1

Collapse of an elitist state

IN common parlance, an elitist state is one where the benefits of economic
growth are disproportionately appropriated by a small sliver of the
population at the expense of the majority and manifested in income,
regional and gender inequalities. In contrast, the shared growth model
raises the tide lifting all boats and the benefits are widely distributed.

The elite’s composition does vary with the passage of time but usually comprises
groups that exercise or have access to the levers of power in a state ie political leaders,
bureaucrats, military officers, large businesses, big farmers and top professionals. The
empirical validation of this model was presented in my book Pakistan: The Economy of
an Elitist State in 1999 (revised in 2019).

The ongoing popular discourse about the collapse of the Afghan state apparatus — the
national unity government, provincial governors, the Afghan National Army, Afghan
police etc — has rightly focused on the chaotic departure of the US forces and the
peaceful takeover by the Taliban. It is legitimate to ask why, despite spending $2
trillion and building an army and police force at the cost of $89 billion, the US was
forced to exit so unceremoniously. How come a superpower with its military might and
economic prowess could not overcome a disorganised group of non-state actors?

Read: Afghan army collapse 'took us all by surprise': US defence secretary

Various explanations ranging from Afghanistan being the ‘graveyard of superpowers’ to

the ideological commitment of the Taliban to the poor strategic choices made by US
presidents have occupied the debating space. While all these may be partially true this
article propounds an alternative hypothesis ie it is an issue regarding the collapse of an
elitist state artificially nurtured and pumped up by external stimuli. Once those stimuli
were withdrawn the artificial superstructure found itself dismantled.

Why did soldiers and policemen surrender so easily to the Taliban?

In the case of Afghanistan, a new elite class was popped up by an artificial respiratory
system and administered injections of huge doses of donor money. The country did not
have the capacity to absorb roughly $100bn annually — five times its 2020 GDP (the
2001 GDP was only $4bn). A new class of contractors, suppliers, transporters,
importers, experts, bankers and military commanders was added to the traditional
elites such as warlords, government officials, clergy leaders, drug traffickers etc. The
Taliban, as well as the US companies and intermediaries, also got a share of the US
contract money for providing safe passage.

ELITISM
 2

Read: US spent $290m every day in Afghanistan for 20 years

This enlarged elite class was the main beneficiary of the continued occupation of
Afghanistan by external forces; incomes, rent-seeking opportunities, businesses, jobs
and corruption swelled the elite’s wealth. Having transferred this wealth abroad they
were the first ones to take flights out of Kabul helped by the US forces. SIGAR Report,
Afghanistan Papers and Carnegie Fund reports have amply documented the leakages,
misappropriations and capital flight. “For almost two decades now, billions of dollars
in corruption proceeds have been funnelled from Afghanistan, a country devastated by
four decades of conflicts, to Dubai. These outflows have played a part in stunting
Afghanistan’s economic and political development, facilitating the resurgence of the
Taliban and exacerbating regional instability.”

Compare this scenario with the plight of the common citizens of Afghanistan. Ninety
per cent of the population lives below the poverty line without decent jobs, steady
sources of livelihood, or access to basic public services. Donor money financed most of
the schools and clinics but SIGAR found evidence of embezzlement and diversion of
donor funds.

The question arises: why did the Taliban have such a walkover without any resistance
by residents? Despite many weaknesses and transgressions committed by the Taliban
in their earlier regime the ordinary Afghan had no trust in successive Afghan
governments. They welcomed the Taliban not only because they were fed up with
continuing violence and insecurity for the last four decades but also because they felt
the Taliban would not indulge in the massive corruption rampant since 2001. Trust is
the glue that keeps the population attached to the government of the day.

Successive governments were popularly seen as having been imposed by outsiders,

taking orders from them, looking to them to resolve power disputes, and relying on
them for economic sustenance. The army and police were recruited, trained, equipped
and paid by the same outsiders not to protect the citizens or Afghanistan’s territorial
integrity but as a counterinsurgency force. Almost all institutions of the state had
become dysfunctional and the erosion of their capacity diverted the population’s
attention and support towards the Taliban who could fill the vacuum.

