Growing inequalities necessitate departure of economic activities from concept of fast growth of GDP to creating happiness for all.
Renowned economists ranging from Adam Smith to J. M. Keynes of 19th and 20th centuries and those living in 21st century have no doubt emphasis on economic welfare of the masses, but theories propounded by them are based on assumption like free market economy, free trade aiming for creating trade surplus (as advocated by David Recardo) reducing unemployment and role of government to manage aggregate demand and overcome recession with emphasis on achieving all macro economics indicators.
Modern economists who delved on promoting concept of globalization and fast economic growth have lost sight of original purpose of maximization of social welfare leading to reducing inequalities. They instead have been found influenced with the concept of maximization of consumption, which ultimately leads to increase in income generation and fast growth of GDP.
However some of them particularly Amertya Sen an eminent economist of India, Dr. Muhammad Yunus – Nobel prize winner of Bangladesh and Richard Layard have focused involvement to overcome inequity and failing free market.
Amertya Sen in particular through his analytical approach to well-being of masses gave emphasis to development economics with special reference to measuring living standards, social justice, eradication of poverty and gender inequity.
Dr. Muhammad Yunus of Bangladesh in view of extreme poverty faced by his newly emerged country propounded a novel idea of micro finance scheme for helping poor people to have greater access to institutional credit to meet their business as well as consumption needs leading to socio economic welfare of down-trodden rural poor and introduced Grameen program encompassing establishment of a micro finance bank (Grameen Bank) and various initiatives promoting social sector activities like civic amenities in general and particularly education for all rural poor of Bangladesh.
Similarly Richard Layard, an eminent economist associated with London School of Economics with firm belief of the fact that economic as a social science is meant for maximizing happiness for well being particularly of disadvantaged segments of society has vehemently stated in his book ‘unemployment, macro economics performance and labor market’ that economic growth promotes well being and happiness, but according to him “variable factors like health, personal freedom and strength of peoples’ social support drive much of the association of GDP per capita with well being”.
He has rightly analyzed that “within countries incomes bring no more than 2 percent of the variance in happiness even in the poorest countries”.
Richard Easterlin an American economist and also a contemporary of Richard Layard advocated the cause of economic happiness saying that rich people are on average happier than poor people, but paradoxically a society on average does not become happier as a country grows wealthier. It is because individuals compare themselves with those around them. They are happy when they find themselves socio economically placed on a higher status than of their friends and relations. Yet when everybody in community struggles together to improve their economic status then relative status remains unchanged and they find themselves a happier community.
The idea behind concept of Micro finance delved into by Dr Muhammad Yunus was to provide opportunity to rural poor of Bangladesh to come out of poverty by availing easy credit from Grameen Bank to establish their micro businesses and rural community as a whole becomes economically satisfied segment of total population of the country.
The global penetration of micro financing has helped a sizeable population of developing economies to come out of poverty according to parameters set under MDGs expired on December 15, 2015 and Sustainable Development Goals (SDGs) to start with.
In fact Dr Yunus through his program of micro finance has floated the idea that people benefited through this program as a community must not aim for achieving higher economic status than their fellow community members. According to Grameen program on the whole concept of compassion over rides competition contrary to both modern and old economic theories emphasizing the concept of competition on all economic processes.
Economists laying stress on happiness as ultimate goal of all economic activity are of the view that governments’ policy should be to reduce inequality based on the assumption that poor people are benefitted far more than rich from an added dollar of income.
In context of Pakistan initiatives taken to eradicate poverty and economic empowerment of disadvantaged segments of population fast emerging micro finance banks and SME banks have given impetus to growth of micro and small businesses and on the other hand taking advantage of advancement in information technology particularly cell phones almost all the micro finance banks have launched loan products for purchasing cell phones and they also in collaboration with cell phone service provider companies have launched products like Easy paisa etc for quick transfer of funds even to remotest rural areas.
Hence people earning their livelihoods in big cities remain in touch with families and can look after their immediate financial needs through e-mobile banking facility thus available.
Accordingly it has created a sense of satisfaction and happiness. for under privileged population enabling families in far flung areas to remain in touch with their bread winners working in big cities.
However, such pockets of economically satisfied and happy households in rural areas do not exist in urban areas. Despite some of the improving macro economic indicators as claimed by government people are faced with escalating cost of living as such as low and lower middle income population continue to be in a miserable situation what to speak of getting economic happiness.
Inefficient delivery system of civic and utility services particularly electricity and water has added to the cost of living and doing business both for household and business entities.
Inefficient taxation system despite various amnesty schemes launched from time to time has failed to bring major chunk of population under tax net and resultantly fiscal deficit remains uncontrollable and shortage of revenues is generally covered by heavy taxation for those already under tax net and also by curtailing Public Sector Development Program benefit of which may reach masses.
Regarding taxation system both in advanced and developing economies, Richard Layard above discussed economist suggests redistribution of income through tax system and also to get rid of performance related pay system to reduce income inequalities and enhance welfare for all.
This paradoxical statement was greatly criticized, but the philosophy behind it is supported by Adam Smith who stated in his book Wealth of the Nations as ‘among civilized and thriving nations on contrary, through great number of people do no labor at all, many of whom consume the produce of ten times, frequently of hundred times more labor than the great part of those who work; yet the produce of the whole labor of the society is so great that all are abundantly supplied and a workman even of the lowest and poorest order if he is frugal may enjoy a greater share of necessities and convenience of life than it is possible for any savage to acquire’.
Islamic economics including Islamic banking is based on the principle to do away all types of exploitation, uplifting the deprived masses through strict enforcement of Zakat and prohibition of interest in the form of excess charged while trading money.
If the Islamic system is practiced in letter and spirit then desired environment of justice and equity can be achieved.