The poverty puzzle

The good news is Pakistan has seen an exceptional decline in poverty - falling from 35 per cent in 2001 to less than 10 per cent by 2013-14. Moreover, these gains were not concentrated among those close to the poverty line. Even the poorest 5 percent of the population saw an improvement in living standards. This is according to national data as quoted in a blog (Who is Poor in Pakistan Today? Raising the Basic Standard of Well-Being in a Changing Society) by Dr Ghazala Mansuri of the World Bank.
Dr Mansuri is a lead economist in the Poverty Reduction and Equity Group of the World Bank. Her research spans four broad areas: rural land, labour and credit markets, the economics of household behaviour, and the political economy of participatory development and institutional and governance reforms for development. Her research on the political economy of local development includes a number of evaluations of participatory development programmes. Dr Mansuri has published extensively in leading journals in economics and development. She holds a PhD in economics from Boston University.
Quoting the national data further, Dr Mansuri says that the increase in incomes is also evident when looking at other indicators of well-being: access to toilet facilities for instance, has significantly improved; among the poorest 20 percent of households, those without any type of toilet has been cut in half - from close to 60% to about 30%, while the ownership of assets like motorcycles has risen from only 2% to 18%; and many more of the poorest households now have refrigerators, televisions and stoves.
"Most importantly, households have changed their dietary patterns in ways that are consistent with poverty reduction. Even the least advantaged families in Pakistan have moved towards a more diverse diet with a greater consumption of dairy, meat, fruits and vegetables. Not only has their diet become more diverse, households also spend a smaller fraction of their total income on food items, preferring instead to spend more on non-food items such as housing, utilities, education, healthcare and consumer goods, including leisure goods."
She believes that the Rural Support Programs (RSPs) are at the center of the incredible work being done on the ground since the early 1980s that has helped lift roughly 40 million people above the poverty line in Pakistan's rural areas.
"While there is lot more work to be done, the federal and provincial governments over that time period and the World Bank and many donor agencies all deserve credit for the incredible progress that has been made to tackle poverty in Pakistan."
But the not so-good news, according to Dr Mansuri herself is 30 per cent of the population or nearly 60 million Pakistanis are still living below the poverty line!
On the face of it the seemingly glaring illogicality that seems to exist between the two claims of Dr Mansuri - a sharp decline in poverty from 35 percent to 10 percent between 2001 and 2013-14 and the current state of poverty that shows 30 per cent of the population living under the poverty line - renders the comparison too confusing.
But Dr Mansuri's clarification sounds logical enough in the framework of her explanation: As societies develop, ideas about the absolute minimum acceptable standard of well-being also change. More precisely, with development, the minimum requirements for a productive life and personal dignity grow, and this changes a society's views about who is poor.
"Few would argue that Pakistan is the same country today that it was 15 years ago. As development has occurred our standards for what is a bare minimum level of existence have also risen - and this is a good thing.
"All societies that aim to build democratic and inclusive policies must respond to development by periodically raising the standard of living for their most vulnerable members. In the (now) developed world, governments have intervened time and again to help ensure that the standard of living for the most deprived improves with development.
"The government's decision to set a new poverty line for Pakistan is extremely encouraging in this context. It was also necessary given the robust decline in poverty based on the old line.
"The new line, which uses an improved methodology, sets a minimum consumption threshold of Rs 3030 per person per month. This translates into between Rs 18,000 and Rs 21,000 per month for a household at the poverty line, allowing nearly 30% of the population or close to 60 million people to be targeted for pro-poor and inclusive development policies - thus setting a much higher bar for inclusive development."
In a country where heads have not been counted since 1998, it is very difficult to swallow conclusions made by what is called the national data. Nevertheless, one would surely agree with Dr Mansuri that Pakistan today is certainly different from what it was 15 years ago. Perhaps poverty did decline during this period but not as sharply as the national data would have us believe. And perhaps you need a little bit more than Rs 3030 per head to move above the poverty line in today's socio-economic context. So perhaps using the rule of thumb in the absence of updated headcount as of today those living below the poverty line set in 2015 could be as many as half the population and not 30 per cent.
Along with poverty Pakistan like many other countries in the world is facing a serious state of inequality that is expanding by the day. Indeed, none is more threatening than the inequality of condition, of wealth, and opportunity. This phenomenon needs to be tackled urgently but prudently. To start with the government should be investing more in education and training. Simultaneously, effective policies relating to distributive justice should be introduced and enforced strictly through equitable and progressive income tax laws.
Also, public programmes should be introduced to create job opportunities for educated and skilled youth.And in order for the government to have the fiscal space to intervene on behalf of those on the negative side of inequality the state should purchase minority stakes in assets that yield an income, which it could use to finance part of its spending on the poor. If the state gets a significant chunk of the profits then the income will be spread far more widely.
Over the 70 years Pakistan has simply jay-walked like a mindless pedestrian. For economic sustainability it has over the years depended on multilateral (mostly from the World Bank, Asian Development Bank and the International Monetary Fund) and bilateral dole (mostly from the US, the UK, Europe and Saudi Arabia). And for its geopolitical sustainability Islamabad has remained beholden mostly to the US all these years. As a result it has continued to remain a totally dole-dependent country serving in return the global and regional interests of the major donors.
In the changing global scenario this arrangement is likely to disappear very soon leaving Pakistan to fend for itself on its own. In view of this our policymakers need to do some deep soul searching and come up with innovative ideas to protect and promote the interests of the majority of Pakistanis by earning enough on our own and spreading this national wealth equitably across the nation to tackle both poverty and inequality at the same time.
Many a modern economic philosopher has claimed that modern economic growth can be sustained only by permanent innovation. They have argued that good institutions - the legal protection of property rights, functioning markets, and "inclusive institutions," in which many people are involved in the governing process - provide the necessary preconditions for innovation and thus sustained growth.
The enabling conditions for creating such institutions are said to flow from the lead provided by what is called the culturally influential elite of a country. But those who make up this elite in Pakistan are mostly ignorant morons capable of taking the nation nowhere back to the dark ages. Even most of the faculty in our higher educational institutions like universities seems imbued with reactionary ideas lacking the openness that help generate creative ideas. In fact, in these places of higher learning ideas are suppressed while dogmas are promoted.
One way of creating a critical mass of culturally influential elite is to promote the culture of research in our universities. Since the government lacks the resources to fund research work of quality and quantity, the private sector, especially the banks - the most profitable sector of our economy - could contribute by setting up venture capital type of cells in the universities like the Lahore University of Management (LUMS), Institute of Business Administration (IBA), Karachi, National University of Science and Technology (NUST), Islamabad and Quaid-i-Azam University, Islamabad.