The improvement in private welfare should have resulted in an increase in public revenues to allow for adequate redistribution to low-income cohorts. Instead, public revenues from taxation either remained stagnant or declined, while the affluent classes continued to demand improved public services. Because of the widespread unwillingness to pay taxes, governments borrow from the IMF and other lenders to meet the fiscal deficit. Unless those who can pay taxes acknowledge their public duty, the State will continue to be weak and will increasingly become irrelevant and incapable to look after the interests of the public.
It is important for us to acknowledge that the middle class in Pakistan is doing much better socially and financially than before. To illustrate my point, I will share my family’s story with the readers so that they can recognise the positive changes that may have also occurred in their lives. Once we appreciate that the quality of life for many in Pakistan has improved, perhaps then we may be more willing to strengthen the State by paying taxes and providing governments with the fiscal space needed to deliver public goods and services.
I grew up in lower middle class neighbourhoods in Murree, Peshawar, and Rawalpindi. In the late 70s, only one household in our extended family network owned a car, albeit a used one. Some had motorcycles, but most had no other means of private transportation. Only one household in our immediate neighborhood in Rawalpindi had a telephone. Almost no one owned a refrigerator. In fact, it was only when I was born, the first child in the family that my parents invested in a refrigerator, which had to be imported from Germany.
We had fans, but no air conditioners. We had gas stoves, but no microwaves. We had a black and white television, but no VCR. In fact, I remember the bustling business of television and VCR rental that existed in every neighborhood, but as of late has disappeared altogether because the demand for such rental services do not exist anymore.
The most telling characteristic of our improved welfare can be gauged from the improvement in toilets. I distinctly remember that no household had modern toilets with septic tanks. Pit toilets were common across Pakistan that were cleaned once a day by a cleaner who would physically transport the waste (night soil) out of the house. Its final disposal would remain a mystery to me to date.
There was no running water in our neighborhood (Lower Mall) in Murree. A municipal tap was the only place one could get water and that too operated for a couple of hours in the afternoon. My brothers and I used to carry small buckets with us to the municipal tap. We would stand in line for hours for our turn to fill the buckets and return home to deposit the water in a water tank. Obviously, there were no showers or bathtubs.
Fast forward a couple of decades and a different picture emerges. The same middle-class neighborhoods of Dhaki Dalgaraan in Peshawar, Gowalmandi in Rawalpindi, and Lower Mall in Murree have transformed significantly. Housing units have improved in structural quality with several additions. Several private cars are parked on the same streets with little room left to walk or stand. Almost every household has one or more motorcycle or similar modes of motorized transportation. Air-conditioners are common, with many households owning more than one unit. Almost all households have modern toilets and in-house water supply. Televisions, VCRs, microwave ovens, computers, and refrigerators are common in the neighborhoods that I grew up in and other similar ones across urban Pakistan.
If one compares the household characteristics that existed in the 70s and 80s to the ones today, it will be hard to argue against the fact that the general welfare of Pakistan’s urban middle class has improved considerably. And while some may argue that incomes relative to prices have not increased, one can see that the consumption has.
Such a massive increase in private consumption impacts the demand for public goods and services. However, the reluctance to pay taxes or market rates for consumed services has contributed to the collapse of Pakistan’s public sector. Take electricity as an example. In the 70s and 80s, the household demand for electricity was generated largely by the use of bulbs, tube lights, fans and TVs. Today, the households have not only increased in number, but their per capita need for electricity has increased manifold with the introduction of electrical appliances that consume considerable power, such as air-conditioners, computers, and microwave ovens.
While consumers demand improved delivery of electricity, they are unwilling to pay the market-rate for their marked increase in consumption. Similarly, they demand better public education, but are unwilling to pay for it. They demand better public healthcare, but for free. They demand security and law and order, but they themselves steal taxes from the State. They willingly spend money to purchase new cars, but are unwilling to pay for the maintenance of roads and bridges. The unwillingness to pay for public goods to sustain the increase in private consumption is the root cause of the collapse of the State in Pakistan.
Those who demand better services from the State should be willing to pay adequate income, property, and other taxes on consumption to allow the governments the means to deliver on their mandate.
Refusing to do so will keep Pakistanis individually rich, but collectively poor.