Friday, March 27, 2015

Comparing Median Incomes of Bangladesh, India and Pakistan

Pakistan's per capita median income is $73.26 per month in terms of 2005 PPP (purchasing poverty parity) US dollars as of 2010. It is higher than India's $60.48 and Bangladesh's $51.67 per capita per month, according to the World Bank.

Source: World Bank


Median income is the amount that divides the income distribution into two equal groups, half having income above that amount, and half having income below that amount. Mean income (average) is the amount obtained by dividing the total aggregate income of a country by the number of people in that country.  A country's median income is a better indicator than the average income to gauge how a population is faring economically.

Median income also helps assess the size of the middle class in India, Pakistan and Bangladesh based on the definition used by Asian Development Bank and World Bank. Both of these institutions define middle class as those earning $2 or more per capita per day in terms of 2005 PPP US$.

Pakistan median income of $73.26 per month translates into $2.44 per day, higher than $2 per day income level used by ADB and WB to define middle class. It means that more than 50% of Pakistanis are in middle class. India's $60.48 per month puts 50% of Indians in middle class while Bangladesh's $51.67 means fewer than 50% of Bangladeshis are in middle class.

Source: Asian Development Bank 2010



A 2010 Asian Development Bank's report titled "Asia's Emerging Middle Class: Past,. Present, And Future" reported Pakistan's middle class size as 40.12%  of the country's population as of 2005.  It also estimated Bangladesh's middle class at 20.25% and India's at 25.05% of their total populations.

Source: Institute of Business Administration Karachi Pakistan


More recently, research conducted by Dr. Jawaid Abdul Ghani of Karachi School of Business and Leadership (KSBL) concluded that Pakistan's middle class rose to 55% of the country's population in 2010.

Even though Pakistan's GDP growth has been relatively low compared to India and Bangladesh in recent years, the country's middle class has continued to grow rapidly. It's explained as follows: It's not the overall GDP growth and average per capita income increases but the median per capita income growth that tells you how the GDP gains are shared among the population.

Data shows that economic gains in Pakistan are shared better than India and Bangladesh because of lower inequality. Income poverty rate (those below $1.25 per capita per day) in India is 33% and Bangladesh 43% versus 13% in Pakistan, according to WB data on povcalNet.  Gini Index for India is 33, Pakistan 29 and Bangladesh 32, indicating that Pakistan has lower inequality.

Related Links:

Haq's Musings

Pakistan's Middle Class Estimated at 55% of Population

Comparing Bangladesh and Pakistan in 2012

India-Pakistan Comparison in 2014

Pakistan's Official GDP Figures Ignore Booming FMCG Sector

Musharraf Accelerated Human and Economic Development in Pakistan

Pakistan's Growing Middle Class

Pakistan's GDP Grossly Under-estimated; Shares Highly Undervalued

Fast Moving Consumer Goods Sector in Pakistan

3G-4G Roll-out in Pakistan



Mobile Money Revolution in Pakistan

25 comments:

rjs said...

in the 4th paragraph, i think you meant to say: "Pakistan median income of $73.26 per month translates into $2.44 per day, higher than $2 per day..."

(not per month)

Riaz Haq said...

From Business Standard December 2013

The yearly income earned by an individual in India is the lowest when compared with people living in the BRICS (Brazil, Russia, India, China, South Africa) nations, a Gallup survey showed on Monday.

The annual median per capita income in India stood at $616, the 99th position among 131 countries.

Median means half of the respondents involved in the research get an income less than $616 and the others half above that. Among the BRICS economies, Russia's median per capita income was the highest as people earned $4,129 a month.

The survey observed that in countries where full-time employment was more, the median per capita income was stronger. In India, close to 25 per cent of the people had full-time employment between 2008 and 2012, which is low compared with BRICS peers.

Russia was followed by Brazil, where the median per capita income was $2,247, followed by China ($1,786) and South Africa ($1,217). The survey also highlighted a large difference between more economically developed countries and developing ones. The firm said this “illustrates how dramatically spending power varies worldwide.”

