Why economic growth alone cannot eliminate poverty in Pakistan?

In the history of the economy of Pakistan, it has witnessed growth at several junctures. Annual growth of more than 6% during the 1960s. Similar figures occurred in the 2000s. Today, however, about 40% of the people are living below the country's poverty line. Nor should this number be as significant as it is if growth were really the only consideration. It isn't. The answer is simple Growth is an indicator of the size of the pie, not who is consuming it.

Growth without distribution Is just a number. Higher GNP has always been at the cost of a select few people in Pakistan landlords, industrialists, and urban professionals while the needs of rural workers, the needs of the daily-wage labourers and the needs of females have always been neglected. Those surges in the economy do not provide jobs for the poor when the economy is fueled by real estate speculation, remittances or imports. It makes assets more expensive, benefiting already property-owning individuals.

The trickle-down effect, or the premise that money trickles down from the top to the bottom of the economy, does not play out in a country whereby elite groups can capture state resources in a systematic way. Land reform was rolled back. Powerful are being disproportionately served. Tax collection is one of the lowest in the region, thus reducing the State's ability to redistribute any resources at all.

Wealth Inequality from one Generation to the next. The child who is born poor in rural areas of Sindh or in the South Punjab doesn’t only live in poverty, now. She is burdened with poor nutrition, weak schools, lack of health facilities and early marriage. All these factors help block her opportunities to help her break the cycle of poverty as an adult. None of the above is remedied by economic growth alone. It needs conscious investments in public services which is lacking in Pakistan.

The educational expenditure in Pakistan is around 1.7% of GDP while health expenditure remains less than 1% of GDP. The amount spent is significantly less than other regions such as Bangladesh or India, which have been able to make more progress in literacy and child mortality. The simple transfer of poverty without this kind of investment is an intergenerational transfer in the context of a different economic climate.

Structural barriers block entry means that hard barriers or obstructions are preventing access. When employment opportunities are available, the poor are locked out of such work. Women's labour force participation rate in Pakistan is less than 25% one of the lowest in the world. This cannot be accounted for in terms of growth or lack thereof. It is rationalized by social norms, immobility, limited child care, weak law enforcement etc. Likewise, majority of Pakistan's disadvantagedness in informal sector. There are no contracts, no protection and no credit. They are excluded from the formal economic growth. Whether or not the headline GDP number says otherwise, they are still on the sidelines.

The Inflation Problem Inflation has been a frequent phenomenon in the periods of growth in Pakistan. When food and energy prices go up at a rate that is higher than wage growth (which they invariably do for the poor), growth has the effect of reducing the bottom 50 per cent's real standard of living. Food and fuel costs are 60 – 70% of poor people's income. Their only cushion against fluctuating prices is the lack of a hedge. The 5% growth rate is not progress for them with their 20% food inflation. It is regression.

What makes a difference in reducing Poverty. The lessons from Pakistan's own experience and from other similar countries indicate the targeted transfers, availability of public services, land reform, and enforceable rights to work. The Benazir Income Support Programme was effective in making a measurable impact in reducing extreme poverty. Girls' enrolment in schools was expanded, which led to better outcomes in the long-term. These are policy outcomes and not market outcomes. These interventions can be financed via growth. It is not their alternative.

These numbers will continue to disappoint irrespective of the GDP figures, until poverty reduction becomes a policy objective for government to take direct action for instead of leaving it as a result of an expanding economy.