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Tuesday, October 19

Why Western aid reinforces the worst about Pakistani society

In Stay Out of the Bazaar I discussed obstacles to U.S.-Pakistan communication that are rooted in cultural differences. In this post I'll address obstacles that are rooted in human nature, which is the same in every culture.

When people are engaging in behavior they know is wrong and yet they don't want to change, they deploy tactics that will allow them to resist pressure to change. One tactic is to persistently misread cues that are attached to money or presents given as an inducement to change.

This tactic easily leads to a vicious cycle with the giver expecting improvement in the recipient's behavior, and the recipient accepting the money without changing his behavior. When the giver tries withholding the money as a prod the other person acts very injured, as if he's being attacked.

In short, human nature is shrewd enough to outwit the famous carrot-and-stick method of conditioning when it's determined not to change its ways.

How do you break the cycle? You remove giving from it because unless you do, the recipient is studiously interpreting the giving not as an inducement to change but as a reinforcement to stay the same.

The recipient's logic is a little twisted but it hangs together: Hey, if you really think my behavior is that bad, why would you give me anything?

This logic is in operation in the Washington-Rawalpindi/Islamabad relationship. So every time the USA gives money to Pakistan's regime the Pakistanis don't say to themselves, We know the Americans want us to do something because they're giving us this money, so we'll do it.

Instead they're thinking, As long as the Americans keep giving this money, they're telling us they're accepting our behavior.

If Washington retorts, We're doing nothing of the kind! We're giving the money because we want you to change -- the ready refrain would be, If you really want us to change, then why do you keep giving us money?

Washington: We keep giving you money because you keep demanding money!

Pakistan: Then if you keep giving into our demands, you can't think our behavior is really wrong! Right?

Human nature: more fun than a barrel of monkeys. The consequences in this case have not been fun; they've led to an ever-deepening sense of frustration and anger on both sides -- and, in the case of the Pakistan side, the claim of being publicly humiliated.

If they're being humiliated they're doing it to themselves. As the U.S. deploys the stick or threatens to, Pakistan's professional moochers redouble their efforts to prise money out of the Americans. As I've noted before this leads to the Pakistanis (or their American apologists) publicly listing all Pakistan's sins before making the pitch for more money.

The most recent display of this tactic was in the Christian Science Monitor yesterday in an opinion piece by Mansoor Ijaz titled, A game-changer for US-Pakistan relations. On its own the writing is not funny but after you've plowed through a couple hundred of these pitches it's fun watching the wind-up: Kick us, beat us, I know we're awful, our military is a mess, our terrorism is terrible -- so what Pakistan needs is more money, and here's the best way to give it so that this time all of it won't get stolen.

Aside from the harm that going along with this tactic does to taxpayers around the world who support it, and the ISAF troops and innocent Afghans who get killed and maimed because of it, the people suffering most are Pakistan's best citizens: the middle-class taxpayers.

I know the Western powers couldn't care less about what happens to Pakistanis; they just want the terrorism problem solved. But I think the middle classes in NATO countries would be sympathetic and outraged if they realized what their tax-funded bribes to Pakistan's military are doing to the middle-class in Pakistan.

The more aid and low-cost loans thrown at Pakistan, the more the wealthy among them can stave off paying their taxes. This situation is by no means limited to Pakistan; I've mentioned it several times in relation to Mexico. But in Pakistan it's helped support the very conditions that make the country Terrorism, Inc.

I've talked about this issue before but recently Inter Press Service did a great report on Pakistan's tax problem and how it folds into the rest of the country's ills. Asia Times Online snapped up the report, which I'll feature here. (See the AToL website for links in the report.) Unfortunately the report has no byline so I can't thank the individual reporter(s) for their work, but a big thanks to IPS:
Anger rises over flood tax plan
October 9, 2010

KARACHI, Pakistan - It was meant as an appeal to generous souls, but a suggestion for a one-time tax to help raise funds for Pakistan's millions of flood victims has instead reminded many Pakistanis of their country's faulty tax system.

Indeed, many are angered by President Asif Ali Zardari's proposal for a tax to be imposed on Pakistan's "well-off" and "people of means"; many, like accountant Munaf Lakda downright seething.

"I most definitely protest and would not pay the flood tax at all if I can avoid it," says Lakda. "Just pick up their [ruling elites'] income tax returns and compare them to mine - it's ridiculous how little they pay, if they pay at all!"

