Before the concepts of agrarian and market economies, ancient societies especially the Roman Empire used to have a system based on Manorialism. In that society ruling elite comprising mostly of feudal elite and others used to control the land resources of the state through their political and military influence. The ruling elite support their finances and lifestyle by collecting obligatory contributions from the peasants and slave population under their jurisdiction. The contributions were in the form of coins, mandatory labor or even in the form of usable items and kinds. The dependent in return only used to get the right of living, earning just enough to live and a false sense of security.
The way situation in Pakistan is going, it seems we are moving very fast in backward direction of time to the point where Manorialism was at its peak and few lords used to enjoy enormous economic and ruling power. Recent debate on imposing new taxes or increasing the percentages of the old one to serve the expenses and corruption of our ruling elite is a good example of this.
The reality of our situation is that few classes of our people are working like bonded labour to pay most of the taxes so that they can ensure their living and also serve the ruling classes of the state. The Tax to GDP ratio debate and the methods which are devised to increase it in order to bring it to so called international standards seems to be leading a common salary class person in a position where he will only be able to serve the ruling elite with his hard work and his own survival will be just enough to keep him available for work.
The problem with our country is not of low Tax to GDP ratio but the real problem is wastage of resources and money for serving the huge size of governments comprising of around hundred of federal ministers and equal positioned offices. Also in provinces the situation is no different with lots of illicit ministries and offices working just to accommodate the supporters of ruling elite and ensure a regular income through kick backs and percentages.
Major area of our budget goes into debt retirement and interest payments. With Debt to GDP ratio of over 60 percent resulting in high interest payments and no policy of reducing or controlling the expenses, we cannot expect any improvement in our current economic crisis. In fact the current tax debate is for RGST which is being imposed to fulfil the demand of IMF to get more loans.
Another area where we are suffering badly is unaccounted defense budget and useless expense on an unwanted war. The war is not only hitting some estimated 13.5 billion dollars annually but it is taking the investment and business opportunities away from the country resulting in unemployment and economic slow down. This economic slow down and unemployment is also resulting in high crime rate and low standard of living. This shows a real sorry situation and it seems we are in a self-destruction mode.
Now the question is how to come out of this mess keeping in mind our problems, limitations, resources and opportunities. The problems and limitations discussed above are obvious and only an average mind is required to understand them. The real thing is to look what resources we have and what opportunities we can produce for the economy of our country.
First thing to do is to reduce government expenses and for that reduction in the size of government is must. Government should limit itself in areas where it is required most or if required at all. Most of the departments and ministries like housing, women development ,defence production and many others are simply there to accommodate political allies and cronies. Also we need to see how much burden the government-owned organizations put on our economy. Not only illicit expenditures are a problem but the real problem is corruption and resulting loss of money. Not only ending corruption in these institutions is required but giving them to private sector through privatization or if no buyer is there then involving private sector through public-private partnership on merit and transparent accountability can help in reducing the expenses.
For debt retirement, not only steps like privatization based on merit, transparency and fair value can help but selling the prime commercial land which our institutions hold can help the cause. There is simply no reason to have military bases or armed forces colonies on prime commercial area such as Shahra e Faisal or Sadar. In most of the countries military bases are planned outside the cities which not only help in controlling the problem of population congestion and development of new areas but the commercial value of land can give billions of dollars which can be used for debt reduction. If we are able to reduce or eliminate our debt then instead of putting more taxes on people, our country can afford some tax relief for them.
We also need to end non productive politically motivated programs such as Benazir Income Support Program which are making people beggars. For welfare of extremely needy a community driven Zakat system can help the cause with checks and balance from the society, where it is collected from. There is a serious requirement of revising our defense and intelligence budget and for this transparency and accountability are must. We need to see where the money is going and whether it is required in the area or not. This is every taxpayers right to know that the money is spent in the right direction.
We have also invested heavily in defense technology areas including nuclear technology, military vehicles and aeronautical technology. It is right time now to open the opportunities for private sector and share the research with private sector in return of royalty or going for joint ventures with government only contributing with technology base or in rare cases land. This can help us a lot in developing a strong private sector base in automobile, aeronautical, energy and other areas of industry. Not only huge revenue can be generated but job creation without burdening the budget and taxpayers will be possible with this.
Instead of taking flood taxes, value added taxes or useless surcharges on energy which make the economy slow and increase the cost of living and business. Again a community driven Aushur system for agriculture and natural resources areas can help bring those people in contributing classes who only know how to get more out of the economy i.e. feudal-corporatist ruling elite. Also the plot and agriculture land distribution culture is needed to be ended. Currently prime residential and agricultural land is being distributed in influential sections of our society especially related to military and political elite. This culture of giving exclusive control of land based on influence is a sign of slave society discussed in the beginning.
Apart from reducing cost of business to ensure economic growth and progress of business, Rule of Law is must. Not only terrorism and government created energy crisis are making the business difficult but red-tapism, extortion money collected by mafias and political parties, illicit licensing and quotas for political corruption are making it harder for a genuine business to flourish or even start. Independent and strong judiciary, protection of human rights and freedom are must for the progress of any country.
It is wrongly assumed that government has every right or authority to get taxes out of the hard-earned money of its working classes. Government needs to justify the taxes they take and expenditure they make. Its high time for nation to see what their ruling elite is doing and whose interest they are serving. We need to decide whether we live in a free country or a medieval slave society.
A really informative article on the economic situation of Pakistan,friends of Pakistan, the crisis we are facing due to our role in so called war against terror and foreign interference in our issues.