The Government Cannot Do Everything For You (FreePakistan Newsletter # 148-149)
FreePakistan Newsletter # 148-149
0 The government cannot do everything for you
By Farooq Tirmizi
0 Minimum wage politics
By Sultan Mehmood
0 Basic social services to all
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THE GOVERNMENT CANNOT DO EVERYTHING FOR YOU
By Farooq Tirmizi
[This article first appeared in The Express Tribune on March 18, 2013.]
It is a paradox that I have failed to understand: Pakistanis tend to hate their government, think of it as corrupt and incompetent, but at the same time, we feel that the government should do absolutely everything for us.
The average Pakistani sees absolutely nothing wrong with the idea of the government setting prices in energy and agriculture.
They see nothing wrong with the government blatantly discriminating against some industries by giving others preferential treatment in the tax code and regulatory structure. And most people do not seem to have a problem with the fact that the government owns vast swathes of the entire economy.
Ordinary voters, for instance, appear to think that the only way a person can get a job is if the government provides him or her with one.
The idea that jobs can be created by the government simply getting out of the way and letting private sector firms create jobs is a concept that does not seem to penetrate our thick skulls, no matter how simply it is explained.
The truth, of course, is that the economy does best when the government restricts its mandate to that of a regulator of, and not a participant in, the marketplace.
For example, the banking sector employs about three times as many people now as it did when it was entirely owned by the government. And instead of needing billions of rupees in bailouts every year, it is one of the government’s most reliable sources of tax revenue.
The fact that Karachi is the one city that has both a privatised electricity company and the most reliable supply of electricity is not coincidence: Karachi’s utility is better managed because its owners have a profit motive and it is also effectively regulated by the government.
One could blame Zulfikar Ali Bhutto for this extreme fondness of the state, even as we are aware of its extreme shortcomings, but the truth is that Pakistan has almost always had a heavy presence of the state in the places that it should not — the economy — and a very light presence in the places that it should: education, health, law enforcement, and infrastructure development.
In the next election, voters do not seem to face a choice when it comes to a reorientation of the role of government.
That is just a debate that the Pakistani public is not interested in. A pity, because that is the one we really should be having.
[Courtesy The Express Tribune]
MINIMUM WAGE POLITICS
By Sultan Mehmood
[The writer advises the Dutch government on macroeconomic policy. This article first appeared in The News on March 15, 2013.]
On May 1, 2012, the then Prime Minister of Pakistan, Yousuf Raza Gilani, announced in front of a charged crowd that the minimum wage in Pakistan was to be raised from Rs7000 to Rs8000. On the same day the Chief Minister of Punjab, Shahbaz Sharif responded with a further Rs1000 increase. This resulted in the statutory minimum wage in Punjab adding up to an unrealistic Rs9000.
The PML-N has now “in its recently unveiled election manifesto 2013” pledged that upon coming to power, the party will further raise the minimum wage to a whopping Rs15000!
At this point, one should point out that raising minimum wage based on mere political whims is not only unscientific but downright disastrous. Of course, it would be a good thing if incomes were to be increased. However, raising minimum wage introduces a host of negative “unintended consequences.”
Nobel Laureate Milton Friedman argues that increases in minimum wage have both positive and negative effects. One is the “intended” poverty reduction effect of raising the wages for the poorest quartile of the population. The other more subtle effect is the resultant increase in cost of hiring for the employers.
When increases in minimum wages are introduced, not only current but future levels of unemployment tend to increase. In an effort to maintain the desired levels of profitability, employers tend to lay workers off and in turn compress the economy. Additionally, they cut back on future hires. This reduction in future hiring is particularly alarming for Pakistan with most of its population below the age of 30 and a large number of youth entering the labour force every year.
Another approach employers have adopted in the past in response to steep increases in minimum wages is to increase prices. Hence, in a country where inflation consistently hits double digits the result is a further upward pressure on inflation.
The very people who are supposed to benefit from the increase in minimum wage end up spending more because of the increased prices of the goods they buy. This has an additional negative consequence of reducing the policy toolkit available to the government and the central bank. For example, in periods of low growth, the central bank can no longer rely on an (expansionary) monetary policy to spur growth.
The result of this drastic increase in minimum wage will be that there will be a large number of people living in extreme poverty and willing to work for lower wages, and employers who would like to hire them albeit at lower wages, which is no longer possible given the statutory minimum wage. Therefore, many transactions will not materialise.
