Institutions, Economic Growth, and Participatory Development
January 11, 2014
Akmal Hussain*
1.
Introduction
This chapter provides a new perspective, located in institutional
economics, on the nature of the structural constraints to achieving sustained
economic growth in Pakistan and overcoming poverty. It argues that the
fundamental factor underlying the failure so far to embark on the process of
sustained economic growth is the economy’s rent-based institutional structure
and associated patron–client-based governance model.
The
institutional structure generates rents for a small coalition of elites by
restricting competition and excluding the majority of people from the process
of saving, investment, and high-wage employment. The consequent narrow base of
economic growth is unequal; it is also incapable of being sustained because of
lack of incentives for competitive efficiency and innovation on one hand and a
low savings rate and export growth on the other. This chapter argues that
sustainable economic growth can be achieved through an institutional change
whereby the process of saving, investment, productivity increase, and income
generation can be broad-based to include the poor and the middle classes.
Section 2 critically examines the neoliberal view that markets
are self-regulating and necessarily produce efficient outcomes. Section 3
analyzes the institutional factors underlying the pattern of economic growth,
endemic poverty, and slow growth in both export-based manufacturing and
agriculture. Section 4 argues that elite-dominated power structures at the
local level make markets as well as the provision of public services asymmetric
with respect to the rich and the poor. Some of the main institutional factors
underlying the asymmetry of markets and the provision of public services such
as health, education, and justice are examined briefly. Section 5 presents an
alternative approach: creating new institutions through which poverty reduction
can be built into the structure of the economic growth process to make it both
equitable and sustainable. Section 6 discusses one of the dimensions of this
institutional initiative—participatory development—in the context of the nature
of poverty and the processes through which the creative energies of the poor
can be harnessed. In this new growth process, the poor and the middle classes
become active subjects rather than merely passive recipients of an uncertain
“trickle-down” effect.
2.
A
Conceptual Note: Are Markets Necessarily Efficient?
Over the last four decades, the view that markets necessarily
deliver efficient outcomes and are self-regulating gained ascendency in the
corridors of power in academia as well as the sphere of public policy. The
lessons of the Great Depression of the 1930s were set aside and neoliberal
economics became the framework for policy thinking. It prescribed
nonintervention in markets on the grounds that market regulation was
inefficient, except central bank control of the money supply. This led to
policies deregulating markets and fostering privatization, reducing the public
sector’s role and allowing the private sector free play.
Hussain (2006) has critiqued the
neoliberal view that markets are self-regulating and should be allowed to
function unfettered in the context of Pakistan. He argues that the view that
“markets are self-organizing and self-regulating” implies “a physiology of
markets where the dynamics of the market organism ... are independent of the
specific history, institutional framework and the process of cultural change of
any particular country.” Yet the process of self-regulation as the neoliberal
view suggests is a messy and chaotic business, and “would necessarily occur in
the concrete historical and cultural context of a particular country.”
How long the mess would last and what the magnitude of the
chaos would be cannot be predicted by ”market developers, but would be discovered
by the people of that country.” On the basis of earlier research, Hussain
(2006) suggests that
what are referred to in the literature as ‘market distortions’
are not marginal but may be central to the functioning of a significant part of
the market space in Pakistan. The asymmetric nature of factor and product
markets and the consequent allocative and distributional inefficiency may be
organic to the nature of markets as they exist in the specific historical and
social context of Pakistan.
Two years later, the world economy was
struck by the greatest economic crisis since the 1930s. Under the influence of
neoliberal economics, the US Glass-Seagall Act 1933, which forbade retail banks
from engaging in risky investment activities such as selling securities, was
repealed in 1999 (Skidelsky, 2010, p. 7). Such market deregulation was a key
factor responsible for the world economic crisis in 2008. The neoliberal thesis
that markets are self-regulating proved to be spectacular folly with tragic
consequences for human societies across the capitalist world.
Neild’s (2009) seminal study provides a powerful critique of
economic orthodoxy, which he calls the general theory of market economics. He
argues: “the problem is that competitive endeavor can run wild if it is not
prudently constrained and policed by government. The orthodox theory of market
economies has failed to provide adequate guidance as to why and how constraint
should be applied” (p. 1).
Just as the Great Depression of the 1930s, as indeed the
current world economic crisis have made clear, markets as they exist are
subject to periodic failure not because of “market distortions” but because of
the structural imperfections that are organic to their actual functioning.
These include individual choice with imperfect information, the absence of an
adequate self-correcting mechanism, and the unequal distribution of power where
large economic organizations are interlinked. They can make highly risky
individual decisions that can have a major impact on the economy as a whole.
Investment decisions by individuals and organizations are based on the
probability of individual rather than systemic risk, which can lead to greater
risk in investment choices than any individual economic actor is able to
estimate. Spence (2009) points out that, in a situation where individual risks
are positively correlated and where the distribution of individual risk is
changing, estimating systemic risk becomes inherently difficult.
In the case of Pakistan, the neoliberal
idea is that incentives for innovation and risk taking will necessarily lead to
the emergence of dynamic entrepreneurs, who will then lead the economy to
sustained high GDP growth. As Hussain (2006) argues, this view ignores the
possibility that entrepreneurs in Pakistan respond not simply to profit
incentives and the presumed discipline of the market, but to a matrix of
institutions that embody both formal and informal rules. “The latter are
contained in norms and culture that change much more slowly than government
policy. The economic elite in the areas that now constitute Pakistan has
historically functioned within a patron–client model of governance since the
late 18th century” (Hussain, 2006, p. 3). As Ali (2003) suggests,
underlying the apparent discourse of modernity is the notion that neither the
polity nor the economy has made a fundamental break from the past.
3.
Institutional
Structure and Unsustainable Economic Growth
3.1.
Governance Model
and Rents
Central to the
problem of unsustainable growth is a governance model where the institutional
structure systematically generates rents for the ruling elites. North, Wallis,
and Weingast define rents as unearned income that accrues to an economic asset
when the benefit from its use exceeds its opportunity cost (2009, p. 19). In
Pakistan, power has been historically constituted through rents by establishing
patron–client relationships within a structure of dependency. In order to build
political support, the ruling elites appropriate and use state resources for
arbitrary transfer as rents to selected individuals and groups.
The rent-based
model of governance originated under the British Raj in the 19th
century, when the exigencies of establishing order required a convivial
relationship with the new agrarian elite in the Punjab. This new elite had
emerged following the peasant revolts in the late 18th century when
the preceding Mughal elite was overthrown and replaced by the leaders of the
revolt from among the upper strata of the peasantry (see Ali, 1988, 2003).
