Even after 64 years of independence, the fundamental macro-level problems such as poverty, illiteracy, inflation, corruption, etc

. still not only exist inPakistan, but are accelerating in magnitude at an ever increasing rate. Not to say that the situation was ideal prior to that, but these problems have been exacerbated to unprecedented levels within the past 4-5 years. We now seem to be running instead of walking towards the edge of a cliff. Though every government has made efforts, even if at varying levels of sincerity, to curb these issues through legislations, fiscal policies, and government programs and reforms but to no avail. The ground realities suggest that all efforts have miserably failed to even stop the problems from increasing let alone solving them. The reasons for this could be many, some political and some technical, but as far as we, the people, are concerned, they amount to nothing except excuses and we are only concerned with results not excuses. However, in my opinion, one of the main reasons we have failed so far is that we have either almost always taken the naive and simplistic approach of considering each of these complex problems as an independent and isolated issue or have not focused on the right set of issues. In this article, I will argue that a vast majority of socio-economic problems, such as the ones mentioned above, are not independent and isolated, rather, they are merely direct or in-direct effects of some larger underlying root-cause(s); and that any solution that ignores this reality amounts to nothing more than ‘beating around the bush’. On the contrary, a solution that addresses the root-causes in a long-term and persistent manner will not only be successful but would also be easier to implement, because it will be focused towards a much smaller set of issues. Furthermore, I will identify what those root cause(s) are in my opinion and describe some essential ingredients of a solution targeted towards those root causes. For the purpose of our root-cause analysis, lets consider the following set of macro-level issues thatPakistanhas faced throughout a large part of her history: 1. Tax evasion. 2. Military spending. 3. Insecurity and lawlessness. 4. Energy crisis. 5. Lack of employment opportunities. 6. Illiteracy. 7. Poverty. 8. An iron-clad grip on power and resources of the country by the beneficiaries of the status-quo. 9. A persistent trend of accumulation of wealth in a decreasing number of people resulting in an ever increasing gap between the rich and poor. 10. Inflation (or, as commonly understood, an increase in the price of goods and services).

it is necessary to understand how corruption differs from theft and how it relates to debt monetization. would argue thatPakistanspends an exorbitant amount of money on defense and the spending is mostly justified through fear mongering and hundreds of other well-crafted lies. is but a necessary evil. and fear. So unless there is a medical break through that allows us to remove this weakness from people. the center of power lies with the elected representatives. these are not the sole reasons for my belief that these two issues are the root causes of almost all evil. however the end result of every analysis will always be the same: corruption and ability of the government to monetize debt. which is a natural human weakness. Ability of the government to monetize debt (or. Both corruption and theft are because of greed. It is so powerful that it is has literally become a state within a state. You say no. an influential author and one of the founding fathers ofUSA. This means that corruption is special type of theft that can be performed only by the government. We could keep digging further and uncover several reasons for this. However in case of theft. even in its best state. in a so-called democracy. So why are we not able to cut the defense spending after all these years? In theory this issue should be easy to address. they do it because they are dishonest. It is also an unfortunate reality that we cannot get rid of government altogether because a society needs some form of a government in order to function. the root cause is corruption. in its worst state an intolerable one. and they can easily cut the defense spending to a more reasonable level. we cannot get rid of corruption. However before further discussion. Hundreds of books have been written about this by world class economists. etc. this is not the case. It is reasonable to say that corruption is only possible if someone is legally empowered to use other peoples’ money without requiring their consent. Even though the above argument is solely based on logic and reason.” . writes in “Common Sense”: “Society in every state is a blessing. they are merely side effects of corruption and ability of the government to monetize debt. inability of the people to elect their ‘real’ representatives due to poverty. then how are they able to do it without ever getting caught? Because of corruption within the FBR itself. What about military spending? Most people. the thief does not have legal empowerment. as well as by religious scholars. 12. such as corruption within the electoral process. the power is and always has been tightly held by the establishment. Why do people evade taxes? Mostly because lack of trust on the government. if not all. In both cases.11.) The list definitely goes on but it would be reasonable to say that the above diagnosis paints a fairly complete picture of the disease thatPakistansuffers from. philosophers. leaders. because only she has legal empowerment over other peoples’ money through taxation and/or debt monetization. However we all know that in reality. Corruption within the electoral process. Well. as commonly understood. because. ability of the government to print money. 13. Corruption within the government. People have known about the grave negative consequences of this deadly combination as a fact for centuries. As Thomas Paine. Even though all of the these issues have far reaching negative implications and seem to be of equal importance. however in my opinion. illiteracy. but government.

