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The Political Economy Of Poverty Alleviation
Dr.Akmal Hussain
Dated: The Herald Special January 2000

For the first time in the history of economic policy in Pakistan poverty alleviation has been made the center piece of the government's economic revival plan. However for the 45 million people of Pakistan who live in hunger today what matters is not so much that a pro poor policy pronouncement has been made by the government as the issue of whether or not it will be successfully implemented. In this article we will first indicate how the objective of poverty alleviation can be made integral to a macro economic growth strategy and then discuss the implementation mechanism of a direct attack on poverty.

At the outset it is important to specify three elements in the political economy of poverty in Pakistan: (a) The reproduction of poverty on an increasing scale is endemic in an economy where productive assets are concentrated in the hands of a small elite. (b) The resultant inequality in the distribution of incomes is further reinforced by the institutions of credit and skill training which are designed to cater to the elite rather than the poor. (c) A centralized bureaucracy whose mode of exercising power involves the use of state resources to intensify the dependency of the poor through the establishment and maintenance of patron-client relationships between the elite and the poor. In view of these features underlying the poverty phenomenon in Pakistan, any realistic strategy of poverty alleviation would essentially involve initiating an economic and social process through which the poor acquire power. The poor must be enabled to organize themselves at the village and mohallah level, to acquire skill training for increased productivity, to access credit for building their asset-base and to participate in institutions of local self governance, as well as at the provincial and national levels. It is only then that the poor can replace their sense of being isolated and ineffectual with a sense of being part of a community. It is only then that they will have control over the decisions that affect their economic and social lives. This perhaps constitutes 'empowerment' of the poor. By contrast, the power of the ruling elite is constituted by fragmenting and isolating those they 'govern', and locking them into a relationship of dependence, in which each handout of resources to the poor reinforces their dependency and reproduces their poverty. The enterprise of poverty alleviation, therefore, brings into focus two counter-posed conceptions of power. The issue of taking 'poverty alleviation' to scale, raises the question of how a different space is to be created, in which the process of reproducing the power of the ruling elite is replaced by a process of 'empowerment' of the poor.

A three pronged strategy of growth and poverty alleviation needs to be launched: (1) Winning both time and space for an independent national revival strategy through financial negotiations with the IMF and political negotiations with the G-8 countries. (2) Injection of aggregate demand into the economy by increasing investment in those sectors which have the capacity of generating a relatively higher GDP growth, employment and exports per unit of investment. (3) Launch a national initiative of developing and replicating Community Based Organisations (CBOs) at the village and mohallah level. Such an initiative to be feasible must be characterized by autonomy of CBOs, rapid pace of coverage and cost effectiveness. The tendency to set up government sponsored top-down NGOs which are bureaucratic and have high overheads must be eschewed.

Let us examine each of these prongs of a national strategy of growth and poverty alleviation:

1. The necessary financial space must be won through economic diplomacy with G8 countries and the IMF. We must reason with them that the rescheduling of some of our debts that occurred last year must be repeated again in the year 2001 to avoid a crippling increase in our debt servicing burden. Another three years of respite from debt servicing beginning from 2001 is necessary to win the financial space for launching a revival strategy. What makes this economic diplomacy particularly challenging is that together with achieving a second rescheduling of loans we must also persuade the IMF that a home grown, high growth strategy is necessary for sustainable macro economic stabilization. It would be unrealistic to expect that western financial support for Pakistan's economic revival strategy can be acquired merely through the quality of our economic logic or the eloquence of our negotiators. It may be necessary to seriously address the major political concerns of the G-8 countries. These could be: (i) the problem of export of Jehadi militants, (ii) stabilization of nuclear deterrence at a minimum level, (iii) a peace process with India and (iv) initiating a new democratic era in Pakistan within a specific, though not necessarily declared time frame.

