The Consumer Class

Our world is one of contrasts. While 1.7 billion people earn enough to be classified as members of the consumer class (users of items including televisions, telephones, and the Internet, along with the culture and ideals these products transmit), as many as 2.8 billion people including Pakistanis struggle to survive on less than $2 a day, and more than one billion lack reasonable access to safe drinking water. Yet providing adequate food, clean water, and basic education for the poorest could all be achieved for less than people spend annually on makeup, ice cream, and beverages.

Private consumption expenditures—the amount spent on goods and services at the household level—topped $20 trillion in 2000, up from $4.8 trillion in 1960. Some of this four-fold increase occurred because of population growth, but much of it was due to advancing prosperity in many parts of the globe. Production efficiencies of the 20th century have driven much of the consumption boom. Modern industrial workers now produce in a week what took their 18th century counterparts four years. In the semiconductor industry, production efficiencies helped drive the cost per megabit of computing power from roughly $20,000 in 1970 to about 2 cents in 2001. Global spending on advertising reached $446 billion in 2002, an almost nine-fold increase over 1950.

According to a survey on Consumer Spending and Population, by Region, in 2000 it is found that 5.2% of world population in United States and Canada has 31.5% share of world consumption expenditures. Out of 6.4% of world population in Western Europe has 28.7%, 32.9% in East Asia and Pacific has 21.4%, 8.5% in Latin America and the Caribbean has 8.5%, 7.9% in Eastern Europe and Central Asia has 3.3%, 22.4% in South Asia has 2.0%, 0.4% in Australia and New Zealand has1.5%, 4.1% in Middle East and North Africa has1.4%, and 10.9% Sub-Saharan Africa has1.2% share of world consumption expenditure.

The health status of women and children in Pakistan is awful—eight babies are born every minute, one mother dies every 20 minutes and about 15 of them suffer from morbidity every 20 minutes, about 50 percent women are suffering from malnutrition and anemia. Less than 20 percent of them are receiving help during delivery and about 25 percent of children are being born under weight. The vision of reproductive health in Pakistan is less costly than the amount spent on smoking.

Smoking contributes to around 5 million deaths worldwide each year. In 1999, tobacco-related medical expenditures and productivity losses cost the United States more than $150 billion—almost 1.5 times the revenue of the five largest multinational tobacco companies that year.

Time pressures are often linked to the need to work long hours to support consumption habits—and to upgrade, store, or otherwise maintain possessions.

In 2002, 1.12 billion households—about three quarters of the world's people—owned at least one television set—Pakistan had 4 million TV sets with only 2,823,800 registered. Some 41 million passengers vehicles rolled of the world's assembly lines in 2002, five times as many as in 1950. The global passenger car fleet now exceeds 531 million, growing by about 11 million vehicles annually. Consumers across the globe now spend an estimated $35 billion a year on bottled water and consumes 33 million liters (35 million quarts) a year in Pakistan.

In 1999, some 2.8 billion people—two in every five humans on the planet—lived on less than $2 a day (Pakistan falls within this category with Per Capita Income as $492). In 2000, one in five people (2 in 5 people in Pakistan) in the developing world—did not have reasonable access to safe drinking water. 2.4 billion people worldwide—two out of every five (and in Pakistan, 3.5 in every 5)—live without basic sanitation. Providing adequate food, clean water, and basic education for the world's poorest could all be achieved for less than people spend annually on makeup, ice cream, and pet beverages.

When the annual expenditure on luxury items in the world are compared with funding needed to meet selected basic needs we see that Annual Expenditure on products like makeup, perfumes, ice cream and beverages.

Consumer goods and services are often sold on the premise that they make life easier and more fulfilling. But too often, beneath the surface of these claims, lay hidden costs. Automobiles are often advertised as bringing freedom to their owners, yet in reality, the average adult urbanite now spends 50 minutes a day behind the wheel. As consumers upgrade, store, or maintain possessions, they are also likely to experience time pressures linked to the need to work long hours to support consumption habits.

If a person is very poor, there is no doubt that greater income can improve his or her life. But once the basics are secured, well being does not necessarily correlate with wealth. Most governments make ongoing growth in the gross domestic product (GDP) a leading priority, under the assumption that wealth secured is well-being delivered. Yet undue emphasis on generating wealth, particularly by encouraging heavy consumption, may be yielding disappointing returns. Overall quality of life is suffering in some of the world's richest countries as people experience greater stress and time pressures and less satisfying social relationships, and as the natural environment shows more and more signs of distress.

