Pakistan: the scourge of inequality

Wealth inequality in Pakistan is overwhelming. According to a World Inequality Database report, the top 10% of Pakistani households earn 42% of the country’s income, while the bottom 50% earn only 13%. With the current tsunami of inflation and low growth these figures are bound to aggravate further.

Income inequality is equally staggering where the rich live in a different world and the poor inhabit a different planet. To put it into perspective the richest earn sixteen times more than the average income for the poorest.

While we all read this, it is Ramazan, the holy month, when the spiritual fervour is the most and the charitable deeds are at the highest. So, it is not amiss that we talk about inequality in Pakistan and any framework that might help us get out of this quagmire.

In Pakistan, income disparity is severe. The country’s Gini coefficient, which is a measure of income inequality where zero represents perfect equality and one indicates perfect disparity, was 0.334 in 2018, according to the World Bank. This is greater than the lower-middle-income country average of 0.313.

There are various explanations behind Pakistan’s high level of inequality. One key factor is the concentration of wealth in the hands of a small elite that has profited from economic progress. This has resulted in large income and wealth discrepancies amongst social groupings.

Inequality is further exacerbated by limited access to education and healthcare. This has resulted in considerable variations in outcomes across areas and social groupings. In Pakistan, the poorest people frequently lack access to essential amenities such as clean water, sanitation, and power.

Furthermore, there are major gender differences in Pakistan, with women frequently encountering discrimination and limited educational and employment prospects. As a result, there is a considerable gender pay gap, with women earning less than males for doing the same jobs.

Keeping in view the stunning levels of inequality in Paksitan, there is a need to understand how this inequality is damaging the society.

Nobel Laureate Joseph Stiglitz in his book, “Price of Inequality” examines the economic and social consequences of income inequality. While some inequality is unavoidable in any market economy, Stiglitz contends that the level of inequality that exists in many developed countries today is harmful to both individuals and societies.

According to Stiglitz, extreme inequality has a number of negative consequences. It can, for example, result in lower social mobility because children from lower-income families are less likely to succeed than those from higher-income families. Furthermore, as those at the bottom of the income distribution become increasingly frustrated with their lack of opportunity and influence, inequality can lead to social and political unrest. Inequality, according to Stiglitz, can harm the economy by reducing demand for goods and services and making it more difficult for businesses to grow.

To reduce inequality, policies like progressive taxation, investment in education and infrastructure, and increased access to healthcare and other services can help.

Ramazan provides Muslims with a unique chance to ponder about the impoverished and take action to eradicate poverty and inequality in society. Fasting might assist to build empathy and understanding for others who are less fortunate.

Ramazan emphasises the significance of generosity and giving, in addition to fasting. This month emphasises the value of community and social responsibility. It also emphasises the value of community service and social responsibility. The emphasis on community can serve to foster collective action and responsibility for eliminating societal poverty and inequality.

While Ramazan pushes all of us to think about the poor and the downtrodden it has affected another Nobel laureate Abhijit Banerji, who won Nobel prize in Economics in 2019. The month of fasting touched him also and he wrote about his experiences in an article.

He used his experience of a time of abstaining from food in Ramazan on the suggestion of one of his friends so that they can enjoy the traditional Iftar in Kolkata and how he linked that experience of going hungry in the day to the plight of the poor. Without going through the details of this very enjoyable and well written article we can cover a few points that he made through the experience of going without food for a day: “It’s hard, as I learnt that Ramazan day, to focus on anything but food when your stomach is rumbling.” He further writes: “This is why children from low-income families need school meals if we want them to learn well”.

He further explains that the poor face double the burden when they cannot think straight due to hunger at a time when they have to make their biggest decisions; “they are robbed of their ability to think clearly and act decisively precisely when they need it the most, when their entire survival is at stake.”

While fasting in Ramazan we must refer to the teachings of Islam to reduce inequality.

Islam offers a system that aims to reduce social inequality. Islam’s teachings promote social justice and equality. Islam wants to promote more equitable wealth and resource distribution.

