Friday, August 20, 2010

ADB Report Shows Pakistan Offers Higher Upward Mobility Than India

Over the last two decades, Pakistan has continued to offer much greater upward economic and social mobility to its citizens than neighboring India. Since 1990, Pakistan's middle class had expanded by 36.5% and India's by only 12.8%, according to an ADB report on Asia's rising middle class released recently.

The simplest definition of the middle class is a group of people in a society who are neither rich nor poor. The middle class has always been considered vital to a country's political stability and economic growth. The rich and the poor simply distrust each other too much to let the other govern. Nations with large middle class populations find it easier to reach consensus on sustaining good, democratic governance.

Unfortunately for Pakistan, the size of the middle class was very small when it came into existence, and the country was dominated by a small powerful feudal elite created by the British rulers to sustain their colonial rule. And the urban middle class remained small for decades. The situation has, however, finally begun to change in the the last decade of 1999-2009 with a combination of increasing urbanization and faster economic expansion that fueled significant job creation in the industrial and services sectors to enable middle class growth.

An ADB report on Asia's rising middle class released this month confirms that Pakistan's middle class has grown to 40% of the population, significantly larger than the Indian middle class of about 25% of its population, and it has been growing faster than India's middle class. The other significant news reported by Wall Street Journal today says the vast majority of what is defined as India's middle class is perched just above $2 a day, making it vulnerable to various shocks. This is also true of Pakistan.

Here are the details of income levels in India, Pakistan and China as reported by ADB:

Daily Income......$2-$4.......$4-$10........$10-$20.....Over $20

India...............20.45%......4.15%........0.45%........0.10%

Pakistan............32.94%......6.56%........0.62%........0.15%

China ..............33.97%......25.17%.......3.54%........0.68%

Pakistan has continued to offer much greater upward mobility to its citizens than neighboring India. Since 1990, China's middle class population has expanded by 61.4%, Pakistan's by 36.5% and India's by 12.8%.

In terms of education, average number of years of schooling in Pakistan is 13 years, 3 years more than India's 10, according to an education comparison published by Newsweek recently. An average Pakistani is, therefore, better educated and more capable of earning higher income than an average Indian.

In terms of absolute numbers in millions of people, China and India are naturally the biggest contributors to the rising population of Asia's middle class that is driving increasing consumption. They are followed by Indonesia and Pakistan vying for the third place.

The ADB report discusses in some detail the impact of Asia's rising middle class on a whole range of social, political and economic developments in the world. The report argues that "Asia’s large population and the rapid expansion of its middle class during a period of global economic rebalancing is fundamentally important as a driver not only of the Asian economy but also the global economy. However greater middle class wealth and consumption is only one factor in the region’s increasing importance. The rise of its middle class is likely to aid not only the growth process, but also result in substantial social, political, and environmental changes. Thus, the contention is that, building on strong growth and continued progress in reducing poverty in Asia, developing a stable middle class requires governments to formulate and implement middle class-friendly policies. In turn, this requires understanding and analyzing the characteristics of the middle class, the factors contributing to its growth, and the various implications—positive and negative—of its rise. These are some of the issues this special chapter addresses".

Here are some of the key points of the ADB report:

1. While 56% of developing Asia’s population, or nearly 1.9 billion people, were already considered part of the middle class based on an absolute definition of per capita consumption of $2–$20 per day in 2008, nearly 1.5 billion Asians were still living on less than $2.0 per day. Moreover, the majority of the Asian middle class still falls in the $2–$4 range, leaving them highly vulnerable to slipping back into poverty due to economic shocks. Thus, for the middle class to become a prominent force it will likely depend on its size and spending levels and characteristics. It will require governments to introduce policies that bolster the incomes of those already in the middle class. It will also require social policies to expand the middle class—such as through greater spending in education and health. Through these, it is possible to build a strong and stable middle class that continues to grow.