Norway, which topped the list, had a median per capita income of $19,308, followed by Sweden ($18,632). Zambia recorded a per capita income of $287.

http://www.business-standard.com/article/economy-policy/india-s-median-per-capita-income-lowest-among-brics-gallup-113121600968_1.html

Mahesh said...

According to Gallup 2013, median per capita income in South Asia is highest in Sri Lanka $719, then India $616, Bangladesh $616, Nepal $519 and Pakistan $480 the lowest. Aggregate data from 2006 to 2012 was used.

Median household income depends on household size. Since household size is the largest in Pakistan, the household income is correspondingly larger.

The ADB statistics are from ADB report of 2010 using 2005 data. All South Asian countries have experienced GDP growth of nearly 6% or better except Pakistan(4%)

Riaz Haq said...

Mahesh
The ADB data used 2005 surveys but the World Bank PovCal data and Dr. Ghani's data are from 2009-2010 surveys. All use 2005 PPP dollar for comparisons

Kadeer said...

Pakistan low savings rate is hampering GDP growth. The savings rate is one of the lowest in Asia and is below the 10% mark now. A developing country can only achieve meaningful fundamental growth if the saving rate is about 20%

Amjad N. said...

I just got back from Pakistan. Saw positive signs of growing middle class, strong consumer spending, improving infrastructure (yes, with major flaws but getting better), mjor stride in higher education, numerous good initiatives (Pakistani solutions) in basic education and tech based education, resurgence of voice for demand of better education and reform .. I could go on. My optimism continues to increase. On the negative, law and order and civic sense needs major help.

Mayraj said...

Bangladesh still paying for British impoverishment of richest Mughal province. When you are decimated like this, you need huge boost-Pakistan didn't do anything to imprve the situation in E Pakistan and neither has Bangladesh leadership. 80% of exports are clothing-but because paid least among competitors! This means Govt should have done redistribution from what it gained in export earnings and it didn't.


West Bengal also suffering from impoverishment because relied too much on farming, with farmers having increasingly small plots of land.'
India has way more people and relied too much on IT and manufacturing now using automation and low wage contract workers. So India has basically lost opportunity to improve wages for most of its people with HUGE investment in human capital

Meanwhile agriculture is becoming unsustainable because of groundwater abuse and increasing number of small plots. There is a reason why Mumbai and Delhi so huge, rural people cannot find better opportunities for work elsewhere. India needs to create city regions. Even in a country like Japan a city region makes a difference as difference between Tokyo and rest reveal.

Riaz Haq said...

Mayraj,

The biggest reason for continuing rampant poverty in Bangladesh and India is that they both have very low value added agriculture, about half of Pakistan's on per capita basis. This causes rural poverty and farmers suicides.

http://www.riazhaq.com/2013/11/pakistan-leads-south-asia-in.html

Riaz Haq said...

Population below $2 a day is the percentage of the population living on less than $2.00 a day at 2005 international prices.

World Bank data on percent of population living on less than $2 a day per capita:

Bangladesh 2010 76.5%

India 2012 59.2%

Pakistan 2011 50.7%

http://data.worldbank.org/indicator/SI.POV.2DAY

Jigar said...

According to Social Progress Index developed at MIT, out of 132 countries surveyed, India was #102, Bangladesh #99 and Nepal #101. Pakistan was at 131 just above Chad at #132.

The SPI measures the well-being of a society by observing social and environmental outcomes directly rather than the economic factors. The social and environmental factors include personal safety, ecosystem sustainability, health and wellness, shelter, sanitation, equity and inclusion and personal freedom and choice.

Riaz Haq said...

Jigar: "According to Social Progress Index developed at MIT.."

Highly subjective indices like SPI and Legatum prosperity index defy credulity and common sense as spelled out by Abraham Maslow's hierarchy of needs.

Countries like India with vast majorities of its deeply deprived people stuck at the bottom of Maslow's pyramid is better measured by Oxford's multi-dimensional poverty index.