Here comes the discussion about Progressive taxation; the government should implement a more progressive tax system in which higher-income people pay a larger proportion of their income in taxes. This would raise government revenue and aid in the funding of social services and infrastructure development that assist low-income people.

However, this is easier said than done, currently government is relying heavily on indirect taxation which is totally opposite of what we are talking about and this is due to many factors including the apathy and lack of capacity of the tax machinery, lack of will to tax the rich and thus avoiding most of the direct taxation measures; a case in point is agri income of the land lords and reduced rates on capital gains for the rich. Whereas all the brunt of direct taxation is borne by the salaried class. This Ramazan we must call out that this is injustice, and it is causing misery to the masses.

While Pakistanis are busy distributing Zakat, which is a great tool to alleviate poverty and reduce economic inequality in society. But Islam strikes at the core of the inequality that emanates from injustice. That is why Islam emphasises the importance of treating all people fairly and justly, regardless of their social status or economic background. This includes ensuring that everyone has access to necessities like food, shelter, and clothing.

Islam also promotes resource sharing and cooperation among individuals and communities. This is evident in the waqf tradition, which entails donating land or property for public use, such as the construction of schools, hospitals, or community centres. Waqf can aid in economic and social development by distributing resources to those in need and encouraging collective ownership and accountability.

While we see sporadic actions where rich form trusts to do some good in the field of education or health, yet this is a much-neglected area. Such institutions serving community are still largely the old trusts bequeathed by pre-partition non-Muslims like Sir Ganga Ram, Dayal Singh, Gulab Devi etc. As a society we need to do more at the private level to bridge the gap between the rich and the poor. The government can promote such spending by incentivising it for corporations and individuals both.

To address inequality a multifaceted approach is required, one of the elements is to provide education to the poor and it should be of the suitable quality. This needs better funding of the public schools but currently our spending on education is abysmally low.

Further, a quick turnaround could be achieved by providing technical training to the youth in various fields making them worthy of earning better living through doing technical work. This programme, if executed properly, can create a workforce that could be exported to various countries thus earning foreign exchange and alleviating the poverty at the same time.

Inequality in Pakistan has increased exponentially because of the untargeted subsidies; these have broken the financial system and diverted the resources that were meant for the poor to the rich instead. We need to provide targeted subsidies and that too in the form of cash grants to the poor.

Now biometric data and electronic ID systems backed by NADRA enable the government to provide targeted support to the poor. We must use these electronically enabling technology for those the backbone is already in place.

Gender equality and women’s empowerment can assist in minimising income inequality in Pakistan. While we can list a host of measures like enhancing women’s access to education and healthcare, increasing women’s representation in decision-making positions, and combating discrimination and violence against women but it would suffice that we must work to grant women the rights that had been espoused in Islam and how the Holy Prophet Muhammad (SAW) emphasised about good treatment of women in his last sermon and during his last sickness.

Although economists have long held the view that investment in infrastructure helps in reducing poverty but now the game has changed a lot. Infrastructure projects help the capitalists more than the poor as most of the work traditionally done for these projects that was labour intensive is taken over by machines that are capital intensive. So, infrastructure development itself does not help the poor as much as it does the person with money.

Rather it should be infrastructure that is itself targeted to help the poor through its use like schools and hospitals that will be more helpful in reducing inequality as such infrastructure would have all the benefits that any such projects can provide through provision of jobs, etc., but it would eliminate the distortion that capital intensive technologies have created in the favour of money.

To reduce inequality in Pakistan, the government, civil society, and the commercial sector must all work together. Pakistan can move towards a more equal and just society by implementing a policy of fairness, justice and providing individuals with tools and resources to lead fulfilling lives.

As armies cannot march on empty stomach so does the societies cannot progress when necessities are not met; masses must be given social safety net where they can have food, shelter and education without discrimination. Though this is a tall order, but it requires a commitment rooted in our religion and values more so than resources.

Copyright Business Recorder, 2023