Following the passage of the Kerry-Lugar bill, PML-N immediately reacted by calling the $7.5 billion ‘peanuts,’ and suggesting that this investment will help no one. This dismissive talking point caught on quickly across Internet forums where opposition supporters have repeated it ad nauseam rather, it would seem, than taking the time to read the bill. Aside from being unconstructive, though, this talking point shows a misunderstanding of fundamental economics.
A common refrain from Kerry-Lugar opponents goes like this: “How can $1.5 billion help 0.18 billion people? This is only $85 per person!” And, if Kerry-Lugar proposed to post $85 cheques to each and every Pakistani citizen, then, indeed, the program would be a farce.
But that’s not how investment works.
In fact, despite being relatively little per capita, $1.5 billion in annual non-military aid can have a transformative effect on Pakistan, improving the lives of real Pakistanis who are suffering from preventable problems like unsanitary drinking water, poor access to education, and limited energy capacity.
Investment dollars are multiplied in return because, rather than being handed out individually, they are pooled to improve infrastructure that benefits all. Much like citizens can improve their collective lot by pooling their money through taxes to build roads and electrical plants, or businesses can improve their production and efficiency by pooling investments in improved technology and infrastructure, the billions of dollars provided in Kerry-Lugar will be invested in ways that provide collective and far-reaching benefits to Pakistanis.
As an example of the multiplier effect of aid like that included in Kerry-Lugar, the World Health Organization estimates that the return on a $1 USD investment in water sanitation is between USD$5 and USD$28. This means that $1.5 billion in US aid to Pakistan could have an impact of as much as $42 billion. That’s $10 billion more than Pakistan’s budgetary expenditures in 2008. Hardly ‘peanuts.’
The investments provided by Kerry-Lugar have the potential to not only improve the day-to-day lives of Pakistanis across the nation, but to enable Pakistan to achieve its potential as a nation that provides an example of a strong, prosperous, democratic Islamic Republic at peace with its neighbors and itself. Far from handing peanuts to Pakistan, Kerry-Lugar is America planting a farm with the seeds of hope in Pakistan’s native soil.