In the process
of establishing colonial power, the British government consolidated the
position of the new peasant lineages through revenue settlements that
formalized the proprietorship of the new zamindars
over land. Rent transfers in the form of resource gratification for the new
agrarian elite was unprecedented in Indian history, and was accompanied by the
British government’s development of the canal irrigation system and the
associated process of agriculture colonization in the late 19th
century. These areas were appropriated by the government as Crown waste to be
utilized or disposed of at administrative or political discretion. Landholdings
of between 100 and 500 acres were granted to existing members of the landed
elite who were loyal to the Raj. Some particularly favored individuals received
much larger holdings (Hussain, 2008b).
Post-independence,
the governance model and underlying institutional structure continue to
systematically generate rents for the coalition of elites that had emerged.
These included the landed elite of the pre-Partition period as well as the
military, bureaucracy, and a state-supported nascent entrepreneurial elite.
Particular forms of rents have characterized the policy and power framework of
each government in the post-independence period. For example, in the first
decade after independence, the principal form of rent was the grant of
“evacuee” property by the government to selected migrants from India.
During the Ayub Khan period (1958–68), various forms of rent emerged
through the regulatory economic policy framework. The modes of rent transfers that
were made to a small industrial and commercial elite during this period
included: direct and indirect subsidies, protectionist import controls, cheap
imported machinery and raw materials through an overvalued exchange rate, and
subsidized credit to favored entrepreneurs who were granted licenses to
establish commercial and industrial enterprises.
During the Z.
A. Bhutto period (1973–77), the main forms of rent consisted of lucrative
appointments in the nationalized sector to favored individuals, government
contracts, and bank loans. Rents were also transferred to loyalists through the
new system of “lateral entry” where individuals could be granted direct entry
at various levels into the elite Civil Service of Pakistan. Perhaps the largest
source of rent transfers to a broad range of upper, middle, and working classes
was conducted through the state-sponsored export of human resources to the
Middle East (Hussain, 2008b, p. 40).
During the
Zia-ul-Haq period (1977–88), a new form of rent generation emerged with the
inflow of multibillion-dollar economic and military aid to Pakistan when it was
positioned to play a frontline role in the US-sponsored Afghan jihad against
Soviet troops in Afghanistan. The Pakistan government acted as a conduit for
funds and weapons to support the war, during which a significant proportion of
these funds and the sale of some of the weapons enriched individuals and groups
favored by the government.
Under the
Benazir Bhutto and Nawaz Sharif governments, the principal form of rent was the
alleged siphoning of large funds from public sector banks, insurance companies,
and investment institutions such as the National Investment Trust and the
Investment Corporation of Pakistan. During the Musharraf government, the
government allegedly manipulated stock markets to enrich insiders through the
funds of banks and companies in the nationalized sector (Hussain, 2008, p. 39).
3.2.
Institutions and
the Pattern of Economic Growth
Despite over six
decades of economic growth post-independence, mass poverty persists in
Pakistan. This is because of an institutional structure characterized by rent
generation for the elites; a highly unequal distribution of productive assets;
and the exclusion of the majority of people from access to productive
resources, capital markets, and high-wage employment. Consequently, the process
of saving and investment is restricted to a small consumption-oriented elite
coalition that has failed to generate adequate savings and high rates of
investment. At the same time, the constrained competition characteristic of
such an institutional structure (North et al., 2009, p. 17) while generating
rents for the elite creates disincentives for diversifying exports toward high
value-added growth. Thus, two key constraints to sustaining high rates of GDP
growth have emerged: (i) a low savings rate and (ii) slow export growth.
Table 18.1
provides evidence on gross fixed capital formation (GFCF) as a percentage of
GDP in the private and public sectors under various political regimes during
1960–2010. The table shows that private sector gross investment as a percentage
of GDP has remained low for the last five decades under all political regimes,
military or civilian. In six out of the eight periods, private sector gross
investment was below 10 percent and reached about 14 percent during the
Musharraf regime. Total gross investment (private plus public) has also been
low, varying between about 12 percent during Prime Minister Yousaf Raza
Gillani’s regime to about 18 percent during the Musharraf regime.
Table
18.1: GFCF as a percentage of GDP and GDP growth rates, 1960–2011
|
Average during
|
GFCF as a
percentage of GDP
|
Annual GDP
growth rate (period average)
|
||
|
Private
|
Public
|
Total
|
||
|
1960–73
|
8.21
|
7.26
|
15.47
|
6.26
|
|
1973–78
|
4.79
|
10.71
|
15.50
|
4.99
|
|
1978–88
|
7.10
|
9.66
|
16.76
|
6.6
|
|
1988–93
|
9.22
|
8.73
|
17.95
|
4.92
|
|
1993–98
|
9.32
|
7.36
|
16.68
|
3.14
|
|
1998–2008
|
11.23
|
3.72
|
14.95
|
6.25*
|
|
2008–11
|
10.85
|
1.34
|
12.19
|
2.62
|
* Refers to the period
2002–08.
Source: Pakistan economic survey (various issues).
At existing
levels of income inequality, Pakistan requires a GDP growth rate of about 8
percent to have a substantial poverty reduction impact. To sustain a long-term
GDP growth rate of 8 percent, investment as a percentage of GDP needs to be
about 32 percent, given the incremental capital–output ratio (ICOR) of about 4.
If Pakistan is to move onto
a high-growth trajectory and reach the required investment target of 32
percent, while increasing the growth elasticity of poverty reduction, then a
change in the institutional structure for broad-based investment is necessary. This will require institutional changes
through which the middle classes and the poor can be enabled to engage in the
process of saving, investment, productivity increase, and innovation.
The New
Institutional Economics literature shows that a defining feature of developed
countries is their ability to sustain per capita GDP growth over long periods,
while underdeveloped countries achieve brief spurts of per capita income growth
but are unable to sustain it over longer periods (North et al., 2009, p. 6).
The evidence shows that a fundamental factor underlying the characteristic
failure of underdeveloped countries to sustain high GDP growth rates is their
rent-based institutional structure, which inhibits broad-based competition,
investment, productivity increase, and innovation.
The history of
Pakistan’s economic growth performance shows a structural inability to sustain
growth. As Table 18.1 indicates, growth has occurred in brief spurts followed
by sharply declining GDP growth. Relatively high GDP growth rates were achieved
mainly during the military regimes when large concessionary capital inflows
from the West were available to fuel growth. The average annual GDP growth
during the military regimes of Ayub Khan and Yahya Khan (1960–73) was 6.26
percent, which declined to 4.99 percent in the subsequent period of Z. A.