2. The second prong of the revival strategy should be to sharply increase investment through public-private partnership in three key sectors of the economy:

2 (a) Rehabilitation of the irrigation system which is currently in a state of acute disrepair with irrigation efficiency down to only 30%. Such a campaign would involve organising semi skilled labour for the desilting of canals, strengthening the banks, organising villagers for making "Pucca Khaalas" (concrete lined water courses) and to improve the gradient of water courses and farmlands in order to improve both the delivery and application efficiency of irrigation. Such a campaign being inherently labour intensive would not only generate large-scale employment rapidly but also help to improve water availability and yields per acre at the farm level. If the campaign is professionally designed and managed, the funding for financing wage payments to the newly employed labour force could be sought from the World Bank or the Asian Development Bank both of which have poverty alleviation and sustainable agricultural growth as their priority concerns.

In addition to the campaign for improved maintenance of the irrigation system other labour intensive infrastructure projects should also be undertaken to simultaneously generate employment and stimulate aggregate demand in the economy. Such projects could be the building of farm to market roads, national high ways and ports, together with improved infrastructure in small towns across the country. Such infrastructure projects would need to be undertaken through joint venture arrangements between domestic construction outfits such as the FWO and specialized foreign firms. The joint ventures would have to be pro-actively facilitated by the government.

2 (b) Rapidly develop export led production capacity for milk, fisheries and high value added agricultural products such as fruits, vegetables and flowers. Let us illustrate this initiative by using the example of milk. At the moment Pakistan is producing approximately 177 billion rupees worth of milk annually for domestic consumption. This makes milk the largest agricultural product. By comparison, wheat, Pakistan's largest crop has an annual production value of approximately 111 billion rupees. Unlike wheat however, the output of milk can be accelerated sharply within a couple of years. Currently Pakistan's milch cattle have a yield per animal which is one-fifth of the European average. Demonstrable experience in the field has shown that the milk yields per animal in Pakistan can be doubled within two years through scientific feeding, breeding and marketing. If the institutional framework could be established for training the farmers in scientific feeding and breeding and if the logistics could be set up to collect milk from the farm door by means of refrigerated transport, milk output in Pakistan could be doubled. This would have a dramatic impact not only on the incomes of poor peasants, but also on exports and overall GDP growth. In view of the fact that Pakistan lies at the hub of milk deficit regions such as Central Asia, West Asia and South East Asia, if milk out put in Pakistan could be doubled our export earnings could increase by US $ 4 billion annually. Keeping in mind that Pakistan's balance of trade deficit is about US $ 1.5 billion an additional four billion US $ of foreign exchange earnings from milk exports would resolve Pakistan's balance of payments problem. Such an initiative therefore can lead to accelerated exports, higher GDP growth and improved income distribution in Pakistan.

Marine Fisheries, also provide a significant potential for improving foreign exchange earnings although not as large as the potential for milk. Here again what is required is improved institutional support and better management rather than huge investments by the Government. In the case of marine fisheries currently there are large losses and failure to achieve significant exports due to the fact that the storage conditions of fish during transportation are both unscientific and unhygienic by international quality standards. Currently alternate layers of fish and hard sharp edged ice are placed in containers on the boat. Under the weight of upper layers of fish and the sharp edged ice, fish at the lower layers are crushed, and the resultant bleeding causes putrefaction. To avoid this it is necessary to provide shelves for layered storage of fish in boats, topped by dry ice, with fiberglass covers. Through such measures it would be possible to bring back the fish at the European Union standards of minus 7oC and thereby make it exportable. An export potential of at least 300 million dollars exists over the next three years if such improved management of the marine fisheries industry could be achieved.

Another element in increasing high value added production and export in the agricultural sector would be to facilitate the production of fruits, vegetables and flowers for exports. This would require institutional support for improved quality of output, improved grading packaging, and refrigerated transport right up to the cargo terminals for air freight to the export market.

2 (c) Establish industry specific training institutions combined with institutional support for credit and marketing to the small-scale industrial sector in Pakistan. Large-scale training of software experts for example could quickly result in significant software exports from Pakistan. India with its 200,000 computer specialists, exports about 5 billion US$ worth of software and has a target of 20 billion software exports in the next five years. There is no reason why Pakistan cannot build a pool of software experts for a large increase in its export earnings. This would of course require a pro-active government to establish joint ventures between large software companies such as Microsoft and Pakistan's institutions such as LUMS and Private sector firms such as Informatics.

