In Defence of Marxism

A World Food Programme (WFP) report last week said nearly half of Pakistan's 160 million people are at risk of going short of food due to a surge in prices. Food prices rose at least 35% in 2007, compared with an 18% rise in minimum wages, cutting the purchasing power of the poor by almost 50%, WFP said. The question is where are the benefits - for the mass of people - of an economy that has been growing at between 7% and 8% during the past five years?

After 9/11, Pakistan has received between $65bn to $70bn in terms of remittances, international debt rescheduling, aid inflows and foreign direct investment, says Asad Sayeed, an independent economist. This windfall fattened the bank deposits and coupled with low interest rates during 2002-06, sparked an unprecedented monetary expansion in the shape of consumer financing. Easy credit lines created nearly 25 million buyers of houses, motorbikes, cars and larger vehicles, mostly in the urban centres.

But the policy hardly created any jobs. Instead, it created inflationary pressures in the economy, pushing more people below the poverty line. Since the middle of 2007, the economy has started to slow down and defaults on consumer loans have gone up from less than 1% in 2002 to over 8% today. This bodes ill for the poor and places a question mark on the perspectives for the coalition government.