Bhutto’s government (1973–78).
GDP growth
accelerated again to 6.6 percent during the Zia-ul-Haq period (1978–88),
followed by a sharp decline in the subsequent democratic interludes of Benazir
Bhutto and Nawaz Sharif (1988–93 and 1993–98, respectively). Another spurt
occurred during the Musharraf period (1998–2008) when GDP growth reached 6.25
percent, declining sharply to 2.62 percent under the subsequent government of
Yousaf Raza Gillani (2008–11). It is clear that each of these spurts was
followed by a decline in growth. At the end of each high-growth period, the
structural constraints of a low domestic savings rate and slow export growth
were manifested in fiscal and balance of payments pressures, which induced a
subsequent slowdown in GDP growth.
3.3.
Low Savings Rate,
Taxation, and Inequality
Given the
rent-based governance model in Pakistan, the business elite enjoys various
forms of financial support from the government (subsidies, cheap credit, import
protection, tax exemptions). It is not surprising, therefore, that
entrepreneurs—many of whom are also landowners—following the tradition of the
landed elite, engage in conspicuous consumption and tend to have a low
propensity to save.
Historically,
the domestic savings rate in Pakistan has been less than the investment rate,
thereby creating a persistent savings gap that has induced growing national
debt, particularly during high GDP growth periods. For example, average annual
domestic savings as a percentage of GDP during 2001–2007 was 16.5 percent. By
contrast, the investment rate required to sustain the target growth rate of 8
percent with an ICOR of 4 is 32 percent (Pakistan, Ministry of Finance, 2007,
p. 11, table 1.6). The consequent debt-servicing problem has now become a
constraint to growth just as it was in the Ayub period in the 1960s and in the
Benazir and Nawaz periods in the 1990s. The low savings rate and consequent
dependence on foreign inflows is a major factor in the stop–go pattern of GDP
growth in Pakistan’s history.
The high
debt-servicing requirements resulting from the rent-seeking elite’s tendency to
consume rather than save, while also avoiding direct taxes, has obliged
successive governments to levy high and increasing indirect tax rates. An
earlier study on the increase in the incidence of the tax burden shows that the
increase in the tax burden as a percentage of income was highest at 6.8 percent
for the lowest income group (less than PRs 700 per month) and lowest for the
highest income group (at –4.3 percent, over PRs 4,500 per month). The evidence
shows that, over time, the tax burden on the poor has increased and declined
for the rich (see Pakistan, Ministry of Finance, 1997, p. 6). Thus, the
rent-based governance model and its incentive systems have induced a pattern of
elite consumption and government tax policy that reinforces income inequality
in the growth process.
Given the
highly unequal distribution of productive assets in Pakistan, interpersonal
inequality has risen in recent years. The Gini coefficient for income, which
was 0.27 in 2000/01 (World Bank, 2005, p. 281), has increased over the last
decade; the average for the period 2000–11 is 0.33 (United Nations Development
Programme, 2011, p. 137). Even this level of inequality is understated because
the top decile of the population tends to understate their income and
expenditure to avoid taxes. Shahid Javed Burki has derived improved estimates
of inequality in Pakistan on the basis of World Bank data. He suggests that the
top 10 percent of the population holds 27 percent of the national income. The
richest 18,000 people have an average income of USD 72,700 per capita, which is
about 70 times the overall per capita income of USD 1,050 of the population as
a whole.
As is now well
known, the higher the initial income inequality, the lower the impact of GDP
growth on poverty reduction will be. Pakistan’s high and rising economic
inequality has shaped the structure of the growth process whereby mass poverty
persists despite the relatively high trend rate of GDP growth (5.5 percent).
3.4.
Manufacturing,
Export Structure, and Growth[1]
In 1947,
Pakistan inherited not only various state institutions with their underlying
structures of power, but also the rent-seeking and risk-averse behavioral
proclivities of the economic elite.
Pakistan’s
failure to adequately diversify exports—and hence the slow export growth and
consequent perennial pressures on the balance of payments—is a structural
constraint to sustaining high GDP growth. Even after 60 years of industrial
growth, the percentage of total investment channeled into textiles and related
goods has not declined (it was 41 percent in 1964/65 and 44 percent in
1990/91). In terms of output, 80 percent of Pakistan’s manufactured exports
consist of textiles and clothing, compared to 12 percent for developing
countries and 6.5 percent for the world as a whole (World Trade Organization,
n.d.). The persistence of Pakistan’s textile-based export structure is an
important factor hampering overall export growth. This is because the
composition of demand in the global market has changed: world trade in textiles
is growing at a much slower rate than nontraditional manufactured exports.
Pakistan’s textile industry, which has remained largely at the lower end
of the value-added range, emerged in the 1960s as a result of large government
subsidies. The institutional structure of policy created disincentives to
innovation, productivity, and export diversification. By the 1990s, the structure
of state support to industry had been substantially dismantled. However, even
then, as late as 1990/91, as much as 7 percent of GDP was transferred by the
government to industrialists in the form of subsidies (Kemal, 1999). The
diversification of industry into higher value-added exports was constrained by
government patronage on one hand and the lack of risk-taking dynamism among
most industrialists on the other.
For the
manufacturing sector as a whole, the major elements in the current institutional
structure that constrain investment and growth are as follows.
-
The continued
threat to citizens’ lives and property due to persistently
poor law and order. The total number of terrorist attacks and other
incidents of political violence in Pakistan increased from 254 in 2005 to 2,386
in 2008. The direct and indirect costs of the war on terror during 2005–08 have
been estimated at PRs 2,083 billion,
with the average annual cost being 4.34 percent of GDP (Institute of Public
Policy, 2009, p. 76, table 4.7).
-
High electricity
tariffs and frequent power outages. These incurred an estimated overall cost to
the economy of PRs 1,228 billion in 2011/12, which was 6.3 percent of GDP in
that year (Institute of Public Policy, 2013, p. 86).
-
The adverse
incentive/disincentive structure within the institutional framework and an
inadequate technological base. These have constrained industry from responding
flexibly as the global pattern of demand changes toward higher value-added and
knowledge-intensive products.
-
The adverse policy
environment of the past. Tariff and export incentives have been distorted
against those entrepreneurs seeking to improve quality and productivity for
export growth (Pakistan, Planning Commission, 2010).
-
A weak enforcement
mechanism within the government with respect to trademark regulations and
tariffs. This has led to the widespread dumping of smuggled, poor-quality, and
extremely low-priced imported goods from China, which are in many cases
counterfeits of branded Pakistani manufactured goods (Pakistan, Planning
Commission, 2010).