The Economist reported in November 2020 that security actually improved in the areas
the Taliban controlled. Local Taliban leaders solved most disputes and decisions were
taken immediately and enforced. The Taliban leaders insisted that teachers actually
turn up at work. “Boys at least can still get an education and the sick can receive
healthcare in areas occupied by the Taliban.” It was this expectation of corruption-free
good governance, expeditious and inexpensive justice and access to basic services that
led residents to pave the way for the Taliban.
ELITISM
 3

Women activists have rightly agitated against the serious risk of girls not going to
schools or women not getting employment opportunities under the Taliban. While
these concerns are genuine it must be admitted that except for the urban educated
women and girls enrolled in urban areas the plight of the majority of Afghan women all
these years has not improved. Life expectancy was 45 years and the incidence of deaths
at the time of pregnancy and child birth was quite high.

Why did soldiers and policemen surrender so easily to the Taliban? A soldier won’t risk
his life when he hasn’t been paid his salary for months, his family is on the brink of
starvation and he knows that his commanders have amassed huge wealth by diverting
his dues and that they don’t care about his welfare. A sense of uncertainty and
demotivation prevailed because they knew their paymasters (the US) would no longer
fund them. It was the survival instinct that overwhelmed them and resulted in their
surrender.

The lesson from Afghanistan’s story is that misgovernance and corruption by elites at
the expense of the majority’s welfare will cause popular disaffection and allow non-
state actors to take over the reins of the state.

The writer is the author of Pakistan: The Economy of an Elitist State.

Our elite’s bankruptcy

“God gave Noah the rainbow sign, no more water, the fire next time.”

AS Pakistan’s difficulties in meeting its external payment obligations deepen, its elitist
policymakers, both past and present, are inclined to believe that the country got into
this mess because of a host of recent external factors — the post-pandemic super cycle
in commodities, Russia’s invasion of Ukraine, the US Federal Reserve’s change of tack,
biblical floods at home.

The entrenched conventional wisdom also appears to be that managing the mounting
payment difficulties and debt distress (or, in this case, a near-certain default on the
current path) is Pakistan’s only challenge, and that averting the inevitable in the short
run by kicking the can down the road will be ‘mission accomplished’ for the incumbent
political set-up and its architects.

For a country that is experiencing its 13th balance-of-payments crisis since 1988, and is
in its 23rd Fund programme since 1958, this argument can only wash with the
cognitively inert. Placing the two figures quoted above in context (13 and 23), gives
some perspective of how deep-rooted and protracted the country’s economic malaise
has been.
ELITISM
 4

Pakistan is one of the foremost protracted users of IMF resources globally, spending,
by my estimate, a cumulative of 34 years in various IMF programmes since
independence. This suggests that it has slipped into a new Fund programme once in
less than every three years of its existence on average.

Perhaps unsurprisingly, Sri Lanka comes close, with a total of 16 IMF programmes
under its belt since its independence in 1948. (Argentina, a serial defaulter on its
sovereign debt, has approached the IMF 22 times since 1956).

It will also be illustrative to see a breakdown of the number of IMF programmes

undertaken by each political party by its tenure in government since 1988. PML-N has
four IMF programmes under its belt, PPP six, two under Gen Musharraf, and one by
PTI.

Power elites have their heads in the sand regarding the country’s frequent and
multiple crises.

This should put paid to any politics that each of these political parties has played at
various times with regard to seeking a bailout from the Fund, especially in 2018 and
2019 when the then PTI government was dithering on signing off on a loan
arrangement with the IMF and the very same PPP and PML-N that are in power today
were hauling it over the coals for petty political mileage.

While Pakistani elites believe that everyone and everything except their own poor
policies and choices over the past 75 years may be the root cause of the problem, the
fact is that as the data indicates, there is one constant that predates all recent events: a
lifelong history of poor political as well as economic governance.

This is a textbook example of what psychologists call an external locus of control,

referring to the belief in some individuals and societies that they do not have agency
over what happens to them, and that their life outcomes are determined by external
factors beyond their control.

The plethora of deep-seated and widely believed conspiracy theories bandied about in
Pakistan is a prime demonstration of this phenomenon.

Where have things gone wrong for Pakistan? Is the country a victim of bad luck, bad
policy, bad governance, or an international conspiracy? The exploration of this
question over the years is well documented, and while various commentators differ as
to the exact root of the malaise, the consensus appears to be that the fault lies in our
own choices and constructs — and not just on the economics side.

