Economy should work for all citizens. Economy is a system of producing and distributing resources and opportunities. Everyone should have a share in it on an equitable basis. Inequality in this system gives rise to social ills, unrest in the society and conflict among various sections of citizens. In Pakistan extreme inequality in wealth and control of resources has caused social, political, economic and even emotional/psychological subjugation and suppression of the middle and working class and has perpetuated the class-based system.
Economy is the foundation upon which rests the whole social and political structure. If the foundation is skewed, so will be the rest of the structure.
Economy is defined as a system of organizations and institutions that either facilitate or play a role in the production and distribution of goods and services in a society. Economies determine how resources are distributed among members of a society; they determine the value of goods or services; and they even determine what sorts of things can be traded or bartered for those goods and services. Its goal should be to meet the needs and wants of all citizens. Thus, a system which fails to meet the needs and wants of majority of the citizens needs to be restructured and redesigned.
Another important point is that globalization has resulted in a global economic system through which all countries are interconnected and interdependent. If we look at global economic system and its impact on countries, we notice that the current system is neither fulfilling the needs and wants of the world citizens, nor national systems are satisfying their citizens. And that presents a real challenge because even if a country’s economic system is not serving the interests of its citizens, it is difficult if not impossible to completely bypass the global order to establish a new system for its own use. Not even most developed countries like the USA are exempt from this rule but for developing countries it is very difficult to ignore the global order. One way to deal with this problem is to develop alliances with countries with similar agenda and goals. However, we believe that even with these constraints, changes can be made to create a more egalitarian system.
Social relations among members of a society are to a large extent determined by economic relations in general and by the ownership of means of production in particular. For example, the relation between land owner and hari/khait mazdoor/sharcropper in a feudal system is different than between a factory owner and worker or a banking corporation and bank teller in a capitalist system. This principle works at all levels of human society starting from family structure to tribal, national and international level. It is then this relationship that forms the basis of political and social systems. Thus, in order to change the political and social systems, we have to change these relations. Any other tinkering with the system without changing its essence will be superficial and temporary.
If we keep this fundamental principle in front of us, it becomes easy to see the flaws in the current system and to understand why successive governments in Pakistan have failed to make any substantial improvement in the lives of the masses. Thus, the goal for our economic policy is to ultimately lead us towards changing that relationship in order to bring equality.
The problem is not in the production but in the distribution. There is no lack of resources but they are concentrated in a few hands. According to a 2017 OXFAM report there are only eight individuals in the world who own as much wealth as half of world’s population. Wealth distribution in Pakistan is even more skewed. The problem has become much worse for the past 25 to 30 years with the onslaught of neoliberalism. Under the guise of “free market”, economy has been tailor made for mega mergers, market monopolization, and hostile take overs. The theory of trickle-down economics has failed miserably to deliver. To cover up these problems and fool people, the indicators to measure economic performance have been devised in ambiguous manner which has very little relevance to the well-being of masses.
For example the most common measure of economy is GDP (Gross Domestic Product). It is measured in 2 ways: either by monies spent by various groups that participate in the economy like buying consumer good, investment in businesses, or government spending, or by income earned by all factors of production in economy like wages, interests, rent etc. When GDP goes up, economy is said to be expanding and when it goes down, economy is said to be contracting. This means that if in a country, out of 100 people there are 10 rich people who own the means of production and are consuming and producing more and more, the GDP will expand and economy will be considered healthy even if the rest 90 people are barely consuming or earning which essentially means that GDP does not reflect the well-being of masses. Thus, GDP does not reflect or measure wealth inequality.
GDP also does not measure what is produced in household, mostly by women. So, their share in the economy is not taken into consideration. For example, if a woman cooks herself, it will be not measured in calculating in GDP but if she hires a cook, wages paid to them will be part of this equation. This undervalues women’s contribution to the society as a whole.
Another measure of economy is per capita income. It is calculated by dividing the country’s total income by its total population. If the income of a few goes up, it will increase per capita without reflecting inequality of income or wealth.
Both these indices, GDP and Per Capita Income are useless in terms of measuring economic activity of masses, their share in economy or truly track their progress.
We believe that economy like everything else has been divided into classes. In Pakistan, like the rest of the world, rich are claiming larger and larger share of economy while the poor share is shrinking at all levels.
Most if not all the problems facing people of Pakistan are related to economic system. In order to understand our program, it is important for people to know some basics about how the current economic system works because in order to achieve our goals we will have to bring about a paradigm shift in our thinking about economic structure.