There will be a further expansion in the already-bloated black market economy and a fall in tax revenues. The result is the classical “deadweight loss” scenario elucidated in economics textbooks: mutually beneficial transactions are barred! Hence, drastic increases in minimum wages will compress employment and ?consequently? GDP growth.
You might be wondering about the size of the aforementioned effects. If the effect is marginal, the increases in minimum wages might still be justified. However, careful econometric scrutiny reveals that a 10 percent increase in minimum wage decreases employment in the range of one to three percent.
Extrapolating this in the context of Pakistan, even considering the lower bound point estimate of one percent, the effects of increases in minimum wage leads to dire consequences.
If the PML-N is to go ahead with its proposed increase of minimum wage from Rs8000 to Rs15000, Pakistan’s economy will suffer a reduction of overall employment by about nine percent with a possible increase in prices. This is a possible loss of about five million jobs! Not only will it harm the very people it is intended to protect, it will also cause a distortionary effect on the economy and make the labour market more rigid.
Since the 1990s, more than 100 studies have been published on the effects of minimum wages on employment. An overwhelming majority of empirical research suggests the dominance of the negative impact of increase in minimum wage on employment. In fact, in the case of large raises as here, the positive effect is strongly outweighed by a large decrease in employment.
Whenever there was indeed a positive effect documented for raising minimum wage, these were modest increases in periods of high productivity growth. Unfortunately, both are missing in Pakistan.
Our politicians clearly need to refrain from political point scoring when deciding on national economic policy. If they are indeed to live up to their promises of over six percent GDP growth and poverty reduction, there is need for a concerted approach. They need to base their decisions on evidence rather than wish lists.
They need to think about the overall well-being of the national economy, and the possible unintended and long-term effects of their policies. One way is to focus on creating vibrant markets that will absorb the incoming labour force without the need to legislate a minimum wage hike.
In a vibrant market, competition among employers “and not increase in minimum wage” raises income levels. This has positive effects on innovation, productivity and entrepreneurship, the drivers of all modern growth. This can be facilitated with other concomitant reforms. For example, reforms in the areas of civil service, public health care, and universities, as well as a focus on honing school curricula that engenders dissent and critical thinking.
If we are to continue making our policies based on political expediency “this increase in minimum wage being just one example” it is mere wishful thinking that Pakistan will rise again. [Courtesy The News]
[Aslam Khan Marwat, Lakki Marwat]
Politicians who belong to parties with completely different manifestos are uniting in the name of seat adjustments to fool voters for another five years. In my view, this is an organised and pre-planned way to exploit the masses. It is pre-poll rigging to hijack the mandate of the people. [The News]
MUSARRAT SHAHEEN VS FAZLUR REHMAN
[Hafiz Muhammad Noman]
A very amusing statement was made by famous Pashto film actress, Musarrat Shaheen against Maulana Fazlur Rehman two days ago. Talking to a media person she said she would, of course, stand against Maulana Fazlur Rehman in the upcoming elections and defeat him. She amazingly added that she needed the symbol of scissors in the elections because she wanted to cut such maulana’s……. As Musarrat Shaheen with smiling face used equivocal words for Maulana Fazlur Rehman and did not elaborate what she wanted to say actually was indeed shameful and surely sensible persons would have understood what she wanted to say.
It is unfathomable why Musarrat Shaheen is the enemy of Maulana. I believe there is no competition between the actress and the Maulana. Doubtless, Maulana Fazlur Rehman himself has been a dramatic performer but he is a religious scholar or a Mufti whereas everybody is aware of the character of the actress. On the other hand, a private news channel aired the clip which was condemnable. Media in Pakistan is not playing its role positively. Such people’s statements should not be given coverage that use slang language. [The Frontier Post]
THE DOCTOR’S ADVICE
[Dr Zafar Yusaf, Lahore]
The good PPP doctor, aka Mr Rehman Malik never ceases to amaze and amuse. Even on his last day as the country’s civilian security czar he continued his research doctorate by recommending that the current COAS be promoted to the rank of Field Marshal of the army in recognition of his “services for democracy.”
People my age or older will remember self-appointed Field Marshal Ayub Khan and his “services for basic democracy.” It is often heard that it was the founder of the PPP who suggested to Gen Ayub that he should take up the rank of field marshal. I would like to point out that field marshal is not an easily achieved rank. Promotion to the rank historically requires extraordinary military achievement by a general such as a wartime victory. The current COAS should be recognised for his services to democracy with another three-year extension as he has proven that he is not interested in derailing the democratic process and may even believe that democracy is the best revenge.
