Thursday, October 4, 2018

Under development in Rural Sindh









Under development in Rural Sindh
Introduction
Poverty is a global affliction affecting numerous countries in the developing world. Pakistan is home to millions of people who live in extreme poverty. Poverty in Pakistan is on track to decrease, but there is still work to be done. Although the latest economic news is not good and one factor that mitigates poverty incidence is a strong GDP growth .
With approximately 200 million citizens, Pakistan ranks 147th out of 188 countries in the Human Development Index (HDI). Reports on poverty in Pakistan show that as much as 40 percent of the population–roughly the size of the population of Florida, California and New York combined–live beneath the poverty line.

The Multidimensional Poverty Index (MPI) report by the Pakistan Ministry of Planning, Development and Reform in June 2016 shows that 39 percent of Pakistanis live in multidimensional poverty. The MPI methodology, developed by UNDP and the Oxford Poverty and Human Development Initiative in 2010, uses a broader concept of poverty by reflecting people’s deprivations related to health, education and standard of living in addition to income and wealth.

The good news is that poverty in Pakistan decreased by 15 percent in the past decade, but, given the grim lows overall, this figure is less than encouraging. In order to alleviate poverty, policymakers need to focus on achieving the U.N. Sustainable Development Goals (SDGs) by 2030. Although it is a big challenge for an underdeveloped country like Pakistan, meeting the SDGs is important since they provide the best possible integrated way for inclusive growth, peace and development.
Poverty levels in Sindh
Poverty in Sindh’s capital stood at 4.5% in 2014-15, decreasing the poverty ratio for the province as a whole.  2015 floods, coupled with egregious governance, have worsened living standards in Sindh where 75% of the population in rural areas is now living in abject poverty. The overall poverty ratio of 43.1%, compiled by aggregating figures from urban and rural areas, does not actually convey the real picture of Sindh most of which is rural.
The province has been categorized second poorest after Baluchistan among all the provinces and regions of Pakistan, excluding the militancy-hit Federally Administered Tribal Areas. Baluchistan’s 84.6% rural population lives below the poverty line, according to a United Nations report.
The statistics revealed in the recently released study on multidimensional poverty in Pakistan were discussed at length at a seminar organized by the UN’s Food and Agriculture Organization (FAO) and International Labour Organization. The UN report for 2014-15 titled “Multidimensional Poverty in Pakistan” shows poverty in urban areas of Sindh at 10.6% but an alarming 75.5% in rural areas, which constitute a major chunk of the province.
In  Sindh’s Umarkot district, where half of the population is Hindu, 84.7% people lived under the poverty line. In 2012-13, the figure stood at 80.7% and in 2010-11 75.9%. In Thatta, 78.5% people live in poverty while the rate was 76.5% in 2012-13. Few districts in Sindh have seen progress in alleviating miseries of people. Some showed a slight improvement one year but the situation deteriorated the next year. A slight change in weather or an untoward incident pushes the people back to extreme poverty.
In Tharparkar, some progress was achieved over the years but the district slipped back into the negative trend. In 2008-9, 92.1% lived in poverty, 91.6% in 2010-11 and 84.6% in 2012-13. But in 2014-15, the figure increased to 87%. Statistics for Nawabshah, Naushero Feroz and Mirpurkhas also show similar trends. However Jamshoro is among a few districts witnessing a steady improvement over the years.
In 2008-09, 72.4% population of the district was living below the poverty line but it reduced to 70.7% in 2010-11 and 67% in 2012-13. In 2014-15, the district registered a poverty rate of 55.6% – faring better than the provincial average.
With better job and business opportunities, Karachi maintained its reputation as the ‘mother of the poor’. Poverty in Sindh’s capital stood at 4.5% in 2014-15, decreasing the poverty ratio for the province as a whole. In, 2010.5% of Karachi’s population lived below the poverty line.
 Poverty Assessment
The poverty head count ratio in the countryside is almost double that of urban areas. Rural Sindh has around 50 per cent of the population, and shares about 30 per cent of the province’s GDP.
The state of affairs is attributed to slow growth in the province’s hinterlands, which has led to widespread rural poverty. This is a serious concern not only for the welfare of the dwellers of the countryside, but also for the economic and social stability of the province.
The World Bank has observed a 0.5 per cent decline on average in per capita income in rural Sindh every year since 1999. The report also says that 50 per cent of the population of rural areas lives below the poverty line, and suffers from low per capita incomes and calorie intake, as well as unemployment and inadequate access to education, sanitation and health facilities, an unhygienic environment, and insecure access to natural resources.

The concentration of the poor is highest among households that have at their head an unpaid worker, share-cropper, or owner/cultivator with less than two hectares of land. A major study recently conducted found that 36.3 per cent of the respondents in rural Sindh consumed less than 1,700 calories a day, while another 25 per cent consumed between 1,700 to 2,100 calories a day.
Water and Agriculture
Since the economy of Sindh is largely agrarian the economic development of the province depends largely on the development of its agriculture sector. Rural Sindh has been hit hard by disasters including droughts and floods and the majority of rural population has been pushed below the poverty level.
The irony is that both sources of livelihood and employment opportunities for rural inhabitants in Sindh are shrinking. As a result, the unemployed youth move to cities for jobs but the urban employment market is already oversaturated.
Sindh has fertile soil and is rich in fuel and mineral deposits but has a rural poverty graph that continues to rise. In the absence of proper land-use regulation, unscrupulous land developers have been allowed to convert agricultural land near urban centers into housing schemes. These agricultural lands were traditionally used for growing vegetables and other cash crops.
Urban Sindh, which consists mainly of Karachi, Hyderabad, Sukkur, Nawabshah, Shikarpur and Larkana, comprises 48 per cent of the provincial population. It is also showing a decline in economic growth. In addition, the urban areas of Sindh continue to receive an influx of population leading to stress in the infrastructure and a further increase in the level of unemployment.  
Rural inhabitants are mainly dependent on agriculture, with those in arid zones on animal rearing, and those along the coastal belt on fishing. But the constant shortage of water in Thatta, Badin, Umerkot, and parts of Sanghar, Mirpurkhas, Dadu districts, and surprisingly even in some pockets of the Rohri canal system in Khairpur district, is the main factor behind increased poverty.
This is due to the mismanagement of water. Independent economists and the World Bank have held both the draught and the policymakers responsible for low agricultural production. Devastating rains a few years ago and flood damages, which damaged crops in some areas, (exposed lack of drainage facilities)  have increased poverty levels in some areas.
Official figures suggest that poverty is on the rise in Badin and Thatta districts due to sea intrusion, which is causing a permanent or seasonal submerging of irrigated cultivable lands. Lands that are not under direct threat of sea intrusion, but where there is a constant shortage of irrigation water, or an irregular supply of it since the last 10 years, have virtually ruined the agriculture.
Ground realities suggest that water shortage in Badin and Thatta districts, as well as in Umerkot and a major portion of the command area of Taluka Johi and Khairpur Nathanshah in Dadu district, will not improve, and actually further deteriorate.
While the availability of water in other parts of Sindh may be comparatively better, the crop yield is still low, mainly because of soil erosion and over-irrigation. Besides this, farm inputs are costly, quality seeds are not available, fertilizers are adulterated and pesticides spurious.
Urban employment
Employment opportunities in Karachi, Hyderabad, Sukkur and other urban areas of Sindh started declining in the 1990s as a result of a flight of capital and industry from the urban areas due to a serious law and order situation. Some rural industry like cotton ginning also shifted from Sindh to South Punjab