ELITISM
 5

Whatever impulse our external environment may or may not have given to our growing
challenges, it is clear that the entropy caused by the ‘establishment’s’ governance of the
country’s internal affairs has played a large role in bringing things to this pass.

Unique factors and circumstances following the country’s birth that handed the reins of
power, decision and policymaking to a small elite consisting of the army, politicians
and bureaucracy laid the basis for a system of governance run on wider co-option (and
coercion). The judiciary and industrialists were next to be co-opted, followed eventually
by the media and other business segments.

As a result, with so many ‘insiders’ enjoying the benefits of the status quo, it is no
surprise that there is no organised reform constituency in the country. Business
segments that are affected only want policies that hurt their interests to be tweaked,
while retaining the rest of the edifice that provides them ‘rents’. The disaffected middle
class appears to have rallied behind PTI, but it is largely unorganised and lacks a
coherent national economic strategy so far.

A clear manifestation of elite capture is the unwillingness as well as inability to

organise the country’s polity as well as economy into anything resembling ‘normal’.
This is illustrated by the half-hearted commitment to reform demonstrated since
independence.

With fiscal reform at the core of the wider economic reforms needed, a need recognised
since the 1950s, policymakers have embarked on at least 15 ‘attempts’ at fixing the
country’s tax system since 1972, with various commissions, committees and task forces
formed at periodic intervals. Despite the repeated identification of the (same)
problems, tax collection has doggedly remained mired at around 10 per cent of GDP for
over seven decades.

A survey of multiple education sector reform attempts reveals the exact same dismal
results. More recently, attempts at introducing a semblance of viability in the energy
sector have also been meeting with failure.

The country’s power elites would still like to believe that it is ‘bad luck’ that landed us
here, but running a country on geopolitical rents, mercenary impulses and elite capture
is hardly sustainable — and has never ended well.

The elites have to wake up. Without recognition of what I would term the country’s
foundational mis-constructs, whether on the political or the economic side, and taking
responsibility as well as ownership for addressing them, any hope of getting onto the
road to recovery will give way to a path to perdition.

ELITISM
 6

The writer is a former member of the prime minister’s economic advisory council,
and heads a macroeconomic consultancy based in Islamabad.

Published in Dawn, January 19th, 2023

Power and corruption

“POWER tends to corrupt”, the saying goes “and absolute power corrupts
absolutely.” Such words are easy to toss around in Pakistan, whose citizens
have seen the process first-hand and numerous times in the existence of
their still young country.

Each day is an exercise in navigating the corruption and power nexus, with even some
petty overlords or government functionaries of a middling and insignificant sort
demanding their palms be greased for doing what is essentially their job. When the
bottom feeders are this way, the top naturally excel at the job; one constant in
Pakistan’s story has been the rotating cast of scions of powerful (and corrupt) families
seen to be looting the country’s coffers. Things change but not this.

Is it the system that makes these erstwhile leaders, generations of them, corrupt ie does
their survival and rising to the top require the misuse of power? Or is the proclivity for
corruption determined more by individual character?

In his new book Corruptible: Who Gets Power and How It Changes Us researcher Brian
Klaas presents some interesting theses on this question. One study that Klaas writes
about looked at whether people will follow the rules due to a commitment to doing the
right thing. In this study, researchers looked at parking violations in New York City. In
particular, the study looked at the period between 1997 and 2002 during which time
United Nations diplomats stationed in NYC could get away with parking illegally
because they had diplomatic immunity.

Accountability is easy to prescribe and far harder to enforce particularly in places

such as Pakistan where it is more or less endorsed.

When a car with a diplomatic licence plate was found to be illegally parked, a parking
ticket would be issued, but it did not have to be paid because the diplomat could not be
prosecuted owing to immunity. At one point, there was so much illegal parking by
diplomats of various countries that the city was losing up to $18 million a day. Sadly,
one of the 10 worst offenders was none other than Pakistan while diplomats from
countries including Sweden and Norway rarely abused their power.

ELITISM
 7

This would suggest that those who came from countries where corruption is common
were more likely to abuse their power because the only way they may have got their
position was by being unethical; using connections rather than rising on the basis of
merit. Culture and context, Klaas concluded, had a “drastic” effect on how individuals
behaved.