Fouzia Mapara, another salaried worker, says, "It is another gimmick to skin the poor middle class who are already going through a tough time to make both ends meet."

It is not that Pakistanis are not generous lot, since many have expressed willingness to help the estimated 18 million people affected by the floods that inundated large parts of Pakistan two months ago. Zardari's tax proposal, however, has hit a raw nerve in this South Asian country where government officials are among those said not to be paying the proper amount of taxes.

A recent media report says that many ministers - majority of whom are feudal lords with big land holdings - including Prime Minister Yusuf Raza Gilani, paid taxes based only from their salaries as lawmakers, not from their private fortunes. There are even ministers who have paid less than 10,000 rupees (US$117 ) as their annual income tax.

A report on Pakistan's taxation system by the Washington DC-based Carnegie Endowment for International Peace confirms that fewer than three million of Pakistan's 180 million people pay any income tax. It also says the country's tax-to-GDP ratio stands at just 9%.

According to economist Haris Gazdar, a tax-GDP ratio is low "in 'strong arm' military governments as well as 'weak' civil governments". Akbar S Zaidi, the Pakistani economist who authored the Carnegie report, writes, "Pakistan's lack of a proper tax and revenue regime has resulted in high rates of tax evasion, burdening the country with unsustainable debt and undermining its development priorities."

Pakistan's tax system is apparently so dismal that in September 2010, the country's biggest creditor, the International Monetary Fund (IMF), told Finance Minister Abdul Hafeez Sheikh that an US$11 billion emergency loan program would be frozen until Pakistan fixed its tax collection system.

United States Secretary of State Hillary Clinton has also commented that countries "that will not tax their elites but expect us to come in and help them serve their people are just not going to get the kind of help from us that they have been getting."

"There's got to be some reciprocity here," she said. "You cannot have a tax rate of 9% of GDP when big landholders and all the other elites do not pay anything, or pay so little that it's laughable."

Such remarks from outsiders may have prompted Zardari to try asking Pakistanis themselves to help the government come up with the estimated $43 billion needed to rebuild infrastructure damaged by the floods, the worst in many decades, and for the relief and rehabilitation of those rendered homeless by the calamity.

In suggesting the one-time tax, the president had noted, "Unless we are prepared to share bread with our grief- and disaster-stricken brethren, we should not expect others to help us."

Zardari probably did not expect the generally negative reaction to his proposal. But as Quaid-e-Azam University physics professor Pervez Hoodbhoy explains, "Because documentation exists, the salaried class is the only segment of society that actually pays taxes. To milk it further will produce much resentment."

Fellow academic Q Isa Daudpota, who suggests that perhaps the government should stop buying military aircraft instead of imposing a flood tax, said: "Ad-hoc taxation is bad and reflects poorly on successive governments."

There are even those like Najma Sadeque, a non-government organization worker, who says, "All big tax evaders starting from Zardari and Gilani and guilty parliamentarians and ministers, and all tax evaders [should be placed] under house arrest until they cough up overdue taxes!" Sadeque says that if they all just pay up, there would be no need for a flood tax.

Still, there have been more sober counterproposals from even those who are critical of both the Pakistani government and the tax system.

Badar Alam, editor of the current-affairs monthly Herald, says, "A one-time flood tax should be imposed on conspicuous consumption." He suggests that something like a 1% sales tax be imposed only on "high spenders" for one-time shopping or dining that exceeds 10,000 rupees.

Hoodbhoy, for his part, proposes "a flat one-time tax on urban property and agricultural lands at one percent of the current market price".

Yet he also believes the current furor over the elite's supposed non-payment of proper taxes is all sound and fury that will eventually die down.

"Apart from the exception created by the lawyers' movement [started in 2007 in protest against General Pervez Musharraf's dismissal of the chief justice of Pakistan], the common man has come out on the streets only when blasphemy is alleged, or when some religious or anti-West issue gains prominence," said Hoodbhoy.

"The absence of a progressive national movement for economic and social justice means that tax thieves, feudals, and other enemies of Pakistan's people will get away this time as well."

(Inter Press Service)

What's the option? Pakistan likes to compare and compete with India (while the has its eyes on China). Yet, they are unable to keep economically with their (once equally) corrupt and socially unjust, inept neighbor.

Pakistan is doomed to fail. All the US support is to just delay the date for their own strategic purposes.
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