3.5.
Institutional
Factors in Slow and Unstable Crop Sector Growth[2]
In agriculture,
the average annual growth rate of major crops declined from 3.34 percent during
the 1980s to 2.38 percent in the 1990s. The frequency of negative growth years
for some of the major crops has also increased, accentuating the process of poverty
creation. In a year of negative growth (i.e., a bad harvest), small farmers
operating at the margin have to borrow to meet their consumption requirements,
and thus fall into debt. In the following season, in the absence of an
investible surplus, they are unable to reconstitute the production cycle and,
hence, slip into poverty. Thus, the instability of crop sector growth and
increased frequency of negative growth years has become a structural factor in
poverty creation.
Underlying
this phenomenon are five major institutional constraints. The first is reduced
water availability at the farm gate due to poor maintenance of the irrigation
system and low irrigation efficiencies of about 37 percent. While the
availability of irrigation water has been reduced, water requirements at the
farm level have risen due to increased salt deposits on the topsoil and the
consequent need for leaching.[3] The
resulting large water deficit means that farmers even in the irrigated areas
are dependent on rainfall. Given the vicissitudes of weather—particularly due
to global warming, which has caused wide variations in the timing, location,
and quantum of rainfall—rain does not always fall in the right quantity at the
right time for water-deficit farmers. Consequently, there is greater
instability in crop sector output than before (Hussain, 1999).
What makes the
improved efficiency of irrigation even more important is that the extensive
margin of irrigated acreage has been reached, so that future agricultural
growth will have to rely on improving the efficiency of water use and other
inputs. Thus, the rehabilitation of Pakistan's irrigation system to improve
irrigation efficiency has become a crucial policy challenge for sustainable
agriculture growth.
It is well known that high-yielding seed varieties gradually lose their
potency through reuse, the changing microstructure of soils, and the changing
ecology of micro-organisms in the topsoil. The average age of wheat seed in
Pakistan is 11 years compared to 7 years in all developing countries (Hussain,
1999). Therefore, breeding more vigorous seed varieties adapted to local
environmental conditions and diffusing these among farmers through an effective
research and extension program is necessary.[4]
The
possibility of declining yields per acre related to global warming indicates a
new dimension of the imperative of improving research capability in the crop
sector. Given the sensitivity of wheat seed to temperature increase, even a
two-degree-centigrade increase in average summer temperatures could mean an
absolute yield decline of between 10 to 16 percent during the 21st
century.[5] With a
2.8 percent population growth rate, a decline of 10 percent in yield per acre
associated with global warming could mean serious food deficits and high food
inflation rates for Pakistan, with greater adverse consequences for the poor.
Indeed, the United Nations’ Intergovernmental Panel for Climate Change (2007)
predicts a 30 percent decline in the yield per acre of food crops in South
Asia. It is, therefore, necessary to develop heat-resistant varieties of food
grains through an institutional framework for collaboration between agriculture
research centers across South Asia
One of the
most important constraints to sustainable growth in the crop sector is soil
degradation resulting from improper agricultural practices such as: (i) lack of
crop rotation and the resultant loss of humus in the topsoil, (ii) the
stripping of topsoil and resultant loss of fertility associated with
overgrazing, and (iii) water erosion along hillsides and riverbanks due to the
cutting down of trees and depletion of natural vegetation. According to one
estimate, over 11 million hectares have been affected by water erosion and 5
million hectares by wind erosion (Mian & Mirza, 1993).
4.
Institutions,
Markets, and Public Services
This section
examines four features of the power structure that makes markets asymmetric to
function adversely against the poor.
4.1.
Power, Tenancy,
and Tied Labor
In areas where
landowners control the local state apparatus as well as the credit market, poor
tenants are locked into a nexus of power and debt bondage with their
landowners. Consequently, the tenants are obliged to work part time on
landowners’ farms as laborers either at less than market wage or no wage at
all. The Pakistan National Human Development Report (PNHDR)’s survey data shows
that 51 percent of tenants get locked into debt dependence on their landowner;
out of these, 57 percent are obliged to work as laborers on the landowner’s
farm without wages, while 14 percent work for a wage below the market rate
(Hussain, Kemal, Ali, Hamid, & Mumtaz, 2003, p. 63, table 14). This
structure of power and dependence creates distortions in the labor and capital
markets, which systematically deprive the poor of their actual and potential
income. The consequent inefficiency in the allocation of labor and capital
resources constrains agricultural growth, increases inequality, and engenders
persistent poverty (see Table 18.2).
Table 18.2: Loan dependence on
landowners and labor exploitation of the poor peasantry
|
Status
|
Extremely
poor
|
Poor
|
Nonpoor
|
Total
|
|
Loan from landowner
(%)
|
50.8
|
29.4
|
11.7
|
34.4
|
|
Work for landowner
against wages (%)
|
14.0
|
24.3
|
5.1
|
16.9
|
|
Daily wages (PRs)
|
28.0
|
43.6
|
60.0
|
40.0
|
|
Work for landowner
without wages (%)
|
57.4
|
38.5
|
25.4
|
43.5
|
Source: National Human Development
Report 2003; Poor Communities Survey of Pakistan 2001 (Pakistan Institute of
Development Economics).
4.2.
Power and the
Double Squeeze on the Peasantry
In
landowner-dominated areas, a landowner’s power affects the disposal of the produce
by poor farm households, which has direct consequences for their food
consumption. As Table 18.3 shows, under asymmetric tenure arrangements,
extremely poor farmers are obliged to pay a larger proportion of their farm
produce to the landowner as rent compared to other categories of the peasantry.
For example, the extremely poor have to pay 28.21 percent of their production
value to the landowner compared to 13.39 percent by poor households and only
8.41 percent by nonpoor households. Consequently, the extremely poor are forced
to keep only 39.59 percent of their crop output for household consumption,
compared to 48 percent by the poor and 54 percent by the nonpoor.
Table
18.3: Disposal of crop harvest by income class
|
Economic status
|
Total
production value
|
Paid in
kind to labor
|
Paid as
rent
|
Paid to
landowner under share cropping agreement
|
Given to
relatives
|
Crop sold
|
Crop kept
for own use/total production value*100
|
|
(Value)/total
production value*100
|
|||||||
|
Extremely poor
|
13,864
|
1.45
|
1.10
|
28.21
|
0.09
|
29.57
|
39.59
|
|
Poor
|
22,538
|
2.76
|
1.40
|
13.39
|
1.06
|
33.27
|
48.12
|
|
Nonpoor
|
37,626
|
4.70
|
0.83
|
8.41
|
1.61
|
30.02
|
54.43
|
Source: National Human Development
Report 2003; Poor Communities Survey of Pakistan 2001 (Pakistan Institute of
Development Economics).