Inflation is thus an increase in the supply of money without a corresponding increase in the supply of goods and services. And absolute power corrupts absolutely”. but also because raising taxes is a politically unpopular move. Therefore. It is analogous to a sales tax on all goods and services. Inflation misdirects production so that scarce resources are dedicated to inappropriate projects. And in order to close all possible doors to inflation. in fact such a monetary system is the ONLY practical monetary system. misallocates capital and resources. Taxation imposes some fiscal responsibility onto the government not only because there is a physical limit to the amount of money that can be collected via taxes. inflation is the loss of purchasing power of a currency and consequently is a type of hidden tax that falls on each citizen in the form of higher prices for what he purchases. However it should be noted that I mentioned the challenges as being purely ‘political’ in nature and not technical. In simple words. and as the saying goes: “Power corrupts. First. is not immediately visible to the public. In addition. ‘inflation’ is a problem that is more devastating than any other problem our country faces and the ‘tool’ used for this purpose. it triggers a “chain reaction” of socio-economic issues that are extremely difficult to address directly. The difference is so huge that its almost like comparing a ‘Fire Cracker’ to an ‘Atomic Bomb’. changes production patterns. discourages saving and investment. it gives absolute power to a government. we have to prohibit debt monetization through a constitutional amendment. I understand that this is easier said than done. a government gets access to money via taxation or debt monetization (or printing money). leaving taxation as the only source of money for the government. such as gold or silver. Its major consequence is rising prices. we have to do two things. It goes against common sense to hear some ‘experts’ claiming this as being ‘impractical’. Illusory profits deceive producers. wages lag. Inflation falsifies economic calculations and accounting profits and leads businessmen to make errors. Inflation distorts prices. As noted. i. Secondly. The initial aura of prosperity dissipates as prices go up. It has been used throughout the history of mankind and it wasn’t until the late 17th century (more specifically. inflation. In short. transfers wealth from savers to spenders. i. with the creation of the Bank of England in 1694) that the fait . such as restrictions by IMF. and business decisions brought about by false market signals produce bad results. Debt monetization however imposes no such restrictions and allows a government to spend as much as she wants simply by printing the currency. There are numerous political challenges involved both at the national as well as international level. However the amount of corruption that can be facilitated by debt monetization dwarfs the amount of corruption that can ever be done through tax collection. in my opinion. we need to make our currency redeemable in terms of a “fixed amount” of something that has intrinsic value. ‘debt monetization’ is a ‘root-cause’ of all of the problems listed in this article. Inflation levies a tax on all who have money or have money owed to them. Inflation is an increase in money and credit. In other words.e. and stifles individual initiative. invite mal-production and mal-investments and make planning a nightmare. Inflation occurs when the economy’s aggregate volume of money expenditures grows at a faster rate than its total real output grows.Nevertheless what we can do is to change our monetary system to make it as difficult as possible for any government to do corruption.e. debt monetization has little political consequences because its effect.

