Ali Asad Sabir/Abdul Rehman Nawaz
Design: Mohsin Alam
PUBLISHED on March 12, 2023
Recently, Pakistan’s Defense Minister Khawaja Asif pointed out that there are more than 200 golf courses built exclusively for the country’s elite on state-owned land. Commenting on the issue, he pointed out that if these lands were returned and auctioned, Pakistan could earn significant revenue to repay its foreign debts.
The minister also pointed out that the rent charged for a facility set up on a 1,500 kanal government land in Lahore for the elite is only Rs 5,000. The revelation of such stark inequality in the use of public resources has raised concerns about the fairness and transparency of land distribution in Pakistan.
Pakistan’s income inequality has been a persistent and growing problem, with the richest 10% of the population receiving about 40% of national income, while the poorest 10% receive only about two percent of national income.
According to Oxfam Pakistan’s Inequality 2020 Report, one percent of the population in Pakistan has 10 times more wealth than the bottom 50 percent. Social elites, on the other hand, use their influence to ensure better education, health and employment opportunities for their children, maintaining intergenerational wealth inequality, according to the 2020 Pakistan National Human Development Report of the United Nations Development Program (UNDP). ), titled The Three Ps of Inequality: Power, People, and Politics.
Elite capture is a deep-rooted phenomenon in Pakistan that continues to create and perpetuate income inequality by restricting the economic opportunities of the vast majority and keeping wealth in the hands of a privileged few, ultimately creating many economic challenges. Elite capture in Pakistan is a phenomenon in which a small group of powerful individuals belonging to the political, bureaucratic and economic elite use their positions to benefit themselves at the expense of the general public.
Pakistan’s richest people, commonly referred to as the ’22 families’, are synonymous with immense wealth and unlimited wealth. These families are part of two different sets: the original 22 and the 22 families of the modern era, the latter of which includes lesser-known factions. The elite includes specific individuals such as politicians, businessmen, the media, and militant leaders. elite. The elite club took the form of a large brotherhood of interconnected and shared interests.
Allocation of funds
The role of political, economic and social elites in maintaining income inequality in Pakistan cannot be overstated. Political elites use their power to ensure that policies and laws are in their favor. For example, the agricultural sector, which is dominated by the political elite, receives massive subsidies from the government, while small farmers and workers in other sectors do not.
According to the Pakistan Economic Survey 2020-21, the government has allocated 682 billion rupees (about US$4.3 billion) in subsidies to the agriculture sector, while a total of 70 billion rupees (about US$440 million) has been allocated to all other sectors. Economic elites control most of the country’s resources, including industry and land, further exacerbating income inequality.
According to the Global Inequality Database, 10% of Pakistan’s population owns 64% of the country’s wealth, while the bottom 50% have access to only four percent of the wealth. This severe wealth inequality is largely due to elite capture.
The issue of elite capture is particularly important because government and the private sector(s) have historically been dominated by powerful elites who have little interest in promoting the interests of the people. As a result, the economic opportunities of the majority of the population are limited, and poverty and inequality persist.
Elite spending in Pakistan is often associated with luxury items and activities such as extravagant parties, golf club memberships and exclusive country clubs. For example, the Islamabad Golf Club, considered one of the most prestigious golf clubs in the country, charges an annual membership fee of around Rs. 1.5 million (about $9,000).
Likewise, the rich and famous in Pakistan often flaunt high-end designer clothes, expensive jewelry, and luxury cars as symbols of status. Exclusive clubs such as the Karachi Club and the Lahore Gymnasium cater to the affluent section of society and offer amenities such as swimming pools, tennis courts and fine dining restaurants. These activities and items are generally out of reach for the average Pakistani and serve as symbols of the country’s vast economic inequality.
The story of sugar
A notable example of elite capture in Pakistan is the sugar industry, where a small group of politically connected individuals are accused of price manipulation, tax evasion and market monopolization.
According to a Federal Board of Revenue report, the sugar industry received billions of rupees in subsidies and tax exemptions between 2014 and 2018, while creating artificial shortages to raise prices and increase profits. This has led to a situation where a few sugar mill owners have amassed enormous wealth at the expense of farmers, consumers and the wider economy.
According to the latest data from the Pakistan Bureau of Statistics, the country’s Gini coefficient, a measure of income inequality, is 0.37, higher than the regional average in South Asia and the global average. This means that the income distribution is heavily skewed towards the top while the majority of the population struggles to make ends meet. This level of income inequality is a serious problem because it limits economic opportunities for the majority of the population, increases poverty and social unrest, and inhibits overall economic growth.
Compared to other countries in the region, Pakistan has one of the highest levels of income inequality, with only India having a higher Gini coefficient. The persistence of income inequality in Pakistan can be attributed to the problem of elite capture, where a small group of political, economic and social elites control a disproportionate amount of wealth and resources, maintaining income inequality for their own benefit.
Seize the opportunity
Elite capture not only perpetuates income inequality, but also limits the economic opportunities of the majority in Pakistan. Elites have the power to influence government policy in their favor, often leading to underinvestment in critical sectors such as education, health, and employment.
For example, a United Nations Development Program (UNDP) study found that Pakistan has one of the lowest education budgets in the world, with only 2.2% of its GDP allocated to education. According to the Pakistan Education Statistics Report 2019-2020, this low investment in education has led to poor literacy rates, with more than 22 million children out of school.
Similarly, Pakistan’s healthcare system suffers from underinvestment, with only 0.9% of its GDP allocated to healthcare, according to the World Bank. As a result, the majority of the population does not have access to quality medical facilities. Moreover, the concentration of wealth in the hands of a few elites limits employment opportunities for the masses, as most businesses and industries are owned and controlled by the elites. This leads to high levels of unemployment and lack of economic opportunities for the majority of the population.
In Pakistan, there is a wide gap in access to basic needs and economic opportunities between elites and non-elites. Elite capture has ensured that elites have access to the best facilities for education, healthcare and employment, while non-elites have to do the best they can.
Living on the edge
According to a recent report by the Pakistan Bureau of Statistics, only 43% of households in rural areas have access to basic health facilities, compared to 70% in urban areas. Moreover, elite control over the country’s resources has led to an unequal distribution of wealth, with the richest 10% of the population owning 34.8% of total income, while the poorest 10% own only 2.2%.
This inequality limits the economic opportunities of many, making it difficult for them to escape poverty and lead a better life for themselves and their families. Elites’ control of basic needs and resources means they have a disproportionate influence on policymaking, resulting in policies that favor their interests and further exacerbate income inequality.
First, the government must ensure that its policies and practices are fair and do not disproportionately benefit the elite. This includes implementing a progressive tax policy, increasing public spending on education and health care, and subsidizing and encouraging small and medium-sized businesses.
Second, the government should strengthen regulatory mechanisms to prevent the emergence of monopolies and cartels, which often lead to higher prices and less competition. Third, to prevent corruption and mercenary behavior, the government should improve transparency and accountability in its decision-making processes.
Finally, civil society and individuals can play an important role in promoting fairer economic policies and practices by advocating for their rights and holding those in power accountable. By implementing these measures, the government can begin to address elite capture and income inequality, creating a more just and equitable society for all.
Ali Asad Sabir is a political economist and senior fellow at the Institute for Development and Economic Alternatives (IDEAS). Abdul Rehman Nawaz is a researcher at IDEAS. All facts and information are solely the responsibility of the writers.