Ishrat Husain

The Economics of Violence DR. ISHRAT HUSAIN

The author is a Director at the World Bank. The views expressed in this article are his personal views and do not represent those of the World Bank, its management or the Executive Directors.

The upsurge in incidents of growing violence ,terrorism and sectarian conflicts throughout the country--from Karachi to Hungu--- is not an isolated and disconnected phenomenon . It betrays a complex set of political, cultural and social trends prevailing in the country. It is true that the role of extrenal disruptive forces, break down in the machinery of law and order, the spread of Klashnikov culture, the growing intolerance of differences in religious beliefs, weak political commitment and internal strifes among a major ethnic group are some of the critical elements in the build up to these incidents and should be tackled seriously. But this paper will argue that in addition to these and other pertinent non-economic explanations there are strong underlying economic factors which are fueling violence in the country. Unless actions are taken to remedy the economic ills responsible for this state of affairs there is a likelihood that these acts of violence will remain unabated and create irreparable damage to the economic development of the country. We can identify at least four economic factors that are at work.

First, is the widening gap in the incomes and wealth between the rich and the poor. the conspicuous consumption and ostentatious living standards of a small group of population consisting of the politicians, big zamindars, large businessmen and industrialists, military and civil bureaucrats , tribal chiefs, professionals earning huge untaxed private incomes , contractors and suppliers of goods and services for the government departments, importers misdeclaring the value of the goods, smugglers, drug lords etc. have given rise to a deep sense of despondency, deprivation and degradation among the hard working population of the country. Most of the population lives in abject poverty or hardly earns subsistence incomes despite working hard and honestly.There is a widely held consensus that the sources of the income and wealth accumulated by the ultra- rich are dubious and questionable and include misappropriation of public money, evasion of taxes and other public dues and non payment of loans from the public financial institutions. The majority of the population realizes that the benefits of their labor are not likely to accrue to them,their families or their future generations but to a handful of privileged groups. Most of them have resigned to their fate and have accepted this outcome grudgingly but a small minority have gotten very agitated and transformed their resentment and wrath into active acts of violence and disorder. A few among them have become so desperate at this glaring sense of injustice that they have joined the extreme fringe groups of fanatics. Some others have gotten associated with ethnically organized political groups, while another small group participates in the fanning of sectarian hatred in the name of religion. Together, this small minority spearheads the movement that results in lawlessness, targeted murders and assassinations , retributions and revenge and acts of mass violence.

The second factor contributing to this phenomenon is the large incidence of open and disguised unemployment particularly among the youth in the urban areas. As the economy has been in a cycle of stganation for the past several years , growth rates have slowed down and the public sector has been unable to generate employment opportunities (because of the fiscal constraints) there is an overall decline in the number of new jobs being created in the economy. There are at least 1.4 to 1.5 million new entrants to the labor force every year looking for jobs. Most of them end up in the informal, self employment sector. But the educated youth find it most difficult to get absorbed. The safety cushion which was provided by migration to the Middle East countries in the 1970s and 1980s is also no longer available. In addition to the volume of new jobs being restricted ,there is also the blatant inequity in the distribution of the jobs that are to be filled in. Sifarish, nepotism, connections and outright corruption are the means through which jobs are usually allocated. Those who have worked hard to earn their degrees but have neither the connection nor the money to offer feel revolted at this state of affairs and turn either to the extreme religious or ethnic groups or they join groups of criminals who pay them handsome amounts for the services they render. It may be recalled that at the peak of the dacoit rampage of interior Sind a number of graduates were recruited by the dacoits at highly remunerative salaries and the promises of compensation for their families.

A closely related and in the long term a very important problem is the disparate educational system which nurtures divisiveness --an ingredient essential for promoting violence. At the early formative phase of a child there is a choice faced by the parent in respect to the system of education--madarsah or modern.. The parents can send their child to the religious madarsah where lodging and boarding are provided free of cost or they can send to a modern school but incur out -of -pocket expenses. The products coming out of the madarsahs are unfit for employment in the formal sector of the economy as they do not possess the requisite skills. They are thus most likely to join the informal sector for earning their livelihoods but a few activits among them are also attracted to one of the religious groups or extremist or fanatic factions. There is a further bifurcation among those attending the modern system. The children belonging to the affluent strata of society end up at prestigious private schools,colleges and universities or obtain scholarships to go abroad. On completion of their studies, they enter choice businesses or professions perpetauting the inter-generational disparities.The offspring of the less well-to-do families who usually attend the government- run schools and colleges and seldom get quality education ( except those who are motivated and able students who excel due to the dint of their merit and hard work) are usually unemployed or underemployed or employed in wrong jobs . They feel frustrated and demotivated and thus channel their energies and exuberance to other causes- some of them constructive and productive but others less socially desirable. This " excluded" group consisting of those educated at the madarsahs or poor quality schools becomes the breeding ground for exploitation by those indulging in violence and terrorism.

The fourth factor reinforcing the above three is related to the urban sprawl, inadequate access and congestion of essential services in the expanding urban centers of the country. The unplanned and haphazard growth of Karachi, Lahore, Peshawar, Pindi, Faisalbad, Hyderabad, Quetta etc coupled with large scale migration to these and other cities from the rural areas has constrained the physical and adminstrative capacity of these areas. Poor sanitation conditions, lack of drinking water, inadequate, unaffordable and time consuming public transport facilities , insecure land titles , absence of low cost housing and constantly rising prices of essential commodities have turned the lives of the ordinary people into a perpetual state of disarray. The dysfunctional and corrupt governance structure led by the Police, Municipal and Development authority functionaries have added futher miseries to day-to-day living conditions of the poor citizens.Consequently, the disgusted and disgruntled citizens do not extend any cooperation to the law enforcing agencies in the apprehension and prosecution of those involved in the acts of violence and criminality. Because these offenders are seldom punished or penalized, they get emboldened in carrying out their activities . Social capital that exists in small communities and works as a deterrent against commission of crimes and violence is totally eroded in the impersonal and faceless world of large cities. Thus weak governance , eroding social capital and difficult living conditions in the urban areas provide the perfect canon fodder for violence and terrorism.

All the above factors, whatever their origin, have one common strand --- an awful loss of productive human resources that can potentially add to the output of goods and services and also keep prices moderate and stable. In a country where the human resource endowment is low to begin with, it is a pity that the existing capacity of human resources is being misallocated, misutilized and underutilized. On the other hand, the incidents of violence and terrorism create serious concerns for the security of life and property. This insecurity perpetuates a state of uncertainty and inhibits new investment by domestic and foreign economic actors. Lack of new investment, in turn, slows down the rate of economic growth and limits employment opportunities. This sluggish growth is also a major impediment in the way of raising tax revenues or incurring public expenditures on basic social services and physical infrastructure. In other countries the poor and unemployed receive temporary assistance but given our desparate fiscal situation and weak adminstrative capacity ,this is not a feasible proposition. The vicious circle therefore keeping feeding upon itself.

Fortunately, the same constellation of good economic policies and institutional reforms which are needed for reviving the economy and reducing poverty and income inequality are also going to work in eliminating some of the ills that are responsible for creating violence and terrorism in the country. But having said that ,it is quite possible that the weight of the non-economic factors may still remain so overwhelming that these acts may continue uninterrupted. In that event ,we haven’t lost any thing because we would have taken measures which are required in any case to put the economy back on the rails. But the upside is that these measures may,in fact, help to subdue this menace in the country along with the other stringent actions on the political, social , administrative, diplomatic and cultural fronts.