I will end my article with the following quote: “The study of money. and the only fool proof way to do it is to prohibit debt monetization. which. I have spent time thinking about it day and night. The main purpose of this article was to highlight an important point of view that has received very little media attention and consequently is not a well understood topic among the masses. widespread. As a word of advice for your research.” John Kenneth Galbraith. read several books. in my opinion. debated with hundreds of people from varying backgrounds. read and viewed hundreds of lectures by well-known and respected people in field of monetary economics. John Kenneth Galbraith. I have even read the translation of several Chapters. Peter Schiff. Ron Paul. Jim Rogers. not to reveal it. that the only way to curtail corruption in a long-lasting and effective manner is to limit the ability of the government to spend beyond it means. I have done an extensive and impartial (though informal) research on this topic during the past four years. Outline • Introduction • Definition of corruption: It is misusing of power for the private/personal gain • Types of Corruption: Petty. Grand and Political • Incidence of corruption: rare. and politics such as Lugwig von Mises. etc.currency system was forced on the people by their governments. I encourage the readers to do their own study on the subject of monetary economics and inflation. Hayek. was to allow a few select people to keep a tight grip on power and enjoy a lavish and care-free lifestyle without ever having to do anything useful or productive. is one in which complexity is used to disguise truth or to evade truth. above all other fields in economics. Marc Faber. This system has been immensely successful in achieving its sole objective. systemic • Scenario of corruption in world in general and Pakistan in particular • Corruption in Islamic teaching • Quaid-i-Azam on corruption • Causes of corruption • Dismal performance of Institutions • Poor governance • Absence of political will Lack of effective accountability Meager income Lack of Transparency Impact of corruption Deteriorate the quality of governance Moral degeneration . And I have always reached the same conclusion. I do not want or expect the readers to take my word for it. as well as several related verses within the Holy Quran in order to validate my research and conclusions. finance.

The corruption is universal. Its presence distracts a man from ethics. humanely attitude. They usually involve in this type corruption in order to maintain their status quo. whereas. The root causes of the rampant corruption in the country are lack of effective accountability.Shamble the economy Retards economics growth increase poverty inflation Unemployment Injustice to people Widening the gap between rich and poor Remedial Measures Rule of law Effective accountability Mass awareness Adherence to Islamic principles Role of transparency agencies Conclusion Corruption is the misuse of entrusted power for private gains. the country has witnessed of the rampant corruption. its existence varies in rate of occurrence. grand and political. The pervasive corruption in the country can be checked by applying certain measures. the systemic corruption becomes a way of life and it is very difficult to overcome. Damned is the bribe giver (or corruptor)-the bribe taker (the corrupted) and he who goes between them. equal protection by the law and equality . It is of different types e. He avowed a strict action against such mal practices and their doer. it means equal application of law. unchecked and unlimited power of feudal for vested interests. Many governments in general and the governments in decade of 1990 in particular has become the victim of the widespread corruption and corrupt practices. tradition and civic laws. shackle the economy which leads to the inflation. the grand corruption is associated with the high level bureaucracy. Whereas. poor performance on the part of respective institutions. Quaid-i. unemployment and poverty in the country. the political corruption as name indicates is related to the politician. petty. in this regard the incidence of corruption may be rare. The rare corruption is easy to identify and control than widespread. However. widespread or systemic.g. The corruption varies in the rate of presence. however. In a recent survey conducted by the Transparency International. therefore. The petty corruption is usually linked with the lower salary employees and generally considered as facilitating payments. Islam explicitly condemns the existence of corruption in every form. Pakistan ranks lowered from 42th most corrupt country to 34th country in the world. Since the inception of Pakistan. The presence of corruption and corrupt practices play a pivotal role to deteriorate law and order. Hazart Muhammad (PBUH) declared that.Azam Muhammad Ali Jinnah has strongly condemned the presence of corruption. The government should ascertain the rule of law.

