Government, My Foot!

The article, “Government, my foot!” argues that governments’ delivery of goods and services throughout the world has suffered a steep decline. This is more so in countries which have transformed into elitist states and where production and distribution of goods and services is heavily controlled by governments. Pakistan is one such country where government’s control has disabled both its economy and society. It presents a classic case of how a government fails its people and makes their life miserable.


by Dr. Khalil Ahmad

Introduction

The article, “Government, my foot!” argues that governments’ delivery of goods and services throughout the world has suffered a steep decline. This is more so in countries which have transformed into elitist states and where production and distribution of goods and services is heavily controlled by governments. Pakistan is one such country where government’s control has disabled both its economy and society. It presents a classic case of how a government fails its people and makes their life miserable.

Take the example of electric power generation and distribution sector which is virtually a government monopoly, and is totally in shambles now. In addition to long hours of outages, the availability of electricity supply in bits such as if it is available for one hour, for the next it is not, is of no use. Not only is it harming every sector of our economy but also making the lives of millions of individuals miserable.

It shows how a government tries to be jack of all trades, but ends up in being master of none. It does not focus on its basic duty of protecting lives, liberties, and properties of its individual citizens, but zealously indulges in the business of providing goods and services to the people which it ought not, and ultimately fails them and makes their life miserable.

But bravo the market which never dies! It innovates, creates, recreates, discovers, and comes to provide people not only with what is in demand but also that what may be improving the life of the people; whereas government controls, regulates, stifles, strangulates, and corrupts everything it puts its hands on.

In the midst of this dark perspective, let me give you a pleasant surprise. In an area of Lahore, a private initiative has come to the rescue of the electricity-load-shedding stricken people. An enterprising person has installed a gas generator and is providing electricity to the neighborhood businesses and homes jus for Rs.10 per day. Of course, this is limited as one cannot use all his electric appliances with this limited supply, but this is just the start and at least enables us to light our shops, premises, and homes.

However, I fear when this business grows and starts providing electric power to the people at a larger scale and at competitive prices, the government will start interfering, it will try to regulate and tax the business, and will ultimately grow obstacles in its way, and may be some day will nationalize it, and then we will be again at zero as we are at this moment! So, the first lesson of governmentonomics is that every creation and innovation is followed by regulation and taxation and finally disappears like electricity in Pakistan.

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How ironical that those who live at the expense of others mostly depend on the market order for their needs to be fulfilled!

It’s an incontestable fact that governments’ delivery of goods and services throughout the world has suffered a steep decline. This is more so in countries which have transformed into elitist states and where production and distribution of goods and services is heavily controlled by governments.

Pakistan is one such country where government’s control has disabled both its economy and society. It presents a classic case of how a government fails its people and makes their life miserable. Expansion of all the sectors which have been under the direct control of our government has been stifled and those sectors which play the role of a life-line to the economy have especially seen a real collapse, thus halting the overall growth and giving rise to widespread suffering.

Take the example of electric power generation and distribution sector which is virtually a government monopoly, and is totally in shambles now. In addition to long hours of outages, the availability of electricity supply in bits such as if it is available for one hour, for the next it is not, is of no use. Not only is it harming every sector of our economy but also making the lives of millions of individuals miserable. No doubt, the continuous or continual absence of electricity is striking every aspect of economic, social and personal lives hard, it is producing suffering, anxiety, anger, frustration, depression throughout the society which no one knows when and how is going to explode.

Though, a number of years back, private sector was permitted to generate electricity under “privileged” conditions which we know as IPPs (Independent Power Producers), and industrial concerns were allowed to generate electricity but for their own use; however, the distribution remained and still remains in the hands of WAPDA (Water and Power Development Authority), a virtual monopoly, which itself runs several generating units. Wapda purchases electricity from these IPPs at a pre-determined rate and then distributes it to its commercial and domestic users.

Another monopoly, KESC (Karachi Electricity Supply Company Ltd.), has been privatized with its management totally handed over to its present owner, but the government owns about 26 % of its shares, sees to the determination of its tariff, and thus has a stake in its running. The fate of this privatization is in a precarious state because of its failure to meet the demands of its clientele for diverse reasons, and most probably government is going to take its control back. Also, the privatization of KESC requires a detailed study whether monopolies when privatized can yield good results that privatization usually brings with it. If such a study is conducted, it will clear the air of confusion regarding the phenomenon and policy of privatizing the state entities.