The evidence
suggests that poor tenant households face a food deficit near the end of the
year due to the relatively small crop share they have been able to retain. As
they run out of their household stock of food grain, they are obliged to
purchase grain in the market at the year’s end when market prices are
relatively high.[6]
Such households then need to borrow for food consumption. The PNHDR evidence
supports this argument, and shows that extremely poor households borrow to meet
their food consumption needs (Hussain et al., 2003, chap. 3, table 1).
Poor farm
households are thus placed under a double squeeze. In the first instance, they
are obliged to give up a relatively large proportion of their crop output as a
crop share to the landowner. The second squeeze is a result of seasonal
variations in the market price of grain, which forces extremely poor households
to purchase a relatively large proportion of their food consumption
requirements from the market near the end of the production cycle, when prices
are high (Hussain, 2004, pp. 76–77).
4.3.
Adverse Changes in
Tenancy Arrangements and Poverty
As the evidence
suggests, since the majority of the rural poor are tenants, any deterioration
in tenancy arrangements would be expected to accentuate their poverty. The
weakening relative power position of poor tenants means that tenancy
arrangements have changed adversely for them. They now have to bear a higher
proportion of input costs than their landowners on tenant-operated farms. As
Table 18.4 shows, tenants’ contribution to input costs (for each of the major
crops)—such as tractor rental (see Hussain et al., 2003, p. 64, table 16),
hired labor, and seed and fertilizer—increased during 1990/91 to 2000/01.
Table
18.4: Tenants’ contribution to inputs (%)
|
Economic status
|
1990/91
|
2000/01
|
||||||
|
Tractor
|
Labor
|
Seed
|
Fertilizer
|
Tractor
|
Labor
|
Seed
|
Fertilizer
|
|
|
Extremely poor
|
36.3
|
13.8
|
24.8
|
26.0
|
43.5
|
28.5
|
31.0
|
31.8
|
|
Poor
|
29.5
|
18.8
|
22.8
|
24.5
|
41.3
|
30.5
|
34.5
|
34.0
|
|
Nonpoor
|
39.8
|
25.8
|
28.8
|
27.3
|
44.5
|
32.8
|
38.8
|
34.5
|
|
Total
|
34.3
|
22.5
|
24.8
|
25.5
|
42.8
|
30.3
|
34.0
|
33.3
|
Source: National Human Development
Report 2003; Poor Communities Survey of Pakistan 2001 (Pakistan Institute of
Development Economics). For crop-wise figures, see Hussain et al. (2003, p. 64,
table 16).
The above
evidence suggests that the adverse changes in tenancy arrangements with respect
to tenants’ input contributions have become a significant structural factor in
generating poverty. While the financial burden on poor tenants has thus
increased, their lack of control over the timing of water application, combined
with adulterated inputs, keeps the yield per acre low, thereby further
squeezing their net incomes.
4.4.
Asymmetric Markets
for Inputs and Outputs
Hussain et al.
(2003) argue that local elite power structures in rural areas distort markets
in favor of the rich and against the poor. Poor peasants face input and output
markets in which they have to pay a higher price for their inputs while
receiving a lower price for their outputs than large farmers. The study shows
that the latter lose as much as one third of their income due to asymmetric
markets (pp. 65–68).
4.5.
Poverty and
Illness
Hussain et al.
(2003) show that 65.1 percent of the extremely poor and 55.6 percent of the
poor in the PNHDR’s sample survey suffered from ill health due to inadequate
diets and lack of access to safe drinking water and sanitation facilities. The
data also shows that poor respondents reporting sickness at the time of the
interview had, on average, been unwell for 95 days of the year (see Table 18.5).[7]
The prevalence
of disease among those who are slightly above the poverty line is a major
factor pushing them into poverty. Those who are already poor are pushed deeper
into poverty as a result of loss of income due to absence from work and high
medical costs incurred by illness. Thus, unequal access to public health
facilities and the relatively high prevalence of disease among the poor becomes
a structural factor that accentuates both poverty and inequality (Hussain et
al., 2003).
Table
18.5: Profile of the poor who are sick (household head
only)
|
Economic status
|
Sick at the
time of survey (%)
|
Number of
days of current sickness (mean)
|
Treatment
expenses
(PRs)
|
Patients
traveling over 6 km for treatment
(%)
|
|
|
Extremely poor
|
65.1
|
94.9
|
1,885
|
49.4
|
|
|
Poor
|
55.6
|
27.4
|
497
|
29.5
|
Source: National Human Development
Report 2003; Poor Communities Survey of Pakistan 2001 (Pakistan Institute of
Development Economics).
4.6.
Education,
Poverty, and Growth
The relatively
low levels of literacy, high-school enrolment rates, and poor quality of both
school-level and higher education in Pakistan compared to other South Asian
countries indicates the low priority given to education. This is understandable
in a country where the allocation of public resources and the institutional
framework for translating them into outcomes are determined by a ruling elite
dominated by the military, bureaucracy, and landowners.
This power
structure affords greater priority to expenditures on the military,
bureaucracy, and transfer of public resources as rents to various strata of the
elite and its dependents. Building an institutional framework for higher
education based on high-quality research is also not a high priority. Education
requires resources and institutional mechanisms for high-quality teaching,
research, and the infrastructure facilities to pursue these activities. At the
same time, it is necessary to have an environment of intellectual freedom to
pose and pursue new questions and to engage in critical thinking. This is
inimical to a rent-based power structure that relies on authoritarian rule,
whether in military or civilian form.
Although the literacy rate has increased sharply from 46 percent in 1999
to 54 percent in 2006, the gender gap remains high (23 percentage points) and
has not changed significantly over the period.[8] The
gross primary school enrolment rate at about 70 percent has remained unchanged
over the last two decades in spite of the multibillion-dollar Social Action
Program of the 1990s. At the same time, almost 25 percent of the total
population (over 40 million) consists of adult illiterates. Due to the
relatively low school enrolment rates, the number of adult illiterates is
expected to rise during the coming decade, thereby increasing poverty even if
greater employment opportunities become available. In Pakistan, 91.6 percent of
the labor force is unskilled (Majid, 1997, pp. 34–35), with low productivity
and poor adaptability to technical change. This constitutes a significant
structural constraint both to growth and poverty reduction.