Islam provides complete code of life. Muhammad Ali Jinnah was the staunch opponent of the corruption. he said that. widespread and systemic. the corruption which is permeated in all the sphere of life is called as widespread corruption. in all . National anticorruption strategy (NACS) has defined the corruption as. extortion. This type of corruption usually exists to fast track the administrative bureautic procedure and regulations. we must put it down with iron hand” The corruption is perceived as universal. The general perception about this kind of corruption is that people indulge in order to meet their living expenses. and lust for power is few factors which inspire the politicians for corruption. The incidence of corruption varies in rate of existence in society. Islam lays great importance on the lawful earning. Hazart Muhammad said in this context. law and civic virtues.e. and the culprit can easily be punished. It exists in all countries i. It is a petty. It is replete with moral standards. The political corruption is related to politicians. “Whoever withholds cereals that may become scarce and dear is a sinner” (Mishkat-12:8) Furthermore. The word corruption is derived from the Latin word corruptus means to break. ethics. It may be rare. The greed and lust for power is the main factors behind this type of corruption. in case of systemic corruption. by misgiving the position in which they are placed”. “Earning of lawful livelihood is a duty only next to importance to the duty (of prayers)” Quaid-i-Azam. active role of media to eradicate the corruption are the few factors which can play an active role to diminish the corruption. Thus the need a reason is applied to this form of corruption. In Pakistan the prevalent corruption is perceived as widespread and systemic. In simple words the corruption is defined as the misuse of delegated power for private/personal gains. cooperative and loyal. The corruption which is not deeply rooted in the entire edifice of the government known as rare corruption. it becomes the way of life and it is very difficult to overcome. The grand type of corruption is associated with high level bureaucracy. However. dispense the political favor from the colleagues and to keep the subordinates happy. The expensive election campaigns. Further. It has deeply ingrained in society and government at all levels. it is generally referred as ‘facilitating payments’. professional and business life in more disciplined way. developed and developing. Conceptually it is a behavior which distracts a person from ethics. embezzlement. grand or political. unlawful hoarding and earning. bribery. The petty corruption is linked to the low salaried employees. He advocated the policy of strict action against the corruption doer. whereas. “A behavior on the part of the office holder in the public or private sector whereby they improperly and unlawfully enrich themselves or those close to them or induce others to do so. values and norms of behavior which facilitates the Muslims to run the daily affairs of personal. That’s really is a poison. In this regard. morality tradition. Therefore. The corruption is of various types. Islam condemns the corruption in it's every form i.e. Hazart Muhammad (PBUH) said about the hoarding.before law. and it is difficult to detect and control. Islam is the religion of high values and ethics and strongly condemns the corruption in all its forms. effective and impartial accountability. “One of the biggest curses is the bribery and corruption. it is easy to detect and control.

It degrades the morality of the people which leads to violence or dissension among the people. The minimum wages set by the government. its ranking as most corrupt country jumped from 42 in 2009 to 34 in 2010. public and private. The economic reform in a country demand greater transparency. In some countries it is infused in lesser scale than the other countries. autonomous or semi-autonomous as well as in non-profit and charitable organization. former Finance Minister publicly acknowledged and pointed out about the existence of 500 billion rupee corruption in Federal Bureau of Revenue (FBR). tax collecting institution. humanely attitude. In Pakistan there are many profit-earning institutions which have been running in a loss during many years. the corruption and corrupt practices place restraint on the country’s capacity to undertake economics reforms and make some substantial progress in the development of a country. The presence of corruption and corrupt practices in a society distract a man from ethics. the institution becomes the model of efficiency and performance. Other factor conducive to such a rampant corruption in a country is the meager income of the employees. The government increases pay at once in a year. However.4 in 2009 and out of 178 counties. rather these become the hub of politics. Pakistan has remained the prey of corruption since its inception. civics and laws. despite that fact that Quaid-iAzam Muhammad Ali Jinnah. The major factors are responsible for the pervasive corruption in the country is the poor governance on and the dismal performance on the part of institutions. however. They pose serious threats to the sanctity of ethical and democratic values and weaken the administrative. however. Pays and prices tend the employees to the corruption to make both ends meet. In a country over a period of years particularly during 1990’s many government became the victims of the rampant corruption.sectors i. These include. Consequently. But the government does not seem to take any strong measures to nip the corruption in the bud.e. the prevention of corruption Act of 1947. and salaries given to lower grade employees do not keep the body and soul together. tradition. In a recent report presented by Transparency International. the founder as well as the first Governor General of Pakistan denounced the existence the corruption. Though the governments have made efforts for handling the corruption like Pakistan penal code of 1960. Pakistan’s corruption perception index declined to 2. If such process is carried out transparently. it varies in magnitude and frequency. In a recent year it is recorded that the prices rose on 18 months high. however. steel Mill. Therefore. There are several factors responsible for the existence of prevalent corruption in the country. the institutions become the burden on the country’s exchequer. In Pakistan the corruption has become systemic on large scale. accountability. however. in Pakistan the appointments are being made on the basis of favoritism and nepotism at a great extent. etc.3 in 2010 against 2. social and political institutions. Mr. It is a fact of matter that the very foundation of any institution lays in the process of appointment. the prices of consumer goods soar on the daily basis. and the National Accountability Ordinance . free and fair competition. the development and innovation in these institutions remain stagnant. The existence of corruption weakened the very foundation of society and country. Pakistan Railway. Therefore. Shoukat Ali Tarin. due to the continuity of corruption it has become the way of life now. The corruption and corrupt practices are indicative of breaches in the governance edifice. It deteriorates the quality of governance. these efforts remain elusive on the side of implementation due to absence of a political will to carry out this gigantic task. Corruption has also adverse impact on the . The presence of corruption a country has extensively and devastating effect on society and country. Wapda. This gap in the prices and pays engender the corruption.

