Social stratification: A major cause of economic crisis
Elite capture has prevented progress
PAKISTAN is divided into several socioeconomic classes, with a few rich elites at the top and the great bulk of the people living below the poverty line. The country is ruled by many types of elites as rudimentary parts of the government institutions. They control wealth, resources, and power, while the poor struggle to make ends meet. Because of the elite’s control over society and the system, Pakistan is unable to implement state-oriented policies that benefit the state and its people; instead, policies are crafted to benefit the elite. Resultantly, the gap between the affluent and the poor is widening. Unfortunately, this elite domination over institutions has damaged public institutions, resulting in increased corruption and damage to government institutions, notably law and order of the country.
It can be argued that social stratification leads to economic stratification. Inequality is a major contributor to the country’s economic woes. The purpose of this piece is to emphasize social disparity as a cause of Pakistan’s economic catastrophe.
The three Ps of Inequality: Power, People, and Policy, published by the United Nations Development Program (UNDP) in Pakistan’s National Human Development Report of 2020, describes elite methods of controlling the system. The report claims that during the 2017–2018 fiscal year, the productive elites caused economic losses totaling Rs 528 billion, in the industrial sector alone. A total of between Rs 196 billion (banks) and Rs 528 billion (industry) in extractions were attributed to each category of the elite. Each was accountable for a Rs 332 billion loss on average. In total, the groups caused losses of approximately Rs. 2.7 trillion in 2017-2018, representing nearly 8 percent of GDP, a staggering amount.
Other examples of the pro-elite policy tilt include the imposition of only a 25 percent regulatory duty on imports and the case of money laundering in the real estate industry, which is also controlled by the elite. Overall, this sum could have been generated as tax revenues but was instead foregone because of the low level of taxation placed on their activities and incomes, as well as the favorable pricing they receive while selling their commodities.
The absence of economic prospects for the poor is one of the most serious repercussions of social stratification. Unfortunately, the wealthy elite dominate the country’s economy; in this case, landlords rule the economy by owning approximately 31.7 percent of agricultural land. They not only exploit it to their advantage, but they also track pricing accordingly. They have a significant voice in economic policies since they control the market. Regrettably, because of their elite alliances in other departments, they are also exempted from income taxes, creating a void in checks and balances against them.
For example, the top powerful groups within the state enjoyed tax exemption of about Rs 860 billion in 2019, which particularly includes 25 percent of regulatory duty over imports alone. However, according to former finance minister Dr Hafiz Pasha, the income tax exemption for trusts and agriculture are two instances; nonetheless, it is publicly known who owns these trusts.
Another effect of social stratification is inequitable resource allocation. Rather than investing in sectors that benefit the entire country, the rich elite frequently invest in enterprises and industries that appeal to their interests. As a result, there are few development initiatives and a plethora of enterprises that inflate labour capital, keeping the impoverished class under the authority of the wealthy. Empirical data from the finance division show that the labour force has grown significantly since 2017-2018, rising from 65.5 million to 71.76 million in 2020-21, while the number of employed people increased from 61.71 million to 67.25 million during the same period. This leads to a lack of investment in infrastructure, healthcare, education, and other critical services for economic progress.
Evidently, 8.6 percent of illiterate teenagers are in the labour force, whereas 8.7 percent of children indulged in child labour. Unfortunately, the concentration of wealth and power in the hands of a few creates an uneven playing field in which the poor have little opportunity for upward mobility.
There have been several occasions in the last year where the elites were caught redhanded by the National Accountability Bureau (NAB), but the bulk of them went undiscovered, even while they were engaged in severe corrupt activities like tax evasion and money laundering.
Not only that, but they frequently utilize their elite alliances to gain government contracts and other lucrative economic opportunities, leaving little opportunity for small enterprises or people to compete and contribute to the national economy. As a result, they have access to cheap workers and control over the industrial sector. The overabundance of poverty demonstrates that the labour force, the lower class, is being used for the advantage of the rich.
Similarly, a lack of investment in vital sectors of the economy adds to high levels of unemployment and poverty. Businesses cannot thrive and the economy cannot expand without proper investment in infrastructure and other key services, leaving many people without employment or money. This cycle of poverty and unemployment reinforces Pakistan’s economic crises, making it impossible for the country to achieve sustainable economic progress.
On the contrary, the lawand-order situation has been substantially harmed because of the elite’s stranglehold over the law. Similarly, the absence of checks and balances makes it easier for the privileged to continue their corrupt activities. This deepens social stratification since the wealthy have better access to the legal system than the lower-status masses. Nonetheless, this misfortune results in an indifferent justice system based on class or status.
As a result of higher levels of inequality in rural settings, elites have more influence over community choices and a stronger potential to co-opt prominent members of the community and in economic terms, whether it be pricing management or border commerce. The example of Abdul Rehman Khetran`s private jail and his illegal capture of the people in it is instructive. However, this is only a sliver of what has been going on under the elite umbrella.
In conclusion, all the above-mentioned roles of the elite, work together to ally and capture the system which ultimately affects the economy. It will be absurd to call a single actor responsible for the economic crisis, but the elites mentioned have a major contribution in the downfall of the economy of Pakistan. On the other hand, social stratification is a significant cause of the economic crisis in Pakistan. If Pakistan is to overcome its economic crisis, it must address this issue by promoting economic equality and investing in sectors that benefit the entire population and the state. Only then, can the country achieve sustained economic growth and improve the standard of living for all its citizens. The state must enhance accountability departments as Gen Pervez Musharraf did during his tenure to counter corruption, which is the major contributor to economic downfall.
Furthermore, the government should promote small businesses to end the elite monopoly in the country; this will boost economic growth and help reduce the poverty rate, as more industries will bring more employment. Not only this but the federal and provincial governments should undertake stringent measures by training the youth, particularly the working class, with the technical skills so that this becomes useful and productive for the thriving youth of Pakistan. .
The government should promote small businesses to end the elite monopoly in the country; this will boost economic growth and help reduce the poverty rate, as more industries will bring more employment.