The Rich Dads of Pakistan

The Rich Dads of Pakistan
“Pay Yourself First” is the term first coined by George Clason in the book “The Richest Man of Babylon,” published in 1926. He proposed that you if want to achieve financial freedom, you must save at least 10% of your income before paying for expenses, so you build your wealth and control your expenditures. In 1997, Robert Kiyosaki extended this term in his New York Times #1 bestseller book “Rich Dad Poor Dad” by advising that you must pay yourself first even if it means delaying payment of your bills and taxes. Although Rich Dad Poor Dad is considered the #1 Personal Finance book of all times, with over 32 million copies sold, it has invoked criticism also because of some of the advice, including delay paying bills and taxes.

It seems the Rich Dads of Pakistan, the top 1%, who own 10 times more wealth than the bottom 50% combined, according to a 2020 Oxfam report, not only understood Kiyosaki’s idea, but also figured out how to do even better by using their power and privileges. They decided that they first must increase their income by making the government pay them first through subsidies (feudal class, large corporations) and exorbitant perks for their services (bureaucrats, judges, military officers, ministers). Then they went even further and decided they don’t want to pay taxes and made laws so agricultural income is tax exempt and then used that loophole to avoid paying taxes on other income (lawmakers pay less than 5% on average in taxes).

Even if that was not enough, these high net worth individuals avoid paying billions of rupees in taxes using some of their money to help needy taxmen who also want to pay themselves first. Since this undocumented money must go somewhere – besides under the pillow, they start laundering it at offshore locations, pay for their high value purchases by cash, but above all, create laws to whiten their money in real estate investment. All of this is happening under the government and judiciary’s watch because bureaucrats and judges are too busy counting their own money and enjoying their perks.

The biggest damage these ruling rich dads have done to Pakistan is how they have stunted Pakistan growth and made it irrelevant for its people, and to the world.

To keep a firm grip on their power and influence, these rich dads in Pakistan don’t invest in new technologies to create jobs and improve production. They create obstacles for new businesses by skewing government policies in their favor. They don’t care about upgrading education as their children are getting the best education from elite schools; they don’t worry about healthcare, as they have access to the best healthcare within a short flight’s distance, and they spend their money in charity, so their workers remain dependent on them. But above all, they perpetuate their influence by preparing their children for political leadership in different political parties, so they remain in power, irrespective of who ends up ruling the country.

Since they are also part of the ruling elite, these rich dads bring the same model of paying themselves first using other people’s money when running the government. They go begging to other countries for loans, and then pay themselves first in perks and subsidies using this money. They make import-substitution policies to protect themselves and enhance their profits. They don’t invest in the country to develop human capital and infrastructure. Instead of cutting their expenses, they seek more loans and thus keep on putting the country in a deeper hole. In fact, if they must cut something they cut the development funds first. Since they are powerful, they engage in real estate and commercial businesses to make more money and allot themselves expensive prime lands for pennies while serving the government.

But it does not end here. Since they want to keep poor dependent, they come up with welfare schemes, such as BISP and Ehsaas, so the poor keep silent and remain in a perpetual state of poverty. Even in charity, they keep the same model of paying themselves first when they give Rs3.2 million each to 93,000 large landowners with 50+ acres vs an average of Rs 45,000 each to 9 million BISP recipients.

Paying yourself first is not just a financial mindset for these rich dads. The biggest damage these ruling rich dads have done to Pakistan is how they have stunted Pakistan growth and made it irrelevant for its people, and to the world. They appoint their family and friends for critical jobs instead of hiring the most qualified people. They put themselves above the country and create chaos just to get into power, instead of solving problems through parliament. They jeopardize the country’s security just to keep themselves relevant instead of taking swift actions against those who spread violence and terrorism. They consider themselves above the law while passing questionable judgements based on personal biases, money, and pressures. Driven by self-interests, the country and its people are not a priority for them.

In many ways, running a country’s finances is not all that different from managing personal finances. Like growing personal wealth requires saving money and investing in assets that grow over time, a country needs to pay itself first by investing in human capital, infrastructure, and wealth generating tradable assets to grow its economy. Like taking a loan for investment in a house creates a leverage for future returns, a country takes loans to invest in improving its productivity and grow its economy. However, once you start taking loans to pay for your expenses instead of increasing your income, you will become bankrupt sooner or later, personally or as a country.

If Pakistan is to become relevant to its people and the world at large, it needs to be a player in global value chain. If it wants to reduce its oil import bill, it must move fast towards renewable energy and electric vehicles, manufactured locally. If it wants to compete with other countries for its products, it needs to stop hefty import duties to protect its industry. If the country wants to export $100 billion of its goods and services in 5 years, its needs to prioritize investments in IT services, export based high-tech manufacturing (such as solar, battery, electronic equipment), and agricultural technology to improve yield and production.

This requires a different model for economic management than what has been practiced and pushed by large landowners and large corporations, who are only interested in their profits. This requires professional economists making policies instead of career bureaucrats. This requires moving from upfront subsidies and tax exemptions, to incentives based on production and export volume. This requires moving from perks to performance at all levels of government. This requires investments in building assets, so the country can grow economically.

But above all, it requires the country’s political, military, judicial, and business leadership to decide if they want to continue paying themselves first, monetarily, or for their ego and power – thus continuing to create chaos and crises - or pay the country first to improve the conditions for the 230 odd million people that call Pakistan home.