Feb 13, 2011

Teach me how to fish…

By Syed Bakhtiyar Kazmi

There is a proverb which, in my opinion, succinctly explains the theory of economic growth, if there ever was one. “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime”.

Apply this now to our country and the continuing dependence on aid and soft loans becomes clearer. The inability to do a hard day’s labour culminates in the desire to make quick money which gives birth to corruption. However we digress, the point here is that while in a calamity of humongous proportion it may be acceptable to give cash payouts to the refugees to sustain them till rehabilitation, continuity of such interventions will result in the creation of an interest group comparable with beggary. While there maybe current political gains, there will be future economic drains.

Having accepted that aid is necessary in extreme situations and that handouts are destructive in the long run, what then is the preferable form of assistance? The proverb hints at the solution. Teach our man to fish! The problem with this solution is that our man needs to be near a lake or the sea where he can fish; otherwise teaching him to fish serves no purpose.

The analogy refers to aid for training in vocations where employment is not available. Training for the sake of training may pacify the philanthropist within us, but it will breed further unrest in the form of increasing unemployment. Going back to our fish example, if our man does not know how to fish or alternatively while fishing can’t find a lake he will again starve or steal the former being synonymous with extremism and unrest.

Finally, in our fish example even if the man is trained in fishing and also provided a lifejacket and a lifebuoy but he still can’t find the lake, he will again starve or steal, but will probably feel worse than before. Notwithstanding, we are still not sure how to help our man, if that is our intent. The probability that giving the man a fish a day may have been a strategic decision to keep him subservient is discounted solely for the purpose of sticking to our hypothesis. Accordingly, we assume that the grantor is sincere and committed and actually intends to help the starving man.

We can now safely conclude that if our man is to be fed for a lifetime it is necessary that he is trained in fishing and, more importantly directed towards a lake. At this juncture, substituting the man for IDPs in Pakistan, the lake with employment, and the fish with aid, we deduce that the long term solution for IDPs is the provision of employment. No wonder that employment remains the primary objective of any government.

While the necessity of schooling and health facilities in the impacted areas cannot be underscored, in the absence of provision of employment for the bread-earners of the family these will remain ineffective in controlling dissent.

Observation of urban areas shows that quality of education and health is directly proportionate to the earning capacity of the populace, as per capita income rises better schools and hospitals crop up to meet the demand. Consumption of these facilities is dependent on the remaining disposable income after accounting for basic necessities such as food, clothing, and shelter.

Willful migration towards city occurs with the sole objective of employment. In a hypothetical experiment, setting up of a world class university and a hospital in a remote area should not be expected to flourish into a metropolitan. Substitute these with a center for trade and industry and the resultant growth will overshadow all projections.

Interestingly, as the city grows, world class hospitals and universities will be a natural outcome. Demographics of any city are, therefore, dependent upon its employment and trade opportunities as also confirmed by numerous historical examples of expansion and contraction of cities purely on this basis. Civil unrest again is an outcome of unemployment proven by the recent upheaval in Tunisia and Egypt.

But how do we create employment? Unfortunately, there is no simple answer except that it is a universally recognised truth that creating employment is the sole domain of the risk taker. While the presence of resources and capital are a prerequisite, exploitation thereof emanates from the profit-oriented mind of the entrepreneur alone.

Governance opportunities are a by-product of business. Mysteriously, more qualified and experienced management is likely to fail in a public sector or development sector environment as compared to the private sector. To my mind, the difference is that in the latter case success enhances personal property and failure is fatal. Motivating the risk takers, however, is complicated since their appetite for risk is directly proportionate to reward. The decision to invest in Swat rather than in Karachi, as an example, will only be considered if it results in super profits.

There is then a need to enhance profitability for projects in targeted geographic areas to excite our risk takers. This methodology has already been adopted in the power sector where higher returns were offered to entice investment. A variant of this policy can be the solution for the problem under consideration. Aid can be the catalyst for mobilising private investment under a well thought out mechanism. Again, this is not a revelation; there are examples of grant funds being offered in other countries for subsidizing project costs with the sole objective of creating employment. The criteria for funding being the level of employment created. With consequent higher profits entrepreneurs may tend to consider projects which were earlier ignored due to the level of associated risk.

The optimum mechanism will need brainstorming in our specific environments. Tax-free zones can be another option where grants subsidize tax. One acknowledges that such schemes will require stringent monitoring to avoid abuses which are more than likely. Nonetheless, the benefits far supersede the costs. Subsidizing interest rates on micro-financing can also be considered keeping in view its growth in the country.

Micro-finance, however, assumes that the borrowers will be able to deploy funding in a manner which creates sustainable future earnings even when the loan is repaid. This may not necessarily be true particularly in the aftermath of a devastating natural calamity. Consequent subjective write-offs then result in our man again getting comfortable with free fish with zero commitment to pay future debts.

Honest employment is a pre-requisite for self esteem. Our man will eternally be grateful to the means responsible for providing honest employment. It is our culture. The mileage gained by the respective donors from providing jobs will be much more than that achieved through free fish and life jackets.

Acknowledging the absence of a quick fix the suggestion is to at least move in a new direction for aid utilisation. The onus lies on the government of Pakistan to engage and convince the donors in taking a more holistic view of development. The focus needs to be on employment creation which will ensure directing the energies of the population towards productive activities.

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