Inequality is a global concern. The rich accumulate wealth so rapidly that it makes it impossible for the poor to reduce the gap, even if they start earning a decent income. Bill Gates, for instance, has accumulated so much wealth that he will have to spend $1 million per day to exhaust it in 218 years.
If he keeps his entire wealth in the bank at an interest of only 2 percent per annum, his daily interest income would be $4.2 million. This is the way it is and any hope reducing inequality is unrealistic. We can yearn for a fair society not for equality. In the United States the richest country in the world only 1 percent richest have more wealth then the remaining 99 percent of the population. The poorest 1.2 billion people living on this planet account for only 1 percent of the global consumption while one million richest consume 72 percent of whatever is produced in the world.
Concern over inequality is expressed in all countries; very high inequality in the United States, however, does not deprive the overwhelming majority of basic needs, while high inequality in Pakistan means living in extreme poverty which calls for addressing this issue.
Inequality has always remained high in capitalist societies, but the social welfare system entrenched in developed economies takes the sting out of disparity in incomes. In developing economies, as in Pakistan, the social welfare system is almost non-existent. In the United States the Food Stamp recipients get enough nutritious food to stay healthy. In Pakistan the much touted Benazir Income Support Program hardly addresses the hunger of even one family member.
This is the reason that global development experts rank income inequality alongside terrorism, climate change, pandemics, and economic stagnation. There are, however, no effective solutions for addressing the issue of poverty. An interesting comparison rate of on is that of United States and China that has grown at an astounding rate of over 10 percent in the past 20 years. Both have Gini coefficients of 0.47. Gini coefficient commonly used measure of inequality. The governance systems in both economies are poles apart. United States is a democracy while China, despite opening up of its economy, is run by the state machinery.
A further analysis of the situation during past 40 years reveals that inequality in United States is increasing sharply as in 1978, the top one percent of American rich were 10 times richer than the rest 99 percent today they are 30 times richer. The inequality in China has, however, declined appreciably during past 40 years which is the reason that the Gini coefficient of both countries is the same.
A free market economy looks like the best system for driving income growth and creating a large economic surplus. However, when it comes to income distribution the free market economy leaves much to be desired. Still, an authoritarian and state-controlled economy has miserably failed in Pakistan, as all state-owned entities performed much below par, further aggravating the poverty in the country.
Inequality in developing democracy cannot be addressed through semi socialist measures as even in case of China the inequality declined because of high GDP growth. If the growth is very high the trickledown effect will also be higher. A few people may accumulate disproportionately higher wealth, but those at the bottom would also get at least enough share to improve the quality of their lives.
The first priority of the planners should ensure that the entire population enjoys basic living standards. They should have access to nutritious food, adequate shelter, quality healthcare. After achieving this, they should look for ways to reduce inequality. Those aiming for full income equality fail to realize that it the urge to live better than others that drives economic growth. If income equality is guaranteed there will be no urge to work and prove disastrous for the society in the long run.
The planners however should bear in mind that entire population enjoys level playing field so that given equal opportunities anyone could move ahead. Currently, Pakistan is moving in the opposite direction. The system has been distorted in such a manner that only the children of the rich have the chance to move ahead in the bureaucracy or in private sector jobs. The education system is lopsided. Those studying in government schools are no match for high fee (Rs10,000-Rs50,000 per month) schools. These rich children acquire better knowledge and extreme confidence so that when they go for job interviews, they can defeat the poor aspirant for a job easily and on merit. Exceptions may be there, but very few and not enough to provide meaningful jobs for 60 percent of the population that lives in poverty.
One thing that our planners must understand is that all countries that have reduced income inequality grew at a constant rate of 6-7 percent for at least a decade. Moreover, their population growth rates ranged from 1 to 1.5 percent. Pakistan, during the past 35 years, has never been able to maintain a sustained growth rate of 6 percent for even one decade. Ideally a growth rate of 7 percent for a decade ensures that the per capita income doubles.
The main concern of our planners should be to first eliminate poverty by introducing a uniform education system, an adequate health regime and fair transparent regulations that provide equal opportunities to all. Opportunities to move ahead in a fair way are nonexistent in Pakistan. America has produced a Bill Gates or Steve Jobs from within the system without any tax evasion or accumulation of wealth unethically. Pakistan has also produced billionaires in recent years, but they accumulated wealth unethically through smuggling, under-invoicing and tax evasion. They did so because the government policies provide windows for whitening ill-gotten wealth. This window, provided in 1991, through which people first looted Pakistan, sent that money abroad and then bringing it back as remittance has helped many bureaucrats and smugglers to come out clean. There are no questions asked if one brings foreign exchange into the country.