2. According to the “political economy” argument, societies with a small middle class are generally extremely polarized, and find it difficult to reach consensus on economic issues; they are overly focused on the redistribution of resources between the elite and the impoverished masses, each of which alternates in controlling political power. Societies with a larger middle class are much less polarized and can more easily reach consensus on a broad range of issues and decisions relevant to economic development (Alesina 1994).

3. Besides helping to reach consensus, Banerjee and Duflo (2008) have discussed three mechanisms through which a large middle class could promote development. First, the middle class may provide the entrepreneurs who create employment and productivity growth in a society. Second, “middle-class values”—that is, the values of accumulation of human capital and savings—are critical to economic growth. And third, with its willingness and ability to pay extra for higher-quality products, the middle class drives demand for high-quality consumer goods, the production of which typically presents increasing returns to scale. This encourages firms to invest in production and marketing, raising income levels for everyone.

4. Middle class is not inimical to the interests of the poor. Indeed, Birdsall (2010) argues that “… in the advanced economies the poor have probably benefited from the rule of law, legal protections, and in general the greater accountability of government that a large and politically independent middle class demands, and from the universal and adequately funded education, health and social insurance programs a middle class wants and finances through the tax system… A focus on the middle class does not exclude a focus on the poor but extends it, including on the grounds that growth that is good for the large majority of people in developing countries is more likely to be economically and politically sustainable, both for economic and political reasons.”

Talking about Pakistan's growing middle class, Professor Rasul Baksh Raees, head of social sciences at the Lahore University of Management Sciences, told the Christian Science Monitor that "the reach and influence of civil society has grown as Pakistan’s middle classes have become more affluent, organized (thanks in no small part to the Internet age), and confident".



The years 2007 and 2008 saw increasing political activism in Pakistan as many members of the nation's newly expanded middle class, most of whom rose to middle class status during Musharraf's economic boom, left the comforts of their homes for the streets to march against the suspension of civil liberties and the firing of Pakistan's chief justice by former President Musharraf. A test of the middle class now is how it responds to the current crises ranging from political instability, poor governance, rising corruption, economic stagnation and the massive flooding that is taking its toll on the nation. At this moment, the greatest need of the hour in Pakistan is greater social activism by the middle class to help their unfortunate fellow citizens devastated by the unprecedented floods sweeping the nation's rural landscape. Early media reports are encouraging, indicating that some Pakistani middle class networks are mobilizing to provide assistance to the flood victims. As the support efforts move from rescue and relief to reconstruction and rehabilitation, my hope is that Pakistan's middle class will be engaged in helping their fellow citizens for the long haul. Such sustained engagement will be a part of Pakistan's defense against religious extremism and radicalization of some in its alienated young population.

Here's a video clip on Pakistan's middle class:



Related Links:

Haq's Musings

Pakistan: a modern history By Ian Talbot

Disaster Dampens Spirits on Pakistan's 63rd Independence Day

Pakistan's Decade of Middle Class Growth

Comparing India and Pakistan in 2010

Indian poverty

Pakistan Wage Structure 1990-2007

Middle Class Clout Rising in Pakistan

Urbanization in Pakistan

The Rise of Mehran Man

Industr ial Sector of Pakistan

India Has No Middle Class

Pakistan's Foreign Visitors Pleasantly Surprised

Escape From India

Reflections on India

After Partition: India, Pakistan and Bangladesh

The "Poor" Neighbor by William Dalrymple

Pakistan's Modern Infrastructure

Video: Who Says Pakistan Is a Failed State?

India Worse Than Pakistan, Bangladesh on Nutrition

UNDP Reports Pakistan Poverty Declined to 17 Percent

Social and Cultural Transformation in Pakistan

Pakistan's Choice: Talibanization or Globalization

Pakistan's Financial Services Sector

Pakistan's Decade 1999-2009

South Asia Slipping in Human Development

Asia Gains in Top Asian Universities

Pakistan's Industrial Sector

Pakistan's Multi-Billion Dollar IT Industry

India -Pakistan Military Comparison

Food, Clothing and Shelter in India and Pakistan

Pakistan Energy Crisis

Monday, August 16, 2010

India is Home to World's Largest Population of Poor, Hungry and Illiterates

In yesterday's Times of India piece titled "Our freedom was born with hunger, we're still not free", one of India's Green Revolution leaders Monkombu Sambasivan Swaminathan says, "Our freedom was born with hunger. It was born in the backdrop of the Bengal famine. If you read the newspapers dated August 15, 1947, one part was about freedom, the other was food shortage".



As India celebrates its 63rd independence anniversary, it is very unfortunate that economically resurgent India still remains home to the world's largest population of poor, hungry and illiterate people. Tragically, hunger remains India's biggest problem, with an estimated 7000 Indians dying of hunger every single day. Over 200 million Indians will go to bed hungry tonight, as they do every night, according to Bhookh.com. Along with chronic hunger, deep poverty and high illiteracy also continue to blight the lives of hundreds of millions of Indians on a daily basis.



India ranks 66th on the 2008 Global Hunger Index of 88 countries while Pakistan is slightly better at 61 and Bangladesh slightly worse at 70. Though the problems of poverty and hunger in Pakistan are a bit less serious than in India, Pakistan also suffers from high illiteracy and low levels of human development that pose a serious threat to its future.



India has the dubious distinction of being among the top ten on two very different lists: It ranks at the top of the nations of the world with its 270 million illiterate adults, the largest in the world, as detailed by a just released UNESCO report on education; India also shows up at number four in military spending in terms of purchasing power parity, behind United States, China and Russia.

Not only is India the lowest among BRIC nations in terms of human development, India is also the only country among the top ten military spenders which, at 134 on a list of 182 nations, ranks near the bottom of the UNDP's human development rankings. Pakistan, at 141, ranks even lower than India.

India also fares badly on the 2009 World Hunger Index, ranking at 65 along with several sub-Saharan nations. Pakistan ranks at 58 on the same index.

A recent Oxford study on multi-dimensional poverty confirmed that Indians are far more deprived than Pakistanis and the poorest of the poor Africans. The study reveals that there are more "MPI poor" people in eight Indian states (421 million in Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh , Orissa, Rajasthan, Uttar Pradesh, and West Bengal) than in the 26 poorest African countries combined (410 million).



Developed at Oxford University, the Multidimensional Poverty Index (MPI) goes beyond income poverty based on $1.25 or $2 a day income levels. It measures a range of "deprivations" at household levels, such as schooling, nutrition, and access to health, clean water, electricity and sanitation. According to Oxford Poverty and Human Development Initiative (OPHI) country briefings 2010, 55% of Indians and 51% of Pakistanis are poor.

Access to healhcare in South Asia, particularly due to the wide gender gap, presents a huge challenge, and it requires greater focus to ensure improvement in human resources. Though the life expectancy has increased to 66.2 years in Pakistan and 63.4 years in India, it is still low relative to the rest of the world. The infant mortality rate remains stubbornly high, particular in Pakistan, though it has come down down from 76 per 1000 live births in 2003 to 65 in 2009. With 320 mothers dying per 100,000 live births in Pakistan and 450 in India, the maternal mortality rate in South Asia is very high, according to UNICEF.

The health problems in India are compounded by serious lack of sanitation. According to a joint study conducted by the World Health Organization and UNICEF, 665 million Indians, or nearly two-thirds of them defecate in the open. While a mere 14 percent of people in rural areas of the country - that account for 65 percent of its 1.1 billion population - had access to toilets in 1990, the number had gone up to 28 percent in 2006. In comparison, 33 percent rural Pakistanis had access to toilets in 1990 and it went up to an impressive 58 percent in 2006, according to UNICEF officials.

In its issue earlier this year, the harsh reality of hunger and malnutrition in India was described by the Economist magazine as follows:

"India-wide, more than 43% of Indian children under five are malnourished, a third of the world’s total. Over 35% of Indians are illiterate and over 20m children out of school. For all its successes, including six decades of elections and a constitution that introduced the notion of equal rights to an inequitable society, India’s abiding failure is its inability to provide aid and economic opportunity to millions of its impoverished citizens."

The reality of grinding poverty in resurgent India was recently summed up well by a BBC commentator Soutik Biswas as follows:

A sobering thought to keep in mind though. Impressive growth figures are unlikely to stun the poor into mindless optimism about their future. India has long been used to illustrate how extensive poverty coexists with growth. It has a shabby record in pulling people out of poverty - in the last two decades the number of absolutely poor in India has declined by 17 percentage points compared to China, which brought down its absolutely poor by some 45 percentage points. The number of Indian billionaires rose from nine in 2004 to 40 in 2007, says Forbes magazine. That's higher than Japan which had 24, while France and Italy had 14 billionaires each. When one of the world's highest number of billionaires coexist with what one economist calls the world's "largest number of homeless, ill-fed illiterates", something is gravely wrong. This is what rankles many in this happy season of positive thinking.

As India and Pakistan celebrate their 63rd independence day, it is time for both major South Asian nations to reflect and act on the urgent need for careful balancing of their genuine defense requirements against the need to spend more to solve the very serious problems of food, education, health care and human resource development for securing a better future of their peoples.

Here's a video clip showing grinding poverty in resurgent India:



Related Links:

Haq's Musings

Disaster Dampens Spirits on Pakistan's 63rd Independence Day

UNESCO Education For All Report 2010

India's Arms Build-up: Guns Versus Bread

South Asia Slipping in Human Development

World Hunger Index 2009

Challenges of 2010-2020 in South Asia

India and Pakistan Contrasted 2010

Food, Clothing and Shelter in India and Pakistan

Introduction to Defense Economics

Saturday, August 14, 2010

Pakistan's Glass is Half Full on its 63rd Independence Day

The devastating floods in Pakistan have dampened the spirits of its people on its 63rd independence day this Aug 14, 2010. All official events marking the day have been canceled as the nation mourns the death of at least 1700 of its citizens and finds itself overwhelmed by the monumental relief and rescue efforts aimed at tens of millions of people across three provinces.

As the scope and scale of the disaster becomes apparent, the response from Pakistani government and the international community has been very slow and inadequate. Coming on the heels of continuing terrorist violence and a slow economy, the floods have further challenged even the greatest optimists in Pakistan.



While it is urgent to cope with the flooding crisis at hand as effectively as humanly possible, it is even more important to keep the faith and remain optimistic about the future of Pakistan in its most difficult hour. And I do see some key trends to be optimistic about Pakistan. Here is the list as I see it:

1. Pakistan is well on its way to becoming an urban middle class society. The country is already more urbanized with a larger middle class than India's as percentage of the population. In 2007, Standard Chartered Bank analysts and State Bank governor Dr. Ishrat Husain estimated there were 30 to 35 million Pakistanis earning an average of $10,000 a year. Of these, about 17 million are in the upper and upper middle class, according to a recent report.

The urban population now contributes about three quarters of Pakistan's gross domestic product and almost all of the government revenue. The industrial sector contributes over 27% of the GDP, higher than the 19% contributed by agriculture, with services accounting for the rest of the GDP.

2. There is an unstoppable mass media revolution sweeping the nation. It began ten years ago when Pakistan had just one television channel, according to the UK's Prospect Magazine. Today it has over 100. Together they have begun to open up a country long shrouded by political, moral and religious censorship—taking on the government, breaking social taboos and, most recently, pushing a new national consensus against the Taliban. The birth of privately owned commercial media has been enabled by the Musharraf-era deregulation, and funded by the tremendous growth in revenue from advertising targeted at the burgeoning urban middle class consumers. Analysts at Standard Charter Bank estimated in 2007 that Pakistan had 30 million people with incomes exceeding $10,000 a year. With television presence in over 16 million households accounting for 68% of the population in 2009, the electronic media have also helped inform and empower many rural Pakistanis, including women.

3. With the popular civil society movement for restoration of democracy and rule-of-law in 2007-2008, political activism by the middle class has been on the rise in Pakistan. The nation has very energetic political talk shows on dozens of TV channels, and a very active blogosphere. With only about 20 million internet users in a population of over 160 million people as of 2010, it is among the most politically active nations online, according to Huma Yousuf, reporter for the Christian Science Monitor in Pakistan.

4. For the first time in the nation's history, President Musharraf's education adviser Dr. Ata ur Rahman succeeded in getting tremendous focus and major funding increases for higher education in Pakistan. The extraordinary increase in funding helped establish 51 new universities and degree awarding institutions during 2002-2008, tripling university enrollment (which had reached only 135,000 from 1947 to 2003) to about 400,000 in 2008, establishment of a powerful digital library which provides free nation-wide access to every student in every public sector university to 45,000 textbooks/research monographs from 220 international publishers as well as to 25,000 international research journals.

According to Sciencewatch, which tracks trends and performance in basic research, citations of Pakistani publications are rising sharply in multiple fields, including computer science, engineering, mathematics, material science and plant and animal sciences. The number of papers published by Pakistani scientists reached 4300 in 2007 (For comparison purposes, India-based authors published 27000 papers in 2007, according to Science Watch). Over two dozen Pakistani scientists are actively working on the Large Hadron Collider; the grandest experiment in the history of Physics. Pakistan now ranks among the top outsourcing destinations, based on its growing talent pool of college graduates. According to Pakistan Software Export Board, Pakistani IT industry has grown at 40% CAGR during the 2001-2007, and it is estimated at $2.8 billion as of last year, with about half of it coming from exports. As evident from the overall results, there has been a significant increase in the numbers of universities and highly-educated faculty and university graduates in Pakistan. There have also been some instances of abuse of incentives, opportunities and resources provided to the academics in good faith. The quality of some of the institutions of higher learning can also be enhanced significantly, with some revisions in the incentive systems.

5. While Pakistanis are poor, they are still better off than than their neighbors, according to a recent Oxford report on multi-dimensional poverty.

OPHI 2010 country briefings on India and Pakistan contain the following comparisons of multi-dimensional (MPI) and income poverty figures:

India
MPI= 55%,Under$1.25=42%,Under$2=76%,India_BPL=29%

Pakistan
MPI=51%,Under$1.25=23%,Under$2=60%,Pakistan_BPL=33%

Lesotho MPI=48%,Under$1.25=43%,Under$2=62%,Lesotho_BPL=68%

China
MPI=12%,Under$1.25=16%,Under$2=36%,China_BPL=3%

Among other South Asian nations, MPI index measures poverty in Bangladesh at 58 per cent and 65 per cent in Nepal.

6. UNDP publishes the Education Index which is measured by the adult literacy rate (with two-thirds weighting) and the combined primary, secondary, and tertiary gross enrollment ratio (with one-third weighting). The adult literacy rate gives an indication of the ability to read and write, while the GER gives an indication of the level of education from kindergarten to postgraduate education.

On this UNDP education index, Pakistan scores low at 0.665 and ranks 137, but it is still ahead of India's score of 0.638 and ranking of 142nd on a list of 176 nations.

7. Pakistan is blessed with many social entrepreneurs who are engaged in activities ranging from microfinancing to enable small entrepreneurs to providing solutions such as clean water, solar lighting, setting up schools, etc. to help fill the vacuum left by the government. These people believe in lighting candles instead of cursing darkness.

Summary:

While I recognize that Pakistan in its current state faces many difficult crises and falls short of the expectations of many in dealing with them, I do believe that Pakistanis have what it takes to move forward as an urban middle class nation capable of dealing with its problems. Its glass is half full, and all it takes to fill it up is the will to do it....and I expect that when the going gets tougher, the tough will get going in Pakistan to meet the challenges. I'll conclude here by leaving you with the following question: If not now, when? If not us, who?

