The World Bank's Casual Approach

Reduction of absolute and relative poverty is essentially required to create a harmonic society. Though the poverty is multidimensional phenomenon and, therefore, could be addressed from different angles, the essence of the issue lies in equitable distribution of income and wealth. The distribution of income has been an important subject of economics and has developed an exhaustive analytical work particularly in the context of market economies, where income is distributed according to the conventional principles of demand and supply. It is fact that market forces alone are not enough to ensure an equitable distribution of income.  A poin which  needs  attention  is that  in capitalist economies, while the capitalist shares the income generated on three accounts (i.e. profit, interest and remuneration as an organiser) the labour is only paid in terms of wages; most often from a poor bargaining position particularly when strong labour unions do not exist or are not allowed to function effectively. The situation with reference to agricultural income is also more or less similar except that the capitalist is replaced by a big landlord, unless land is fairly distributed. The situation for those unemployed and who do not belong to these two classes is even worse in a capitalist market-oriented economy in getting their due share from the national income as a member of the society. Since capitalist (or landlord) receives much more than his normal consumption, he is always in a position to accumulate wealth and continuously strengthen his position as an economic agent. This has happened (and is happening) at national and international level. Communism (and the establishment of socialist economies) was a reaction to the capitalist system which had created inequalities at individual level as well as among nations. However, the solution provided by communism was unnatural and difficult to implement in an open society. Its failure was, therefore, quite natural.

In order to reduce the inequalities and ameliorate poverty (basically to restrict the expansion of communism), the capitalist economies took several measures to ensure a minimum standard of living for their citizens. The high level of income and wealth accumulated over several decades has helped these nations to achieve this objective but without resorting to major transfer of resources from the rich to the poor. In the context of developing countries such measures could not be taken in a comprehensive manner because of the strong hold of a small class on economic and political instruments. And the measures taken to address the issue of inequality and poverty are most often ad hoc and related to a particular political class and government rather than based on a firm and continuous national policy.

The Pakistan Poverty Assessment (Report No 14397-Pak) prepared by the World Bank clearly portrays classical reality described above. There is no evidence of firm, continuous and stable policy to tackle the problem of poverty and inequalities. The macroeconomic policies guided by the capitalist principles, which have been discussed in detail in the report, are going to create old-fashioned capitalistic distribution of income and wealth. The conventional approach that high growth rate associated with some ad hoc measures will solve the problem of absolute/relative poverty is not going to work. In case of Pakistan, in spite of a high GDP growth rate of exceeding 5 percent over the past four decades, around 20 million people are still undernourished and more than 40 million cannot meet their basic needs.

The study has analysed in substantial detail various measures, taken by the government for alleviation of poverty. Among other, the zakah and ushr system, as organised and functioning in Pakistan, has also been discussed in some detail. The report clearly highlights that zakah is playing an important role to help the most needy. However, the report has not properly appreciated zakah as an important instrument of helping the needy and redistribution of income and wealth. A report of this stature, prepared by the World Bank, should have at least examined the whole concept of zakah in the context of redistribution of income and then related to what was being done in Pakistan. The naive system of zakah introduced in Pakistan has collected Rs 2,844 million during 1993-94, which was only 0.2 percent of the GDP. Even if zakah would have been levied on total fixed and savings accounts, it would have generated fund to the extent of Rs 4,762 million. The study has pointed out a number of leakages in zakah system, which, together with the enforcement of Islamic inheritance law, provides the most powerful tool for redistribution of income/wealth particularly when implemented with “interest” totally eliminated as a source of income to the capitalist. The system takes the shape of a process which ensures the continuous flow of wealth from the richer to the poor and needy circles in a way least disturbing the societal relationships. Based on the concept of brotherhood and being God-ordained religious duty, zakah in fact becomes the binding force of the social fabric.

Source: Poverty Alleviation in Pakistan: Present Scenario and Future Strategy, Mohibul Haq Sahibzada. Republished with permission.