Oxford's MPI shows that India is only slightly better than Afghanistan in South Asia region in terms of multi-dimensional poverty that comprehends basic like income poverty, disease, basic sanitation, etc.

It defies imagination to talk about concepts like "social progress" and "prosperity" in the midst of such depths of deprivation as those suffered by vast majority of Indians whose numbers exceed those of the poor and the deprived in the entire continent of Africa.


http://www.riazhaq.com/search?q=depth+of+deprivation

Jigar said...

"defies imagination"! Exactly sir. Yes there is tremendous amount of deprivation in India. That is why India is at 102 and New Zealand, where there is hardly any deprivation, at the number one spot. The point is Pakistan is at 131, second from the bottom.

However, I understand that you want to discard the Social Progress Index, developed at MIT and based on research by Amartya Sen & Joseph Stiglitz.

Fine. Let us look at the Human Development Index. Even with the open defecation stats mentioned ad nauseum in your articles, Pakistan now finds itself in the LOW group behind India in the MEDIUM group. You can argue that India is higher only because of its higher income. Well then why is Bangladesh, which has lower income than Pakistan, ahead of Pakistan?


BOTTOMLINE
It is meaningless to endlessly compare countries within South Asia - a region in the world that is not very far from the bottom.
I would rather spend time, money and energy on rallying people and NGOs that focus on good governance and on alleviating deprivation in the region.

Riaz Haq said...

By Ali Salman

A recent report by Oxfam and the Lahore University of Management Sciences (Lums) has highlighted a multi-dimensional inequality of incomes as a major stigma of Pakistan’s socio-economic milieu.

This report is based on the review of household surveys from 1990-91 to 2012-13. To support its claim, the report has stated that the concentration of wealth in the richer 20% is five times more than the bottom 20%.

In the US, the top 20% households are 8 times richer than the poorest 20%; in China its 12 times while its 2 times in Brazil.

According to the report, free trade agreements are the major cause for inequality, while at the same time it praised high growth, associating it with less inequality. If this were true, China would not have lifted almost 400 million of its people out of poverty through unilateral trade liberalisation.

The Oxfam-Lums report on inequality seems like a myth. It serves as an endorsement of the state-sponsored propaganda of abject poverty in the country, which the state has conveniently used to solicit international aid and grants.

The case of Africa is a testimony to the fact that such official assistance has never helped a country. In Pakistan’s case, it may have contributed to socio-economic decline. The truth is that there is no reliable data available in the country, which can portray a true picture about the state of poverty and inequality.

This report suggests that 40% of sons born to poor fathers remain poor, and 52% of sons born to rich fathers remain rich. Look at the flipside of the same data: 60% of sons (a clear majority) born to poor actually improve their economic condition. And, more importantly, 48% (almost half) of the men born rich do not remain in that spectrum.

This should be a cause of jubilation – as it is indicating a highly mobile society in Pakistan.

The report has stated that “it is self-evident that in the broad sense, markets in Pakistan are not working given that so many people are unemployed, denied access to credit at reasonable terms and the chance to develop human and nutritional capital.”

The stated unemployment rate is indeed high, however, the elusive informal economy has served as a true shock absorber for Pakistan, and hence we usually do not observe any street protests from unemployed people.

The issue of lack of access to credit is also real, but it is the state and its borrowing operations which have withheld private bankers from lending to the risky projects of the private sector.

The private sector has also failed to produce sufficient formal jobs due to the lack of a reliable and affordable energy infrastructure. This is also due to state dominance of the energy sector, by virtue of following wrong policies, and by denying the private sector producers the opportunity to produce electricity at full due to the ballooning circular debt.

Therefore the assertion that “markets in Pakistan are not working” is only the half-truth. In true sense, markets have not been allowed to be created in the first place.

The report claims that “free trade agreements have exacerbated inequalities” by citing free trade agreements with China, which has arguably rendered local manufacturers jobless. However, there is no empirical data to prove it. Pakistan’s street smart entrepreneurs have switched gear to trading and contract-based work to mitigate the risk of freer flow of goods from the outside and energy deficiency from inside.

