Can it be formulated in naya Pakistan?
To start off, I wish to correct a mistake in part – I of this article, whereby John Kenneth Galbraith served in the Office of Price Administration and Civilian Supplies (OPACS), USA, during the Second World War (and not after) as both Assistant- and Department Administrator, respectively. In his book, ‘A Theory of Price Control’ published later on, Galbraith points towards the reasons whereby price controls introduced during World War II worked so well. The book, along with the Emergency Price Controls Act (1942) under which OPACS was formulated, could in fact be a good source of understanding on how to check ‘…speculative and excessive price rises, price dislocations, and inflationary tendencies…’- to borrow from the long title of the Act itself.
Unlike the debate in economic history on the efficacy of price controls, the intention here is to remove the artificial controls of the elites/cartels- that wrongly exploit the underlying weak market frameworks and high levels of information asymmetry, among other factors, prevalent all the more in a developing country-context specifically- in reaching the true price signals; those that correspond to the correct forces of demand and supply, and allow reaching a socially and economically responsible price, in both the real and financial markets. Therefore, the commission would in fact be removing unwarranted controls over price, and would allow government to adjust prices, so that they are a) socially responsible, b) incentivize investment/ productive activity, along with c) enhancing the attitude towards a wide range of work.
The basic philosophy as guiding principles for this commission should be that incomes earned are enough to lead a respectable life at least, and that the difference in the incomes/wages between lower and higher level employees are not irrationally skewed in favour of those simply higher on the seniority ladder, and not effort.
Furthermore, with regard to profits, those should be socially responsible ones, and not exorbitant. In this regard, the government will have to evolve a consensus on this among economic agents, with the help of the technical workings of this commission, so that responsible levels of profits are reached at. Moreover, the prices of commodities (including land), financial- services and instruments, should be closer to the scissor of demand and supply, and not arbitrarily hiked up at the back of collusive practices.
At the same time, the private sector, for example, the educational, health, IT and energy-related services (among others) it provides, and the price it charges the consumers for these, in turn should also be corroborated by the price commission with the same line of philosophy indicated above. Hence, the onslaught of Neoliberal policy, which required the state sector to mostly leave alone the markets and private sector to their affairs, not only undercuts democracy in this way- by keeping private sector affairs away from public scrutiny through limiting the reach of public policy and price check under this philosophy- but also leads to economic injustice for the large segments of the population, to the benefit of a few.
Moreover, the price commission should also re-evaluate the composition and extent of items in the basket for calculating various inflation indices
This price commission should, therefore, work close in hand with the Competition Commission of Pakistan, and also should have the right kind of technical expertise, along with having all the required government power legislated and administratively, behind it, so that the commission could reach correct prices and profits in the country. This will, in turn, go a long way in not only controlling inflation, but also in pushing aggressively the informal sector of the economy into the formal fold- at the back of lack of incentives for economic agents to remain in the black economy once price difference advantage of staying there has been taken away-, in reducing the income inequality gap, and in improving distributional consequences of economic growth. Moreover, lower and stable prices will lead to better macroeconomic stability, lesser burden on policy rate hike to be pushed up, and will in turn lead to lower cost of doing business and greater competitiveness. Most of all, it will reduce the need to earn more by economic agents to purchase the same amount of economic benefits.
The price commission should also look into the pricing mechanism of petroleum products and energy tariffs. These two items feed heavily into the costs of domestic production and overall transportation costs, affecting in turn, the prices of a whole array of commodities that reach the end-consumers. The price of petrol and electricity contains a heavy proportion of indirect taxes/levies, along with margins that are also paid, in turn also reflected in the final price. The commission should try to suggest alternate domestic resource mobilization and expenditure policies, so that the prices of petrol and electricity could be deflated by removing these unnecessary burdens. In fact, since they are so important for the overall production costs and inflation, there should be a policy to subsidize the prices of these two items further.
Moreover, the commission should also work in a similar direction to rationalize the taxes/duties on imported commodities, so as to both reduce the level of inflation pass-through for the economy, and to re-direct import demand towards commodities that play a greater role in alleviating poverty, and in enhancing the level of sustainable growth, with good distributional outcomes in the country. In the same vein, the price commission should rationalize the taxation structure of domestic consumption and production, in favour of those items and services, which allow economic sectors to receive focus according to the importance they hold in strengthening the overall base of the economy, and its consequences for sustainable growth and welfare.
The price commission should also look into the magnitudes and ways of determination of wages/incomes being received by the employers and employees; in turn, aligning earnings with ability to live a secure and decent life, and removing at the same time sources that cause unjustified income inequalities. Here, minimum wage should also be rationalized in the same vein, with likely large upward revisions- and that the differences in income levels across the hierarchical scale should be a fairer reflection of effort/responsibility difference; and not the unjustifiable exacerbated difference at the higher job levels- while a sea of employees barely making to the bare minimum. Moreover, the price commission should also re-evaluate the composition and extent of items in the basket for calculating various inflation indices; not to mention over-hauling the whole institutional mechanism for collection of price data, to enable receiving correct, timely and complete price information from sectors of the economy.
Lastly, as the government exercises its rightful role in reversing the Neoliberal assault on economy and democracy- through enabling economic sectors to reach true price signals- the element of corruption and the level of information asymmetry will also drastically reduce at the back of greater information with government. This is because the government will have more presence and understanding of all these markets and economic spheres, in terms of loopholes and pathways, largely through which such issues arise. Moreover, the removal of undeserved income being earned, once price correction takes place, will restore rightful importance to the earning and judicious expenditure of money; including election campaign spending- especially the role of certain sections of the financial sector that invest in election campaign funding of political parties, gaining in turn an unfair voice in public policy to their advantage. A price commission of the sorts is indeed an essential must. Will this be formulated in the naya (or new) Pakistan?