Feudal structure and land ownership
A World Bank report titled, Securing Sindh’s future prospects and challenges, noted that, “given its feudal traditions, progressive ideas and reforms have always taken more time to take roots in the interior of Sindh than in most other areas of Pakistan. Sindh has the highest incidence of absolute landlessness, highest share of tenancy and lowest share of land ownership in the country.
“Wealthy landlords with holdings in excess of 100 acres form less than one per cent of all farmers in province, and own 150 per cent more land than combined holdings of 62 per cent of small farmers with holdings less than five acres.”
The rural parts of Sindh are in a state of abject poverty. One of the major reasons is that most of the population there does not own or control assets like good quality land — the prime asset in rural settings. There is a highly uneven distribution of land ownership in Sindh. Land reforms have never been on the agenda of any government.
Access to land, which is the basic factor of production, is crucial to reduce poverty in rural areas. According to the Agricultural Census of Pakistan, cultivated land is unequally distributed in Pakistan. About 47 per cent of the farms are smaller than two hectares, accounting for only 12 per cent of the total cultivated area. In Sindh, where the rural society is dominated by a feudal elite, the proportion of small farms is just above a third. In fact, the landholdings of the feudal families in Sindh have multiplied instead of having decreased. Although economic vulnerability has not been comprehensively measured for Sindh, there are indications that vulnerability differs significantly across agro-climatic zones and over two-thirds of the households in rural Sindh may be classified as economically vulnerable. Poverty has become a major issue in rural Sindh, where 50 per cent of the population lives below the poverty line and suffer from low calorie intake, low per capita income, unemployment, inadequate access to education, sanitation, health facilities and an unhygienic environment. More importantly, these people are the most vulnerable to shocks.

Public services
The poor also suffer from low quality public services. They have relatively lower access to safe drinking water and sanitation facilities. For example, while 31 per cent of the rural population of the country is connected to the drainage system, the same is true for only 14 per cent of Sindh’s rural populace. Only 10 per cent of them have access to proper sanitation facilities.
In villages, excreta accumulations can be found outside homes, and this becomes a major source for spread of infectious and waterborne diseases. Women, children, the elderly, and those who are already suffering from diseases, are largely affected.
Education
Pakistan belongs to those nations who have the world's worst literacy rate, which is the main reason for its slow agricultural growth and sluggish economy  The literacy rate for Pakistan in a 2012 consensus was 56%, which includes both males and females from both rural and urban areas. A 56% literacy rate is very low; this means that almost half of the country is illiterate and can contribute very little to economic development because the major contribution in that area is made through education
According to the United Nations Educational, Scientific and Cultural Organization (UNESCO), Pakistan at 55% has one of the lowest literacy rates in the world, and stands 160th among world nations. Many schools and colleges are entering the teaching profession, particularly in major cities, but those living in rural areas record a greater loss.  
Sindh is Pakistan's most populated province, with a population of over 25 million people. Its literacy rate is below 50% in rural areas. In 1972 and 1998, it was 30.20% and 45.30%. Similarly, in 2010, 2013 and 2014, it was 69%, 60% and 56%. Overall, many children are deprived of education, as evidenced by the greater percentage of child labor. .Adult literacy rates for Pakistan are presented as follows :


 


Adult Literacy Rate in Rural Areas [2010-11] [15 plus age Cohort]

Overall
Male
Female
Pakistan
44.9
60.0
29.9
Punjab
48.7
60.9
36.7
Sindh
38.6
48.0
17.2
Khyber Pakhtunkhwa
42.5
62.4
23.8
Baluchistan
30.2
49.2
9.0
Source: SPDC estimates based on household level data of PSLM 2010-11

Health
According to UN estimates, poor sanitation costs the country $4.2 billion, or 6.3 per cent of its GDP. According to estimates from the United States Agency for International Development, around 250,000 children die each year in Pakistan due to waterborne diseases. About 40 per cent of hospital beds in Sindh are occupied by patients suffering from water and sanitation diseases like typhoid, cholera, dysentery and hepatitis, which are responsible for one-third of total deaths as well. 

rural areas in terms of health outcome indicators such as malnutrition, infant mortality, maternal mortality and immunisation. Geographic coverage and accessibility of public health services in rural areas is also very poor which has serious implications for peoples health. Federal and provincial governments have made attempts to introduce alternate models of service delivery in the form of public-private partnerships that have achieved some success. Moreover, vertical programmes of the federal government have also played an important role in supplementing the efforts of the provincial governments. However, the dismal situation of health indicators demands that a more concerted effort needs be made, possibly in every domain of the health sector
Meanwhile, more than 55 per cent of public elementary schools do not have water connections or toilet facilities. Given that rural poverty in Sindh is higher than the country average, the rural poor suffer from an especially severe lack of critical facilities, which is likely to have a strong impact on their health. Therefore, sanitation and hygiene are fundamental to broader rural development.
Haris Gazdar, Pakistan’s lead researcher for Leveraging Agriculture for Nutrition in South Asia (LANSA) and director of CSSR, reported findings from the Women’s Work in Agriculture and Nutrition (WWN) Survey 2015-16. The survey found that 46 per cent of children between 0-3 months are stunted in rural Sindh.
Oil Companies
The province is rich in natural resources, having huge reserves of oil, gas and coal. It has two seaports one of which is in Karachi — the financial hub and business nerve centre of Pakistan. Some of its districts have industrial zones but these have been hit by lawlessness.
Sindh accounts for almost 72 per cent of the total oil and gas production of the country, but its hinterland is still one of the backward regions with soaring poverty, high rate of unemployment and widening inequalities between rural and urban Sindh. When oil and gas was exploited, it was believed that poverty would become history and Sindh would be affluent like the Gulf emirate of Dubai. But this hope has remained a mere pipedream.
Oil companies are not fulfilling their corporate responsibility, as they have to spend one per cent of their earnings on local development and establish schools, hospitals and construct roads. Nothing meaningful is happening. It is an irony that while Sindh produces almost 72 per cent of the country’s total oil and gas, its hinterland is still one of the more backward regions in the country, with soaring poverty, high unemployment, and widening rural-urban inequality. For instance, look at the plight of Badin district, which produces 60 per cent of the country’s oil, but ranks at 90 in the Human Development Index of districts of Pakistan.
 Social Changes in rural Sindh
 Arif Hasan states
 “The change that I have observed and which has been articulated by the groups I interacted with, is enormous and that too in 10 years. The most visible and important change is the presence of women in development and political discourse. They are employed in NGO offices, they manage development programs, they are social activists and the majority of them are from the rural areas. In some of the remote villages I visited, there were private schools and beauty parlors run by young village women. Blocking of roads to protest against the “high handedness” of the local landlords, bureaucratic inaction, and/or law and order situations, has become common. Women participate in these demonstrations and in some cases these blockages have been carried out exclusively by them.
Discussions with groups on the issue of free-will marriages were also held. The vast majority of individuals were in favour of such marriages even if they violated caste divisions. However, they felt that it is the parents that have to change so as to make such marriages conflict free. The non-availability of middle schools for girls was also discussed. Surprisingly, the village communities had no problem with the girls studying with the boys in the male middle schools. In addition, discussions with the Sindh Rural Support Organisation’s (SRSO) women groups, which consist of the poorest women in a village, revealed that about 20 per cent of them had mobile phones and almost all of them watched television although around 30 per cent households actually own a TV.
The other major change that has taken place is in physical mobility. The number of transport vehicles has visibly increased manifold. The desire to migrate to an urban area is second only to the desire to get children educated. In all the areas visited, many families had members working in Karachi. Previously, people were scared to go to Karachi because of the violence in the city. But now they have friends and relatives over there and protection as well. This partly explains the rapidly increasing numbers of Sindhi speakers in the city. In addition, it was constantly stated that those haris who had relatives in urban centers and received remittances were better off and were able to send their children to the cities for better education and hence a better future.
Many of the above changes are related to the changed landlord-hari relationship. Unlike before, the haris spoke openly against the local landlord. In most cases, they also stated that they did not want to remain haris but to get regular jobs, operate rickshaws and do small businesses. Their perception of the landlord has also undergone a change. He no longer comes regularly to the area. He has a city wife and his children have little or no link with the land. Given his changed nature, he can no longer effectively settle “disputes”. His absence and changed nature has provided the hari families with opportunities for physical and social mobility. Dr Sono Khangharani of the SRSO also made an important observation by pointing out that an increasing number of “low caste” young men and women were studying with the children of powerful rural families in the elite universities of Pakistan.
The changes described above are the natural outcome of new technologies, expanding trade and commerce and the media revolution. But more so, they are the result of the Government of Pakistan’s education system, in spite of its bad quality. Young men and women have returned from universities and colleges in the larger cities armed with new experiences and knowledge and a vision of a new world. Peasant women have gone to the village school and learnt to read and write. It must also be noted that in many cases, the village elders and a new breed of politicians are also responding to this change. Recently, an elder from a very small and conservative village visited me with CVs of three village girls who had done their BA with the request that I should get them jobs with some NGO or government program.
However, according to the people we met, the system is fighting back. They are of the view that the tribal conflicts that are taking place are being created to break the unity of the people; that problems are also created so that the chiefs and their representatives can assert their power in the process of solving them; that the law and order situation in the rural areas is created to drive away ‘genuine’ activists; and that much of the migration to the urban areas is the result of such violence. Land is also being acquired by the powerful at all costs so as to consolidate their power further. It is felt that they are sending their children and relatives into the bureaucracy and the police so as to both acquire and control this land. The mullahs meanwhile, preach against minority Muslim sects, women’s studying and working and against the “fahashi” of free-will marriages. And, everyone from the wadera to the hari is armed. It is obvious that the old order cannot come back for the change is too big to be contained.”
  Causes of Poverty
The rural parts of Sindh are in a state of abject poverty. One of the major reasons is that most of the population there does not own or control assets like good quality land — the prime asset in rural settings. There is a highly uneven distribution of land ownership in Sindh. Land reforms have never been on the agenda of any government