In 2002, Michael Bloomberg was elected mayor of NYC and he put an end to
diplomatic immunity for parking tickets. As soon as this new directive was issued, the
worst offender countries immediately started to follow the rules; countries like Kuwait,
for instance, went down to almost no violations. This suggests that when the corrupt
are held accountable for their abuse of power then they are less likely to engage in
violations.

In this case, countries like Kuwait and Pakistan that had been among the top 10
offenders dropped almost to the bottom of the list. This indicates that while the abuse
of power is common among the corrupt, the threat or actual prevalence of
accountability can drastically reduce the abuse of power.

Of course, accountability is far easier to prescribe and far harder to enforce particularly
in places such as Pakistan where it is more or less endorsed and even encouraged by
the prevailing culture. The difficult question here is how to change a system that
encourages, even requires corruption in order to succeed. As the example about
parking tickets and diplomatic immunity illustrates, effective policing or enforcement
is required to get everybody to get in line and follow the rules.

Making enforcement an expectation such that bad actors know that their chances of
getting caught are very high is difficult if not impossible in a corrupt system which is
based on the opposite assumption. So if Pakistan had a mythical leader who tried to
end corruption, he/she would find his/her efforts stymied because the local elite that
wants the corrupt status quo and hence their own largesse to persist will ensure that
this leader would not be successful.

Once the ‘good’ leader realises this, his/her choices are revealed not as being good
versus bad but rather the degree to which he/she capitulates to the demands of this
elite that feeds off corruption. When the people in a system are used to corruption and
even expect and welcome it, a good leader is useless, because the system requires
corrupt behaviour.

A corrupt system, and in Pakistan we have just that, makes it difficult for good people
to survive within it. Their choices are to become complicit with the system, do as others
do, and forget about being a good moral actor or to exist outside the system to the
extent that is possible. This is particularly true where politics are concerned; good
ELITISM
 8

people who do not want their conscience to be ravaged simply cannot enter this realm
of the compromised. The consequence is that the progeny of powerful families, who
have a genealogical history of upholding corruption, are the ones that are most eager to
grab power and then to hold on to their ‘entitlement’.

As in the parking example, Pakistan needs someone to announce that the rules will be
enforced so that the abuse of power can stop. Sadly, what is happening instead is that
the longer any leader is in power, the more the system encourages them to be corrupt
or condone corruption. As a result, everyone from the least powerful to the most
powerful have no expectation that the abuse of power will be checked or curbed. The
impetus for survival in such a system is to get as much power as possible, for the very
purpose of abusing it.

The writer is an attorney teaching constitutional law and political philosophy.

More, not less politics, is the answer to Pakistan’s

economic crisis
Only through a sustained political process that increases inclusivity and representation
of the many instead of the few can Pakistan meet its full economic potential.

Economics is a social science that focuses on the production, distribution, and

consumption of goods and services. What is produced in an economy, who produces it
and how, and how consumption of these goods and services is encouraged (or
discouraged) falls under the domain of economics.

To produce these goods and services, resources are required, which means that
economics also deals with the collection and distribution of key resources in an
economy.

Understanding the above is critical for recognising that contrary to the wish of many in
Pakistan, economics and economic policymaking cannot be separated from politics.
This is especially true in a country like Pakistan, where resources are both scarce and
have been captured by a narrow kleptocratic elite.

It is for this reason that calls to separate the economy from politics and even well-
meaning demands for developing a so-called “charter for the economy” are unlikely to
resolve the crisis confronting Pakistan’s economy — the inability to create opportunity
and wealth for the many, not just the few.
ELITISM
 9

Elite capture
According to the UNDP, over $17 billion a year is provided in subsidies and other
handouts to elite segments of society. To put this figure in context, the total losses and
reconstruction costs of the 2022 floods is about $30 billion, meaning that resources
provided to elites over a period of two years are sufficient to recuperate the losses and
rebuild communities devastated by the historical floods.

In the absence of a political conversation about the resources Pakistanis have collective
access to, suboptimal choices about who benefits from the distribution of resources
will always be made.