Our ivory tower economists never take pain to understand how our small- and medium-scale enterprises survive against all odds. In Pakistan, inequality is a function of an unjust legal system. The laws created for protection of certain classes, professions or sectors, even with the noblest of purpose, potentially deny innovation and competition and thus retard growth.


http://tribune.com.pk/story/860958/cause-and-effect-myths-about-economic-inequality-in-pakistan/

Riaz Haq said...

Inequality in earnings has doubled in India over the last two decades, making it the worst performer on this count of all emerging economies. The top 10% of wage earners now make 12 times more than the bottom 10%, up from a ratio of six in the 1990s.

Moreover, wages are not smoothly spread out even through the middle of the distribution. The top 10% of earners make almost five times more than the median 10%, but this median 10% makes just 0.4 times more than the bottom 10%.

"The main driver has been an increase in wage inequality between regular wage earners—contractual employees hired over a period of time," says the Organisation for Economic Cooperation and Development (OECD) in a new report on inequality in the developed world and emerging economies. "By contrast, inequality in the casual wage sector—workers employed on a day-to-day basis—has remained more stable," the report said.

South Africa is the only emerging economy with worse earnings inequality, but it has halved this number since the last decade. "The combination of marked spatial divides, persistently high shares of informal sector jobs and disparities in access to education accounts for much of the widespread variation in earnings from work in the EEs," the report said.

Wage inequality has driven more general income inequality in the country. India has got more unequal over the last two decades—India's Gini coefficient, the official measure of income inequality, has gone from 0.32 to 0.38, with 0 being the ideal score. In the early 1990s, income inequality in India was close to that of developed countries; however, its performance on inequality has diverged greatly since then, bringing it closer to China on inequality than the developed world.

There is evidence of growing concentration of wealth among the elite. The consumption of the top 20% of households grew at almost 3% per year in the 2000s as compared to 2% in the 1990s, while the growth in consumption of the bottom 20% of households remained unchanged at 1% per year.

http://timesofindia.indiatimes.com/india/Indias-income-inequality-has-doubled-in-20-years/articleshow/11012855.cms

Riaz Haq said...

Breaking the Caste Barrier: Intergenerational Mobility in India
Viktoria Hnatkovskay
, Amartya Lahiriy
, and Sourabh B. Pauly


"Our findings are comparable with
the intergenerational mobility results in other developing countries. For instance, our intergenerational income elasticity estimate for the last survey round of 2004-05 (for India) is around 0.5 which is similar to elasticities estimated for Brazil and South Africa around the same period."

http://faculty.arts.ubc.ca/vhnatkovska/Research/Intergen_revrev2.pdf

Ravi Krishna said...

http://www.wsj.com/articles/edward-p-lazear-want-to-reduce-inequality-consult-china-vietnam-and-india-1427844560

Riaz Haq said...

Ravi Krishna:

Why would US learn from India and China where inequality is growing faster than the US?

Did you actually read the Wall Street Journal story you shared links to?

Do you realize that Wall Street Journal is a Rupert Murdoch-owned right-wing pro-capitalist publication that publishes articles that are directly contradicted by NY Times?

Except from WSJ story:

"The fact that inequality within India and China has grown is of minor consequence. What’s important is that the average citizen of these countries, once among the poorest in the world, has seen income rise substantially. Though China and India are the most striking examples because of their size, smaller developing countries have experienced similar changes. In 1993, Vietnam had 64% of its then nearly 70 million people in poverty. But by 2008, after implementing market-based reforms, and with a population of 85 million, the percentage of Vietnamese in poverty had fallen to 17%, according to the World Bank."

" The improvement in the standard of living of the poor in China, India and elsewhere is a direct result of allowing markets to work. Still, these countries are very different from rich, developed countries and it might be argued that their lessons are not relevant for wealthier countries. Perhaps not, but there is no compelling evidence that the poorest citizens of rich countries fare better when there is more government control of the economy."

http://www.wsj.com/articles/edward-p-lazear-want-to-reduce-inequality-consult-china-vietnam-and-india-1427844560

Now read the following from NY Times:

"India’s billionaires control a considerably larger share of the national wealth than do the superrich in bigger economies like those of Germany, Britain and Japan. Among the Indian billionaires included on the most recent Forbes rich list, a majority have derived their wealth from land, natural resources or government contracts and licenses, all areas that require support from politicians."

http://www.nytimes.com/2011/07/27/world/asia/27tycoon.html?_r=2&src=me&ref=general

Also read the following:

http://www.riazhaq.com/2011/07/india-worlds-biggest-oligarchy.html

A 2012 study of 22 nations conducted by Prof Miles Corak for the Organization for Economic Cooperation and Development (OECD) has found income heritability to be greater in the United States, the United Kingdom, Italy, China and 5 other countries than in Pakistan.

http://www.riazhaq.com/2012/11/pakistan-offers-higher-economic.html

Riaz Haq said...

Here's NY Times on India's coal reserves under forests where wild life and indigenous people live:

"In 2009, India’s power and coal ministries granted Mr. Adani initial approval to build a power plant in Maharashtra state, a deal that included the right to develop a coal mine. But the coal concession was in a forest near a wildlife reserve for endangered tigers. Protests mounted until India’s Ministry of Environment and Forests blocked the mine project.

The dispute underscored how often important national priorities — environmentalism versus expanding electricity — collide. India has the fifth-largest coal reserves in the world and depends on coal-fired power stations for electricity, yet much of India’s coal lies beneath forests in areas populated by tribal groups. Rare is the project without protests, controversy or violence."

http://www.nytimes.com/2011/07/27/world/asia/27tycoon.html

Here's a recent report on Modi's land acquisition act:

Protests and debates have always been a feature of land acquisition bills and acts, since its amendment in 2013 by the UPA or the ordinance which was brought into effect in December 2014.

With the ordinance lapsing on April 5, 2015, the Modi government is anxious to pass the Land Acquisition Bill 2015. Unfortunately, the Opposition is relentless in their, well, opposition to the bill and various interest groups are openly protesting the new bill.

Beating all imagination though, a group of adivasis in Jharkhand have taken giving-a-shit to a whole new level. Quite literally.

They sat in a line and took a major dump on copies of the Land Acquisition ordinance.

National Convener of the National Campaign for Adivasi Rights (NCAR), Abhay Xaxa, whose Facebook page the pictures have been sourced from, told The Indian Express that defecation as a method of protest was suggested by some of the younger members of NCAR.

Now if anyone says the provisions of the land acquisition bill smell funny, you might know why.

-------------

Right after the General Elections in 2014, one of the first issues which the Modi sarkaar wanted to 'fix' was the LARR, 2013, barely a year in operation.

In December 2014, an ordinance was promulgated by the government, which effected some crucial changes. The provision for mandatory consent from affected families was removed for five special categories namely, housing for poor, defense installations, rural and urban infrastructure, electrification and social infrastructure.

The requirement of social impact assessment was made more selective, none for the above five categories, and immunity was given to bureaucrats to ensure speedier execution of acquisition-related dealings.
-----------

The new land bill is said to be more investor friendly and Modi has been accused of diluting provisions of the Land Act, 2013 to benefit big business. Considering Modi's model of development is heavily based on economic growth, these claims may have credence.

As the Congress leads the charge against the passage of this 'anti-farmer' bill, what seems to be more disturbing is the lack of interest of the urban classes about this crucial issue.

http://www.scoopwhoop.com/news/land-bill-a-la-shit/

Riaz Haq said...

How Coal Fuels India’s Insurgency
In mineral-rich jungles Maoist militants find a foothold through violence and extortion.

By Anthony Loyd

The gunman at the jungle’s edge lived and died by different names. Some knew him as Prashant, others as Paramjeet. Occasionally he called himself Gopalji, trading the alias with another insurgent leader to further confuse the Indian authorities trying to hunt him down.