 Poor governance is the key underlying cause of poverty in Pakistan. Poor governance has not only enhanced vulnerability, but is the prime cause of low business confidence, which in turn translates into lower investment levels and growth. Governance problems have also resulted in inefficiency in provision of social services, which has had serious implications for human development in the country. The lack of public confidence in state institutions, including the police and judiciary, have eroded their legitimacy and directly contributed to worsening conditions of public security and law and order during the 1990s.
With regard to economic factors, decline in the Gross Domestic Product (GDP) growth rate is the immediate cause of the increase in poverty over the last decade. The causes of the slowdown in growth may be divided into two categories,  i.e.  Structural and others. With the former being more long-term pervasive issues, which have persisted because of deteriorating governance. Among the structural causes, the burgeoning debt burden and declining competitiveness of the Pakistan economy in the increasingly skill-based global economy are the most important. While the former occurred due to economic mismanagement, the latter was because of Pakistan's low level of human development.
The existence of pervasive poverty, wherein a significant proportion of the population remains poor over an extended period of time is strongly linked with the structure of society. Cultivated land is highly unequally distributed in Pakistan. About 47 percent of the farms are smaller than 2 hectares, accounting for only 12 percent of the total cultivated area. Access to land, which is the basic factor of production, is crucial to reduce poverty in rural areas. Pervasive inequality in land ownership intensifies the degree of vulnerability of the poorest sections of rural society, because the effects of an unequal land distribution are not limited to control over assets. The structure of rural society, in areas where land ownership is highly unequal, tends to be strongly hierarchical, with large landowners  or tribal  chiefs exercising considerable control over the decisions, personal and otherwise, of people living in the area under their influence, as well as over their access to social infrastructure facilities.



Recommendations
Sindh needs rapid development in agriculture coupled with genuine land reforms, agro-based industries, small and medium industries and the development of the information technology sector at the provincial and district levels. There is strong potential to create jobs and self-employment at both the provincial and district levels. This potential to create jobs and self-employment needs to be explored further. Growth must be accompanied by measures that ensure social development, which takes into account economic, political and social dimensions. The rural population must be provided the opportunity to fully harness and participate in the growth process and develop their capacity to take benefits from it while giving special attention to rural Sindh and bringing it into the mainstream.
Water availability also needs to be improved, so to must be the sharing of water on a canal where the down stream users are usually deprived of much water.
Labor policies and laws needed to apply to female agricultural workers (who perform the bulk of the work).  The need for forming women cooperatives at the state level for greater financial inclusion and political representation of women is crucial. The need for strong policy instruments and political will to ensure landownership and land titles for women. Actions needed to be taken to ensure that women could access and use credit, especially microfinance. Actions needed to be taken to ensure that women could access and use credit, especially microfinance.
Strategic opportunities are recommended which include political championing at the highest level to leverage nutrition into development priorities across party lines; technical support to cohesively define nutrition priorities across sectors and across urban and rural Sindh; strengthen governance; integration of nutrition within the operational budgets of key sectors to have a better chance of maintaining continuity; improve effectiveness of central convening structures; strengthen vertical accountability within sectors; address inequities in food insecurity and long-term disaster mitigation and recovery.
Oil companies are not fulfilling their corporate responsibility, as they have to spend one per cent of their earnings on local development and establish schools, hospitals and construct roads. This should be ensured.