equal protection by law. equal protection by law. all these efforts are in vain due to the absence of political will. Government must ensure the rule of law i. It is concluded that the Corruption issue is that corruption is a symptom of deep-seated and fundamental economic. Islam obviously condemns the corruption and provides means and mechanism to curb the corruption. humanely attitude. It has severally affected the state of governance. had increased up to 120 percents in the last one year. effective and impartial accountability. however. Therefore. The direct impact of corruption in Pakistan could be witnessed in the rise of food commodities. Once the people are convinced that the government is serious about fighting the corruption. has distracted the man from ethics. To be effective. A publicity campaign to create awareness among the people on the adverse effects of corruption is indispensible to combat the corruption. equal application of law. tradition. .private investment. This impact on the economy lead to inflation and unemployment in the country. measures against corruption must therefore address these underlying causes and not the symptoms. organize and disseminate the information is vital to create the great public awareness and to provide the impetus for undertaking reforms to overcome the corruption. it requires well-woven plan along with effective implementation. civics and laws. both domestic and foreign which are considered very harmful to a developing economy. analyze. The government must provide the effective mechanism for implementation of rule of law without any discrimination. the corruption may be eradicated on adherence to Islamic teaching. they will provide their support in resolving the problem. It plays significant role in widening the gap between the rich and poor. Moreover. the institutions get weak and become hatcheries of corrupt practices. Government is required to ensure the rule of law in a strict sense. and equality before law. The government has already made serious efforts to combat the scourge of corruption. The law of rule means equal application of law. has shackled the economy. political and institutional weaknesses and shortcomings in a country. and equality before law. Media also plays significant role in creating the awareness among masses and government plan to curb the pervasive corruption with an iron hand. which according to the Federal Bureau of Statistics. The application of rule of law in a letter and spirit requires political will to carry out such a colossal task to eradicate the corruption.e. Without rule of law. however. The pervasive corruption cannot be eradicated in a day. A responsible press to gather.