Similarly other high value added small scale industries such as manufacture of moulds, dyes, electronics and machine tools could be encouraged to produce quality products for export. This could be done by providing institutional support in terms of credit, quality control management, skill training and marketing. (A detailed blueprint on such industrial support institutions is available in my book titled: A strategy of Poverty Alleviation). Such support institutions while being facilitated by the government can and should be in the private sector and be market driven. Such small-scale industries have the advantage of having a low gestation period, are labour intensive, and can generate larger output per unit of investment compared to the large scale manufacturing sector. This would accelerate GDP growth in the medium term at relatively low levels of investment and would also increase employment and exports for given levels of GDP growth.

The third prong of the revival strategy should be to launch a national campaign for poverty alleviation. The objective of this campaign should be to facilitate rapidly and cost effectively, the establishment of village and mohallah level organisations of the poor through which they can identify income generating projects, initially at the household level; acquire skill training from governmental sources, private sector, NGOs and donors; and access credit for micro enterprise projects through apex organisations such as the Pakistan Poverty Alleviation Fund (PPAF).

The very concept of 'empowerment' of the poor, is problematic in a form of governance in which political support is to some extent acquired and maintained through patron-client relations between the 'governors' and the 'governed'. In this context, disbursement of the state's financial resources and provision of employment opportunities are used as a means of enlarging patronage and power. Even some of those who are heading large government initiated, but autonomous poverty programmes, tend to operate them as fiefdoms and form alliances with politicians and the bureaucracy by granting them unwarranted access over resources and employment decisions within their 'demesnes'. Consequently, resources (whether granted by donors or government) apparently provided to create a space of empowerment for the poor, tend to get re-appropriated by the ruling elite. The space of empowerment for the poor tends to get restructured into a more complex space which appears to be empowering the poor while actually reinforcing their dependency through patron-client relations. Some of the government sponsored large NGOs or "Support Organisations" have become subject to this dialectic.

The question that arises is how scaling up of support organizations for Participatory Development is to be achieved without bureaucratizing the support organizations and the space 'allocated' for the empowerment of the poor, prevented from being used for the exercise of patron-client relations. This possibility occurs whenever governments create large support organizations which while being formally autonomous are actually subordinate to the ruling elite and its mechanisms of reproducing dependency. Perhaps a workable solution to this problem could be to foster the rapid replication of existing community based organisations at the village/mohallah level, through the PPAF and a major Micro Credit Bank along the lines of the Grameen bank in Bangladesh.

It is important that such village level community based organisations (CBOs) be autonomous and have the ability to form cluster apex organisation with other CBOs. Such organisations by means of social mobilisation, increased productivity through skill training, increased income, savings and investment would begin a process of localised capital accumulation. Such a process would be integrally linked with the emergence of a new consciousness of participatory development. The poor could thus break out of the poverty nexus and become active subjects of economic growth rather than being passive victims of it. Such a process of village/mohallah level increases in productivity incomes and savings, would not only constitute a direct attack on the poverty problem but would also contribute to a faster and more equitable macro economic growth.


We have argued in this article that poverty alleviation cannot be conceived either as a trickle down effect of growth or as a handout by the elite. It is essentially about changing the structure of power itself from an elite dominated to a more broad-based and decentralized one. A credible strategy would therefore require two inter related strategic initiatives: (a) First to initiate an economic growth strategy based on high value added small scale units in both the farm and manufacturing sectors which can generate higher output, employment and exports per unit of investment. This should help to restructure the growth process itself by developing the asset-base of the relatively lower income groups and thereby achieving growth with equality. (b) To induce a decentralized and cost effective process of empowering the poor by facilitating the organisation of the poor, skill training, access over credit and local self governance. Thus poverty alleviation instead of being merely a sop by the elite, would become an integral part of the process of economic growth and change in the structure of political power.

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