The low growth and high inflation of the recent past should result in the shrinkage of the middle class. This is borne out by recent studies, most notably by the World Bank, showing poverty as having increased from 34.8 percent in 2015 to over 39 percent in 2023. It should be noted that increases in poverty are the result of people from the middle class falling into poverty, mostly those who had earlier emerged from poverty. It should be noted that the middle class generally pay the bulk of taxes, and are the most important consumers, leading as purchasers of consumer durables for example.
As the elite has engaged in elite capture, and the lower class is too poor, it is left to the middle class to bear the burden of the state. It should also be noted that it is from the ranks of the middle class that the rich will emerge. That makes it particularly important for a growing country like Pakistan, which depends on it to man the ranks of the nouveau riche that a growing economy should generate. However, both of its vulnerabilities, inflation and low growth, have been prominent in recent times, which has meant that more have fallen into poverty than ever before. This has not been helped by a population which is both growing and also younger than ever, which means that ever larger batches of young people emerge every year seeking jobs, which are shrinking in number. The way out of this problem is by eliminating the elite capture, and ensuring that the country’s resources are not hogged only by one class, and opened to all. Old-style industrialisation, as India is looking to, is not a solution, for it involves a disregard of the environment that sits ill with an era of climate change and reducing fossil-fuel use.
This means that the present fixation on IMF approval is counter-productive, for the IMF deprioritises growth in favour of ensuring a country’s solvency. While the government carries out anti-inflation measures with vigour, it must remember that all its efforts will come to naught if there is a sustained increase in the world oil price. Further, one of the factors behind its rise in poverty, the covid-18 pandemic, has still not played, as witness the worldwide inflation depressing Pakistan’s goods exports and remittances.
