Pakistan: A flood of restrictions

In response to floods unprecedented in Pakistan’s history, the authorities are taking popular steps that seem obvious—stricter price controls, a flood surcharge-tax and controls on charities. What we really need is bold, non-populist and counter-intuitive thinking.

By Ali Salman

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Published: Fri 17 Sep 2010, 9:45 PM

Last updated: Thu 2 Apr 2015, 10:32 AM

History reminds us that in 1770 Lower Bengal’s rice harvest failed utterly and fully a third of the population died. The government’s response to the shortages was to prevent prices from rising and thereby prohibit what it called the monopoly of grain. The predictable result was to intensify the famine and discourage transporting food from areas where it was more plentiful.

A century later, in 1866, the government of Bengal faced a famine and reacted with a very different policy. Far from trying to control prices the government facilitated competition by publicising weekly returns of prices in every district, causing businesses to transport rice from areas of relative abundance to places of worst scarcity.

Pakistan solved the problem of electricity shortage in late nineties by relaxing the price of electricity. We can also ensure the availability of food and other essential items in flood areas by relaxing price controls.

As for supply, donors and government would find it more effective to introduce some kind of “flood vouchers” to help the needy purchase their daily needs instead of government supplying food and other aid.

The government is also considering a flood tax aiming to raise Rs 138 billion ($1.6 billion). In the current economic meltdown, such a claim looks very implausible. Moreover, taxes always discourage private and philanthropic giving. If I were taxed in the name of flood relief, I would obey but would then refuse to give to all charitable organisations. Thus a flood surcharge would only increase the flow of cash to government coffers instead of going to the many fairly effective humanitarian charities.

The counter-intuitive policy would be substantial tax exemptions on all flood-related expenses and donations by individuals and corporations. This would encourage more private contributions to direct, reliable and rapid flood relief and rehabilitation aid.

But national and provincial governments are imposing licences to collect funds on all charitable organisations. Although financing terrorism remains a problem, such a requirement will only discourage the people’s spontaneous response and will only increase government intervention in times of emergency. The major brunt of such restrictions will almost always be taken by the most deserving groups. The government must immediately lift all such bans.

Altaf Hussain, the London-based leader of the Mutahidda Qaumi Movement (MQM), which dominates Karachi, the commercial capital of Pakistan, has advised flood victims to grab the private property of landlords. The protection of private property remains the top responsibility, after protection of life, of a government. If some individual landlords have violated any laws, they must be taken to task in law, before the courts. Under no circumstances can people be allowed to grab private property. That way lies anarchy and chaos.

Avoiding populist and intuitive thinking defines true leadership. The unprecedented crisis demands rational and hard decisions for the long term, not the temptation of the short-term gains.

The author is an associate of the independent non-profit think-tank, Alternate Solutions Institute, Lahore



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