When I met him, he was fresh from killing, and called himself by yet another name. “Comrade Manas,” he said as he stepped from the shadows beneath a huge walnut tree, machine gun in hand, a slight figure, his frame and features burned out and cadaverous with the depredations of malaria and typhoid, war and jungle.

The day was already old and the sun low. The silhouettes of a dozen or so other gunmen lurked in the deepening green of the nearby paddy fields, watchful and waiting. Manas and his men were on the move and had little time to talk.

In India they are known by a single word, Naxalites: Maoist insurgents at the heart of the nation’s longest running and most deeply entrenched internal conflict. Their decades-long war, which costs India more lives today than the embers of the conflict in Kashmir, has been described by former premier Manmohan Singh as India’s “greatest internal security threat.”

In the spate of violence 24 hours before our rendezvous, Manas, just 27 years old, and his men had killed six policemen and wounded eight more in an ambush across the range of low hills at whose base we now met.

The attack had put the Naxalites back on the front pages of India’s newspapers, and security forces were on the move in angry response. Patrols and helicopters circled the area, sweeping through villages and probing into the jungle.

By rights, the Naxalites should have been relics of history, rather than fighting and killing in the name of Mao long after the Chinese communist leader’s death, in a country he had never even visited—a nuclear power at that. Yet their war, fought in the back blast of India’s energy boom, had been thrown a lifeline by the demands of development and the globalized economy, as mineral exploitation and land rights became catalysts of a revitalized struggle.

In this way India’s energy needs and industry’s hunger for raw materials linked the angry killers in the jungle to coal, steel, and power production, welding the Naxalites to some of the most disadvantaged communities in the country—the Adivasis, India’s original tribal dwellers. Rather than becoming an anomaly from the past, the Naxalite insurgency—fueled by intimidation, extortion, and violence—has come to symbolize a conflict prophetic of the future. It pits development against tradition, with India’s most mineral-rich states at the epicenter.

Indeed Manas, already a Naxalite “zone commander” despite his youth, seemed certain that the social grievances of the poor would eventually ensure victory for his cause. He regarded the overthrow of the Delhi government as an inevitability.

“An adult tiger grows old and dies,” he assured me, his eyes glowing with the luminosity of radicals the world over, “just as the government we are trying to oust is old, decaying, and ready to die. Our revolution is young and bound to grow. These are the laws of the universe. In a battle between politicians and a new society run by the people, the people are bound to win.”

He spoke until the last of the sun had dipped beneath the tree line, and then he slipped off into the shadows with his men. The security forces were getting closer, and they had no wish to become encircled.

The next time I saw his face, Manas was dead. It stared at me from a roadside shrine in the impoverished village where he had been born. Local people told me that he had been slain in a gun battle not long after our meeting. Only by reading the inscription on the stone did I learn the real identity of the insurgent with many names: Lalesh.

http://ngm.nationalgeographic.com/print/2015/04/india-coal/loyd-text

rohan said...

You are a pseudo scientist who uses and manipulates the usage if data (mostly outdated) in a manner to prove that pakistan is superior to India.You do not let data be neutral or updated so that it can speak for itself...no matter how you see it India is progressing and Pakistan is quivering as a jelly state...remove your biased lense and then you may see what are the actual problems in pakistan and then try to really solve them

Riaz Haq said...

Shahid Burki Op Ed in Express Tribune:

I don’t have a great deal of confidence in the numbers the government in Pakistan puts out about the economy and the state of society. I believe that the estimates of the GDP and its recent growth don’t reflect the real picture: both the size of the economy and its rate of increase are underestimated. Since the country has not held a population census for 17 years, we are proceeding on guesswork about the size of the population, its regional distribution, the size of the urban population and the rate at which it is increasing. There are no reliable estimates of the distribution of income among different segments of the population. The claim that Pakistan has the lowest income inequality in the South Asian region is hard to accept. Sometimes, it is better to trust one’s eyes than official data. The levels of consumption one generally sees in the large cities suggest significant inequality.