The survey
evidence in the PNHDR shows that one of the key factors that can pull a poor
household out of poverty is the presence of a second earner. The data indicates
that the magnitude of the second earner’s income depends on his/her level of
education (Hussain et al., 2003). The poor coverage and quality of school
education and vocational training in Pakistan thus constitutes a significant
structural constraint to growth as well as poverty reduction. The extremely
poor quality of higher education in most Pakistani universities and control of
some of them by obscurantist and coercive religious groups is as much a
constraint to equitable growth as it is to building an enlightened,
pluralistic, and democratic polity.
4.7.
Poverty, Justice,
and Citizens’ Security
The poor live in
urban or rural localities that are inadequately policed. In case of theft or
violence against their person, the cost of seeking redress through the judicial
system is, in most cases, unaffordable; where undertaken, the expenses in terms
of time and money lock the poor into permanent debt. This also engenders
endemic poverty, reinforces inequality, and thereby constrains economic growth
(see Table 18.6).
Table
18.6: Frequency of disputes and resolution, and cost of resolution
by economic status (cases reporting disputes only)
|
Economic status
|
Distribution
of reported disputes
(%)
|
Amount
spent on mediation (mean) (PRs)
|
Percent of
reported disputes resolved
|
|
Extremely poor
|
17.1
|
18,333
|
38.5
|
|
Poor
|
48.7
|
12,074
|
59.5
|
|
Nonpoor
|
34.2
|
18,264
|
80.8
|
|
Total/average
|
100.0
|
15,123
|
63.2
|
Source: National Human Development
Report 2003; Poor Communities Survey of Pakistan 2001 (Pakistan Institute of
Development Economics).
5.
Building Poverty Reduction into the Structure of the Growth Process
The preceding
section has identified some of the structural factors underlying endemic
poverty and unstable growth. This section presents a set of institutional
initiatives that can be undertaken to initiate the process of pro-poor growth,
helping to overcome the structural constraints to sustained and equitable
growth. These include: (i) providing land to the landless as part of a new
small farmer-based agriculture growth strategy, (ii) mainstreaming the poor by
establishing large corporations owned by the poor but run by professionals, and
(iii) overcoming the institutional constraints to the rapid growth of
small-scale enterprises (SSEs). These three initiatives are only outlined in this
section, since they have are discussed at length in Hussain (in press). A
fourth initiative, participatory development, is elaborated in Section 6 of
this chapter.
Pro-poor
growth can be defined as a process that directs a disproportionate share of the
increase in national income toward the poor. Going beyond this, restructuring
the growth process in favor of the poor involves empowering them to participate
in the economic, social, and political decisions that affect their material
conditions.
Designing a
policy for pro-poor growth involves addressing the structural features of
Pakistan’s growth process that constrain its capacity at the macro-level for
poverty reduction (see Sections 3 and 4). Therefore, at the macro-level, a
pro-poor growth policy should aim to achieve increased employment elasticities
and lower ICORs by increasing the weight in GDP of microenterprises, and the
output of small farms and small-scale manufacturing enterprises. The strategy
would also feature institutions that could take to scale a localized process of
capital accumulation through participatory development.
5.1.
Land for the
Landless
One of the most
important factors in endemic poverty in rural areas (where the majority of
Pakistan’s poor reside) is that millions of households do not own any land or
that their ownership of this productive asset is less than the critical level
required for subsistence. The data shows that poor peasants who do own land
have, on average, 2 acres, while larger farmers are able to rent additional land.
Poor farmers either rent out their small owned holdings for a pittance or are
obliged to sell their land altogether (Hussain, 2008a). For example, according
to the PNHDR’s sample survey, as many as 76.5 percent of extremely poor farmers
and 38.9 percent of poor farmers sold their land over the period 1990–2000
(Hussain et al., 2003). The evidence shows that the poor have to sell their
land to meet urgent consumption needs related to health expenditure, crop
failures, and weddings. Thus, lack of access to this vital productive asset is
an important structural factor in endemic poverty.
Farms smaller
than 25 acres constitute about 94 percent of the total number of farms and
about 60 percent of the total farm area. This sector has untapped potential for
increasing the yield per acre on cropland and increasing the output of milk and
livestock products. As discussed elsewhere, a new small–medium farmer-based
agriculture growth strategy could be initiated to transfer the existing 2.6
million acres of state-owned land to landless peasants (see Hussain 2008a, in
press). This could be supported by the establishment of a small–medium
farmer-owned corporation through a public–private partnership that would
provide them with the following facilities: land development; access to
high-quality seeds, fertilizers, and marketing services; extension services to
improve the application efficiency of irrigation; and new technologies for high
value-added crop farming such as tunnel farming.
5.2.
Mainstreaming the
Poor through Equity Stakes[9]
One
institutional change that could bring the poor into the mainstream market
economy would involve establishing professionally managed public limited
companies in which the poor have a substantial equity stake (for a more
detailed discussion of the institutional framework of such an initiative, see
Hussain, in press). This concept was first propounded by Professor Rehman
Sobhan and successfully tried out in the diversification process of the Grameen
Bank in Bangladesh. It was also tried out in India by Dr Verghese Kurien who
set up Amul (originally a cooperative), which is owned entirely by the poor and
is now one of the largest manufacturers of milk products in South Asia’s
corporate sector.
In Pakistan’s
case, there may be considerable potential for developing livestock and milk
production by the rural poor and supplying these products to large private
sector corporations for the manufacture and export of milk and meat products.
The private sector corporations that would buy their inputs from the poor could
also be owned substantially by the poor. The equity stake to the poor could be
achieved initially through the provision of loans to be paid back from the
corporations’ dividends. Similar public limited companies owned by the poor and
run by competent professionals could also be established in key mainstream
sectors of the economy such as energy, telecommunications, and electronics.
5.3.
Institutions for
Stimulating Growth of SSEs
SSEs in small
towns and peri-urban localities of Pakistan have considerable growth potential
because of their highly skilled technicians and innovative entrepreneurs.
However, their growth is constrained by the following institutional factors:
(i) lack of institutional linkages for subcontracted work with the large-scale
manufacturing sector; (ii) lack of access to specialized fabrication facilities
such as forging and heat treatment, which are necessary for the dimensional
control of high value-added metal products; (iii) lack of expertise in
establishing quality control procedures for the production of bulk orders; and
(iv) lack of access to credit facilities and working capital with which to
purchase high-quality raw materials.
These
constraints could be overcome by facilitating the establishment of common
facilities centers in the private sector. These could provide services such as
linking SSEs with the large-scale manufacturing sector through marketing
services; specialized fabrication facilities on a rental basis to SSEs;
specialized training in production management and quality control; and access
to credit for the purchase of high-quality raw materials and specialized
equipment (see Hussain, 2009a, pp. 26–30; in press).
