Pakistan's next rising class will earn in dollars

A framework for class in Pakistan

For 20 years, Muzamil says, Pakistanis asking how to make money got the same advice. Invest in property files. Or import goods from China, brand them and sell them. He believes the way money is made will change completely over the next 20 years, and society will change with it.

He starts with a framework he thinks Pakistanis talk about often but rarely understand: socio-economic class. Most people define class from their own experience. He offers a clearer one.

The elite or upper class are the richest people, with social, political and economic influence. They own businesses, many properties and stakes in major corporations and plants. The middle class is usually the largest group. It is salaried, educated or seeking education, and owns perhaps one family property. It depends on the monthly salary and could last only a few months without it.

He splits the middle class in three. The upper middle class earns good salaries and invests a little. It looks like the elite in dress, speech and style, but it holds that status only by working. The regular middle class lives month to month with a little room for leisure. The lower middle class spends everything it earns and still educates its children, but one accident, death or health emergency can push it into poverty. Below that is the lower class, in absolute poverty with little way out.

Why Pakistanis misread their own class

Muzamil sees two common mistakes. People point at the upper middle class and call it the elite that ruined Pakistan, because it looks like the elite. And many upper middle and middle class people call themselves poor, some on television, and in his view use that claim to collect donations.

He contrasts this with a trip to Russia. A volunteer helping his group, a woman of about 27 or 28, told him the average wage where she came from was 200 to 300 dollars a month. She earned about 350, roughly 65,000 to 70,000 rupees, and said she lived very well and was very happy. In Pakistan, he says, someone earning 70,000 to 75,000 rupees often has a self-loathing attitude. He is careful to say he is not judging incomes. His point is that class feels relative. The person earning 70,000 looks rich to the one earning 25,000 and poor next to the one earning 150,000. That is why a macro framework helps.

The rough size of each class

In a 2019 video, Muzamil crunched the data to size the classes. His estimates: the elite is roughly 0.01% of Pakistanis. The upper middle class is about 3%, or 8 to 10 million people. The middle class, including the lower middle class, is roughly 50 to 70%, or 100 to 150 million people. The remaining 20 to 30% live in poverty.

Classes exist in every society, he says, whatever communists and socialists promise. What matters is social mobility, and which class is rising. Lower classes always follow the class above them. The rising class sets a society’s aspirations: what to become, how to earn money, how wealthy people behave.

When the educated class set the tone

In Muzamil’s reading, Pakistan’s real elite went into hiding after the nationalisation of the 1970s under Bhutto, who took an anti-rich stance. Wealthy families decided that the more they were seen, the more they would be targeted. Most Pakistanis today could not name the country’s equivalent of India’s Tatas or Mittals. Educated people may know the Habib or Dawood families, he says, but most of the public would not.

With the elite out of sight, the upper middle class took the spotlight. That class included top bureaucrats, military officers, managers and CEOs of large companies and bankers. From 1947 until about the 1990s, he says, it was an educated class with a set pattern. The father worked for an institution that provided a car and housing. The children went to good schools and universities and joined institutions in turn. Because this class set the tone, he argues, the 1960s, 1970s and 1980s are remembered for capable institutions and good manners.

Plot files and a new kind of money

After the 1990s, Muzamil says, two shifts shook Pakistan. The first was the market in plot files that grew around housing schemes such as Bahria Town and the army’s DHA. A village next to an expanding society could jump in value to crores or billions of rupees overnight. People with no education or productive work became rich. Others got lucky with files. “This whole game of files was gambling,” he says. Success depended on luck and timing, with no work or education behind it.

The result was a new-money class with no grounding in education or productivity. It sat in an ethical grey zone and did not know how to use its sudden wealth. Growing up, he says, the rich he saw made him not want to be rich: flashy cars, gold chains, rudeness and no respect for women. Old money, in his view, is humble and respectful. Young people copied the new money because it was the class that was growing. He does not blame the young. The fault, in his view, lies with the elders who built that economic structure.

A controlled dollar paid importers at others’ expense

The second shift was the controlled dollar. In Muzamil’s account, large American aid in the Musharraf years brought dollars in, and the rate was held at around 60 rupees. Later, when CPEC money arrived under the Noon League government, the dollar was held again at around 100 to 110 rupees, below what Pakistan’s fundamentals implied.

A controlled dollar makes local goods expensive and imports cheap. So another wealthy class rose: importers of oil, tyres, clothes and everything else, who needed little education or production. Exporters, who ran factories, managed workers and sold abroad, saw thin margins. Neighbours watched the importer’s house and car and concluded he was doing things right.

Overseas workers paid too. Muzamil describes the labourer in the Middle East working 12 to 16 hours a day, who had learned rule of law and professional ethics abroad. Suppose the dollar’s true value was 150 rupees. If he sent 100 dollars, his family should have received 15,000 rupees. With the dollar held at 100, they got 10,000. In effect, he says, the other 5,000 went into the importer’s pocket. Policy rewarded importers and property dealers on the backs of exporters and overseas Pakistanis.

The dollar now finds its own level

Muzamil argues those days are over. Pakistan’s economy is now too large for the dollar to be held down. In his account, Ishaq Dar tried again for about ten months during the first PDM government, and the market broke, with the rate moving from about 220 to about 330. From here, he says, the dollar will find its fair value.

The property bubble that began in the 1990s has also largely burst, because the government now needs to tax property properly. Without speculation, real estate will have to find productivity in apartments, construction and tourism.

So the losers are clear: importers and the real estate market. The winners are exporters, IT businesses, freelancers working from home and overseas Pakistanis, who gain as the dollar rises. Muzamil is plain that no economic policy helps everyone. A free-floating dollar raised fuel prices and made life harder for many people. But policy is an incentive, and the incentive now points toward dollar income.

He tells a neighbourhood story. One family’s son dealt in property or imported cars and played the gangster, until the last two years left him with his head in his hands. Another family’s nerdy son, Saad, sat in the basement freelancing while the street mocked him. Now Saad earns in dollars, has a generator and an internet backup, and everyone can see his family doing well.

The gardener’s son and the turning of the tide

Then a real example. On a recent visit to Pakistan, Muzamil’s gardener, from a lower middle class family, brought his son to him. The boy could not pass matric. “Muzamil bhai, somehow get him some Amazon work,” the father said. He had heard that people in his neighbourhood were earning 300 to 500 dollars doing it. A few years earlier, Muzamil says, people asked him to place their sons in property offices or import businesses. Demand across society has started to dollarise, and people in every street and village now want jobs in Dubai or Europe.

Competing in global markets needs education, professional ethics and respect for the rule of law. So the people who succeed there tend to be educated and decent. When their families rise and move children to private schools, while struggling property dealers move theirs to government schools, neighbours notice. They copy the work, and then the manners and the education.

That is his thesis. “My personal view is that the most negative sentiment and hopelessness in Pakistan’s history is right now, this month,” he says. “After this, every passing month, every quarter, every year, you will see Pakistan getting better.” He credits Pakistan’s size, scale and global position more than any government choice. The incentive structure will now reward educated, hard-working, productive people, and they will move up through the classes.

“Economics is not just the name of money,” he says. “Economics is the name of an incentive structure.” Culture, manners and education all sit on top of it. He closes by asking viewers whether the people around them still chase property and Chinese imports, or now talk about freelancing, tech and exports. If the talk is changing, he says, the direction of society is changing too.