Pakistan: Two ‘floods’ devastate working people and poor

Flash floods destroy lives, soaring price inflation means poverty

The people of Pakistan are facing two floods at the same time. One is partly a natural calamity and the other one is system-made. The flash waters are continuing to destroy the homes and livelihoods of the poor. At the same time, soaring inflation is making the lives of millions of working class and poor people even more miserable and poverty-stricken. The flood waters have affected more than 20 million people but the flood of price hikes is affecting nearly 150 million working people throughout the country. The poor of Pakistan are victims of uncontrolled and unchecked inflation which is driving more and more people into the poverty trap and hunger.

Economists warn of a decline of more than 2 percent in GDP, a sharp fall in tax revenue, food shortages, and rising levels of debt, with record high fiscal and current account deficits and soaring inflation. During the month of Ramadan (the fasting season for Muslims) speculative traders imposed price rises. The unprecedented rise in the price of edible food has created further problems for the poor, who have meager incomes already. According to figures released by Federal Bureau of Statistics (FBS) – the Sensitive Price Index (SPI) – during the week ending 19 August 19, 2010 showed a substantial surge over the same period, last year. The increase in weekly inflation was caused by a major increase in the price of kitchen items, increasing the burden of survival for the most poverty-stricken layers of society.

Households in the two lower income brackets (£30 and £50) have felt the devastating effects of this weekly inflation the most. The SPI increased by over 18% for households in the income group of £51 to £120. It was up by 16% for those on more than the £120 income group.

In the wake of the floods, many renowned economists are afraid that due to poor food production inflation will keep on soaring. They expect that inflation will continuously rise in the coming months. During Ramadan it was already very unstable and prices began to rocket. Low income groups are badly affected due to constant increase in the prices of essential food items and frequent hikes in petro based products that further aggravate the situation due to rising costs of transportation.

The FBS revealed that out of 53 surveyed items, the prices of 50 essential items increased during the week compared to the previous year. In some cases prices rose by 128%! Traditionally, pulses, rice and roti (bread) are considered essential components of a poor persons’ meal. The prices of different pulses increased on average 44%. The price of average quality wheat flour increased by over 20%. The price of average quality wheat also rose by 22%. The price of basmati rice also rose by more than 30%. Undoubtedly, poor people and lower income working class people are enraged with this situation. Even the better paid public sector workers complain that the 50% increase in their salaries, which the government announced in the federal budget 2010, was not enough to meet daily needs at a time when the rate of essential commodities was increasing by the hour.

In last three days, the prices of edible foods are now out of the reach of even lower middle class people. Just one day before the Eid religious festival, prices were increased to incredible levels. In one day, the price of chicken was increased from £1.90 to £2.60 per kg and goat meat from £4 to £5 per kg, tomatoes from 60 pence to £1.20 per kg and cucumber from 50 pence to £1 per kg. Street sellers charged 30 pence per bundle of coriander and mint which usually sold at 5 pence per bundle. The price of fruit and vegetables rocketed by between 50 and 80%, in twenty-four hours. For instance, apples were selling between 50 to 70 pence per kg one day ago were selling for £1.20 per kg. Better quality bananas were sold at around 80 pence to £1 per dozen, grapes at between £1.60 pounds to £2.20 per kg and peaches were sold for £1.60 per kg. Hardly any working class family can afford to buy fruit and vegetables at these sky-rocketing prices.

After sixty-three years of existence, Pakistan is grappling with the worst inflationary pressure in its history. Official statistics show that the consumer price index has increased forty-nine fold during the period 1949/50 – 2009/10. The government was expecting an annual inflation target of 6.5% during 2007-8. This was raised to 12% for 2008-9 and 14% for 2009-10. Yet food inflation in June 2010 soared to a record high of 28%. The core inflation (non-energy and non-food) rate escalated to 13% in June 2010 compared with the modest figure of 5.3% for the same month last year.

The Wholesale Price Index (WPI), which is generally used to measure the cost of production, registered a record increase of 16.21% during 2009-10. The SPI, which reflects the price of fifty-three essential commodities, mostly kitchen items, recorded a rise of 28-37% during the last week of 2009-10. The CPI recorded a substantial rise of 21.83% in June 2010 over the corresponding month last year. The sickness in the economy reflected in this trend prior to the floods is now being aggravated even further following the effects of the flooding.