Current economic structure is built as, what in common language, is called ‘trickle down economy’. It simply means that the rich are given opportunities to become richer by expanding their businesses and other ventures, so that they can then provide jobs to the poor and prosperity can eventually find its way down to grassroots. Thus, all policies are geared towards achieving this goal like tax breaks to the rich, making it easy for the rich to get loans for businesses, facilitating them to get licenses for new ventures, subsidizing their businesses to reduce their cost of doing business etc. And that is why all or most of the economic indicators are also primarily meant to measure this aspect of economy and the indicators which would measure the financial health of masses are not even measured and tracked.
Secondly, another important aspect of this economy is that it is based on accumulation of wealth and maximization of profit (which in reality is nothing but surplus value of labor) by the rich. That is done by suppressing labor and middle-class workers’ rights to assembly, union formation and collective bargaining power. In addition, everything is put up for buying and selling in order to make profit. This even includes essential human needs and services like food and water as well as education and healthcare, transportation, housing and energy. This is the reason for privatization of state institutions and social services.
Thirdly, this system is based on ‘rent’. This includes all those ways and means at rich people’s disposal through which they can accumulate more wealth like taking advantage of their position in the government, or by using their contacts in important positions in the state structure or through bribery and directly or indirectly influencing policy making in their own favour.
Fourthly, they have the ability to invest money in various interest-bearing vehicles and increasing their wealth without working. So, while the 80% people are working hard to barely make a living, they are comfortably enjoying life without lifting a finger.
Another important concept to grasp is “Neoliberalism”. This basically means, that state has minimum role in economy, competition is the best driver for human ingenuity and entrepreneurship and market forces are best left alone to propel the economic engine. And state has no role in providing essential human services to citizens. Thus, based on this ideology, banking and finance were deregulated, mega-mergers and monopolization of market was allowed, austerity measures and structural adjustment programs are imposed and everything which could be sold to make profit is made into a commodity including food, healthcare, education, shelter, transport, even roads and prisons.
Most economists agree now that this system has led to extreme inequality of wealth where only 1% people in the world own most of the wealth and 99% just barely make it.
We also must recognize that most of this wealth is unearned, obtained either through inheritance or acquired through expropriation of surplus value, graft and corruption or build up on the basis of tax dodging etc.
Thus, it is obvious that unless the basic structure of economy is radically changed, it will be difficult to bring any meaningful or sustainable improvements in people’s lives. Our economic program aims to make these changes with ultimate goal of achieving our mission of equitable distribution of resources according to need and equal access to opportunities. We also fully understand that any change in the system will face a strong opposition from those who are benefitting from this now.
Guiding principles of our economic programs are:
- Increase state revenue to improve public services to citizens by raising the taxes on the rich, setting up industry in public sector, strengthening and enhancing state banking system, improving the import/export ratio, land reforms to increase agriculture products,
- Reduce state expenses by eliminating or reducing all perks to public officers and politicians, implementing austerity measures on government spending, reducing and eventually eliminating debt servicing and reducing the need for defense spending by fostering friendly relations with neighbors.
- Reduce the salary difference between highest and lowest paid employees in public and private sector.
- Eliminate economic exploitation and oppression of the weaker segments of society
- Economy which benefits 100% of population rather than just 1 % elite at the top.
- Minimize inequality and ultimately lead to equitable distribution of resources according to need.
- Track Indicators for household income, wealth and standard of living.
- Make Pakistan self-sufficient to reduce and ultimately end our dependence on foreign aid and debt.
- Facilitate Industrialization in public sector, especially in rural areas
- Reduce urban rural gap and minimize uneven development
- Reduce gap between various provinces and regions of the country
- Reduce gender gap
- Eliminate unemployment
- Harness human capital through developing human resource and skilled work force
- Restructure banking and finance
- Overhaul Tax code
- Improve capacity, skills and systems of public sector institutions
- Debt Management
Manufacturing is the third largest sector of economy accounting for 18% of GDP and 13 % employment. This area has been neglected by successive governments in the past, resulting in unemployment and underemployment, widening urban rural gap as well as gap between different provinces and regions, increase in undocumented economic sector and other problems. It has also resulted in a shift towards unskilled low paid insecure jobs in the country and brain drain as the skilled and professional work force leaves the country to look for better opportunities in other countries.
- Our primary focus will be to set up industry in public sector.
- Manufacturing will be not just for export but also to meet the needs of Pakistan’s citizens.
- Set up industry in rural and less developed areas and to provide training opportunities to local people. This will help reduce poverty, unemployment, reduce migration from rural to urban areas and decrease stress on cities. It will develop human capital and skills. It will also reduce rural population’s dependency on large land owners for employment. Special focus will be on agri-industry in rural areas.
