Sartaj Aziz inaugurates the 30th AGM & Conference of the Pakistan Society of Development Economists

Lahore: The 30th AGM & Conference of the Pakistan Society of Development Economists (PSDE) was inaugurated today by Sartaj Aziz, Advisor to the Prime Minister on Security Issues and Foreign Affairs. The three-day Conference is organized by Pakistan Institute of Development Economics (PIDE), Islamabad, and is taking place at the Pak-China Friendship Center, Islamabad. Along with PIDE, the collaborators of the Conference are BRAC, WWF-CCAP-EU, Friedrich-Eibert-Stiftung, International Growth Center, HEC, PPAF, UNDP, USAID, IFPRI, and World Bank.

In his inaugural address, the chief guest,  Sartaj Aziz said that during the past couple of decades, a lot of attention has been paid to poverty reduction but despite the attention, the number of poor people has actually increased. Almost half of the planet’s population is living in poverty and about 1.2 billion people are living in extreme poverty. Although efforts are being made to reduce poverty but unfortunately the results are not very encouraging. One of the MDGs was to halve the poor population by 2015 and although the number of people living in poverty has indeed declined but the goal itself will not be achieved.

Mr. Aziz said that the root causes of poverty spring from the power structure of the society in which benefits accrue to those how own land. These causes of poverty are compounded by manmade policies. Macroeconomic policies have an urban bias, in which positive protection is given to the industry and agriculture is put on the back burner. Due to this urban bias the terms of trade worsen for agriculture which affects the livelihood of small farmers. Globalization has also contributed to the increase in global poverty. The free market ideology and adjustment policies of the international institutions such as World Bank etc. have a negative impact on the poor. For example, they advocate a decrease in subsidies which lead to unemployment and other harmful consequences. Interestingly the developed countries do not practice what they preach and continue giving agricultural subsidies.

The Advisor to the Prime Minister on Security Issues and Foreign Affairs said that we need mutually enforcing solution to end poverty. He highlighted some important factors that need to be looked at in order to combat poverty, namely land-ownership, land skewness and land reforms; power structure; decentralization and the bureaucratic structure in the provincial governments; power sharing in the poor in governance and the presence of institutions for the poor to participate in problem solving; tribal ethnic and religious polarization in the country; capacity of the administration to implement pro-poor policies; and budgetary resource for the social sector. Not all these can be implemented at the same time in a country but if you are able to take care of a few of these factors, poverty can be reduced. The experience of China shows that with high economic growth and pro-poor structures one can fight poverty. In the case of Pakistan with a reasonable growth rate there is good chance of poverty reduction but unfortunately the growth rate has been low lately.

Talking about inequality, Mr. Aziz said that invariably inequality increases when the growth rate increases. We need to reduce inequality not only for equity but also to increase the growth rate. According to experts inequality will be one of the most pressing problems of our era. To increase the growth rate we need to have innovation which is the main driver of economic growth and for innovation we need to develop our human resources. Growth will be at its maximum when each citizen is given a chance to participate in the growth process.

Mr. Aziz said he is delighted to return to this landmark event after a long time. This gathering is an important event for not only the intellectuals but also for the policy makers. He felt that the topic selected for this conference is very important and he would look forward to the suggestions coming out of the proceedings.

Earlier, President PSDE and Vice Chancellor PIDE, Prof Dr Asad Zaman in his Presidential Address said that poverty is not inevitable but it is due to wrong choices. He hoped that the Conference will be helpfulin understanding the nature and causes of poverty. Prof Zaman said that initially it was thought that economic growth is synonymous with capital accumulation and takes place through technology and industrialization. In reality, growth is a multi-dimensional concept,which builds upon human capabilities. Prof Zaman highlighted the great importance that Planning Commission’s Vision 2025 attaches to building human resources as the first pillar of Vision 2025 is “Putting People First”. At the end, the President PSDE stressed that poverty is not one big problem but a combination of thousands of small problems andchange in social norms isthe key. He also emphasized ties with Islamic heritage to bring about change.

At the start of the proceedings, Secretary PSDE, Dr Idrees Khawaja, welcomed the participants who have come to participate in the Conference from all over Pakistan and from across the globe.

The inaugural address was followed by the prestigious Quaid-e-Azam Lecture, which was delivered by Dr Akmal Hussain. Prof. Akmal Hussain while delivering his talk on “Fulfilling the Pakistan Vision of Quaid-i-Azam” prefaced his core argument with Quaid-i-Azam’s famous and has the idea is included in the Constitution of Pakistan. However the situation today is far from this ideal. According to one estimate of poverty based on the calorific norm, almost 40 percent of the population is below the poverty line. This situation worsens further when we look at the Multi-dimensional Poverty Index, according to which almost 46 percent of the population lives in poverty. A recent estimate by Shahid Javed Burki, in fact, has found that the average income of approximately 18,000 individuals is 70 times the per capita income of the rest of the population. A few thousand live in fabulous luxury while 83 million individuals are deprived and children crawl to their deaths in starvation in some regions of the country.

Looking at GDP growth rates for countries over the past 1000 years, the difference between developed and developing countries has grown by leaps and bounds despite developing countries on average having a higher growth rate than developed countries in the 1000s. What sets developed and developing countries apart is the fact that developed countries have managed to sustain a respectable growth rate over the years and have improved their social indicators. Developing countries have been unable to do so and Pakistan is a typical example.

The core factor accounting for the failure to achieve equality or sustained growth is the economy’s rent based institutional structure and associated patron client governance. Exclusion of the majority from investment and high wage employment restricts competition and creates rents generated by the institutional structure for an elite coalition. Prof Hussain said that mainstream economics thinking that inequality is inevitable result of high growth needs to be turned on its head. Broadening the base of competition, investment, productivity increase and innovation will result in equitable and sustained high growth.

Dr Kaiser Bengali, Former Advisor Government of Sindh and Dr. Faisal Bari, Associate Professor LUMS, were the discussants for the Quaid-e-Azam Lecture. The discussants stressed the need for job-creating economic growth and societal enlightenment to have the right choices to bring about change.

At the conclusion of the session, the speaker, chairperson, and discussants applauded the conference organizers for selecting such a critical topic for the Conference. They expressed hope that the discussions and deliberations during the three days of the Conference would suggest some concrete reforms for policymakers to bring about some positive change in the existing situation.