By redefining prosperity to emphasize a higher quality of life—rather than the mere accumulation of goods—individuals, communities, and governments can focus on delivering what people most desire. Indeed, a new understanding of the good life can be built not around wealth, but around well being: having basic needs met, along with freedom, health, security, and satisfying social roles. Asif J. Mir, Organizational Transformation

Cutting out a Pro-Poor Budget

In developing countries each time the budget has come, it means the elimination of benefits for the poor and elevated benefits for the rich. The hopes of the governments for making their countries as the most vibrant economies are laudable but the development policies have no relevance to the man in street.

The majority of the people in poor countries yearns for a pro-poor budget. Promoting pro-poor growth requires a strategy that is deliberately biased in favor of the poor so that the poor benefit proportionally more than the rich.

In general a pro-poor budget is one that takes into account the needs of the poor. It is one that seeks to make a difference in the lives of the poor. It is one that would impact positively on the poor so as to enable them to actively participate in and benefit from the process of development. A pro-poor budget would enable the poor to have increased opportunities In order to be healthy, educated, productive and responsible people. Such a budget would have to have a deliberate bias so that the poor would benefit proportionately more from government expenditure than the rich.

The first step in achieving a pro-poor budget is the identification of who the poor are. The understanding and measurement of poverty has evolved over time. Today it is generally accepted that poverty is not only a money related deprivation, but a combination of several deprivations that result in lack of well being. Consequently budget provisions must respond, to this complex situation of poverty. This is no easy task. In formulating a pro-poor budget there is need to have up to date information of the levels, intensity and types of deprivations that make up poverty.

There are many reasons, both practical and strategic, to establish a conceptual linkage between gender and poverty for promoting gender-sensitive budgets. It would be a mistake to simply equate the two categories. Gender imbalances and inequalities should run across every social, economic and political classification. The exclusion and deprivation experienced by the poor is not the same, and tends to be even more acute for women than for men. Gender allows us to stop envisioning the poor as a homogeneous category of people, whose needs can be addressed in a uniform way.

Pro-poor growth should direct resources disproportionately to the sectors in which the poor work (e.g. agriculture), areas in which they live (underdeveloped regions), factors of production which they posses (such as unskilled labor), outputs, which they consume (such as food), translated into strategy of pro-poor growth - employment generation combined with price stability of goods and services which are essential items. Policies need to be designed to reflect concerns of poverty.

In order to address poverty effectively the budget will need to have more direct rather than indirect means of taxation. This would help reduce prevailing high-income inequalities and help spread the benefits of economic growth.

Pro-poor growth means that the poor benefit disproportionately from economic growth. This is to say the proportional income growth (i.e. their income growth rate) of the poor must exceed the average income growth rate. The per-capita income growth rate of the poor must exceed growth rate.

Three obvious policy messages emerge. First, policies to promote growth should help the poor although they could do so more if they made growth pro-poor rather than neutral as it currently is. Second, reducing initial inequality, particularly asset inequality, should receive highest priority, due to its triple effect on poverty. Third, reducing gender inequality should equally be of highest concern to policy makers that want to achieve pro-poor growth.

It is clear that pro-poor growth that directly reduces poverty must be in sectors where the poor are and use the factors of production they possess. The vast majority of the poor is in rural areas, a majority depends directly or indirectly on agriculture for their livelihood, and the factor of production the poor possess and use most is labor, sometimes land, and even more rarely human capital. Thus pro-poor growth must be focused on rural areas, improve incomes and productivity in agriculture, and must make intensive use of labor. These things are nearly tautological, but often forgotten and are clearly not reflected in public policies or in the allocation of public funds by national governments or donors.

Heavy investment in the human capital of the poor will yield two benefits on poverty reduction. It will increase economic growth and it will make growth more pro-poor. The record of East Asia is a good illustration where high human capital accumulation promoted growth and poverty reduction.

Beyond a concern for increasing average incomes and reducing poverty, there is a greater appreciation for a need to enhance the security for the population if one is to ensure sustainable pro-poor growth. The security of the poor is threatened by physical threats. Thus, the poor are forced to avoid risks that may carry high rewards, can get trapped in cycles of poverty and insecurity, and are regularly pummeled by shocks that militate against sustainable reductions in poverty.

Our budget-makers need to remember that real enemy is poverty and deprivation, that their key weapon is their skill and professionalism and that their modus operandi is their humility. They are the custodians of a value system that defines our objective as demonstrating every single day that we are a caring democracy.

Attaining a pro-poor budget is a big challenge. It requires a bottom-up approach; that ensures that poverty eradication is a central issue and not a donor driven requirement. The principles of equity and accountability with particular attention to efficiency and effectiveness have to be continually respected at each stage of the budget process. www.asifjmir.com