- Key sectors of industry will be kept under public control. Its revenues to be used for public and social programs
- Those areas where there is already raw material and skilled labor available in Pakistan, will be further strengthened such as gems and jewelry, leather, garments, fans, cutlery, surgical instruments, halal meat, sports goods, furniture, crockery and cooking utensils.
- In as much as possible, industries will be set up in less developed areas of the country to reduce rural urban gap. This is necessary not only for financial prosperity of the people of that area and bring the region at par with the rest of the country but also to eliminate a sense of deprivation and exploitation among people leading to more national cohesion and good will.
- Capital for this will be generated by austerity in governmental spending in other areas as well as taxing the rich and improving trade and business.
- Workers right of assembly and collective bargaining power will be strengthened to ensure their and their families’ wellbeing.
Trade and Business
Cooperatives: In many countries of the world people, communities and economists are looking for solutions to take back their economies from big business and capital. Cooperatives are one way to do this.
Cooperatives are business or manufacturing plants, farming or other ventures which are owned and run jointly by its members, who share the profits. There have been many successful experiences in this area in other countries.
State will facilitate formation of cooperatives by providing capital, skill training and capacity building.
A special cell will be set up in R & D department to conduct research in this area and develop best practices.
Reduce trade deficit
Review all trade agreements to ensure that they are fair and for the benefit of masses rather than upper economic classes
Banking and Finance:
At this time Pakistan has public and private banks which also include several foreign banks. Profits generated by the private banks are either siphoned off to other countries or go into private accounts. Public sector banks are poorly managed so that public is not satisfied with their performance. There is a need for complete restructuring of this sector so that profit is used for the benefit of masses and performance of public sector banks is improved.
Public banking System: Our focus will be on strengthening the public-sector banking, improving their performance and expanding their operations. A public bank is primarily controlled and funded by the state rather than private investors. It can be set up at national, provincial or even district level. All government revenues are deposited in this bank. The bank officers report to the local elected bodies. They don’t receive exorbitant salary and benefit packages. Globally about 40% of banks are publicly owned.
In the United States, the stronghold of capitalist system, the US Post Office ran the Postal Savings System from 1910 to 1966 bringing affordable banking within the reach of all Americans. There is currently a movement to reinstate the Post Office Bank to allow growing American access to banking services.
In Pakistan postal banking already exists. It needs to be expanded and enhanced.
Some benefits of the public banks are:
- They invest within the governing community, maximizing public goods rather than focusing on increasing their profit
- They can be authorized to develop programs which are beneficial to the community like student scholarships and support for local businesses
- The interest charged by public banks can be used for public goods or lent to the government at below market rates for development projects
- Profits are used for public good rather than going to private investors or being siphoned off to foreign countries or off shore companies
- They are low cost since they don’t pay exorbitant salaries or bonuses to their CEOs
- They are oriented towards service rather than profit
- Public sector banks should have less fees and service charges.
There are different versions of public banking system around the world. We can adopt or modify a model that fits our needs.
In UK Labor party manifesto calls for, “establishing a National Investment Bank dedicated to supporting inclusive growth in their communities. The bank will deliver the finance that small businesses, cooperatives, and innovative projects need across the whole country. It will fill the existing gaps in lending by private banks. Create a banking system better matched to customer needs.”
German banking system has three kinds of banks, saving banks and cooperative banks belonging to public sector while there are also private banks.
There are state owned banks in some states in the USA.
Cooperative Banking System: This is another form of banking owned and managed by their customers on the principle of one person one vote. They offer a range of services like accepting deposits, and granting loans. The members are owners and customers at the same time.
India has an extensive cooperative banking system.
Banking for the poor: Almost 2.5 billion adults worldwide do not have access to formal banking sector. We don’t have these numbers for Pakistan. With advancing technology many new and innovative methods are being developed to make banking services accessible to the poor. Many countries around the world, for example India, Brazil and other countries have set up such systems. This has helped many to get out of poverty, avoid the predatory and exploitative practices of the alternate lending agents like land lords, reduce the cost of savings accounts etc. We need to learn from them and implement those which fit our needs.
Banking for the small and medium scale enterprises: Right now, it is very difficult and costly for small entrepreneurs to access capital to finance new businesses or manufacturing plants. This means most of the capital is going towards large capitalists and elite. By setting up systems where small and medium size investors can access capital will help in empowering them as well as fuel the economy.
Private Banking System: Pakistan has several major private banks. In fact, according to some sources the market share of private banks is almost 80% of the total. We must remember that just like any other private enterprise the sole purpose of private banks is to maximize their profit. They do that by increasing their ‘spread’. This means that they give loans at high interest rates and pay their customers less. There are many foreign banks operating in the country. We need to ensure that majority of profits from these banks are not siphoned off to foreign lands and off shore companies.
- Debt management: