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The budget blues

M Ziauddin
It is budget day today. But alas any budget based on a population census as out-dated as the one that we have been using since 2003, the year the 1998 census had expired, can hardly be worth the bother of a serious debate either inside the elected Houses or outside. At best, the successive annual budgets passed since have been no more than fictional balance sheets and, therefore, they naturally ended up adding to the national woes rather than alleviating them. Add to the fiction the fact that currently, the black economy is almost more than double the white in size and you further end up looking at a fantasy and not at a realistic account of what is proposed to be earned over the next 12 months and what heads would be allocated what amount.No matter how you try to manage your economy at the official level, there is no way you can come up with a policy that is equitable and ensures equity across the board if you don’t know approximately how many mouths you need to feed in the coming 12 months, how many bodies need to be clothed and how many families need to be provided with shelter. And it becomes even more difficult, nay almost impossible, if you don’t have a documented economy informing you precisely how many persons there are earning taxable incomes and how many of them are paying their dues and how many are evading and avoiding their national financial obligations.A state which does not fulfil its very basic obligations towards its citizens like providing them, especially the indigent millions, affordable food, potable water, electricity, affordable education, affordable health cover, affordable transport, travel and telecommunication facilities, affordable housing, affordable justice, adequate protection of their lives and property, even affordable bank loan facilities, can hardly qualify to be called a legitimate state demanding loyalty from its citizens.Like in the past, this year as well the budget-makers are groping in the dark. And like in the past years, they are likely to come up with an over-ambitious budget, allocating overly impressive amounts for development while announcing the budget, simply to play to the gallery.And since they do not know what resources they would be able to mobilize over the next year to fund their ambitious budgetary allocations, they would, as has been the rule, use the rule of the thumb and come up with an equally ambitious amount under the head of income.A country without adequate capital of its own, without enough of its own energy and lacking in modern technological know-how, can hardly be expected to be able to make ends meet without generous dole from multilateral and bilateral sources. But most of this dole has come with strings attached which are normally designed to keep the dole recipient in a perpetual state of bondage of the donors.According to Thomas Piketty (Capital in the Twenty-First Century) when the four rich countries of the world (Sweden, France, Britain and the US) collected less than 10 per cent from the national income by way of taxes they could afford to fulfil only their central ‘reglian’ functions (police, courts, army, foreign affairs, general administration, etc.) but not much more. This was the situation in these four countries during the 19th century up to the First World War. Between 1920 and 1980, the share of national income that the wealthy countries chose to devote to social spending increased considerably as in just half a century, the share of taxes in national income increased by a factor of at least three to four and in Nordic countries by more than five. The growing tax collection enabled the governments of these rich countries to take on ever broader social functions which now consume between a quarter and a third of national income of which one half goes to health and education, the other to replacement incomes and transfer payments. All told, the total social spending, broadly speaking, amounts to 25-35 per cent of national income.
“In other words, the growth of the fiscal state over the last century basically reflects the constitution of a social state.”

Every budget that our successive governments have announced over the last 70 years has been touted as a social welfare-oriented balance sheet with both the rich and the indigent expected to benefit from it equitably. That at the end of the year, the rich become richer at the cost of the poor is usually suppressed as a tale told by those who are against progress and development.

One of the major reasons why we have continued to fail in establishing a social welfare-oriented economy in the country despite proclaiming that this is what we are engaged in doing at the government level year after year is because Pakistan has continued to remain a security state since its inception. There is no way a security state would become a social welfare state just by wishing it to be so.

We need to re-think our economic strategies and come up with an economic vision that would ensure our security and at the same time enable the national economy to generate enough ‘Roti, Kapra and Makan’(RKM) for all.

Of course many would derisively reject the mantra of RKM which is associated with the late ZA Bhutto. But the fact is, it is no light-weight mantra. Within it is embedded what today is called social capitalism. Bhutto was not an economic visionary. In fact, his nationalization policy is considered by many to have retarded economic growth. But the economic assets that he built during his short rule of four years cannot be matched by any regime, either military or civilian, except to some extent by that of Ayub Khan, who preceded him. Bhutto’s daughter Benazir Bhutto was also not an economic visionary, but if one went back to her two short rules one can detect attempts by her to make the best use of Pakistan’s strategic location as a hub of regional commercial activity. But she was vehemently opposed on the grounds of security. Ironically, today we are just about to become a trans-shipment economy because China wants to shorten its reach to world markets from 45 to 12 days. Mind you, today’s PPP of Asif Ali Zardari is ideologically not the same that the two Bhuttos had led.

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