WB Project: Apr., 13, 2019: The World Bank has downgraded its rating of a $433 million project – launched nearly two years ago to reduce stunting in Sindh – to “moderately unsatisfactory” amid the provincial government claiming better performance in its statistics. The Bank has lowered the ratings of the progress of achieving the project’s objectives as well as the pace of its implementation, according to documents released by the bank on Thursday. The rating of the achievement of objectives has been reduced to “moderately satisfactory” and the implementation progress to “moderately unsatisfactory”. Of the total cost of $433 million, the World Bank had approved a $61.62 million loan in May 2017 but linked the disbursements to achieving the agreed targets. Because of the provincial government’s poor performance, the bank has disbursed only $5 million so far. The project was launched to reduce the stunting rate among children below five years of age and focused on the most affected districts in Sindh. However, the report shows that the provincial government tried to exaggerate its performance in some indicators  There was no progress in the reduction of the stunting rate among children under five in the affected districts. The bank stated in its report that 48% of children under five were still suffering from stunted growth until the end of January 2019. The target is to bring it down to 43% by December 2021. There was also no progress towards the goal of increasing the percentage of children aged between six and 23 months who received appropriate liquids and solid, semi-solid or soft food for the targeted minimum number of times. In 2014, only 8.9% of children in this age bracket received a minimum acceptable diet — a ratio that remains unchanged even after five year, according to the report. Under the bank’s financing component, there is also a plan to distribute 2.7 million micro-nutrient sachets for children up to two years of age till December 2021. Only 682,000 sachets have been distributed till January this year. To increase protein intake and nutrition among children, the bank had also prepared a plan to help setting up of small poultry farm units and community fish ponds. Against the target of 26,000 households establishing backyard poultry farms and raising goats, so far only 822 households have managed to do this. A target was set to help establish 2,600 community fish ponds by December 2021 but so far only 40 have been set up. Around 3.5 million children between the ages of three and five years were required to attend early childhood education. There has been no progress towards this goal.
Education Sector: Apr., 23, 2019:
The Sindh government budget for the fiscal year 2018-19 witnessed an increase in spending on education, with the Rs208.23 billion allocated for the education sector showing an increase in spending of 14.67% from the outgoing fiscal year.
Since the incumbent ruling party in Sindh took the reins of power years ago, budgetary allocations kept increasing every year compared to previous years, while education standards remained stagnant, or rather, deteriorated. For instance, an estimated 52% of children in Sindh are still out of school. Despite billions of rupees being ‘spent’ every year on education by the Pakistan Peoples Party’s (PPP) provincial government, in addition to money spent by international donors over the last 11 years, the ground reality remains depressing and contrary to the claims made by the Sindh government.
The ruling elites of Sindh translate increased literacy to be a danger to their power structure, which is essentially based on feudalism and dynastic politics. Increased literacy will enlighten the citizenry with more tools for critical thinking and informed decision-making skills, which is considered a threat to the very dynastic political structure that is being maintained in Sindh. The PPP-led government is afraid of such a social change, which may render it powerless.
To have a clear understanding of the gravity of the problem, it is imperative to dissect the long 11 years of PPP in Sindh with regard only to the education sector. It is very unfortunate that the Sindh government vociferously cries a shortage of funds, which is what it blames for why it could not improve the standards of education, including increasing the literacy rate, providing a better quality of education, training teachers and so on. Above all, it has completely failed to stop the deadly practice of unfair means or cheating in exams, which is blatantly endangering the future of our younger generations.
However, the fact remains that the Sindh government could not utilise the allocated budget for Special Education, Sindh Technical Education and Vocational Training Authority (STEVTA), Universities and Boards, and so on. During the last eight months of the current fiscal year, utilisation of the allocated budget has been negligible. Out of the Rs5 billion allocated for college education boards for 48 ongoing schemes with different interventions, unfortunately a meagre 16% of the budget has been utilised over the past eight months.
The Chief Minister of Sindh allocated Rs9.598 billion for the Sindh Education Foundation (SEF), with the intention to expand 2,400 schools and reach around 650,000 students. However, it has not moved past 550,000 students, as compared to Punjab where three million students are enrolled under the foundation. This year, the SEF received a large number of applications for the Adoption Program but failed to execute it, because the Secretary School Education and Literacy Department Qazi Shahid Pervaiz could not convene a board meeting over the last five months.
Sindh has a total of 42,383 public schools, a number that has declined from 47,557 in 2011. Most schools, around 95%, only offer primary education. Given the situation, dropping out after primary level becomes unavoidable. Meanwhile, the Sindh government has completely failed to share a roadmap to overcome this gap.
The curriculum being followed is from 2007, while the last review was in 2012, for which the books have not yet been printed. The Information and Communication Technologies (ICT) curriculum belongs in the 19th century, and though the Early Childhood Curriculum (ECE) was launched in a five-star hotel years ago . Still 10th grade the medium of education is either Sindhi or Urdu, but higher secondary and college education in Sindh is completely in English. This sudden change in the language of instruction at higher grades creates trouble for the children
The Standardised Assessment Test (SAT), which used to take place for students of class five and eight, has also been suspended as most students who took the test failed. Instead of improving the quality of teaching or re-examining the test itself, the SAT process was suspended.
Meanwhile, there is no accountability when it comes to the performance of teachers beyond attendance, which is taken once a month, as this is part of the Reform Support Unit (RSU) project in which someone visits and checks attendance through a biometric device. This RSU project remains partly dysfunctional due to a lack of funds, as foreign funding has been stopped.
Regarding the management structure, there are currently two directorates that are operational, while a third one is being planned to be setup for ECE. This means each government school building and operations will be managed by three different directorates. The consolidation policy of Sindh clearly remains a failure. It is evident that the challenges are immense, though certain steps are essential for improving Sindh’s educational system.
The SEF needs radical changes – including budgetary – to increase enrolment, while the Education Department needs to make existing public schools fully functional. The Private Schools Network (PSN) should be taken onboard (through legislation) to run second shifts for secondary schools, and for this the government should provide the PSN a subsidy per child. This is needed on a war footing basis if we are to ensure Sindh’s children get a secondary education. The process should be announced and published once a year to streamline the academic year and ensure increased enrolment.
A curriculum board should also be formed with an open and transparent process like that in Khyber Pakhtunkhwa (K-P). When it comes to teachers, their performance – alongside the principal’s – should be linked with the result of the school unit, while their hiring should be carried out through independent bodies to ensure merit. The college merger process should be carried out as per the judgement of the High Court, while one school unit should obviously be managed by one head instead of four different ones.
For examination boards, the government should constitute a commission for managing, overseeing and recommending measures related to examinations from primary to intermediate levels. It will help improve education standards in the province and prohibit cheating in exams.
Donor agencies such as the US Agency for International Development (US AID), the EU, the United Nations Educational, Scientific and Cultural Organisation (UNESCO) and the Gates Foundation should also be convinced to work in liaison with the federal government for funded projects instead of directly engaging at the provincial level, for I am a witness to how foreign funding is being wasted here.
Sindh is lagging behind in achieving the United Nations’ Sustainable Development goals and fulfilling the obligation of free education under Article 25-A. At the pace with which the Sindh government is working in the name of ‘reforms’, and with millions of children out of school, we can only pray for a miracle to change the fate of the children of Sindh.




Tuesday, October 2, 2018

Economics of the Koran other economic systems and thoughts on poverty







Economics of the Koran other economic systems and thoughts on poverty 

Purpose of Life
The economic system suggested by the Koran is a sub set of the social .Islam recognizes the family as the basic human social unit. The Islamic social system’s primary thesis is that man was given consciousness but humans have to acquire spiritual aspects through effort and knowledge  ,there are inbuilt talents in humans that need to be nourished and nurtured and that is the primary purpose of human life .This awareness and discovery of ones self and the inherent talent has to be made whilst living within society ,simplistically speaking the nourishment of the self and the spiritual progress is the direct result of the amount of effort an individuals makes towards the assistance of others and society .In other words the individuals self develops in direct ratio of the individuals contribution towards the development of the self of others .In an society where all are striving to assist others there can be no strife or conflict . The individual exists in society. Islam requires that individuals attain betterment whilst living in society In fact Islam requires that individuals participate vigorously and forcefully in every day life .Action is an active prerequisite of being a Muslim. .Attainment of personal betterment by shunning society and company of other human beings is not the Islamic way of life.

