Why Pakistan Cannot Borrow Its Way to Prosperity, and What It Could Build Instead (Part 2)
A kiln is therefore the natural place to prove that a wage floor can work, long before anyone attempts to police the millions of households and workshops scattered through the informal economy.
But together they undercut the claim that a country like Pakistan is condemned to compete on suppressed wages, and they suggest that the question is less whether wage floors can function than whether a government is willing to make them.
It would need provincial governments, which hold the constitutional authority over wages and labor, to compete to show results, so that a chief minister who clears the kilns of bonded families can claim credit rather than risk a quarrel.
If the first part of this inquiry is right, and the country’s weakness lies in how it pays and protects the people who work, then the remedy cannot be another round of borrowing, however carefully negotiated. Nor does it require isolation. A country of more than two hundred forty million people will always need imported fuel, machinery and technology, and paying for them requires foreign exchange. The point is to change the terms on which Pakistan meets the world, so that it enters trade as a country with a strong home market and not as a supplicant with a deficit.
The first step is to stop spending scarce dollars on what the country can substantially produce. Pakistan spends large sums every year importing food, including wheat in poor harvest years, pulses, and a very large share of its edible oil. There are limits to how far this can be reversed, since water is scarce, the climate is increasingly erratic, and some crops will never compete economically at home. But every serious step toward food security, whether through storage that prevents post-harvest waste, support for the smallholders whose yields are low, or enforcement against hoarding, saves foreign currency that would otherwise be borrowed. Remittances from the millions of Pakistanis abroad are already a vital support for the country’s reserves, but they are a gift of the diaspora and not a policy, and an economy that leans on them to paper over a weak domestic market is still dependent in a different form.
The fiscal side matters just as much. A state that collects most of its revenue through sales taxes on fuel, food and consumer goods is taxing the poor at the highest rate, because they spend the largest share of their incomes. As workers move from informal arrangements into registered employment at legal wages, the base for direct taxation on incomes, profits and wealth grows, and the government can fund clean water, primary health and roads from its own........