DUMB AND DEAF PARLIAMENTARIANS
[Zahid Rashid, Azad Kashmir]
It was amazing to hear that 23 of our lawmakers from Balochistan in the outgoing National Assembly did not utter a single word during its proceedings in the five years they had been its members. For a people’s representative to say nothing to improve the dreadful situation in the province is simply unimaginable? This shows that either these legislators were totally incompetent or not interested in the people who had elected them. In the upcoming elections all the party leaders should consider the previous record of their candidates while awarding them tickets. Pakistan does not need such deaf and dumb parliamentarian! We need people who care for this country and its people and what is happening here. These people have set a bad trend which needs to be changed. Scrutiny at the time of awarding the ticket will definitely improve performance. [The Nation]
GROSS DOMESTIC MISERY
[Asad A Khan, London]
This week Bhutan passed a bill called GDH, Gross Domestic Happiness. The country is making sure that its citizens are happy more than they are rich. We in Pakistan should pass a bill and call it GDM, Gross Domestic Misery. Mocking things like dancing in public “by those in office, those in political parties or generally” is something we practice regularly. When we hear good music, we automatically start tapping our feet, and that is a form of dancing. Come on people! Wake up and have some fun without hurting anyone. [The News]
US VISA AND DECLARATION
[Dr Irfan Zafar, Islamabad]
One cannot really blame the US or the West for chipping in this clause for the residents of the “Land of the Pure.” According to the online visa application form issued by the US Department of State, everyone applying for a US visa must declare whether he or she is visiting the US to engage in prostitution. It asks: “Are you coming to the United States to engage in prostitution or unlawful commercialised vice or have you been engaged in prostitution or procuring prostitutes within the past 10 years?”
This reminds one of the arrest of nine Asian men, most of them of Pakistani origin, who were arrested in Britain on charges of grooming teenage girls to engage in prostitution. The suspects, aged between 20 and 40, from Rochdale and Heywood in Greater Manchester, were arrested on charges of causing/inciting child prostitution, sexual activity with a child under 16 and paying for the sexual services of a child. One cannot really blame the US or the West for chipping in this clause for the residents of the “Land of the Pure”, owing to our own follies and pathetic reputation.
[The Express Tribune]
[Shakir Lakhani, Karachi]
This is with reference to the news item, “Ashraf selects squads for his lifetime security” (March 22). I’m amazed at the big sacrifice Raja Pervaiz Ashraf is making. He has allocated only 300 million rupees every year for his security for the remainder of his life. I’m surprised he didn’t allocate ten times this amount, because as everyone should know by now, Pakistan is one of the richest countries on the planet, thanks to five years of PPP (mis)rule.
There are 180 million Pakistanis, and each will have to contribute less than two rupees annually for this. Surely they won’t mind paying ten times more, considering that there is no poverty in Pakistan and everyone who lives in this country has more than he or she needs. In fact, I think half the country’s future budgets should be spent like this. This is the only way we can show our appreciation for their performance during the past five years. And if anyone says that they have ruined the country, he or she should be locked up in a mental asylum. [The News]
ACTRESSES AGAINST MAULANA, KHAN
[Mohammad Fayyaz, Charsadda]
Two actresses, one still in showbiz, and the other one long since out of that world, Meera, and Musarrat Shaheen respectively have determined to contest general elections for the National Assembly seats against Imran Khan, and Maulana Fazlur Rahman respectively. Amusingly, Musarrat Shaheen, known and famous for exciting dances in her films of the past, has stressed for the implementation of 62 and 63 of the constitution so that morally clean, competent, honest, and fair people reach federal and provincial assemblies.
I think the ECP should watch some of her films for the implementation of the aforementioned articles. Meera too is like a frog in a well, not knowing about the vast expanse of the world outside. She is better advised to stay in her own miniature world of showbiz. To earn a place in the larger world of politics of the country needs from her years; it is not a bed of roses. Musarrat and Meera should not be part of the games the vested interests want to play just to malign the Maulana and the Khan in the public meetings of these actresses-contestants of NA seats. [The Frontier Post]
MASTER OF ALL TRADES?