Related Links:

Haq's Musings

Light a Candle, Do Not Curse Darkness

Decade of Urban Middle Class Growth in Pakistan

Urbanization in Pakistan

Higher Education Reform in Pakistan

High Cost of Failure to Aid Pakistan Flood Victims

Fighting Poverty Through Microfinance in Pakistan

TEDx Karachi Inspires Hope

Thursday, August 12, 2010

Slow Reponse Aids Radicals in Pakistan Floods

“The international community, to which Pakistan belongs, is losing the war against the Taliban,” Pakistani President Asif Zardari told the French daily Le Monde a few days ago. “This is above all because we have lost the battle to win hearts and minds.”

Unfortunately, this mea culpa of sorts by Mr. Zardari has done little to change the grim reality on the ground. In fact, the situation has been further exacerbated by the absence of leadership by the ruling feudal elite such as Mr. Zardari during recent heavy flooding of large parts of Pakistan, including the Khyber Pakhtunkhwa province which is the center of the Taliban insurgency in Pakistan. This vacuum has been promptly filled by the rapid aid provided to the millions of unfortunate flood victims by the "terrorist" organizations which are being targeted by the "international community" in its "war on terror" of which Mr. Zardari claims to be a part.

Immediate effects:

In addition to the 1600 deaths reported so far, the current estimate is that about 14 million people are affected by the deadly deluge, which is now inundating southern Sind province of the country. The affected population is larger than in other humanitarian crises, including the 2004 Asian tsunami, the 2005 Kashmir quake, the Swat refugee crisis of 2009 and the Haiti quake of 2010.

Almost one in 10 of Pakistan's population has been affected by the floods and at least 6 million are in need of immediate humanitarian assistance. "The flood waters have devastated towns and village, downed power and communications lines, washed away bridges and roads and inflicted major damage to buildings and houses," UN humanitarian chief John Holmes told the media.

"While the death toll may be much lower than in some major disasters... it is clear that this disaster is one of the most challenging that any country has faced in recent years," he added.

Long Term Damage:

There has been a devastating impact to the already poor infrastructure in many parts of Pakistan. "The floodwaters have devastated towns and village, downed power and communications lines, washed away bridges and roads and inflicted major damage to buildings and houses," according to UN's John Holmes.

Already suffering from slow economy, high unemployment and rising food prices even before the floods hit them, tens of millions of Pakistanis living on the edge will have to deal with further loss of homes and livelihoods in the disaster. Some of the worst hit areas have already seen all crops wiped out and many livestock lost, according to the UN's Food and Agriculture Organization (FAO). About 700 000 hectares of crops are under water or destroyed, with many surviving animals without feed. The combination of Russian fires and Pakistani floods has already driven international wheat prices to a two-year high, according to the Wall Street Journal. At about $7 a bushel, the wheat prices are still about half of what they were back in 2007-2008.

Zardari's assessment of the loss of hearts and minds is correct, but his actions are wrong. His absence from the country during the ongoing disaster in Pakistan has sent the worst possible message to the affected people that says that he doesn't really care. Compounding the situation is the extremely slow response of the international community to the unfolding natural disaster that is being called the worst to hit Pakistan in about half a century.

Call For Action:

All is not lost, however. There is still time, though not a lot of time, to make amends by Pakistani government and the international community. They can begin by committing and providing the needed funds, sending in the necessary relief supplies and by deploying a larger fleet of Pakistani and American helicopters with aid workers to reach the trapped people. After ensuring clean execution of short term rescue and relief operations, they must follow up with serious long-term reconstruction efforts to restore and rebuild the lives of millions of affected people. This reconstruction effort would require tens of billions of dollars in the next few years, far more than the immediate half a billion dollar aid requested by the UN.

In the meanwhile, people of goodwill around the world should do what they can by contributing funds through established charities, or by volunteering to alleviate the extraordinary suffering of over 14 million Pakistanis ravaged by the great deluge of this century.

Related Links:

Haq's Musings

American Policies Alienating Pakistanis

80/20 Strategy and Marshall Plan for Pakistan

We Hang Petty Thieves and Elect Great Ones to High Offices

Why is America Losing the War in Afghanistan?

Ode to the Feudal Clown Prince of Pakistan