Economists generally consider three forms of disparity: wealth (wealth inequality), income (income inequality), and consumption (consumption inequality). Of these, income inequality is the most frequently discussed subject. It has two important aspects: interpersonal and regional inequalities. The issue of economic inequality leads to concerns about equity, equality of outcome, and equality of opportunity.

There was considerable and an excited discussion of the causes of inequality in the West following the publication of the French economist Thomas Piketty’s book, Capitalism in the 21st Century. Institutions such as the IMF and the World Bank have also given a great deal of attention to the subject. According to a June 2015 report of the IMF, “widening income inequality is the defining challenge of our time. In advanced economies, the gap between the rich and poor is at its highest level in decades. Inequality trends have been more mixed in emerging markets and developing countries, with some countries experiencing declining inequality, but pervasive inequities in access to education, health care, and finance remain.”

The interest in the subject of equality is not only on moral grounds; as social scientists began to emphasise decades ago, perception of discrimination that leads to inequality can have diverse consequences. The economist Albert O Hirschman pointed out in his book, Exit, Voice and Loyalty published decades ago, that unfair treatment on the part of a segment of the population can lead to one of three reactions: those unhappy with their situation can choose to stay within the system hoping that corrections will be made from within; or they may raise their voice, drawing attention to their situation; or they may exit from the system altogether. We have seen examples of all three in our own history.
---------
What are the many reasons for persistent inequality in the country? In neo-classical economics, income inequality is the result of the differences in value added by labour, capital and land. Within labour income, distribution is due to differences in value added by different categories of workers. As Piketty observed on the basis of data collected and investigated from some of the more advanced countries, the return on capital is much higher than from labour. Unless the state begins to tax those who earn their incomes from the use of capital and to raise resources that would increase the productivity of the poor, inequalities will continue to increase.

http://tribune.com.pk/story/935045/technology-and-inequality/

Riaz Haq said...

Shahid Burki Op Ed in Express Tribune:

I don’t have a great deal of confidence in the numbers the government in Pakistan puts out about the economy and the state of society. I believe that the estimates of the GDP and its recent growth don’t reflect the real picture: both the size of the economy and its rate of increase are underestimated. Since the country has not held a population census for 17 years, we are proceeding on guesswork about the size of the population, its regional distribution, the size of the urban population and the rate at which it is increasing. There are no reliable estimates of the distribution of income among different segments of the population. The claim that Pakistan has the lowest income inequality in the South Asian region is hard to accept. Sometimes, it is better to trust one’s eyes than official data. The levels of consumption one generally sees in the large cities suggest significant inequality.

Economists generally consider three forms of disparity: wealth (wealth inequality), income (income inequality), and consumption (consumption inequality). Of these, income inequality is the most frequently discussed subject. It has two important aspects: interpersonal and regional inequalities. The issue of economic inequality leads to concerns about equity, equality of outcome, and equality of opportunity.

There was considerable and an excited discussion of the causes of inequality in the West following the publication of the French economist Thomas Piketty’s book, Capitalism in the 21st Century. Institutions such as the IMF and the World Bank have also given a great deal of attention to the subject. According to a June 2015 report of the IMF, “widening income inequality is the defining challenge of our time. In advanced economies, the gap between the rich and poor is at its highest level in decades. Inequality trends have been more mixed in emerging markets and developing countries, with some countries experiencing declining inequality, but pervasive inequities in access to education, health care, and finance remain.”

The interest in the subject of equality is not only on moral grounds; as social scientists began to emphasise decades ago, perception of discrimination that leads to inequality can have diverse consequences. The economist Albert O Hirschman pointed out in his book, Exit, Voice and Loyalty published decades ago, that unfair treatment on the part of a segment of the population can lead to one of three reactions: those unhappy with their situation can choose to stay within the system hoping that corrections will be made from within; or they may raise their voice, drawing attention to their situation; or they may exit from the system altogether. We have seen examples of all three in our own history.
---------
What are the many reasons for persistent inequality in the country? In neo-classical economics, income inequality is the result of the differences in value added by labour, capital and land. Within labour income, distribution is due to differences in value added by different categories of workers. As Piketty observed on the basis of data collected and investigated from some of the more advanced countries, the return on capital is much higher than from labour. Unless the state begins to tax those who earn their incomes from the use of capital and to raise resources that would increase the productivity of the poor, inequalities will continue to increase.

http://tribune.com.pk/story/935045/technology-and-inequality/

Riaz Haq said...

