Rethinking the state - Shafqat Mahmood - Friday, April 08, 2011

The doctors’ strike in Punjab is symptomatic of the greater malaise within our political economy. The state has progressively become weaker and poorer. It can no longer afford to pay its employees properly, while its ambit of operations continues as before. It has two choices: either reduce its spread of involvement or raise revenue in order to survive.

Our founder’s aim was to create a welfare state. This meant that the government was to intrude into everything. It had to provide education and health services, create social welfare institutions, run trains, buses, airlines and do much more. There was also an imperative to subsidise basics such as food.

The state structure inherited at independence also had a predilection to control everything. This syndrome was a throwback to the attitudes ingrained during the colonial period when the state was the strongest element within the body politic. Its officials imagined that they knew better, had all the answers and could manage anything.

Contrary to popular belief, the Bhutto period saw the full fruition of these bureaucratic dreams. While the leadership may have been imbued by socialist goals to take over commanding heights of the economy, it was the officials that gained control. The state expanded alarmingly. Its spread and involvement reached every area of national life.

While state authority was galloping ahead with new government controlled institutions coming up rapidly, there was a gaping hole in this arrangement that was not thought through. How will the state be able to pay, house and look after its expanding mass of employees? In other words, while the authority of the state was thrown about, little thought was given to the resources that were needed to back up these grandiose ambitions.

The result was that the wages and benefits available to state employees started to shrink compared to their counterparts in the private- sector. This was in stark contrast to the colonial period when the state was the best paymaster. The salaries of government servants pre-1947 and even after, for a while, were large enough for them to live and retire comfortably.

After the ‘60s, this proportionality started to change. The salaries and benefits of government servants did not keep pace with inflation. What kept them going, particularly in the elite services, was free housing, transport and medical but the take home salary started to become ridiculously low.

This had to have consequences. When authority and salary are not proportional, corruption is inevitable. Some stuck to the straight and narrow because they had private incomes and considered the status and authority that a government job brings a fair compensation for a poor pay package.

Others, still trying to stay within the broader parameters of honesty took opportunities to get plots in housing societies that they sponsored or helped bring about. Almost universally, government transport and other facilities started to be misused without remorse because salaries were considered so low.

The hardest hit were those government employees who were not senior enough or important enough to receive facilities such as free housing and free transport. If there were opportunities of corruption, they took them, and if not, they took second jobs to make ends meet. While there was a certain historical glamour about government jobs, the actual reality had become quite pathetic.

This was particularly true in non-administrative services such as health and education. They had a large number of employees with little benefits and like the rest of the government employees, their pay packages were continuously shrinking in real terms. The senior doctors were able to adjust by carrying on private practice in the evenings and teachers resorted to private tuitions but this was not possible for everyone. The frustration kept growing.

All the follies of the years past are coming home now. The state should have concentrated on improving its revenue streams before going headlong into expansion. Nothing of the sort happened. At around nine percent, Pakistan continues to have one of the poorest tax to GDP ratios in the world. Its state-sector is dying not just because of bad systems and poor organisation; there is just not enough money to keep it going.

It isn’t surprising to see corruption or, at the very least, the misuse of facilities becoming the norm even among senior officers. The core of the state structure has become rotten because there is not enough money flowing through its veins. Why is it that relatives in the private-sector, of the same people who are in the government, lead honest and honourable lives? Only because they are better paid and better looked after.

The poor pay and benefits structure of government employees is a huge blind spot for policymakers and indeed, for the nation as a whole. It is true that nowhere in the world is the state-sector paid the same wages as the private-sector, but its employees are at least paid living wages in other parts of the world.

This does mean that the best and the brightest do not opt for government service but they get by because the general levels of education and capability are higher. It is shocking today to see the standard of some people working for the government in Pakistan, even in senior positions.

If we are to move forward, this has to change. But how? Even if by some miracle, the Punjab government is able to find the money to pay the striking doctors better, will it stop at that? Why wouldn’t the teachers and others start agitating? The frustration among government employees is reaching boiling point and young doctors are just one visible symptom of this.

The answer is obvious. The state has to reduce its reach and raise resources to pay those who are left, better. It is a no brainer that most of the state enterprises have to be privatised, in the centre and at the provincial level. But, there is also need for out of the box thinking in areas such as health and education.

Since we are concerned today with doctors, government-owned hospitals need to become revenue earning institutions. If private health institutions can be flourishing enterprises, the government ones with better facilities can compete by charging higher fees of those who can pay, and by subsidising the poor. It is beyond the scope of this article to go into details but it can be done.

Similar innovations would have to be considered for every government entity. The objective has to be a leaner government that essentially is a regulator rather than a doer. A hundred flowers of the private-sector can bloom in many areas that the government considers its monopoly. Secondly, serious attention has to be paid to improving revenues. Without this, nothing is possible.

The road to salvation for our state is difficult but not impossible. But, does the political leadership have the capacity to deliver? Or, even think about these issues?


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