One has been writing about the economic policy choices of this government and how some rank bad human resource selections have led to both, micro and macro management failures in its economic governance of the country. However, to be fair, the recent economic surveys and reports on the state of Pakistan’s economy by global financial lenders, the IMF and the World Bank and even the one released by our own central bank seem a bit confusing, as they tell a different story on employment generation between corporates and households; normally one expects the two to paint a similar picture.
The employer or the corporate surveys largely coming from the business and trade associations and chambers of commerce and industry, point to a significant number of jobs being added over the last 12 months (some putting the number anywhere around the half million mark), whereas, when you refer to the average household survey—the employment rate among prime-age adults, a key measure of labour market and the economy’s health—the story is that of lack of well-paying jobs and a struggling family kitchen.
Now this is the anomaly that the government is most interested in, arguing that we shouldn’t make too much of the apparent inconsistencies in the two narratives or the reports, since noisy data happens, and the overall economic picture looks pretty good—or according to the economic managers, in many ways this looks like the best economic recovery in many decades or at least for any post-pandemic economy.
Yet the reality is that consumers appear to be feeling very downbeat, the poverty line has increased and businesses seem to be running low on confidence, and this perception of a bad economy is clearly weighing on Prime Minister Imran Khan’s approval ratings. Which for the government raises a pertinent question: Are consumers, the working class and the investors right? Is this indeed a bad economy despite the government propaganda stating otherwise? And if it really isn’t such a bad economy, then why does the public say it is?
One would genuinely like to know the answer to these questions. Don’t think, much as some government functionaries would like us to believe, that it is simply a crude case of “people being lied to by the corporate media,” although the flip side is also a bit silly when people in the media get all worked up over even a remote suggestion that how media reports national economy has an influence on public perceptions! Because if it doesn’t, then why do they even bother?
So what really is going on? Let’s start with the obvious culprit, inflation, which is surely running hotter than it has been for decades. Rising prices have certainly eroded many workers’ wage gains, although surprisingly, the real personal income per capita is still above the pre-pandemic level even though the government’s announced hand outs are not particularly showing in the incremental calculations.
The problem however is that inflation always has a corrosive effect on confidence even when incomes may be rising, since it creates the perception that things are just out of control. To be fair to the government, it could also be that when consumers or average persons on the street are surveyed, they are perhaps being asked the kind of questions that do not accurately relate to the fundamental answers that we seek. For example, it may sound funny but it is a fact that despite such advanced modern day information technology, in our basket of ‘expected inflation’, the resultant number actually quite simply correlates to the prevailing and expected price of the petrol.
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Another aspect is that one gets very different answers when one asks people “How are you doing?” rather than “How is the economy doing? For example, in the US, the Langer Consumer Confidence Index asks people separately about the national economy—where their assessment could be dismal—and about their personal financial situation, where their ratings could be high by historical standards or vice versa.
Likewise, the Michigan Surveys pose their questions more or less using the same principle, albeit using a slightly different technique by asking people how their current financial situation compares with say five years earlier. And this is where the government should be worried, because according to the mainstream media channels more than 65 percent people when surveyed today are saying that they were better off under the PML(N) tenure, almost the same number before Nawaz Sharif won his infamous two-thirds landslide majority in the late 90s.
Again, from the government’s perspective, aside from just looking at what people say, it definitely makes more sense to look at what they do. According to its economic managers, if the people are really as depressed as the sentiment numbers say, then why are retail sales running so high? Also, when looking at businesses, what we see is a record increase in turnover and profits and consequently the balancing, modernisation and expansion of manufacturing facilities by the entrepreneurs—the turf was quite quickly picked up by the corporates.
They opine that the only likely answer here is that businesses in effect see a booming economy and expect the boom to continue. Their main argument being that surely the public’s negative assessment of the economy seems at odds with every other tangible indicator that is used to measure the state of the economy. As already mentioned, though these State’s propagators may have a point, the thing is that it is inflation that more than anything unnerves people even when their incomes are going up and discourages the investors with interest rate hikes even when the economy is seemingly booming.
And especially in our case, the problem stands compounded by rapid and frequent currency devaluations. A recent Yale study highlights how high borrowing costs, mistrust in the country’s currency strength and excessive regulatory conditions are almost always the main triggers behind every market crash. The solution therefore is that—despite some noteworthy pockets of success—unless we quickly create a happier, more inclusive and prosperous society, things will disintegrate very quickly leading to a situation that may render itself uncontrollable.
The focus therefore should be to bring out the new possibilities of high-quality growth that augments incomes in terms of global buying parity in order to ensure that the gap between the rich and the poor narrows over time instead of widening.
Source: Published in The Nation