Economics of the Koran

Islam also presents the evolution of man from more humble existence and this evolution has occurred by struggle and effort and survival. Every facet of life and being is recognized to go through such a struggle and the purpose of this struggle is to develop better and abler species and environment. Adoption to change is a persistent theme in the Koran .Innovation and technological progress are the recommended path which will eventually result in the unification of mankind into one brotherhood,.
Frequently it is suggested that the Koran does not present an economic system it is further asserted that any system (other than say Communism-and that only as communism is said to deny God)) would be Islamic. This is not correct; the Koran does suggest and lays down the basis of an economic framework or system and some that is a part of the capitalistic economic theory, inclusive of its basis, would not find sanction within the economic system suggested by the Koran.
Generally the Koranic system is divided into two parts by most experts i.e. the spiritual and worldly part .It is asserted that the injunctions of the Koran on poor tax and equality in consumption aim at the hereafter .This also is not entirely correct .The economic system suggested by the Koran promises ‘real’ (worldly or benefits in this life ) benefits in this world i.e. the system promises a vibrant , living and stable society , which would be indestructible as long as the basics are followed .The system advocated by the Koran eliminates the fear of : the unknown ;  failure ;  and bankruptcy . The system    allows the individual to pursue her or his dream. The system allows the individual to peruse the higher purposes of life which is the direct result of the elimination of the risk, economic and social.
The Koran’s economic system recognizes that each human is unique and is gifted   by nature by talents which vary from person to person. In the economic sense each individual is to receive the fruits of her or his labours. There is therefore no equality in income and individuals compete and receive rewards in accordance to their abilities and attitudes .The system suggested by the Koran includes the concept of private property and also succession. The system is to be a free market economy, where business is conducted on a voluntary basis with no coercion, the market has to be competitive where the best receive the most and there is an incentive to innovate and grow .The market has to be competitive as is life.
Competition , however, in an Islamic economic system is different from the classical western concept ,the value system in an Islamic society places emphasis upon competition , but the criteria by which the elite is identified is neither wealth nor status nor inheritance but is the amount of effort to enrich society that an individual has displayed . The better are those who enrich society primarily by their actions and also by their thought. The other aspect of an Islamic society is to shun conspicuous consumption, one is free to enjoy ones wealth and too use ones wealth to enrich and improve ones life but as soon as wealth is displayed to express status or superiority it becomes forbidden. Wealth cannot be displayed to portray success and superiority.
The Korans economic system clearly forbids poverty. In an Islamic society, the government, State or society itself has the responsibility of removing poverty. Individuals are required to pay poor tax .The poor tax is so designed that it is payable on ‘idle’ assets .Payment of poor tax is compulsory and can be enforced by governments. 
The system described above is more or less in line with the classical (more correctly the social democratic model of North Europe)  followed by the world and the developed economies. The major deviation being that removal of poverty is a primary objective and the redistribution of income to seek convergence in consumption is voluntary and not coerced or enforced by society or State. .It is in consumption, however, that the Islamic system deviates from the Western model.
Difference in abilities of people translate in difference in earnings .The more able or gifted or talented or educated earn more .There is, therefore, no equality in earnings .The Islamic system does not suggest that earnings be equalized or converged. The Koran suggest that those who are gifted and are ‘assisted’ by nature to be able to earn more than others and these fortunate people should be able to consume whatever they earn, this consumption, however , should aim at nourishment of the individual towards betterment and in exploring talents and latent capabilities ,Consumption should, however, not be based upon the desire to flaunt ones good fortune to others .Wealth should not be used as a symbol or measure of success. Success is gauged by the use of the status or position or assets that an individual attains .The good fortune if used to better society is laudable. Savings are to be invested in production to generate employment or given away to converge consumption. The haves need to fund education, heath, housing etc.
The Islamic society has to ensure that all children are provided equal opportunity , talent has to be nourished and inheritance or family ties is not to be the basis of advancement  .The process of assigning ones ‘surplus’ income to the have-nots is to be voluntary , it cannot and should not be enforced by State or government ,or by law . This is important since the system only works if it is voluntary and sustainable. Risk of failure or bankruptcy is only eliminated if all member participate willingly and with the firm understanding that when the social order is rearranged today have-nots will be treated similarly as tomorrow’s have-nots.
The economic system propagated suggests the removal; of poverty and convergence of consumption, so as to allow all members of the society to be freed from the fear of the vagrancies of life. The system has to be competitive so as to ensure that the better have the control or manage the society inclusive of the economy  
The Koran also forbids riba , there is now some dispute as to what is meant by this , a small group contends that ribe means punitive interest rates and that is what is forbidden, a larger group deems all interest rates to be forbidden , The former group deems that interest rates as applicable today include a portion to cover inflation . This is argued as fair exchange, as X Rupees borrowed a year earlier if returned today would have been devalued due to inflation. There is in any case an impressive work done on interest free banking, this work has been translated into practical as a number of Banks in Pakistan and elsewhere offer interest free banking.

 Capitalistic System

Capitalism is defined as a social , economic and political system  ,where means of production  e.g. industries , banks, natural resources , are owned by individuals or private corporations  .Where the political system operates in the interest of such powers .and where the distribution of national income  is determined by them . It is closely associated with the free enterprise system, which may be defined as one where businessmen, the owners of the means of production are free to maximize their profits. The real driving force behind capitalism – the acquisitive spirit or the profit motive, was nether sanctioned by the State nor Church .Since the Church had submitted to the King, the responsibility of restraining the merchants from unbridled pursuit of self interest fell to the Crown .The power of the State gave way to those exalting individualism and ultimately the acquisitive instinct.
The purpose of economics is to provide the goods and render the services that people want. The best economic system is one that supplies the most of what people want more.
Smiths’s argument was that human beings are moved primarily by selfish and egoistic motives, that all human activity is rooted in self preservation and hence self interest and ambition are not vices but virtues leading to hard work and prosperity. By, implication, then the State should keep its intervention in economic activities to a minimum so that individual and social welfare is at the maximum.
Smith presented a system based upon keen competition as the mitigate to  unbridled personal desire , Smith argued that , left to themselves , producers and workers are guided by the self interest to put their capital and labour to use where they are the most productive . The mechanism that ensures this is the ‘invisible hand’ of a free market  ,where businessmen compete for consumers money in an egocentric search for profits  ,and where consumers seek to obtain the best-quality products at the cheapest price .. The quest for profit maximization producers are impelled only to produce those goods for which there is demand and to use the most efficient techniques so that unit costs are minimized.In a free-market economy  , therefore every one is happy, the producers earn maximum returns , and consumers are satisfied by high-quality products available at the lowest price ensured by maximum productive efficiency .All of this is the miracle performed by the ‘invisible hand’ in spite of , or rather because of , human greed  and acquisitive behaviour .
Smith was a proponent of free enterprise or laisser-faire . With this economic ideology went a political creed that considered the State as an necessary evil – evil because of its encroachment upon individual liberty, but necessary as a bulk ward against anarchy.
Economics as a discipline took from when business enterprises were small and simple and agriculture engaged most of the productive energy of people .Firms responded to changing roles of production and to changing market process. They were sub ordinate to the instructions of the market The theory presented by Smith and others reflected this fact .In time theory was amended to embrace monopoly – or more precisely oligopoly – but it remained a captive of its origins. The competitive firm was still the centerpiece. And Oligopolist also responded to market movements and was impelled to do so, for he sought single–mindedly to maximize profits .Thus the market and hence the consumer remained sovereign. Consumer choice continued to control all.
Smiths contribution was added to and significantly refined by following economists and thinkers, who further elaborated the theory, but they differed little with the basic promise presented by Smith. The refinements offered by subsequent thinkers do not affect or even touch the central substance of the discipline .That, however, subjectively is deemed to be the final form.
The essence of the neo-classical system is that individuals using income derived in the main, from their own productive activities express their desire by the way they distribute the income for , the various goods and services available to them in markets .Their tendency is to distribute their income that the satisfaction derived from the last unit of expenditure for any particular purpose is equal to that from the expenditure for any other purpose  .At this point satisfaction is maximized .
This expression of the individuals will is passed on by the market to the producers along with similar expression of others. When the desire is strong, so will be the willingness to spend money. And so will be the price in the market .Where the desire is weak, so will be the price. The producer will be motivated by the purposes of profit. Thus, over unspecified periods of time, he seeks to maximize .Price changes signal to this motive. Included among the recipients of this information so transmitted are producers who can expand or contract their production, others who can enter or depart the business .They respond, in such response they ensure the production is ultimately in the command of the individual.
Information also passes from the producer to the market and to the consumer .This, however, involves no similar command; rather it is intelligence on the basis of which the individual or consumers alter his instructions to the producer.
The economic system places the individual- the consumer – in the ultimate command of itself. The individual being in charge, cannot be in conflict with the economic (or political) system .The consumer cannot be in conflict with what the consumer commands.
The control of the economic system by the individual varies from individual to individuals primarily in ratio of the wealth or disposable income a person possesses, however, in the neo-classical model this difference and others are said to be mitigated by free market competition.

Emergence of Corporations

The emergence of the corporations disturbed the sovereign consumer concept. Some industries attracted large corporations, the model was modified to encompass this development. The concept of the firm remained unchanged to be the individual owner who is a profit maximize, the owner, however, got power to set prices. The price set by one form affects those of the other firm thus prices that are set acceptable to all. The change in price triggers the consumer’s response and thus the consumer is still in charge. The higher profits of corporations can be managed by taxation. The ultimate social, political and moral sanction of the system driving from its ultimate subordination to the will of the individual remains unimpaired .The firm in the neo classical model remains fully subordinate to the State .The economic management of the State is responsive to the needs of the public as a whole and not to the business firm.
Identified with the neoclassical model is the neoclassical State .The economic system functions in response to the instructions of the market and ultimately to the consumer. Where the response to this instruction of the market is inadequate or imperfect the government may be required to amend the instruction or supplement the response so that it accords better with the public interest .The model assumes that most economic tasks will be accomplished in response to the instructions of the market .The State is supplementary and regulatory in its role. Neo-classical economic has a strong adverse attitude towards  : tariffs ; price controls ; suppression of technological  innovation ; any thing that suggest government assistance  to or acquiesce   in , monopoly . These, all involving the rigging of the market in favour of the firm, are classical devices for winning public support for private purposes .The model, however, still considered the firm to be small and unable to influence free market forces.
The neo-classical model regarded the government to be self regulatory or self righting. Temporary malfunction were self correcting. Its basic tendency was to employ all willing and available workers for some thing close to maximum output. This was because production provided the income which purchased that production and, in the end, provided enough to purchase it all.
The income that was provided could be saved but saved income would also be invested. If savings were large interest rates would fall and this would encourage investment. Or, demand being momentarily deficient, prices would fall, and a smaller of purchasing power would suffice to clear the market .So there could be no permanent shortage of purchasing power.
The neo-classical equilibrium between production and purchasing power that acquired the resulting production was established at a level where all willing and useful workers were employed. If workers were unemployed, wages would fall in consequence of competition for jobs. It would be profitable to hire more workers: perhaps in consequence of the lower wages, demand and prices would fall, But wages directly affected by the unemployment would fall more..Thus the fall in real wages would be a decisive factor in expanding employment. The expansion would continue until all were employed