I did visit Pew Global and found a July 2015 report " A Global Middle Class Is More Promise than Reality".

http://www.pewglobal.org/files/2015/07/Global-Middle-Class-Report_FINAL_7-8-15.pdf

It shows the following:

Population Below $2 a day India 19.8% in 2011 down from 35.4% in 2001 vs Pakistan 18.1% in 2011 down from 33.3% in 2001

Median Daily Per Capita Income India $2.96 in 2011 up from $2.39 in 2001 vs Pakistan $2.95 in 2011 up from $2.42 2001

While median daily per capita income is about the same, Pakistan still has lower $2 a day poverty level than India.

Anyone above $2 a day is considered middle class by both ADB and World Bank definitions.

http://www.pewglobal.org/files/2015/07/Global-Middle-Class-Report_FINAL_7-8-15.pdf

Riaz Haq said...

French Economist-Author Thomas Piketty to #India’s "Hypocritical" "Self-Serving" Elite: ‘Learn From History’ http://nyti.ms/1lQ5b4z

After he fled to the authors’ lounge, Mr. Piketty told me that he found the elite of India “hypocritical” for urging their government to address inequality by pouring resources into economic development, like building infrastructure or helping selected industries. This is self-serving, he says, and only increases the gap between the rich and the poor. In his opinion, governments should find the means to invest more in social welfare, like primary education and health care.

Before the world wars, he said, “the French elite used to say the same things that the Indian elite now say, that inequality would be reduced with rising development.” But after the wars, he said, the French began to see that direct investment in welfare was the way forward.

“I hope the Indian elite learn from the stupid mistakes of the other elites,” he said. “Learn from history.”

India is just emerging from what many regard as a catastrophic experiment in a type of socialism, the sort that economists like Amartya Sen, the Nobel laureate, say was not socialism in the first place, because it neglected health care and primary education. What the Indian elite learned from that history was to fear and loathe the idea of the welfare state.

In 1991, India reached the nadir of an economic crisis that forced it, in exchange for a financial rescue from the International Monetary Fund, to begin liberalizing its economy along the free market lines that were championed then by Washington. In the years that followed, the rich and the educated benefited the most, though the poor are better off today than they were before those changes.

Having prospered in recent decades, the Indian elite have faith in this economic model. But there is also a wide acceptance that India’s inadequate investments in education and health are holding the nation back.

“The problems India is trying to solve are problems other countries are trying to solve,” Mr. Piketty had said during his lecture. “India is trying to solve very complicated problems.”

Riaz Haq said...

The Median as a Better Measure of Development – and Better Than the World Bank’s Shared Prosperity
11/6/13Nancy Birdsall


In India, median consumption is $1.55 a day; that is associated with a $1.25 poverty rate of 33 percent.


Looking along the vertical axis at countries classified as low-income by the World Bank, median daily consumption per capita varies enormously: from $1.30 in Benin and Bangladesh to more than twice as much, i.e. at or close to $3 in Cameroon and Tajikistan.

Looking across the chart along the horizontal axis at about $1.50 daily median consumption per capita, the bubbles represent countries with a wide range of mean GNI or GNI per capita: Malawi, Ethiopia, and Guinea at less than $500; Pakistan, Senegal and Nigeria at about $1000; East Timor at almost $2,000 per capita; Swaziland at almost $3,000; and Angola at almost $4,000 (where the $1.25 poverty rate is 43 percent).

http://www.cgdev.org/blog/median-better-measure-development-%E2%80%93-and-better-world-bank%E2%80%99s-shared-prosperity