6.
Sustaining Growth
Through Participatory Development
6.1.
The Nature of
Poverty and Human Potential
Like all human
beings, the poor, too, have creative potential. Denied the minimum food and
basic necessities, such as health and education; excluded from access to
investible resources, training and high-wage employment; and living in atomized
communities, the poor in Pakistan are, however, unable to actualize their human
potential.[10]
The process of experiencing human potential as indeed of overcoming poverty
involves a new relation with the community and oneself. It is when fragmented
communities are reconstructed and organized to enable individuals to gain
equitable access to markets, skill training, and credit that the poor can
transform their condition. It is through creative thinking and action in
harmony with the community for a better life that the poor experience their
human potential.
The process of
rediscovering community identity, acquiring new skills, upgrading their
knowledge, and being able to take initiatives to improve their economic
condition together with others, gives the poor new power over the social forces
that shape their lives. This consciousness allows them to shift out of their
self-perception of passive victims to active subjects able to initiate
individual and collective interventions to overcome their poverty.
This
consciousness of their potential to bring about change and the institutional
capacity to actualize it constitutes empowerment: it gives the poor the ability
to undertake a sustained increase in incomes by breaking out of the nexus of
elite power that has locked them into a structure of dependence at the local
level and systematically deprives them of a significant proportion of their
incomes (see Section 3).
6.2.
Participatory Development: Individuals, Communities, and Markets
Participatory
development involves a dialectical relationship between the formation and
progressive strengthening of group identity on one hand and the improvement of
the individual household’s material conditions on the other.[11] Community
organizations (COs) change the balance of power at the local level in favor of
the poor by giving them improved access to markets. As a CO emerges, it enables
individual members to acquire skill training, achieve productivity increase,
and obtain credit and access to product markets to systematically increase
their household incomes, savings, and investment. Thus, a localized process of
capital accumulation begins that is sustained by the leverage over markets and
public sector services that COs enable.
This interaction between the individual, CO, and markets helps to
strengthen group identity with each successful income generation project at the
individual level. Strengthening the CO becomes, in turn, the basis of more
complex and diversified projects. These can range from individual
microenterprise projects to collective projects with spinoffs for individual
welfare such as localized irrigation projects and the development of community
schools and basic health services (Hussain, 1994).
6.3.
Process of
Participatory Development: Dialogues, Communities, and Consciousness
The process of
participatory development begins usually with an external facilitator or
development nongovernment organization (NGO) that initiates a series of
dialogues with a particular community. The dialogues are meant to identify a
set of feasible income generation projects that can be undertaken by individual
households, possible sources of local resource generation, and the community’s
preferences with respect to collective projects for the provision of skill
training, education, and health facilities. At the same time, these dialogues
aim to rekindle the awareness that individual welfare can be more effectively
pursued through the formation of a CO.
The size of
any one CO is usually between 25 to 30 members, each from a different
household, and the formal rules of this organization stipulate a weekly meeting
of all the members, with a written record of the minutes. At these meetings,
members identify projects, monitor implementation, help resolve teething
troubles, and commit to supporting households that are facing problems of
access to markets and public services in the pursuit of their individual income
generation projects. External expertise is also brought to bear by the CO
during these meetings, to facilitate household-level microenterprise projects
or community-level social and physical infrastructure projects. Thus, the
participation of members of a community is not through “representatives” who
act on their behalf; rather, each member of the organization is actively
involved in project identification, formulation, implementation, and
evaluation.
The Punjab
Rural Support Program (PRSP), established in 1998, is testament to the efficacy
of participation through the institutional structure of a CO. Following
dialogues with a peri-urban community near Gujranwala, the households agreed to
form a CO with the proposed institutional structure if some of them could
acquire their own weaving machines (khaddis)
for producing cotton mats (durris).
These households were already producing durris on an outsourcing basis for an
urban entrepreneur who provided the machines and thread but purchased the
output at an extremely low price to maximize his intermediary profit. This
arrangement yielded only PRs 3,000 per month to the producers.
Facilitated by the PRSP, the CO members provided the social collateral
to obtain microfinance to purchase the machines and thread. The independent
household production of durris more than doubled their income when they sold
their product in the market. The CO ensured 100 percent payback on the loans
that individual members had been granted.
Similarly, in
a village near Multan, the PRSP’s dialogues resulted in the formation of a
women’s CO for the production of bamboo sunshades. The CO was linked up with
trainers who helped members to learn the craft. They were then facilitated
through the CO in selling their product in the nearby market at a lucrative
price. In both cases above, the weekly CO meetings helped to identify the
project, assess its feasibility, facilitate implementation, and encourage
members to save from their increased incomes as a basis for enlarging their
project.
In each of the
provinces of Pakistan, peasants may be poor, but they have inherited a rich
cultural and philosophical tradition that is reflected in their forms of
apprehending social life, their poetry, and folklore. Through their forms of
love and social action, these peasants express their dreams and make their
history.
The
consciousness of the poor peasantry has been deeply influenced by Sufi saints.
This emerges in their folklore and images of contemporary language use, for
example in the Punjab. A central experiential reference point is love (ishq), as a mode of self-actualization.
The peasants understand self-development as inseparable from nurturing the
ability to love: It is a process of transcending the ego through a connection
with the other. Says Shah Hussain, the 17th century Sufi poet:
You are the woof and you the warp
You are in every pore
Says Shah Hussain Faqir
Naught am I, all is you.
Accordingly,
the more developed a person’s consciousness, the more he or she locates himself
in the collective being of the community, which Shah Hussain has expressed as
follows:
The Faqirs have their being
in the coming together of the community
For their consciousness is in full bloom.
In the
peasantry, the consciousness of the Sufi tradition is woven into language use,
and is manifest in the cadences of their speech as much as their silences.
Najam Hussain
Syed, the great contemporary Sufi poet, refers to this subliminal consciousness
of the peasantry as:
Somewhere on the slopes of silence
Beat the drums of the unsaid
and again as:
Far on the banks of memory falls
Your shadow, Ranjha.
In the process
of participatory development through dialogue and action, there are moments
when this counter-consciousness of love and relatedness of integrity and
creative action, comes into play as a material force in the process of social
and economic change. The challenge in the dialogues undertaken by the PRSP was
to bring about this gestalt switch in consciousness, through word, gesture, and
work procedures.
6.4.
