Despite stable economic growth, why do people lack basic necessities?

The reluctance of the governments to invest in social and economic infrastructure has led to poor performance in a number of indicators like education, health, sanitation, corruption, and political stability.

Pakistan economic growth

People in Pakistan yearn for economic growth. Some claim it to be the only vibrant indicator to assess the health of an economy. But how economic growth impacts the masses is often not touched upon.

Economic growth is an increase in national income. According to the theory, growth should translate into human development. It means that the increment in the income should be spent to improve the core aspects of human life like health care and education. So, the quality of an average Pakistani’s life should develop with a growing GDP. But this hasn’t been the case.

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Figure 1: Economic Growth
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Figure 2: Human Development Index

The link between growth and development is not guaranteed. Pakistan has experienced a reasonable, catching up average growth rate over the years. The growth rates have peaked during the tenures of military dictators Ayub Khan and Pervez Musharraf, and recently during the incumbency of the previous federal government.

However, the country’s performance at the development (HDI) front has been lamentable. The HDI score of Pakistan has augmented at a much sedate rate even during soaring growth.

Modest gains on the human development side

In his article, Human Development First, Faisal Bari said, “These are tough times but even when we have had periods of high economic growth our gains on the human development side have been modest.”

Read more: Pakistan Economy: History and Required Reforms 

Ishrat Hussain, in his research paper- Education, Employment, and Economic Development in Pakistan- highlighted the same conundrum. He said, “Pakistan presents a paradoxical situation. The country was able to record 5 percent annual growth rate over a fairly long period of three decades.

In 1990, after such impressive growth performance, almost two-thirds of the country’s population was illiterate, enrolment ratios were dismally low, the dropout rates were quite high, gender disparities in access to education were rampant and the quality of higher education was on a declining path.”

Ruling elite plundered citizens

The economic growth has only benefited the ruling elite, with additional income getting siphoned into their bank accounts. Despite an upward growth trajectory, Ayub Khan’s regime created social and economic disparities. In his rule, the rich became richer and the poor poorer.

We must crave economic growth, but it should have a substantial impact on the lives of the commoners

President Musharraf’s era saw excessive overspending on trivial expenditures instead of socio-economic development. The preceding government made use of Pakistanis’ high propensity to consume. Rather than rectifying the economic turmoil with structural reforms, the former economic team embraced expansionary policies to demonstrate a consumption-driven, unsustainable growth.

Development cannot occur without growth, but it does not mean that a country having growth will always be developing because of prevalent corruption in the government institutions. For this reason, Pakistan has always performed abysmally on the corruption index by Transparency International. The rulers have either laundered the proceeds of economic growth or spent it on poorly prioritized public projects.

Read more: The gig economy is helping tackle COVID-19 unemployment in Pakistan

Unsustainable economic growth

In addition, Pakistan has spent substantially on financing military goods due to its strategically challenging location. However, this expenditure has been at the expense of education and health, adversely affecting living standards. Pakistan devotes the largest percentage of GDP on defense than any other country of its size.

It is roughly the amount of GDP underspent on education and health. Along with it, Pakistan has an oligarchic society where the politicians restrain the public from having access to quality education. It’s because it will create more awareness leading to a higher demand for welfare.

Moreover, the high growth in Pakistan has been unsustainable, which is why a period of towering growth is always followed by a slump (usually an IMF program). The reluctance of the governments to invest in social and economic infrastructure has led to poor performance in a number of indicators like education, health, sanitation, corruption, and political stability. They have been unable to balance the social, environmental, and economic objectives for the future while making decisions today, so they have not been able to bolster growth.

Read more: Economy of Pakistan and The Coronavirus

The Federation has to service mammoth debt each year with an abysmal performance in export growth, domestic savings, and energy export. This, along with deteriorated government institutions, results in a corrupt, violent, and unstable nation unparalleled to its growth.

In a nutshell, structural reform in Pakistan is the need of the hour. It’s because investment in human capital, along with strong institutions, will lead to a dynamic economic performance. We must crave economic growth, but it should have a substantial impact on the lives of the commoners. For this purpose, the government should prioritize the allocation of sufficient funds to ameliorate Pakistan’s health and education sectors on war footings.

The writer is a former Research Enumerator at the Research Department of State Bank of Pakistan (SBP). I have worked on the bi-monthly Business Confidence Surveys of SBP, which facilitates the Monetary Policy Committee (MPC) in decision making. The views expressed in this article are the author’s own and do not necessarily reflect Global Village Space’s editorial policy.

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