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).

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

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

currency system was forced on the people by their governments. This system has been immensely successful in achieving its sole objective, which, in my opinion, 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. I have done an extensive and impartial (though informal) research on this topic during the past four years. I have spent time thinking about it day and night, debated with hundreds of people from varying backgrounds, read several books, read and viewed hundreds of lectures by well-known and respected people in field of monetary economics, finance, and politics such as Lugwig von Mises, John Kenneth Galbraith, Hayek, Peter Schiff, Jim Rogers, Marc Faber, Ron Paul, etc. I have even read the translation of several Chapters, as well as several related verses within the Holy Quran in order to validate my research and conclusions. And I have always reached the same conclusion; 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, and the only fool proof way to do it is to prohibit debt monetization. I do not want or expect the readers to take my word for it. 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. I encourage the readers to do their own study on the subject of monetary economics and inflation. As a word of advice for your research, I will end my article with the following quote: The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. John Kenneth Galbraith. 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, widespread, 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

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

before law, effective and impartial accountability, active role of media to eradicate the corruption are the few factors which can play an active role to diminish the corruption.

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

sectors i.e. public and private, autonomous or semi-autonomous as well as in non-profit and charitable organization, however, it varies in magnitude and frequency. In some countries it is infused in lesser scale than the other countries. In Pakistan the corruption has become systemic on large scale. Pakistan has remained the prey of corruption since its inception, despite that fact that Quaid-iAzam Muhammad Ali Jinnah, the founder as well as the first Governor General of Pakistan denounced the existence the corruption. Therefore, due to the continuity of corruption it has become the way of life now. In a country over a period of years particularly during 1990s many government became the victims of the rampant corruption. In a recent report presented by Transparency International, Pakistans corruption perception index declined to 2.3 in 2010 against 2.4 in 2009 and out of 178 counties, its ranking as most corrupt country jumped from 42 in 2009 to 34 in 2010. There are several factors responsible for the existence of prevalent corruption in the country. 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. It is a fact of matter that the very foundation of any institution lays in the process of appointment. If such process is carried out transparently, the institution becomes the model of efficiency and performance. However, in Pakistan the appointments are being made on the basis of favoritism and nepotism at a great extent. Therefore, the development and innovation in these institutions remain stagnant, rather these become the hub of politics. Consequently, the institutions become the burden on the countrys exchequer. In Pakistan there are many profit-earning institutions which have been running in a loss during many years. These include; steel Mill, Pakistan Railway, Wapda, etc. Though the governments have made efforts for handling the corruption like Pakistan penal code of 1960, the prevention of corruption Act of 1947, and the National Accountability Ordinance , however, these efforts remain elusive on the side of implementation due to absence of a political will to carry out this gigantic task. Mr. Shoukat Ali Tarin, 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. But the government does not seem to take any strong measures to nip the corruption in the bud. Other factor conducive to such a rampant corruption in a country is the meager income of the employees. The minimum wages set by the government, and salaries given to lower grade employees do not keep the body and soul together. The government increases pay at once in a year, however, the prices of consumer goods soar on the daily basis. In a recent year it is recorded that the prices rose on 18 months high. Pays and prices tend the employees to the corruption to make both ends meet. This gap in the prices and pays engender the corruption. The presence of corruption a country has extensively and devastating effect on society and country. The existence of corruption weakened the very foundation of society and country. The presence of corruption and corrupt practices in a society distract a man from ethics, humanely attitude, tradition, civics and laws. It degrades the morality of the people which leads to violence or dissension among the people. It deteriorates the quality of governance. The corruption and corrupt practices are indicative of breaches in the governance edifice. They pose serious threats to the sanctity of ethical and democratic values and weaken the administrative, social and political institutions. The economic reform in a country demand greater transparency, accountability, free and fair competition, however, the corruption and corrupt practices place restraint on the countrys capacity to undertake economics reforms and make some substantial progress in the development of a country. Corruption has also adverse impact on the

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

CORRUPTION obstructs development; its prevalence hurts the poor, increases the income gap and produces political and social instability. These are no longer treated as abstract notions. 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. 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. It used the term `poor governance` as a euphemism for corruption. 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. Some of its senior staff got involved with NGOs that were committed to reducing corruption across the globe. By far the most serious work in the area of corruption worldwide has been done by Transparency International (TI), an NGO based in Berlin. Its founder Peter Eigen was once a senior official at the World Bank. 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, including Pakistan. They work with considerable autonomy from the parent organisation but follow the methodology developed in Berlin. 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. 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. The results in the 2009 index are sobering: the vast majority of countries score below five. Pakistan received a low score, sharing the 139th position with several countries including Bangladesh. On a score of zero to 10, with 10 being the least corrupt and zero given to the most corrupt, Pakistan was rated at 2.4. India was ranked at 84 with a score of 3.4. New Zealand with a score of 9.4 was assessed to be the cleanest country; Somalia with a score of 1.1 was seen to be the dirtiest. Most of the 19 countries with scores below two had social and political problems. Among them were Iraq, Sudan, Haiti, Myanmar and Afghanistan. Pakistan was at the margin of this group of countries. According to TI, the results presented by it prove that corruption continues to lurk where opacity rules, where institutions still need strengthening and where governments have failed to implement anticorruption legal frameworks. A look at the TI index suggests a strong link between democracy and the absence of corruption. 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. Among the world`s established democracies Portugal with a score of 5.8 is seen as the most corrupt. 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. A recent example of this is the way India is handling the case of its former telecom minister who is said to

have caused a loss of $40bn to the government. Not only was the minister forced to resign but a criminal investigation is likely to lead to his prosecution. 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 a recent issue, the New York Times reported that the head of the Pakistani branch of Transparency International, the global advocacy group that monitors corruption, has alleged intimidation and harassment by government officials for its monitoring of American aid in Pakistan. The newspaper reported Syed Adil Gilani, chairman of the Pakistani chapter of TI as saying that recent statements of the Pakistani government amount to harassment. 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. 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. 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. 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. According to the TI 2009 report, corruption prevents the poor from participating equally in political decisions, from enjoying equality under the law, from seeing their needs reflected in policies and budgets and from accessing public goods and services. Decisions on food and energy security, natural resources, technology and investments are often compromised by corruption with fatal consequences. 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. According to one dispatch from Riyadh, King Abdullah spoke scathingly about the Pakistani president. His comments may have consequences by making the international development community even more reluctant to assist the country. Corruption is both a major cause and a result of poverty around the world. It occurs at all levels of society, from local and national governments, civil society, judiciary functions, large and small businesses, military and other services and so on. Corruption affects the poorest the most, in rich or poor nations, though all elements of society are affected in some way as corruption undermines political development, democracy, economic development, the environment, peoples health and more.