Reducing the economic gap

The social, economic and regional inequalities at the global and national levels have become so acute that the injustice inherent in them has become apparent to politicians as well as policymakers.

In the preceding article in this newspaper (‘Multidimensional inequality’, Aug 25), I had examined the basis of the process of increasing inequality in the structures of society, economy and mode of governance. The question is: what are some of the triggers of change for reducing inequalities that can be initiated through public action (whether through public policy or social and political struggle)? The first is the universal provision of quality education and healthcare. Let us discuss the various aspects of such an initiative.

Conventional wisdom still holds that high GDP growth should be the central goal of economic policy, and therefore health and education being ‘social sectors’ are of only marginal importance. On the contrary, it can be argued that health and education are of critical importance for generating and sustaining high GDP growth. There is a large corpus of empirical research showing that quality healthcare and education have a substantial positive impact on the GDP growth of a country.

The evidence makes common sense because, after all, if the people of a country are healthier and more educated, the productivity and hence GDP growth will be much higher compared to a country where the majority of the people are suffering from ill health and have poor education.

The issue of the quality of education has particular importance in the context of developing a base of for an innovation process. If students are trained in original thinking and develop their creativity, they will in time acquire the ability for innovation in their particular field of endeavour. Recent research by Professor Aghion at Harvard has shown that the greater the depth and range of innovations in a country the higher and more sustained is its long-term growth.

Similarly, quality healthcare is important not only for economic growth (in so far as it increases productivity through quick recovery of workers from illness), but also for poverty reduction. My earlier research for the UNDP National Human Development Report 2003 showed that ill health is a key trigger that pushes those at the margin, into poverty.

When even one member of a family falls ill, the lack of diagnostic facilities and inadequately trained medical personnel and hence improper medication at tehsil-level health facilities makes illness protracted. Thus, the family is locked for long periods into a high cost but flawed source of medical care. In many cases the family is obliged to travel long distances with the patient to seek medical attention in large urban centres, thereby adding to both the misery and the expense.

Evidence shows that such families are obliged to sell their meagre assets, whether chickens, buffaloes or jewellery. In many cases they go into indebtedness at extortionate interest rates in the informal credit market run by sharks. The survey data showed that 65 percent of poor families suffer from illness and are on average sick for three months of the year.

Provision of quality healthcare to all of the population rather than only a few is also integral to the democratic ideals of freedom and equality of opportunity to citizens. Indeed, Amartya Sen has argued that health and education in so far as they enable what Aristotle called human functioning, are vital to human freedom.

The historical experience of many of the countries that have achieved sustained high economic growth shows that they had given a commitment to the universal provision of health and education. For example, Germany under Bismarck in the 18th century, Japan under the Meiji dynasty in the 19th century, Scandinavian countries in the early 20th century and China in the mid-20th century.

The idea that Pakistan cannot afford the universal provision of health and education is also erroneous because these countries at the time they gave this commitment had a per capita income that was lower than that of Pakistan today.

The issue of resource mobilisation is better understood in the context of the dynamics of the political economy of a country. If the state gives a commitment to providing universal health and education, and sets up efficient institutional structures for ensuring that tax revenues collected for this purpose will actually be spent on health and education for all citizens, then the state will achieve what Rousseau called a new ‘social contract’. Within the context of a new relationship between the state and the people arising from such a commitment, the state will acquire the popular support necessary for mobilising the required domestic resources.

In terms of public expenditure on health as a percentage of GDP, which stands at 0.92 percent, Pakistan is ranked amongst the second lowest at 191 out of 192 countries (this is based on the World Health Organisation data). The public expenditure on education as a percentage of GDP is 2.1 percent which also places Pakistan near the bottom of the ranking table, standing at 164th out of 173 countries. In terms of this ratio, Pakistan is also the lowest in South Asia.

The question is: what should be the expenditure on health and education to reach the per capita levels prevailing in, let us say, Sri Lanka? The Pakistan government is currently spending Rs847 billion annually on health and school education.

To reach Sri Lankan levels, we will have to almost treble the expenditure to reach Rs2287 billion. This means that an additional Rs1440 billion have to be mobilised for reaching health and education public expenditure levels of Sri Lanka.

According to a Transparency International estimate, which was officially conveyed by NAB officials to the FBR, the annual tax evasion in Pakistan is Rs2000 billion (The News, April 21, 2015). So the challenge before the country is clear: reduce tax evasion to educate and heal the nation for a prosperous future.

The writer is dean, School ofHumanities and Social Sciences at the Information TechnologyUniversity Lahore.


By Dr Akmal Hussain



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