Beyond growth
Thursday, 13 May, 2010
Common sense tells us that economic growth and employment creation are linked: the faster an economy grows the more jobs it will create. This may be the ‘rule’, but economic expansion does not necessarily guarantee brisk employment and poverty reduction.
Examples, including Pakistan, bear out this ‘deviation’ in the pattern. An economy may experience a quick spell of growth, yet it may also create unemployment and raise poverty levels. The profile of growth — the sectors from which growth emanates and the extent to which this area is employment-intensive — is more important than figures showing an increase in GDP for determining whether new jobs are being created and poverty dented.
The economic mess Pakistan finds itself in today — a slowing economy that is pushing unemployment and poverty levels across the country — therefore demands that the government also shifts its focus to creating jobs rather than striving for growth alone in order to help the poor. It is against this backdrop that multilateral lenders have advised Islamabad to focus on job generation and not solely on GDP growth. Now, there are two ways of generating employment. The private sector, the so-called engine of growth, should invest heavily in the productive sectors to increase industrial and agricultural output. Or the government should enhance — massively — public spending on the economic infrastructure.
In the prevalent economic and security situation, private businesses are shy of making new investments; they are trying to protect their old investments. This shifts the burden of employment creation to the public sector — precisely why the lenders have suggested launching employment-generation schemes in the public sector. Probably, the lenders have ignored that the government itself is facing a financial crunch and printing currency and cutting development spending. How can it spare resources for creating new jobs?
Pakistan is actually facing a paradox of sorts. The economy is refusing to recover from the recession caused by high global fuel and other commodity prices and low domestic and global demand. Private investors, domestic and foreign, are not prepared to make fresh investments due to the rising cost of doing business, energy shortages and security concerns, and the government does not have the money to undertake job-intensive projects.
Thus, the economy finds itself stuck in a vicious circle as it is not growing fast enough to create new employment opportunities, which, in turn, is holding back output growth. Where do we go from here? Apparently, further downwards unless the government is able to create a business-friendly environment to woo fresh private investment, and shows the political will to cut its non-development expenditure to make room for spending on employment-intensive infrastructure.
A fresh start?
Thursday, 13 May, 2010
Are Pakistan and India inching towards a new phase in relations? The meeting between the foreign ministers of the two countries on July 15 will go some way to providing the answer, but improving relations seems to be on the minds of both camps for the first time since the Mumbai attacks.
Never mind that the reasons for the change of heart may lie in faraway Washington or neighbouring Afghanistan; India and Pakistan must seize whatever opportunities that come their way to put their volatile relationship on firmer footing. While the focus will be on the talks between the foreign ministers, there are at least two opportunities before then that could set the stage for a real breakthrough in July. Meetings between the interior ministers and foreign secretaries of both sides will occur before then, and perhaps it is at those meetings that goodwill can be created.
Creating that elusive goodwill between the two countries is a matter of both sides offering something new. India is still very concerned about the relative lack of action here in Pakistan against those linked to the Mumbai attacks. On this count, it could be helpful to inject new life in the anti-terrorism trial that is moving desultorily, marred by countless adjournments. Yes, the wheels of justice move slowly in the subcontinent, but there is a sense that concluding the trial of the Mumbai suspects is not as much a matter of concern as it should be. A more vigorous trial could go some way to ease Indian suspicions.
On its part, India needs to make some gesture which demonstrates it genuinely wants a result-oriented dialogue process, and not just endless talks about talks that produce photo-ops and little else. Perhaps India should think about concluding a deal on Siachen and Sir Creek, two issues where the bureaucrats have come close to sealing a final settlement. There are other gestures that could be made too. The point is that between now and July 15 there are opportunities to ensure that a genuine breakthrough occurs when the foreign ministers meet — and one hopes that no untoward incident mars the prospect.