[Prof SM Owais, Rawalpindi]
I had been reading with keen interest all the articles of Dr Atta-ur Rahman, but fail to understand whether he is an expert of biochemistry or education or politics or mechanical engineering when he does not hesitate to write on all these subjects. On education he always talks of higher education and on engineering the function of four stroke engines. I believe that in Biochemistry the function of four strike engine is not taught. Where are our engineers and physicists to comment on engineering subjects? [The News]
MEERA VS IMRAN
[Asadullah Lashari, Karachi]
Lollywood actress Meera has jumped into the fray of the elections, 2013 by announcing to contest the May 11, 2013 polls against Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan. What Ms Meera needs to understand is that she has to at least do one sensible thing in her lifetime to be able to stand for something of this magnitude. This is not asking for too much, or is it? [Paksitan Observer]
AN ELUSIVE SPARROW
[Wajahat Malik, Islamabad]
As a professional travel documentary filmmaker I have travelled the length and breadth of this country many times over, encountering and marvelling at the great wonders this land has to offer. But like the obscure and mythical elixir of life, I have never stumbled upon that elusive and mysterious sparrow called the “Ideology of Pakistan.” Now I hear that some enlightened and truly patriotic returning officers have unravelled this great mystery while scrutinising the papers of some ignorant electoral candidates. I congratulate them on their epic discovery. [The News]
RICHES TO RICHES
[Dr Irfan Zafar, Islamabad]
Sir: Nawab Aslam Raisani, the ex-chief executive of the poorest province, is the richest of the chief ministers who recently handed over power to the caretaker government. According to the statement filed by Mr Raisani to the Election Commission of Pakistan (ECP), the former Balochistan chief minister had wealth that exceeded Rs 522 million at the end of fiscal year 2011-12 in comparison to last year’s Rs 351 million. His assets include two Harley Davidson motorcycles, one Mercedes sports car, one Hummer H2 and a house in Islamabad. In total, he owns eight properties valued at Rs 143 million. He also owns a security company worth Rs 150 million, a coal mine worth Rs 7 million and an annual income of around Rs 10 million from agriculture land. What the Baloch people should understand is that their plight is not because of the successive governments but is owed to the rape of their resources by their own leaders. [Daily Times]
A SYMBOLIC STAND
[Mohammad Ashraf, Lakki Marwat]
Renowned Pashtu film actress Musarrat Shaheen has once again filed her nomination papers to contest elections against JUI-F Maulana Fazlur Rahman. This is a brave move considering she belongs to a profession that is frowned upon in Pakistan.
Shaheen has channelled her popularity to try and do something for the people, especially the women of her country. If male performers, some of whom have also joined politics, can use their popularity for the good of the people, Musarrat Shaheen should be applauded for this as well. Reportedly, she astounded the RO and other candidates by reciting the Islamic prayers that she was asked to recite (which shouldn’t have been such a big deal considering she is a Muslim). This must have come as a blow for the JI, since their candidate was unable to do so. Although Musarrat Shaheen is likely to be defeated against Maulana Sahib, she is still standing up to be “counted” and facing all the pressure and criticism that women, especially if they are associated with the arts, have to face. [The News]
It is for the people, especially for the think-tanks and NGOs, and no doubt for media also, that the big issue for the next election should be the provision of basic social services (water supply, sanitation, public transport, roads, paved streets, street lights, libraries, parks or playgrounds, and noise and pollution free environment) to all the citizens in Pakistan not only ensured in the constitution but binding on the next government also. If achieved, that will be a great step forward towards the unification of the ordinary and elite Pakistans. Is there any political party ready to take up this at the top of its agenda? [Editor]
LACK OF CIVIC SENSE
[Zulfiqar Khaki, Hyderabad]
This is apropos of Sarfaraz Samad’s letter ‘Lack of civic sense’ (March 29). I also believe that civic sense or the lack of it is a topic that has been widely discussed and argued in our society. Somehow, most of the people do not care much for civic sense. The writer has highlighted issues as regards spit marks, urine, vulgar graffiti, random garbage and overflowing sewers at every nook and cranny of his city, but these are common problems of our cities, towns and even small villages. So, in my opinion, well-wishers of our society should join hands with each other to address these issues, and now is the appropriate time for national reunion in this regard.
