Pakistani politicians have a habit of making over-the-head statements. This time around Ahsan Iqbal asked the people to limit their tea consumption, to save some dollars.
It is estimated that roughly $500-600 million worth of tea is imported every year for our domestic consumption.
Hard pressed by a depreciating rupee, Ahsan Iqbal could do no better than Mushtaq Ghani, who said back in 2019 that people feeling the heat of inflation should eat one not two rotis. He is currently serving as speaker of the KP assembly.
Economic theory works on aggregation. At the macro level, aggregate demand, aggregate supply, aggregate consumption and aggregate investment are the go-to concepts. They indicate the general trend of the economy, guided by choices, wishes and demands of a majority of people.
When politicians like Ahsan Iqbal or Mushtaq Ghani make such absurd statements they are basically exposing their lack of knowledge on economy. One lesson that I learnt and still remember from my macroeconomics class is that there are hundreds of millions of agents in the economy. It is virtually impossible to control their behaviours and decisions. Imposing taxes or giving incentives may regulate their behaviours and decisions. But targeting behaviours of a majority does not make for good economic and political policy. By following the political policy of Robert Walpole — “let the sleeping dogs lie” — politicians will be better advised not to invite the fury of Twitter guns.
Instead of telling people to curb tea consumption, Minister for Planning Ahsan Iqbal and his colleagues in the government should tax items consumed by only a few. For instance, the import payments for the transport group in the import bill exceed $2.5 billion for the fiscal year 2021. More dollars can be saved if the import of non-essential transport machinery is reduced at least by half.
Instead, Planning Minister Ahsan Iqbal and his fellow politicians should ensure that aggregation of the economy takes place in terms of per-capita incomes and standards of living. This can be achieved by bringing more people into the middle-class bracket. Those who fare above the middle-class level with high levels of income and excessive amounts of conspicuous consumptions should be taxed heavily. The money generated from taxing the rich should then be utilised to lift the poor from below the aggregate bracket. Poor people should be provided social safety in the form of health and unemployment insurance.
One of the landmark programmes initiated by the Imran Khan regime was the universal health card scheme. However, a lid on the programme will exacerbate problems of the poor people.
Instead of telling people to curb tea consumption, politicians should tax items consumed by only a few. For instance, the import payments for the transport group in the import bill exceed $2.5 billion for the fiscal year 2021. More dollars can be saved if the import of non-essential transport machinery is reduced at least by half. Further, Pakistan imported more than $7 billion worth of food items in 2021. Among those food items, the greatest share was taken up by palm oil with an import cost totalling $2.44 billion. “All Other Food Items” followed it closely with import cost totalling $2.22 billion.
The habit of conspicuous consumption is practiced by all and sundry. Politicians should suggest a total import ban on goods that form the core of conspicuous consumption. They could range from luxury cars, mobile phones, sugar, fashion items – and dog food.
I wonder what must be so important in these $2 billion that we cannot do without them. All the necessary items that are not usually targeted in austerity measures, like wheat, infant milk, sugar and pulses are not included in the list.
The habit of conspicuous consumption is practiced by all and sundry. Ahsan Iqbal and his colleagues should suggest a total import ban on goods that form the core of conspicuous consumption. They could range from luxury cars, mobile phones, sugar, fashion items – and dog food. They should in fact suggest tea without sugar. They may save $1 million by banning the import of sugar. They should suggest carpooling or local transport, to reduce consumption of excessive fuel.
In a nutshell, politicians should tax items that are consumed by the well-to-do people. Climate change, economic mismanagement, poverty, depreciating rupee and sliding living standards are caused because we are not ready to give up calling our pond an ocean.