Somalia with a score of 1. Pakistan received a low score. He joined hands with a number of former World Bank officials to create TI which within a few years developed a presence around the globe. The organisation has chapters in most large countries. In the beginning the World Bank approached the subject of corruption with some diffidence even when it wished to communicate the message about its ill effects on development. As a result of some serious qualitative and quantitative work done initially at the World Bank and subsequently at several other development institutions there is now a great deal of authority behind these statements. Pakistan was at the margin of this group of countries. It used the term `poor governance` as a euphemism for corruption. The results in the 2009 index are sobering: the vast majority of countries score below five”. These are no longer treated as abstract notions. A look at the TI index suggests a strong link between democracy and the absence of corruption. Among them were Iraq. The 2009 report which caused a fair amount of official stir in Pakistan drew on 13 different expert and business surveys “to measure perceived levels of public-sector corruption in a given country. with 10 being the least corrupt and zero given to the most corrupt.1 was seen to be the dirtiest.4 was assessed to be the cleanest country. Its founder Peter Eigen was once a senior official at the World Bank. New Zealand with a score of 9. TI`s annual reports based on the perceptions of those who know and work in the economies being reported on have become influential in throwing light on the incidence of corruption across the globe in developed as well as developing countries. That democracies would score better is obvious: they have the institutions that help people to air their grievances and provide a way for punishing those who in the public sector don`t walk the straight line. Among the world`s established democracies Portugal with a score of 5.CORRUPTION obstructs development. Pakistan was rated at 2. Some of its senior staff got involved with NGOs that were committed to reducing corruption across the globe.8 is seen as the most corrupt. On a score of zero to 10. A recent example of this is the way India is handling the case of its former telecom minister who is said to . According to TI. increases the income gap and produces political and social instability. an NGO based in Berlin. It was only after the institution came under pressure from the community of donors that it incorporated corruption formally in its research programme and the concern associated with it as a part of its policy framework. Most of the 19 countries with scores below two had social and political problems. They work with considerable autonomy from the parent organisation but follow the methodology developed in Berlin. the results presented by it “prove that corruption continues to lurk where opacity rules.4. its prevalence hurts the poor.4. Haiti. where institutions still need strengthening and where governments have failed to implement anticorruption legal frameworks”. Sudan. sharing the 139th position with several countries including Bangladesh. By far the most serious work in the area of corruption worldwide has been done by Transparency International (TI). India was ranked at 84 with a score of 3. including Pakistan. Myanmar and Afghanistan. Of the 30 countries that receive scores of more than six only two (Qatar and the UAE) are non-democratic while two (Singapore and Hong Kong) are partially democratic.

From Pakistan`s perspective continuation of corruption at a worrying level is doubly problematic since it affects the poor more than other segments of the population. has alleged intimidation and harassment by government officials for its monitoring of American aid in Pakistan”. the environment. from local and national governments. Development experts have determined that the GNP needs to increase at a rate that is a multiple of the rate of increase in the population to reduce the incidence of poverty. Not only was the minister forced to resign but a criminal investigation is likely to lead to his prosecution. corruption prevents the “poor from participating equally in political decisions. King Abdullah spoke scathingly about the Pakistani president. though all elements of society are affected in some way as corruption undermines political development. judiciary functions. economic development. Corruption affects the poorest the most. It occurs at all levels of society. There were reports in the western press that the authorities in Pakistan were harassing the Pakistani chapter of TI after the latter issued its 2009 annual report. in rich or poor nations. the New York Times reported that “the head of the Pakistani branch of Transparency International. . His comments may have consequences by making the international development community even more reluctant to assist the country. from enjoying equality under the law. the global advocacy group that monitors corruption. In a recent issue. The debate in the country as to how much damage the prevalence of corruption was doing to the quality of governance in general and economic development in particular received a new twist with the release by WikiLeaks of cables exchanged by American diplomats with the State Department in Washington. The newspaper reported Syed Adil Gilani. large and small businesses. technology and investments are often compromised by corruption — with fatal consequences”. democracy. According to the TI 2009 report. For a country with a highly skewed distribution of income. the GDP increase should be at least six per cent a year for the incidence of poverty not to increase. chairman of the Pakistani chapter of TI as saying that “recent statements of the Pakistani government amount to harassment”. natural resources. civil society. from seeing their needs reflected in policies and budgets and from accessing public goods and services. people’s health and more. According to one dispatch from Riyadh. …Decisions on food and energy security. With the GDP increase expected to be less than three per cent in 2010-11 the number of people living in absolute poverty may increase by 10 million and reach 70 million. military and other services and so on.have caused a loss of $40bn to the government. Corruption is both a major cause and a result of poverty around the world.

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