Being a voter, we can make groups and can bring these issues on the forum of discussion before going to vote someone. The main point should be the question as to which candidate can introduce good governance for resolving the issues pertaining to civic sense. More and more discussions will help us to solve these problems as well as we will be able to choose a good candidate for our better future. Owing to lack of civic sense many of us are unaware of hygiene problems. [Dawn]
[Muhammad Rizwan Afatb, Karachi]
Through your esteemed news paper I would like to inform readers of the Pakistan Observer about penny press the first successful news paper (penny paper). The Penny Press was most famous for its low price, a penny per paper. It was invented by Benjamin H. Day, founder of the New York Sun. The Sun was the first popular penny paper and it became popular with the American public because while other papers were priced around six cents, they were able to sell their paper for just a penny. The low price made newspapers and the news available to more than just upper class citizens for the first time. The labor and lower classes were able to purchase a paper and read the news. As more people began buying papers throughout the country, news and journalism became more important overall.
The heavy dependence on advertising as a major source of revenue was a main reason that the Penny Press was able to sell papers for a lower price than anyone else. Other papers relied heavily on subscriptions and daily sales. Newspapers rely heavily on advertising as a main source of income and that is also a main reason they are still being offered at relatively low prices today. The changes made to the newspaper during the Penny Press era set a precedent for the way newspapers operate today. [Pakistan Observer]
CLOSING LIBRARIES, CLOSING MINDS
[Anne Ahmad, Karachi]
It is common knowledge that libraries play a vital role in the development of any society. However, in recent times, especially in Pakistan, the ever-decreasing trend of going to libraries and making use of the books available has led to inevitable consequences in the form of social chaos and upheaval, which have sprung directly from the ignorance and indifference of people towards this essential source of knowledge. What is more, many of the major publishing houses have shut down, for mainly two reasons — first, due to a lack of good quality literature available for publishing, and second, the books published in due course just sit on the shelves collecting dust without any eager buyers approaching them.
As a result, the general public finds it increasingly difficult to understand and comprehend the very essence of classical, as well as contemporary literature. It is about time the authorities concerned, as well as the citizens, responded appropriately to stop this trend from continuing. It would do a world of good to our society, people and culture. [The Express Tribune]
USE OF LIBRARY: A TEST OF EDUCATION
[Uzma Razzaq, Islamabad]
Herbert Samuel says, a library is thought in cold storage. But declining reading trend among masses has reduced spaces for such public service places. Going by the demand and supply theory it is bound to diminish. By the same ratio goes the dwindling number of good book shops and being replaced by more consumer demanded eateries. Books are called “charming than furniture” and “medicine for the soul”. Well known persons have praise worthy sayings for library:
* No place affords a more striking conviction of the vanity of human hopes than a public library.
* Nothing sickens me more than the closed door of a library.
* The true university these days is a collection of books.
* To add a library to a house is to give that house a soul.
* Libraries are as the shrine where all the relics of the ancient saints, full of true virtue, and that without delusion or imposture, are preserved and reposed.
Appreciation for acquisition of general knowledge has receded to back seat and students merely cling on to their recommended course books for securing high grades, earning degrees and gaining menial jobs. The examination system is also abetting in limiting the creativity and thinking frontiers. This is not personal or random error but rather a systematic error. Those who memorize best get good grades. Questions are asked verbatim within the prescribed text books, even numerical questions were there in to-to. So from school to university it is the same run of the mill. In brief, given such schooling ambiance how one can bother to pay visit to libraries? Visiting of reading halls will only necessitate when students are given just course outlines. It is onerous on teachers also to cultivate habit in their pupils of using libraries.
Besides colleges/universities libraries, there are far and few public libraries mostly stocked with general books. Liaquat Bagh Library has fairly more books on science and commerce compared to Islamabad Public library H-9. The latter has separate hall for children and separate rooms for scholar, has piled over 40,000 books. Its in charge Mr. Alkhubaib claims that in near future readers will also avail computer facility. But all these places give deserted looks. Given mobile and internet phenomena enticing learners to such places is a call in wilderness. If this trend continues it will cause double loss; semi-literate and under- refined army of youth in knowledge driven economy and drain of scarce resources to national exchequer by keeping large personnel on its payroll. Scope and utility of even whatever existing facilities will become marginalized. Do Muslim youth have forgotten Allama Iqbal’s couplet from Bang-e-Dra; magar woh ilm ke moti,kitabain apny aaba ki jo dekhain in ko Yourap mein tou dil hota hai seepara. [The Frontier Post]
Edited and prepared by
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