Keynesian Revolution and the Planning System

The Great Crash of 1929 made a serious dent in the classical and neo classical economic thought: Keynes reshaped economic theory to reconcile microeconomics with macroeconomics .Keynes after the Great Depression stated that there could be shortage (or surplus) of purchasing power in the economy and that neither wages nor interest rates reacted usefully to correct it .A reduction in wages might merely reduce purchasing power – aggregate demand, yet more, and make things worst. In the absence of sufficient demand even the lowest interest rates, would not encourage the needed investment and thus enhance demand .Stagnation would continue. The only answer, was for the State to intervene. The State would spend in excess of its tax revenues and so add demand when this was required.
The government would also manipulate the supply of funds available for ending, and, therewith, the interest rate at which such funds were available. Alone, low interest rates may not accomplish much .As part of a general strategy of stabilisation monetary policy would be effective.
Savings deposited with banks or other lending or financial institutions are available for relending .The amount that is available can be extended by allowing banks to borrow from the central bank. This can be encouraged by a favourable lending (or-discount) rate by buying government securities from the bank, thus leaving them with money, the supply of funds which they have for lending can be further enhanced by the central bank. If the need is to restrict demand the process is reversed .The interest, or discount rate is fixed by the central bank.
 Keynes observed that businesses function as producers as well as providers of income to households in the shape of wages, rents, interest and profits .The households in return spends money to buy goods from businesses. This cyclic flow runs the economy .Income flows from producers to consumers and then back from consumers to producers. As long as businesses are able to sell their products at reasonable prices the process goes on.
The individuals income is partly saved and deposited with financial institutions, partly taken away by governments as taxes, and some part on imports. These leakages from total expenditure tend to keep aggregate demand for goods short of aggregate supply. These leakage are mitigated by: business borrowings for investment; government spending; and exports. If leakages are matched with injections, total spending matches the total quantity of goods produced, and economy can be said to be in equilibrium. If leakages, however, exceed injections aggregate demand falls short of aggregate supply  , and some goods remain unsold so that producers are forced to scale back production and hence unemployment tends to rise .To cut unemployment governments must increase spending by means of fiscal and monetary policies .
Fiscal policy involves the weighing of governments expenditure versus tax receipts. During a depression, fiscal policy calls for a budget deficit i.e. for government expenditure to exceed tax receipts, but with inflation the solution lies in budget surplus. Monetary policy affects the economy through its impact upon business investment whilst a contraction discourages it. Hence during a depression the monetary policy has to be expansionary, but during inflation thre needs to be a contraction.

Friedman

Keynesian economics assigns a watch-dog role to government in contrast to neo classical economics which views the State as a necessary evil .The Keynesian revolution was attacked by Friedman, who brought back microeconomics and free market policies back to the forefront. His argument those cycles occurs due to the monetary factor and not supply demand imbalances. Monetary supply determines prices and employment rates. To him government’s role has to be shrunk to core activities.
It is basic to neo-classical and neo-Keynesian models that a combination of fiscal and monetary policy will produce stable prices at close to full employment .If there is unemployment this can be off set by public action to increase demand . As unemployment disappears inflation becomes the danger .This can be arrested by curbing demand .Thus stabilisation is obtained.
Both models, however, converge on the fact that market remains the regulator .If total market demand is expanded, firms will respond and increase production and employment and if demand is contracted the firm will respond by reducing prices. Both models depend on the same view of the power of the market.

Criticism of Economic Models  

Main stream economic though is far from clear but both main economic systems adhere to the basic premise that self interest is the best guardian of collective economic health.
The American economy is beset with two evils: the rising concentration of wealth; and the rising budget deficit, the structure of the economy has much to do with both these evils. Large corporations interfere with both the supply side and even to, a extend manipulate, the demand side. The economy has therefore inherited the evils of both systems. It is neither a free market economy nor is it a finely tuned fully regulated system, Concentration of wealth interferes in the state of competition .The rich are able to buy small firms and thus create virtual monopolies. He modern household does not allow the expression of individual personality and preference .It requires extensive subordination of preferences of one member or another .The notion that economic society requires something approaching half of its adult members to accept subordinate status is not easily defendable .And it is not easily reconciled with a system of social thought which not only esteems the individual but acclaims his or her power .Neo-classical economics resolves this problem by burying the subordination of the individual within the household , the inner relationship of which it ignores . Then it recreates the household as the individual consumer .The economist does not invade the privacy of the home.
The structure of the economy from the time of Adam Smith underwent a radical change as large corporations started to emerge. The classical model was modified to accommodate the emergence of large corporations. This, however, resulted in a major shift or deviation from the model .Corporations can into being and exist because technological progress and advancement need organization to nurture and harness the consequences of such advancement . To manage technical advancement firms need to control process and manage demand and this infringe upon the model. The large firm ownership passes over to the managers of the firm and not by its share holders who have nominal power.
Organization does not apply to all sectors of the economy and thus results in a two tier economy one comprised of large organisation largely above the market and the other characterized by small firms who are subject to market forces .The former do not confirm to the neo-classical model . The management of large firms have powers to seek government intervention to manage prices .Innovation needs large organizations to harness the benefits of the innovation and these organizations need to have long time horizons and technology takes time to reach a point where it becomes commercially feasible. Organizations thus need to assure that prices will remain stable so that the risk of a long gestations period is mitigated.
The large corporation seeks to control prices and also to, manage demand .Corporations attempt to control and organize the supply of materials and components,. Corporations also attempt to mobilise its own capital and savings. Corporations develop a strategy to control unions and influence the opinion of the community and the State .The corporation therefore seriously circumvents the model, which does not approve the control of process and management of demand.
The large corporation has power to protect its interests by shielding it from the market forces. Corporations need to ensure sufficient return on capital to justify the large capital outlay needed to harness the technological innovation. The return on capital is then maximized without incurring much risk .Corporations attempt to minimize interference in its decision making by means of a weak oversight process, weak board of directors and ineffective shareholders. Reasonable returns keep outside interference to minimum levels and also insulate the corporations from borrowings or investments that erode the corporation’s autonomy. Reasonable profits are thus crucial to the corporation and therefore prices have to be managed, costs have to be controlled and consumer preferences have to be manipulated..
All large firms in different sectors of the economy may not have the same goal. The model assigns only one goal i.e. profit maximization .In the neo-economic system prices are the primary signals. Prices signal changes in wants of consumers to producers and also inform the consumer of changes in production costs requiring a reordering of the commodities demanded .The consumers maximize the satisfaction achieved from a set of income based on process of different commodities or services.. Customer satisfaction orders the layout of labour, capital new materials and management ability that is needed.
The market system is in itself stable .Fluctuations in demand and prices and supply are self correcting. The planning system has no such ability and is prone to instability in face of recession or inflation and this instability passes on to the mixed system where the market portion is also affected by the instability of the planned system.
Downwards instability means insufficient demand , more goods are available ,or could be made available with existing plants and capital employed in assets , then can be sold .The planned system is  unable to react to such an happening as. decrease in production means that income needed to buy the goods and services produced – each sale returns to some one the proceeds which , if spent, would provide the wherewithal for making the equivalent purchase .With that part of the proceed which is in fact , spent – which is turned to the consumption or further production requirements of the recipients – there is no problem .It is with savings that the danger of the discrepancy arises  .These must be invested and must be thus  spent or else there will be a deficiency in purchasing power .If there is such a shortfall goods will remain on shelves   , orders will fall , production will decrease . Unemployment will increase, thus a recession.
In the market system, the length of such a deficiency in demand is limited. Firms in the market system numerous and small and income is widely distributed in comparatively small amounts. The propensity to spend from this income is high, it is strongly exposed to urgent consumption and production needs of the recipient .If there are savings these will be deposited and made available for lending. And if they are sufficiently abundant, there is at least a chance that this will be at interest rates and terms that will encourage the other and already needy firms of the market system to use them.
The market system allows prices to fall resulting in loss of profits to the firm. The reduction in income immediately results in the reduction of the ability of the firm to save – and thus ensure that more of what the firms receives is spent.. And the lower prices for products and services attracts the customer and increases the purchase of those who are living on fixed incomes or who are spending from past accumulations .So an equilibrium in which demand covers supply is likely to be re-established at lower prices .Output does not decline , there is no increase in unemployment .
In the real world prices and wages are more rigid, output might fall, unemployment might rise, But in the market system, savings do accrue widely in small amounts and are likely to be used. The small firm does reduce his income but remains employed , the small firms savings do fall when this happens .Thus the market system tends to be stable of has tendency towards stability through self correcting mechanisms and responses of the consumer and the producer .

