The current PTI government presented its economic blueprint in Budget 2021-2022 by setting the expenditures and revenues based on its priorities. The main theme of its economic triumph is based on expansion in GDP growth, instead of economic development in coming years. In the budget document and press conferences, the Finance Minister has clearly depicted that it is focusing on economic growth for the prosperity of Pakistan in the long run.
The economic team is very assertive that the focus on growth will reap benefits in the shape of poverty alleviation, employment generation, gender equality and expansion in trade. This confidence is based on the “Trickle Down Theory” which postulates that due to economic growth, the rich become richer in short run but there is no need to worry because after a few years, the impact of inequality will trickle down for employment generation and poverty alleviation of the poor segments of society. In the long run, everyone will be equally benefited and this will lead the economy toward prosperity.
If only GDP expansion is our target, the government will enhance the expenditures on schools, hospitals, roads, dams, etc but this will not contribute in enhancing the literacy rate, health outcome, employment for the poor and vulnerable. This phenomenon is known as “Growth Without Development” and we have experienced it for the last many decades
The concept of trickle-down theory was introduced by Will Rogers in 1944 with the theme that there is a dire need to lower the business restrictions, minimize the tax rate, facilitate the investors in the short run and it will be beneficial for the vulnerable groups, unemployed and the socially excluded in the long run. This idea got prominence in the second half of the 20th century and many countries have followed the philosophy of trickle-down, Pakistan being one of them. In 2020, Bloomberg reported the study of Craig Stirling on “50 Years of Tax Cuts for Rich Didn’t Trickle Down” based on 50-year empirics, and this study concluded that trickle-down theory does not promote employment or trade, or alleviate poverty. Even the experience of Pakistan in the 1960s was not pro-poor, it has been observed that there was very high economic growth but with increased poverty and inequality, which further leads the economy toward political instability. If we build economic growth on the cost of poverty and inequality, it will hurt the sustainability and inclusive growth for the future generations.
The PTI government launched its political campaign named Naya Pakista” during the 2018 elections and kept it up afterwards. We have more than 60 percent population under the age of 30 years and are known as a young country. After 70 years of vulnerable living, people were very motivated that soon they would enjoy the new era of development in Naya Pakistan, where everyone would have inclusive employment, quality education, health facilities, good governance and a corruption-free country.
No one is even ready to accept this unexpected decision of the current government based on trickle-down philosophy, because this thought has been found to have failed in the globe, and even in Pakistan during the 1960s
So, this is very strange for both the friends and foe of the government, that how they would sell this expired product and convince the masses because they are only concerned with poverty alleviation, employment generation and price control, instead of GDP growth, business development, financial deficits and numbers game.
In the 21st century, the pattern of government, politics and global linkages has changed from traditional style because everyone has to compete in the global market based on skill, technology and innovation. So, this is the appropriate time to settle the priorities in line with the international style of development for sustainability and prosperity. Our political leadership should consider “Post-2015 Development Agenda” for the prosperity and sustainability of Pakistan. In this agenda, it has been suggested to the institutions and political leadership to focus on poverty alleviation, inclusive education and health, gender equality in all domains, environmental sustainability, productive employment and urban development for the long term survival and wellbeing of the left behind individuals. Their priority should be to focus on the development and investment in the people because they are the real wealth of any nation. If we invest in the people, they will contribute to the development and sustainability of the economy.
On the other hand, if only GDP expansion is our target, the government will enhance the expenditures on schools, hospitals, roads, dams, etc but this will not contribute in enhancing the literacy rate, health outcome, employment for the poor and vulnerable. This phenomenon is known as “Growth Without Development” and we have experienced it for the last many decades. As a result, we have 25 million children who should be in school but are in streets, we are ranked 154 out of 156 countries in gender inequality, only 60 percent of the population can read and write, we are facing worse health facilities and are considered among the ten most fragile states of the globe. At this stage, we have to set the priorities based on sustainability for the vulnerable and youth of Pakistan, ultimately both can be the strength for economic empowerment.
No doubt Dr Sami Ullah. Pakistan is growing without development. Its hard for this government to get any benefit from trickle-down because this govt have no any micro management policy to reduce unemployment or poverty.