Political economy of elitism



In the literature on political economy, elitism, a recurring theme, has been subjected to two senses.

First, as a normative concept, elitism means that the affairs of a state or economy are best managed when left to a select group, who, due to their knowledge, skills, competence, his experience or his character, is best placed to pilot his ship. .

In its second sense, elitism refers to a real state of affairs in which political or economic resources, or both, are concentrated in a relatively small group, who use them to preserve and advance their position.

Very often there are two or more competing elites, for example the owners and the capitalists. It is in the second sense of elitism that a state or an economy can be called elitist.

Elitism is a problem that several countries have faced. Since democracy is a people-centered political system, one would expect that in a democracy elitism is conspicuous by its absence.

However, in theory as in practice, democracy and elitism are not mutually exclusive. The elite theory popularized by Italian sociologists Pareto and Mosca argues that all societies, regardless of form of government, are governed by one or more political elites.

Pakistan has often been described as an elitist state. The essential narrative is that the national economy was captured by a small elite class, which both manipulated the market and controlled the state.

The result was a vicious combination of inefficient allocation of resources (market failure) and inequitable distribution of income (government failure). The elite have been so powerful that a change of government, or even a transition from despotism to democracy and vice versa, has failed to bring it under control.

After coming to power in August 2018, Pakistan Tehreek-e-Insaf (PTI) launched Ehsaas as a flagship social protection program, which aimed to transform Pakistan from an elitist state into a welfare state in four ways – fight against the capture of elites and inequalities in the system, strengthening of social safety nets, promotion of human resources development (HRD) and job creation.

Whether Pakistani governments have deliberately promoted elitism is open to debate. However, it is clear that for one reason or another, social protection has taken pride of place in public policies over the years.

In addition, social protection policies have had a very narrow objective, namely the transfer of income to people at the bottom of the economic ladder. While cash transfers can help beneficiaries survive another day, they are an extremely weak instrument for promoting public welfare or even reducing poverty. This makes Ehsaas, at least in theory, better than its predecessor, the Benazir Income Support Program, as a public welfare project.

The ultimate test of a poverty reduction program is that the number of beneficiaries decreases over the years and the program ends up phasing out. Cash transfers serve elitism in that they perpetuate the culture of elite dependency, as recipients typically have neither the incentive nor the opportunity to become socially useful economic agents.

While under normal circumstances cash transfers make little economic sense, they are an important way to gain political support and win elections.

Neglected area

HRD is an important means of increasing public welfare in the long term. This is especially true of a labor-rich country like Pakistan, which will always struggle to realize its growth potential without adequate HRD. However, HRD has remained a neglected area in Pakistan.

Not surprisingly, Pakistan is currently ranked 154th out of 189 countries on the UNDP Human Development Index (HDI), which includes three major indicators: life expectancy at birth, expected and average years of schooling, and income. national per capita.

The HDI does not directly take into account the distribution of income. However, countries’ HDI performance is adjusted for inequality in income distribution and other relevant indicators.

Pakistan’s current inequality-adjusted HDI value is 0.384 compared to the world average of 0.587, the developing country average of 0.535, and the South Asian average of 0.475.

Pakistan’s human inequality coefficient is 30.2 compared to the world average of 20.2, the developing country average of 22.3 and the South Asian average of 25.4. Pakistan’s Gini coefficient, which measures inequality in income distribution, for the period 2010-18 is as high as 33.5. It may be a consolation for us that at 37.8 India’s Gini coefficient is even higher than Pakistan’s.

It can be mentioned that these two coefficients are measured on a scale of 0-100. Zero means perfect equality while 100 means perfect inequality.

Major challenges

There are two major obstacles to overthrowing elitism. The first is resistance to the establishment of a favorable public policy framework, which targets egalitarian economic growth.

Several politico-economic factors discourage the development of such a policy. The government can lose a considerable part of its political capital, because the lobbies, which helped a party to come to power with heavy financial contributions and now want their share of the pie, can resist such a move.

There is also, at least in the short term, often a trade-off between economic growth and equality. Equality considerations can hold back growth.

For example, strict enforcement of labor laws can boost the cost of production and thus discourage private sector investment. Since governments usually have their eyes on the next election, they prefer short-term gains. The second major, and most important, challenge in establishing a welfare state is the availability of finance.

A welfare state requires an expansionary fiscal policy, which can be financed either by taxes or by deficit financing – although the latter is not sustainable in the long run. Therefore, a large and steady flow of public revenue is essential for pursuing social protection policies.

In the Scandinavian countries – Denmark, Norway, Sweden and Finland – where social democracy was very successful in the second half of the 20th century, the tax-to-GDP ratio had averaged 40%, which allowed for fiscal expansion sustained. Furthermore, in these countries there was nationwide support for a welfare state, not as a matter of rhetoric but as a matter of contributing to one’s cause. For example, wages and other working conditions are determined by a tripartite agreement between employers, workers and the government.

In contrast, in Pakistan, the tax-to-GDP ratio is only 10%. Overall, Pakistanis are reluctant to pay income or wealth taxes, although they can contribute generously to charity. We have seen how in the recent past traders have successfully defied government attempts to tax them. In such circumstances, a welfare state can only be established by accumulating public borrowing and therefore accumulating public deficits, which is not a viable option in the long run.

The writer is an Islamabad-based columnist

Posted in The Express Tribune, February 15e, 2021.

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