from Bagram, is typical. He was admitted a week before with five others; all say they became addicted in Iran. ‘I left Afghanistan during the time of the Taliban,’ said Wali. ‘I am lucky in that I have a family to support me, although I am ashamed to say that I stole from them.

By bad luck I am addicted. When I was working in Iran my employer was giving us opium to make us work harder. For the first 20 days I was given it for free, then I was told that I would have to pay for it. I was spending my earnings on the drug.’

The scale of the problem is revealed by the men’s recollections. ‘Ten to 12 of us were addicted by the time we returned to our village from Iran,’ said Mohammed. Syed, another who was expelled, recalls: ‘Six people working in my factory, including two of my brothers and three other villagers, were addicted.’

At the cultural centre the addicts smoke scorpion — a mixture of hashish and heroin — or shoot up, often with discarded needles found in the filth. ‘I was working in the construction industry and I was walking home when they grabbed me and sent me to the barracks,’ said one addict. ‘They kept me there three days. Among the 300 people there, 200 I would guess were addicts.’

Others recalled similar numbers of addicts — usually citing between two-thirds and three-quarters of those held in detention. While many of those expelled complained of insufficient food during their detention, some claimed they were beaten, and showed faint scars on shins and burn marks on wrists and arms. Their claims were impossible to verify.

‘We are being swamped,’ said Dr Tariq Suliman, director of the Nejat centre, the first Afghan charity to tackle addiction when it was set up 16 years ago. ‘We have a waiting list of 1,000 to 2,000 people at any one time. We offer a syringe exchange programme, have a mobile outreach programme, and offer abscess treatment [a consequence of injecting impure heroin into veins].

‘The biggest problem now is the returning addicts. It is a tsunami coming to this country,’ Suliman said. ‘For every addict we estimate that the issue impacts on up to five family members. And 90 per cent of the new addicts that we are seeing are coming from Iran. In the past two years we have just seen the graph rocket. The problem is compounded by the fact that donor agencies will not commit to support our activities in the long term. They will fund a project for a year, but they will not commit to 10 years. And that is the scale of the problem. It is out of control.’

Back at the cultural centre, Ali Raza, an addict thrown out of Iran, is berating a group of boys watching him inject — twice in each arm. He looks 70, but says he is 50. ‘We are the worst,’ he slurs. ‘Don’t come here. Don’t walk on the way we passed by. Everyone hates us. Don’t even take one puff.’

—The Guardian, London