We are squandering huge talent and wasting the potential of the nation through nontransparent and discriminating policies. Accumulating wealth should not be discouraged, but it should be ensured that wealth is accumulated transparently without violating or bending the law and full taxes are paid while accumulating that wealth.
If he keeps his entire wealth in the bank at an interest of only 2 percent per annum, his daily interest income would be $4.2 million. This is the way it is and any hope reducing inequality is unrealistic. We can yearn for a fair society not for equality. In the United States the richest country in the world only 1 percent richest have more wealth then the remaining 99 percent of the population. The poorest 1.2 billion people living on this planet account for only 1 percent of the global consumption while one million richest consume 72 percent of whatever is produced in the world.
Concern over inequality is expressed in all countries; very high inequality in the United States, however, does not deprive the overwhelming majority of basic needs, while high inequality in Pakistan means living in extreme poverty which calls for addressing this issue.
Inequality has always remained high in capitalist societies, but the social welfare system entrenched in developed economies takes the sting out of disparity in incomes. In developing economies, as in Pakistan, the social welfare system is almost non-existent. In the United States the Food Stamp recipients get enough nutritious food to stay healthy. In Pakistan the much touted Benazir Income Support Program hardly addresses the hunger of even one family member.
This is the reason that global development experts rank income inequality alongside terrorism, climate change, pandemics, and economic stagnation. There are, however, no effective solutions for addressing the issue of poverty. An interesting comparison rate of on is that of United States and China that has grown at an astounding rate of over 10 percent in the past 20 years. Both have Gini coefficients of 0.47. Gini coefficient commonly used measure of inequality. The governance systems in both economies are poles apart. United States is a democracy while China, despite opening up of its economy, is run by the state machinery.
A further analysis of the situation during past 40 years reveals that inequality in United States is increasing sharply as in 1978, the top one percent of American rich were 10 times richer than the rest 99 percent today they are 30 times richer. The inequality in China has, however, declined appreciably during past 40 years which is the reason that the Gini coefficient of both countries is the same.
A free market economy looks like the best system for driving income growth and creating a large economic surplus. However, when it comes to income distribution the free market economy leaves much to be desired. Still, an authoritarian and state-controlled economy has miserably failed in Pakistan, as all state-owned entities performed much below par, further aggravating the poverty in the country.
Inequality in developing democracy cannot be addressed through semi socialist measures as even in case of China the inequality declined because of high GDP growth. If the growth is very high the trickledown effect will also be higher. A few people may accumulate disproportionately higher wealth, but those at the bottom would also get at least enough share to improve the quality of their lives.
The first priority of the planners should ensure that the entire population enjoys basic living standards. They should have access to nutritious food, adequate shelter, quality healthcare. After achieving this, they should look for ways to reduce inequality. Those aiming for full income equality fail to realize that it the urge to live better than others that drives economic growth. If income equality is guaranteed there will be no urge to work and prove disastrous for the society in the long run.
The planners however should bear in mind that entire population enjoys level playing field so that given equal opportunities anyone could move ahead. Currently, Pakistan is moving in the opposite direction. The system has been distorted in such a manner that only the children of the rich have the chance to move ahead in the bureaucracy or in private sector jobs. The education system is lopsided. Those studying in government schools are no match for high fee (Rs10,000-Rs50,000 per month) schools. These rich children acquire better knowledge and extreme confidence so that when they go for job interviews, they can defeat the poor aspirant for a job easily and on merit. Exceptions may be there, but very few and not enough to provide meaningful jobs for 60 percent of the population that lives in poverty.
One thing that our planners must understand is that all countries that have reduced income inequality grew at a constant rate of 6-7 percent for at least a decade. Moreover, their population growth rates ranged from 1 to 1.5 percent. Pakistan, during the past 35 years, has never been able to maintain a sustained growth rate of 6 percent for even one decade. Ideally a growth rate of 7 percent for a decade ensures that the per capita income doubles.
The main concern of our planners should be to first eliminate poverty by introducing a uniform education system, an adequate health regime and fair transparent regulations that provide equal opportunities to all. Opportunities to move ahead in a fair way are nonexistent in Pakistan. America has produced a Bill Gates or Steve Jobs from within the system without any tax evasion or accumulation of wealth unethically. Pakistan has also produced billionaires in recent years, but they accumulated wealth unethically through smuggling, under-invoicing and tax evasion. They did so because the government policies provide windows for whitening ill-gotten wealth. This window, provided in 1991, through which people first looted Pakistan, sent that money abroad and then bringing it back as remittance has helped many bureaucrats and smugglers to come out clean. There are no questions asked if one brings foreign exchange into the country.
We are squandering huge talent and wasting the potential of the nation through nontransparent and discriminating policies. Accumulating wealth should not be discouraged, but it should be ensured that wealth is accumulated transparently without violating or bending the law and full taxes are paid while accumulating that wealth.
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