From 2001 to 2010, the situation started to deteriorating and upward surges in SPI became continuous and at a rapid pace. From 2001 to 2007, the annual rate of increase was around 7% to 11%. The government policy of more and more reliance on indirect taxes was one of the main reasons behind this trend. Indirect taxes contribute approximately 70% to the total revenue of the federal government. The steady momentum of inflation during the last three months is also related to an increase of one percent in General Sales Tax (GST) from 16% to 17%. The SPI surges are directly related to the rise in poverty which has taken place.

‘Transitory poor’

According to Centre for Research on Poverty and Income Distribution (CRPID), 63% of poor people in Pakistan are in the category of ‘transitory poor’.

The State Bank of Pakistan (SBP) admitted this, stating in its annual reports that the standard definition of ‘transitory poor’ includes those households that are below the poverty line for most of the time but not always during a defined period. The remainder of the “poor” is made up of 32% subsisting below the poverty line in “chronic poverty” and 5% in ‘extreme poverty’. The chronic and extreme poor are households classified as always below the poverty line during a defined period. At the same time, 13% and 21% of total non-poor (those above the poverty above the poverty line) were classified as ‘transitory vulnerable and transitory non-poor’, respectively.

This reveals a desperate situation. With the rise in the SPI more and more people are moving from ‘transitory poverty’ to ‘chronic poverty’, courtesy of the inequitable distribution of wealth and the unjust and exploitative economic system, the greed of big business and traders for super profits and regressive tax policies. The rulers of Pakistan have never shown any concern for redistribution of wealth or the introduction of policies for greater economic and social justice. The manifestoes of all main the main political parties do not even mention it.

Question of socialism

The present crisis clearly shows the bankruptcy of capitalism and feudalism in Pakistan. It shows the need to put the question of socialism and a democratically-planned economy at the fore front of the struggle of the working masses. Within the existing system there is no solution for the mass of the poor in Pakistan. The working class and poor have suffered the consequences of the free market economic onslaught on their living conditions and social gains in the name of “reforms”. The structural adjustment programme, neo-liberal economic policies and privatisation have created havoc in the lives of the poor and working class people over the last two decades. The government privatised all the public sector industries and sold them to big business. It facilitated this by forming cartels in the each sector of industry and the economy. More than one million public sector jobs were lost. Now the tiny number of super-rich individuals (the owners of big industries and corporations) fix the prices of different commodities. The gas industry is a clear example. The four gas marketing companies which control the import and marketing of LPG gas in the country have formed a cartel. They increase the price of LPG gas whenever they want. In the last two weeks, these companies have increased the price of LPG gas from 70 pence per kg to £1.25 per kg. There is no justifiable reason for this big increase. Yet the government allows it to happen. It is not an accident that some of the big guns of these companies are also members of the federal government. The same is true in the sugar industry. The price of sugar has gone up from 55 pence per kg to 82 pence per kg in last few weeks, without any check from government regulators. This is the case in all the industries, banks, big business and trade. All the main political parties of the country represent the interests of big industrialists, landlords and the super rich. There is no political party and voice to represent the interests of poor and working masses. The ruling class is taking full advantage of the situation and getting even richer at the expense of millions of working class and poor people. The price rises taking place are based on speculation without any real justification.

The is an urgent need to establish committees of workers, the peasants, street vendors and all those exploited by capitalism to monitor the real rise in prices and stop speculation. The need for a sliding scale of wages to keep up with inflation is a demand that workers need to unite to fight for.

This clearly shows that capitalism is a system which bases itself not on the needs of the people but to maximize profits through super exploitation and repression of workers and working people in general. Capitalism produces goods not to meet the needs of the working masses but to make profits. Socialism is a system which is based on developing a democratically planned economy to meet the needs of the people, the workers, the peasants, the poor and all those exploited by capitalism and feudalism. Socialism produces goods to meet the needs of the society not to make profits. Pakistan needs a democratically socialist planned economy and workers and peasants’ government to over come all the existing problems and crises, including the price hike. Socialism is the only system that can overcome the existing problems and crises in shortest possible time and provide the basic needs of life.

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September 2010