Why Pakistan Cannot Borrow Its Way to Prosperity, and What It Could Build Instead (Part 2)

If the first part of this inquiry is right, and the country’s weakness lies in how it pays and protects the people who work, then the remedy cannot be another round of borrowing, however carefully negotiated. Nor does it require isolation. A country of more than two hundred forty million people will always need imported fuel, machinery and technology, and paying for them requires foreign exchange. The point is to change the terms on which Pakistan meets the world, so that it enters trade as a country with a strong home market and not as a supplicant with a deficit.

The first step is to stop spending scarce dollars on what the country can substantially produce. Pakistan spends large sums every year importing food, including wheat in poor harvest years, pulses, and a very large share of its edible oil. There are limits to how far this can be reversed, since water is scarce, the climate is increasingly erratic, and some crops will never compete economically at home. But every serious step toward food security, whether through storage that prevents post-harvest waste, support for the smallholders whose yields are low, or enforcement against hoarding, saves foreign currency that would otherwise be borrowed. Remittances from the millions of Pakistanis abroad are already a vital support for the country’s reserves, but they are a gift of the diaspora and not a policy, and an economy that leans on them to paper over a weak domestic market is still dependent in a different form.

The fiscal side matters just as much. A state that collects most of its revenue through sales taxes on fuel, food and consumer goods is taxing the poor at the highest rate, because they spend the largest share of their incomes. As workers move from informal arrangements into registered employment at legal wages, the base for direct taxation on incomes, profits and wealth grows, and the government can fund clean water, primary health and roads from its own revenues without begging for the next tranche. The benefits compound in the workforce itself. Children who are adequately fed do not suffer stunting, which damages brain development and physical capacity for life, and families with stable wages keep their children in school. Over a generation, an unskilled and insecure workforce can become a skilled one, and the country can sell more of what it makes and less of what it grows raw: processed foods, finished textiles, software and services, with the earnings used to service its obligations without another emergency loan.

It would be easy to stop there, but a serious reader will already have an objection, and it deserves a direct answer. Raising wages in an economy where most work is unrecorded is not as simple as announcing a number. An employer who is told to pay more may simply stop registering workers, cut hours, or hire fewer people, and a wage floor that is not enforced punishes only the firms honest enough to obey it. Higher wages can also feed into prices if nothing else changes. These are real risks, and they are the reason that earlier attempts at labor reform have so often dissolved into paperwork. But they are arguments for designing enforcement carefully, not for abandoning it.

The design starts with where enforcement is physically possible. A brick kiln cannot hide. It occupies a fixed site, burns visible fuel, employs hundreds of people in plain view, and sells to contractors who keep records. A kiln is therefore the natural place to prove that a wage floor can work, long before anyone attempts to police the millions of households and workshops scattered through the informal economy. Beginning with sectors of this kind, where the employer is identifiable and the work is concentrated, builds a record of success that can be extended, rather than spreading inspectors thinly across everything and catching nothing. Payment itself can do much of the work. Pakistan already has a thriving system of mobile wallets and branchless banking, and a rule that registered wages must be paid through them would leave a trail where today there is only a handshake, giving workers evidence of what they were owed and the state a means of verifying it without an army of inspectors. Debt bondage, which depends on unrecorded advances and hidden ledgers, is harder to sustain where money leaves a trace.

Other countries offer partial evidence that the approach can work, though none is a perfect model. Bangladesh, after the factory collapse at Rana Plaza in 2013 forced a reckoning, revised its garment wage structure and built inspection regimes that, whatever their flaws, changed what buyers and workers could expect. India’s rural employment guarantee, studied extensively, is widely credited with strengthening the bargaining position of agricultural laborers by setting a floor under what a day’s work could be worth. Brazil’s long run of minimum wage increases in the 2000s is often cited as having helped broaden domestic demand while the economy grew. None of these cases is clean, and each has critics who point to costs and leakages. But together they undercut the claim that a country like Pakistan is condemned to compete on suppressed wages, and they suggest that the question is less whether wage floors can function than whether a government is willing to make them.

That willingness is the real obstacle, and the essay would be dishonest if it pretended the answer were technical. Pakistan has laws abolishing bonded labor, and the courts have repeatedly condemned it. Provincial governments set minimum wages, and the notifications appear on schedule. The Competition Commission has penalized cartels in sugar and other staples, though such penalties have too often been tied up in litigation. What is missing is the follow-through. Enforcing wages at the kiln means confronting the kiln owner, who is often a local figure with influence over the police, the revenue official and the election. Breaking the grain and sugar cartels means confronting people who finance parties and sit in assemblies. Widening the tax net means taxing landowners, developers and traders who have long escaped it. Each reform takes from someone with power, and the beneficiaries, the debt-bonded and the daily-wage, are the least organized people in the country.

Real change would therefore depend on pressure from several directions at once. It would need courts willing to enforce the laws that already exist and to treat a stay order on a cartel penalty as an exception and not a habit. It would need provincial governments, which hold the constitutional authority over wages and labor, to compete to show results, so that a chief minister who clears the kilns of bonded families can claim credit rather than risk a quarrel. It would need labor and farmer organizations strong enough to bargain, and consumers, buyers and journalists unwilling to look away from what is produced and how. Large buyers abroad, who increasingly demand proof of fair labor in their supply chains, are an additional lever for the export sectors. That is a long list, and I do not pretend it is easy. But the alternative is to accept that the status quo is permanent, and it is not even stable, since a country that cannot pay for its own consumption is already living on borrowed time.

There is a particular kind of public speech that fills the gap where such reform should be. On the international days set aside for poverty, labor and the child, the same ceremonial language appears in official statements and social media posts, warm expressions of concern for families who cannot reconcile a safe home, a child’s schooling and a meal on the table, and assurances that decent livelihoods are within reach. I do not doubt that some who say these things mean them. But the words arrive alongside a reality that contradicts them in plain sight: children picking through foul ditches in the cities for scraps to sell, and laborers in the kilns and the fields working off debts that will outlive them. The language treats poverty as a matter of sympathy, relief and temporary packages, something to be eased from above, when it is largely the product of unindexed wages, unenforced labor laws and cartelized food prices that the same officials have the power to change. And when the failures are acknowledged at all, they belong to someone else: a war elsewhere, a trade barrier, a hostile neighbor.

The gap between the statement and the street is not only a moral embarrassment. It is a measure of how much the country has learned to substitute speech for administration. A government that tells its people it cares has done something easy. A government that sends an inspector to a kiln, publishes the wage ledger, and protects the worker who complains has done something costly, because it has chosen the worker over the owner. The first is cheap enough to repeat on every observance of the calendar. The second is the whole of the difference between a country that manages its poverty and one that ends it.

The same habit of attributing everything to outside forces that opened this inquiry closes it. An economy cannot be rebuilt on ceremony and discretionary handouts. It is rebuilt when a wage is a legal right enforced against the powerful, when a farmer’s price is protected against the middleman, and when the bazaars that already feed the country are kept in local hands and made to serve those who work within them. A nation that does these things stops waiting on the next lender and the next global recovery, because it has learned to turn its own labor into its own demand, and its own demand into its own revenue. Zanesville understood that for a while, and lost it only when something from outside came to break it. Pakistan still has the structure to build it, and the only thing it lacks is the will to enforce what its own laws already promise.