Planned System

In the planned system savings may not be invested. The planned system does prefer investment of savings in capital expenditures in contrast to consumption expenditures. Small number of people makes the investment decision. Savings can exceed investment and there is a drop in level of demand which reduces production. The planned system works on synthetic demand which is less reliable than the spontaneous urgent demand of the market system. The stabilization mechanism is very weak, in the planned system, as prices are controlled and as a consequence fall on demand does not trigger a fall in prices .Wages also do not vary and thus do not attract new employment. The entire impact of the reduction in demand is on output and employment. The planned system therefore lacks the self correcting ability of the market system; this in a mixed system exposes the market system also to woes resulting from the inflexibility of the planned system
The Keynesian revolution recognized this inherent inability of the mixed system .The government intervention required to correct instability soon became a part of the planned system .The fact that the Keynesian revolution was necessitated by the need to aid the planned system was not made transparent. The post Keynesian model does not recognize the increase in instability to the increase in the power of the corporations.
In the market system inflation can be controlled rather easily .The individual in the market system takes instructions from the prices, these the individual does not control .Strong demand will pull prices up , such demand can be created by lending by banks or government over and above that what is saved  .This is controlled by tightening credit  or tax increases or reduce governmental spending . Prices will stabilize.
In the planned system the firm has power, over prices .Prices are frequently raised to maintain profits .Price increase raise wages which lead to a spiralling price. The system is severely compromised as corporations along with governments get power to fix wages and prices, it is no longer a self stabilized system.
Inflation is controlled by: reducing public expenditure; reducing private expenditure; and raising taxes .Reduced expenditures are borne by private citizens and market firms not large corporations who have fixed demand in sectors of the economy say defence.
Increase in interest rate is another method of curbing demand  .Corporations minimize use of borrowed funds  ,instead it utilizes capital generated from its own earnings  .The market system relies heavily on borrowed funds .Interest rate hikes do not have the same impact on the planned system as it does on the market system , these hikes therefore curb market firm’s demand  Even use of taxes as a measure to control demand is circumvented by the planned system , which has ability to raise prices to pass the burden to the customers .
The modern economy is irrational, some products are available in abundance whilst some, of more fundamental importance, are scarce The performance of the economy in relation to need is unequal. That is because the planning system usurps the right to fix prices and allocate resources .The planned system wins supports to further enhance the irrationality by redirecting demand. Government expenditure is also lopsided .Weapons, research, highways etc., have access to public funds whereas education, police, courts, sanitation and other urban services are under funded.
The model is completely silent on this, the distribution of public expenditures remains in response to citizens will .Either the citizen is committed to his own discomfort and perhaps even his eventual extinction. Or there is, for the moment some flaw in the government which is producing the wrong use of public funds. Where the power to influence decisions is great there is abundance, where power is lacking the public services are starved.
Wages difference between the market and the planned system will persists and the equalizing claims of neo-classical economics must be rejected and the economy will move to one comparatively affluent, one comparatively improvised working force. The model insists upon the equalization of wages and thus in reality the model does not seem to be relevant.

Suggestions to Modify the Model

 The disruption in the economic sector, in the American economy, can only be minimized or eliminated by reducing the concentration of wealth, linking minimum wages to maximum wage, breaking up raw material monopolies, proper representation of share holders on boards , reducing size of firms reducing or limiting size of inheritance , balanced budgets . Money growth to be in sync with economic growth, government interference is to be minimal. Both main system, however, focus upon the symptoms and not on the root cause of instability and consequently economic and social uncertainty.
John Kenneth Galbraith in his book ‘Economics and the Public Purpose ‘ suggests that action be taken to remove the ills of the economic models or system ,and measure suggested are : support measure to reduce inequality , which is the direct result  of the increasing power of the planned system in comparison to the reducing share of the market system ;  the stabilization of prices and incomes to strengthen the bargaining position of the market sector ; small firms and workers associated with the market segment of rather economy need to be provided security in prices and income ; small firms to take steps to avoid fluctuations in income ; minimum wages should not be bench market to ensure bare survival , be enacted to reduce inequality ; and differential of wages between the market and planned system should be eliminated or narrowed ;government should ensure support to vulnerable groups to ensure that a minimum standard of living is maintained .