How this monopolization of electricity generation and distribution by the state in Pakistan has extremely adversely affected our society is itself such a subject that provides food for all the social sciences, especially economics, psychology and sociology. It needs no detailed narrative what’s happening these days under heavy electricity load-shedding, the present phase of which started in the concluding months of last year. Prior to this, there have been phases of load-shedding for long hours, but the current one which spans over almost 20 hours out of 24 for which the electricity is not supplied to most business concerns, domestic consumers both in urban and rural areas, tells of the complete collapse of a state monopoly or the complete failure of state control and planning.

Now when not only industrial and business life, but social and personal life also totally depends on the supply of electric power, the government failure to meet the demand is catastrophic. This raises many questions on the role of government/public sector as a viable entity. Whatever the bottlenecks, be they political, provincial, or other such things, it must be asked: why there was no planning for the future demand of electricity, and how to meet it; why the responsible ministries, organizations, agencies, ministers, bureaucrats, technocrats, officials, etc. were so oblivious of such a vital economic and social factor of progress; why various governments played with the issue of electricity generation to their political and economic benefit, like the role of the Pakistan Peoples Party leadership in making notorious agreements with the IPPs, and why no responsibility was ever fixed for such deliberate lapses; even if we accept the argument put forward by General (Retired) Musharraf sometime back that since there was so much development, increased electricity demand had resulted in its shortage, it does not absolve the government from its criminal negligence to plan and put into action those plans to meet the increasing demand; if the government was not able to develop the power sector in harmony with the demands of the time, why didn’t it let the private sector, both domestic and foreign, to play its role; last but not least, why is there no accountability for such a great lapse, failure and collapse? In sum, why the market for electric power generation and distribution was not opened and freed in time when the government had exhausted its resources and failed completely?

Imagine that, but it’s no need to imagine, it is all before your eyes, that people have got money, and they need electricity, and they are willing to purchase it, but there is no electricity! What an economic farce it is! Also, this is absolutely governmental that it has completely dismantled and trampled the power generation market. How unprecedented it is that the government has made a hell of its own citizens’ lives! Also, it shows how a government tries to be jack of all trades, but ends up in being master of none. It does not focus on its basic duty of protecting lives, liberties, and properties of its individual citizens, but zealously indulges in the business of providing goods and services to the people which it ought not, and ultimately fails them and makes their life miserable.

But bravo the market which never dies! It resuscitates every time a government tries to kill it. It innovates, creates, recreates, discovers, and comes to provide people not only with what is in demand but also that what may be improving the life of the people; whereas government controls, regulates, stifles, strangulates, and corrupts everything it puts its hands on.

In the midst of this dark perspective, let me give you a pleasant surprise. In an area of Lahore, a private initiative has come to the rescue of the electricity-load-shedding stricken people. An enterprising person has installed a gas generator and is providing electricity to the neighborhood businesses and homes jus for Rs.10 per day. Of course, this is limited as one cannot use all his electric appliances with this limited supply, but this is just the start and at least enables us to light our shops, premises, and homes. There are chances that this initiative expands to meet the increasing demand of electric power.

However, I fear when this business grows and starts providing electric power to the people at a larger scale and at competitive prices, the government will start interfering, it will try to regulate and tax the business, and will ultimately grow obstacles in its way, and may be some day will nationalize it, and then we will be again at zero as we are at this moment! So, the first lesson of governmentonomics is that every creation and innovation is followed by regulation and taxation and finally disappears like electricity in Pakistan.

However, in such circumstances what a government is required to do is only to make its system of dispensing justice efficient, effective, inexpensive, and transparent so that those who have any grievance or complaint or any breach of contract on the part of any business concern they could sue it and get justice. It means governance is not a like a business, it’s a duty and responsibility. A government which defies this truth is but a rule of robbers and depraves! That government, my foot!

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Dr. Khalil Ahmad is president and founder of the Alternate Solutions Institute, Pakistan’s first free-market think tank. 

This article appeared in The Post on October 27, 2008.

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