Institutional
Challenges in Taking Development NGOs to Scale
If participatory
development is to make a significant contribution to achieving inclusive growth
in Pakistan, then COs need to be replicated at the necessary speed and scale
and at a feasible resource cost to be able to have a national impact in the
foreseeable future. Over the last few decades, development NGOs in Pakistan
have used various versions of community participation, ranging in size from
community-based organizations at the village or mohallah level to the union council level, such as the Pakistan
Institute for Environment-Development Action Research (PIEDAR). Some NGOs have
scaled up to the district or multidistrict level (the Kashf Foundation and
Akhuwat). Others include large top-down government-initiated NGOs at the
provincial level—such as the rural support programs in Punjab, Sindh, and
Balochistan—and even the national level (the National Rural Support Program).
Some development NGOs have grown rapidly, others slowly; some unleash
communities’ creative energies by enabling them to be autonomous, while others
are more bureaucratic. Similarly, some development NGOs are cost-effective
while others, particularly government-created top-down ones, have prohibitively
high overheads.
In the case of some large top-down government-created NGOs, questions with
regard to key issues of feasibility persist. High overheads create a continuing
dependence on government and donor funds. The inaccurate targeting of the poor
with respect to credit and organizational support poses a problem. Moreover,
the pace at which poor populations are covered is so slow and the cost of
social mobilization so high, that the prospect of covering a substantial
proportion of the poor can become impossible within a realistic timeframe and
given the government’s resources.
The central
challenges in achieving scale in participatory development are as follows.
First, it is important to retain the autonomy of each CO and its institutional
mechanisms for nurturing community consciousness and ensuring participation in
project identification, implementation, and monitoring. Second, rapid
multiplication should occur without falling prey to the formation of a
centralized top-down bureaucracy that tends to stifle the CO’s autonomy while
being expensive. Third, COs need to become financially independent of donors
and the government by keeping their overheads to a minimum and achieving
economies of scale through reduced administrative (social mobilization) costs
as the organization grows.
7.
Conclusion
This chapter has
examined the roots of Pakistan’s problem of achieving sustained growth in terms
of the economy’s institutional structure and the country’s model of governance.
The constraints to sustained growth that take the form of a low domestic
savings rate and incapacity for adequate foreign exchange earnings are located in
the institutional structure. A growth process that is narrowly based on a group
of elites—generating rents for them by excluding the majority of people—creates
inequality, persistent mass poverty, and disincentives for saving, efficiency,
innovation, and international competitiveness.
The
patron–client model of governance originated when, in the process of
establishing the British Raj in the 19th century, the new agrarian
elite that had emerged following the peasant revolts against Mughal rule in the
18th century, was consolidated. This was done through revenue
settlements that formalized the proprietorship of the new zamindars and rent
transfers granting land to loyal zamindars during the development of the canal
irrigation system. The chapter has also discussed the various forms of rent
generated by successive governments in Pakistan post-independence to show how
the patron–client model of governance inherited from the Raj, persisted.
Additionally,
the chapter has examined the institutional factors underlying slow growth in
manufactured exports and unstable growth in agriculture. It has analyzed the
structures of power, tenancy, and tied labor that systematically deprive the
poor peasantry of a large proportion of their income. The evidence shows how illness,
lack of education, and lack of access to justice play an important role in
perpetuating poverty, inequality, and slow growth.
If growth is
to be sustained and poverty reduced rapidly, then the process of investment and
productivity needs to be broad-based to include the poor and the middle classes
in both the agriculture and manufacturing sectors. This can be achieved through
a new small farmer agriculture growth strategy to provide land to the landless
together with ancillary services for land development, high-quality seed,
improved irrigation efficiency, and access to new farming practices and
technologies. At the same time, the growth of small and medium enterprises in
the manufacturing sector can be accelerated by establishing common facilities centers
in the main regional growth nodes.
Finally, the
chapter has analyzed the nature of poverty and the possibility of overcoming it
in terms of institutions that could actualize the human potential of the poor
through participatory development. In this context, the chapter has discussed
the main features of participatory development and the challenges of taking it
to scale to show how the development of community consciousness can play a
vital role in transforming the material conditions of the poor.
* The author is Distinguished
Professor of Economics at Forman Christian College University, and a member of
the governing board of the South Asia Centre for Policy Studies.
[1] This section draws on Hussain (2008a).
[2] This section draws on Hussain (1999).
[3] About 33 million tonnes of salts are annually brought
into the Indus Basin irrigation system, out of which 24 million tonnes are
retained (see Pakistan, Finance Division, & Pakistan, Planning Commission,
2001, p. 23).
[4] Yet there is no organized seed
industry in Pakistan to meet farmers’ needs for the supply of vigorous
varieties of seed, even for the major crops. Compared to India, there was a
sharp decline in total factor productivity growth in Pakistan after 1975, which
can be attributed to the poorer level of research and extension in Pakistan
(see Rosegrant & Evenson, 1993).
[5] If atmospheric carbon doubles,
average summer temperatures in Pakistan are expected to increase by 1.5 to 4.5 °C (a
base average of 2.5 °C) over the next 70 years. This
could lead to a decline in wheat yields from 10 to 60 percent, depending on the
type of wheat seed, planting time, and related atmospheric/weather conditions
(see Qureshi & Iglesias, 1992).
[6] An analysis of the mechanisms of poverty generation in
the rural areas (with special reference to the Punjab) was first conducted on
the basis of a 1978 field survey. See Hussain (1988, chap. 5, pp. 101–176).
[7] They also relied predominantly on private allopathic
medical practitioners due to lack of access to and the poor quality of most
government hospitals. Private medical clinics, like government hospitals, have
grossly inadequate diagnostic facilities and often poorly trained staff. The
result is that when the poor fall ill, they suffer for a protracted period and
are locked into a source of medical treatment that, despite being expensive, is
frequently ineffective (see Hussain et al., 2003).
[8] Estimates based on Pakistan, Ministry of Finance (2007,
pp. 161–174).
[9] This section draws on Hussain (in press).
[10] Aristotle (1980, book 1, section 5) proposed that human
functioning is the real object of value. The implication of this
formulation for public action today in the context of poverty is that maximizing
value in society requires enabling the maximum number of people to actualize
their human potential.
[11] The discussion on participatory development in this
section is based on the author’s experience of organizing poor rural
communities in nine districts of the Punjab in 1998, when, as the first chief
executive officer of the Punjab Rural Support Program, he helped to initiate
and establish the program on the basis of the methodology of participatory
development. For a field report, see Hussain (2009b).
Labels: Pakistan, Pakistan Economy, Pakistan: Moving the Economy Forward, Publications
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