Poverty

Economic inequality refers to disparities in the distribution of economic assets and income .Inequality within society is due to : Labour markets ; innate ability ; education ; race ; gender ; culture ; wealth concentration ; development patterns ; and personal preferences for work , leisure and risk .
A major cause of economic inequality is caused by differences in supply and demand for different kind of work A job where there are many willing workers competing for the few jobs will result in low pay and visa versa .
Individuals have different abilities such as intelligence, strength or charisma and there are also differences in individual’s wealth. Talented people tend to be in high demand and are better paid than less fortunate people .The most successful people , however , are those who are around average capabilities , very talented or poorly endowed people seem to be left out for various reasons .Education is one important factor in deciding the income of a person , better educated people are better paid ,
Kuznets argues that the level of inequality is the result of the stage of development a country or society is. Countries with low level of development have relatively equal distribution of wealth .As a country develops , it acquires more capital , which leads to the owners of capital having more wealth and income , introducing inequality .Eventually through several possible redistribution mechanisms , such as social welfare programs  , more developed countries move back to lower levels of inequality . The thesis tested with present data seems to be very weak. Newly created wealth concentrates in the possession of the already wealthy individuals .High inflation also is said to cause poverty as high inflation is coercive and favours those who possess wealth, thus aggravating inequality
.
The children of poor remain under achievers in later life and thus remain poor. This is because working memories of children who have been raised in poverty have smaller capacities than those of, say, middle class children. Working memory is the ability to hold back bits of information in the brain for current use  .It is crucial for comprehending languages  , for reading and for solving problems ,Entry into the working memory is also the perquisite for something to be learnt permanently as part of declarative memory – the stuff a person knows explicitly  . It has been demonstrated that the reduced capacity of the memories of the poor is almost certainly the result of stress affecting the way that childish brains develop. Stress changes the activities of the neurotransmitters, the chemicals that carry signals from one nerve cell to another in the brain .Stress also suppresses the generation of new nerve cells in the brain. Most significantly of all it shrinks the volume of the prefrontal cortex and the hippocampus. These are parts of the brain most closely associated with working. Memory. Children with stressed lives  , then , find it harder to learn .They do less well at school and end up poor  as adults and pass on the same circumstances upon their children .Poor life stressful lives due to uncertainty about the future and due to being at the bottom of the social heap as well as financially deprived  . People at the bottom of the social heap experience much more stress in their daily lives than those at the top and as a consequence are less healthy. Even young children are sensitive and are aware of such things.
It has been demonstrated in Britain that the number of children a man fathers is related to his income  .Status though is always relative  , it is linked to money because it drives the desire to make more of the stuff in order to outdo the competition .This is the ultimate engine of economic growth. Since status is a moving target there is no such thing as enough money.
Richard Easterlin observed that while the rich are happier than the poor within a country, average happiness does not increase as that country gets richer. If this can be established without doubt then the ‘free-market’ argument that because economic growth makes everybody better off, it does not matter that some better than others. The argument does not stand up at least if ‘better-off; measured in terms of happiness .Darwinism suggests that a free society better allows people to rise through the hierarchy by their own efforts. People wish to be relatively better off  than their peers even if it means that they are worst off in absolute terms  .Darwinism believes that poverty is relative . It has been established that once a country grown to be lifted out of penury, its inhabitants are likely to live longer, healthier lives if there are not huge differences between their incomes.  It means that low income countries with low income variation can out score richer countries with wider variations in incomes.. It has been established that that those at the heap have the worst health than those at the top. It is believed that it is the Darwinian failure of being at the bottom of the heap that is truly stressful and bad for the health.
Losing has a real cost not just the absence of gain – early death for the failures and genetic continuity for the successors – it is hardly surprising that those at the bottom   of the heap sometimes seek status  , or at least ‘respect’  in other ways .
Poor children are more likely to fail at school, poor adults to commit crimes die young, and so on .Policy makers try to compensate by spending to end ‘child poverty ‘and by targeting health and education initiatives on the neediest yet such attempts are doomed because they conceive of each social ill in isolation, rather then treating their shared root causes .The cause, however, is not poverty , but inequality .
Within the developed world where destitution is rare, countries where incomes are more evenly distributed have longer-lived citizens and lower rates of obesity, delinquency, depression and teenage pregnancy than richer countries where wealth is more concentrated .Studies of British Civil Servants find the senior ones enjoying better health than their immediate subordinates, who in turn do better than those further down the ladder .
Research has shown a link between inequality and social cohesion. In more equal societies people are more likely to trust each other. Egalitarian societies exhibit greater community involvement and lower homicide rates.
There is a robust relationship between socioeconomic status and health. It shows that it is not only the poor who tend to be sick when everyone else is healthy, but that there is a continual gradient, from the top to the bottom of the socio-economic ladder, relating status to health. The Whitehall studies found that although all civil servants in England have the same assess to health care, there was a strong correlation between social status and health. The studies found that this relationship remained strong even when controlling for health-affecting factors such as exercise, smoking and drinking .
Economic inequality is thought to reduce distributive efficiency within society .Inequality reduces the sum total of personal utility because of the decreasing marginal utility of wealth. The marginal utility of wealth is lowest amongst the richest. In other words, an additional dollar spent by a poor person will go to things providing a great deal of utility to that person, such as basic necessities like food, water and health care; meanwhile an additional dollar spent by a much richer person will most likely go to things providing relatively less utility to that person, such as luxury items.. From the standpoint, for any given amount of wealth in society, society with more equality will have higher aggregate utility.
Pigon says :
‘Nevertheless, it is evident that any transference of income from a relatively rich man to a relatively poor man, must increase the aggregate sum of satisfaction .The old “Law of diminishing utility” thus leads securely to proposition : Any cause will increase the absolute share of  real income in hands of the poor , provided that it does not lead to a contraction in the size of the national dividend from any point of view ,in general increase economic welfare ‘
Pigou also says that income generally benefits the rich by making them wealthier than other people. Whereas the poor benefit in absolute terms. He says :
‘ Now the part played by comparative ,as distinguished from absolute  , income is likely to be small for incomes only suffice to provide the necessaries and primary comforts of life , but to be large with large incomes . In other words, a larger proportion of the satisfaction yielded by the income of the rich people comes from their relative, rather than from their absolute amount .This part of it will not be destroyed if the income of all rich people is diminished together. The loss of economics suffered by the rich when command over resources is transferred from them to the poor will , therefore be substantially relatively  to the gain of economic welfare to the poor than a consideration of the law of diminishing utility taken by itself suggests ‘
Robert Putnam says :
‘Community and equality are mutually reinforcing. Social and economic inequality moved in tandem through most of the 20 th.. Centaury. In terms of distribution of wealth and income, America in the 1950s and 1960s was more egalitarian than it had been in more than a centaury. These same decades were also the high point of social connectedness and civic engagement .Record highs in equality and social capital coincided .Conversely , the last third of the twentieth century , was a time of growing inequality and eroding social capital  The timing of the two trends is striking :  somewhere around 1965-70 America reversed course and started becoming both less just economically and less well connected socially and politically’  
Inequality is mitigated by :public education to increase supply of skilled labor and reduce inequality ; progressive taxation ; , where rich are taxed more than the poor ; minimum wages legislation to raise the income of the poorest working groups (although this is debated as it might cut the least skilled out of the employment market entirely ) .


Why More societies almost always Do Better . By Richard Wilkinson and Kate  Pickett .

Poor children are more likely to fail at school. Poor adults are likely to commit crime and die young. The underlying cause in not poverty but inequality. Countries where incomes are more evenly distributed have longer lived citizens and lower rates of obesity, delinquency, depression and teen age pregnancy than richer countries where wealth is more concentrated.
Difference in status causes these ‘gradients’. Low caste Indian children do worst on cognitive tests if they must state their ideanties beforehand
The remedy lies in taxing the rich or lower inequality in income in the first places, Japan and Sweden are examples .

Giovanni Cornia and Julius Court ( World Institute for Economic Research ) concludes  that to much equality (below Gini coefficient of 0.25 ) negatively impacts growth due to incentive traps ,free–riding , labour shrinking and high supervision costs .. They also claim that high levels of inequality ( above a Gini coefficient of 0.4) negatively impacts growth , due to - incentive traps , erosion of social cohesion , social conflicts and uncertain property rights .They advocate policies which put equality at the lower end of this” efficient” range .
Meritocracy favours an eventual society where an individual’s success is a direct function of his merit , or contribution .Therefore economic inequality is beneficial as much as it reflects individual skills and effort , and detrimental inasmuch as it represents inherited or unjustified wealth or opportunities .
Not every one agrees that income inequality is a problem to be solved.  America and England are reckoned to have among the greatest inequalities among rich countries as measured by the Gini coefficient. Such inequality could, however, be the cause of low levels of child well being. These two countries perhaps value social mobility and greater opportunities to prosper higher than reduction in inequality. Nordic countries which are more equal regularly do well in happiness surveys.

What if the price of greater equality is lower growth? The received wisdom is that rich rewards are necessary to stimulate the innovation on which growth depends .No loss the author says: ‘we have got close to the end of what economic growth can do for us ‘.But that is a claim that needs to be supported .If our ancestors had declared themselves satisfied, we would be without many things we value – and, they would have values to .could they have imagined them .Should we be ready to dismiss joys we have never known?
Many people accept inequality as given, and argue that prospects of greater material wealth provide incentives from competition and innovation within an economy.
Modern economic theory has suggested that a functioning economy entails a certain level of unemployment. These theories argue that unemployment benefits must be below the wage level to provide the incentive to work, thereby mandating inequality and that additionally it is impossible to lower unemployment to zero.
Many economists including Adam Smith believe that one of the main reasons that inequality might induce economic incentive is because material well being and conspicuous consumption are related to status .In this view high inequality creates high amount of stratification, leading to greater competition for status.