Rise of the middle class

It seems it has awakened

This week on October 12^th, 2014, Evo Morales of Bolivia won an unprecedented third term as President. He belongs to a very poor family and could not get formal education in his formative years. He became an activist in Coca Farmers Union and rose to the top position in the government by gaining confidence of the poor segments of the society. During his first two terms, he revamped the social services sector to provide relief to women, children, indigenous and labour. He streamlined the natural resources management so that it could benefit poor segments of the society.

Morales is not an isolated case; it seems there is increasing awareness among middle classes of the world that they need to have a stronger voice in the government. In India, PM Modi also rose from humble beginnings and started as a tea peddler in his youth. Brazilian President Dilma Rousseff was a trade unionist and spent time behind bars for her rights movement. She is now contesting to be re-elected for second presidential term. In Indonesia, Joko Widodo was a furniture salesman before he became Governor of Jakarta and then recently elected to be President by defeating a former general. President Barak Obama was a community organiser in Chicago before he became a Senator and later became the first African-American President fulfilling the vision of Martin Luther King’s famous statement of “I have a dream”.

In Pakistan twin dharnas of PTI and PAT attracted wide support from the urban middle and lower classes. They are refusing to accept the status quo and demanding wide ranging reforms not only in the electoral process but also governance and delivery of services. But there is a lesson Pakistan has to learn from the failed Arab Spring that was also spearheaded by middle classes. These movements were able to overthrow the status quo but since they were not organised politically, they could not carry it forward. This allowed the status quo to re-establish itself in Egypt while producing chaos in Libya and Syria. In Pakistan we have similar risk as none of the political parties has representation from the middle class. All parties, including PTI, is now controlled by political elites of the country that are part of status quo. This absence of middle class’ voice in party and policy decision making could result in a missed opportunity for the country to embark on a new direction. Through this article I would like to request retired bureaucrats, ex-servicemen, business executives, intellectuals, trade unionists, farmer activists and academics to join political parties and then exert pressure to have a voice in the affairs of the party.

What kind of social reforms do we need? Uncontrolled capitalism has not delivered on its promise as economic benefits are concentrated in a small percentage of global elite. We need social capitalism in which rights of poor segments of the society are protected. In Pakistan we need reformation of taxation so that every segment of the society pays their fair share rather than a large burden carried by salaried class. We also need to document our economy and close down loopholes like property deals in which official price is just 10 percent of the total transaction value. This not only deprives national exchequer of property tax but also provides an avenue for parking black money. We need to provide social security benefit to women, special needs people, and those that are hit by a natural calamity like recent floods. Unemployment insurance should be offered to labour as well as crop insurance to small farmers at subsidised rates. Employees Old Age Benefit (EOBI) should be streamlined so that beneficiaries do not have to struggle to earn these benefits.

The Islamic concept of community building revolves around localised services. Islamic injunctions related to zakat and charity make it clear that it should be distributed among close relatives, neighbours and those passing through the city. Zakat collected from a particular area should be first spent on that locality and if there is a surplus then passed on to adjacent localities. Both education and health are high price tag items for poor families as a percentage of income. This is because of a complete breakdown of public school and healthcare system. We need to develop a system of local cooperatives that operate on non-profit bases to run schools and hospitals. Members of the cooperative can give donations from their charity while government can provide support through issuance of vouchers for each student or patient enrolled. These cooperatives should be required to submit annual tax returns and information about their donor contribution. A regulatory body can monitor their qualitative performance on a predefined standards. Failure to comply with these regulations could result in penalties and licenses of repeat violators can be cancelled.

Housing is another area where we have failed is to take care of poor. This has given rise to shanty towns in large cities that also becomes heaven for criminals, drug peddlers, and prostitution. Government should develop a low cost housing plan in which a percentage of the cost is born by the government while the tenant is required to pay a monthly rent until cost of construction is recovered after which ownership is transferred to residents. Many countries have successfully implemented these plans including Algeria. We can study these programmes and then tailor made it to our own needs. This will also invigorate our economy and create employment. We have not built any new city since Islamabad. It is about time some efforts are made in this area.

Small business loans is an area where we have lacked creativity. Providing yellow cabs and yellow tractors generate employment for one person which is also important. But we need to allow our entrepreneurs to get small business loans where one of the factors considered is number of jobs created by the enterprise. These loans should provide a grace period, for example three years, before repayment starts. American Small Business Administration (SBA) is a good model to study for this purpose. In this programme government does not actually provide the funds rather provides a guarantee to the loaning bank that they will get their principal in case the venture fails. This allows private sector banks to perform the due diligence, according to the guidelines provided by the SBA as well as service the loan and ensure its recovery. Banks are required to maintain performance benchmarks and those who are unable to maintain it are dropped from the programme. Specialty service providers like doctors, lawyers, accountants, architects, and management consultants should be included in these loan programmes and offered incentive for providing services to poor segments of the society.

These are just ideas to initiate a discussion on social capitalism that is the message of Islam. But this vision cannot be achieved without participation of middle class in the political process. This requires institutionalisation of political parties. That’s the first order of the business today.