A reading of the country’s own short history of 75 years provides us evidence of the
implications of these poor choices — extraction of resources from East Pakistan, for
example, led to a sense of disenchantment and anger among the people that now
inhabit the country of Bangladesh. Similarly, extraction of natural gas from places like
Sui led to resentment among the population in Balochistan, who for decades did not
benefit from a natural resource extracted from their own lands.

These economic choices were made because economic policymaking was disconnected
from politics. A narrow segment of elites, including technocrats brought in to make
economic policies for dictators, railroaded the political process. As a result, economic
choices that were made did not consider the cumulative welfare of the tens of millions
of ordinary citizens.

The development of these exclusionary economic policies and their implication, in fact,
would have been next to impossible had the economy not been disconnected from
politics.

Which is why one can safely say that the policy of depoliticising the economy, and not
its overpoliticisation, is what has brought the country’s economy to the brink.

All choices are political

To get out of this morass, Pakistan needs more effective and representative politics.
This includes devolution of power, which calls for giving local governing bodies the

ELITISM
 10

right and ability to raise and spend tax revenues, as well as a sustained process that
reduces the influence of unelected stakeholders in economic decision-making.

Take for example the issue of property rights. A capitalist society, even one with
Chinese characteristics, cannot function without robust enforcement of property rights.
The enforcement of these rights is a political issue — for example, who can own what
type of land, what they can do with it, and how they profit from (and pay taxes on) said
property are all political choices.

If the said country is facing food insecurity, it may devise an economic policy that
makes it difficult to convert agricultural land to a multi-acre housing society. Another
may realise that while a parcel of land was productive for growing cash crops, the
negative consequences causing reduction in water table demands rezoning of that land
for perhaps a better use.

In the same vein, a country with weak regulations may take a cautious approach to
wholesale privatisation, while one with low literacy rates may prioritise expending
scarce resources towards basic education, not bleeding-edge research and
development.

All these choices are fundamentally political in nature, starting from their local
community impact at the very lowest levels of political involvement and going all the
way to the top in terms of their impact on macroeconomic stability and human
security. To argue that these choices should be made by separating them from politics
would be a travesty, as it disenfranchises millions of ordinary citizens from having a say
in their own economic future.

As Pakistan’s economic and political crisis deepens, the answer lies in more, not less
politics. This is because only through a sustained political process — that increases
inclusivity and representation of the many at the expense of the few — can Pakistan
meet its full economic potential.

How the country makes those choices should be determined by the millions of patriotic
Pakistanis that call this land home. By taking away the right of ordinary Pakistanis to
engage in politics and thereby determine their own economic future, Pakistan’s elites
will only inflict more misery on the country and its future generations.

ELITISM
 11

The ‘One Per Cent Republic’

IN a Tedx talk I gave last year, I argued that Pakistan shouldn’t be called
the Islamic Republic but rather the One Per Cent Republic. Opportunities,
power and wealth here are limited to the top one per cent of the people.
The rest are not provided opportunities to succeed.

Pakistan’s economy thus only relies on whatever a small elite can achieve. It remains
underdeveloped as it ignores the talent of most in the country.

Read: Miftah terms Pakistan ‘a 1pc republic’

Suppose we had decided to select our cricket team only from players born in the second
week of November. That would always have produced a weak team as it would only be
selecting from 2pc of the population. Our teams wouldn’t have benefited from the
talents of many of the greats we have had over the years. This is the same unfair and
irrational way we choose our top people. And just as our team would have kept losing,
so we as a nation keep losing.

This year over four million Pakistani kids will turn 18. Of these, less than 25pc will
graduate from the intermediate stream and about 30,000 will graduate from the O-
and A-level stream. Over 3m kids, or 75pc, will not have finished 12 years of schooling.
(Half of all kids in Pakistan are out of school.) These 30,000 kids from A-levels will
dominate our top universities, many will study abroad and go on to become leaders.
That’s less than 1pc of all 18-year-olds. These are the only Pakistanis for whom
Pakistan works. But it gets worse.

Read: Elite illusions and delusions

There are around 400,000 schools in Pakistan. Yet in some years half of our Supreme
Court judges and members of the federal cabinet come from just one school: Aitchison
College in Lahore. Karachi Grammar School provides an inordinate number of our top
professionals and richest businessmen. If we add the three American schools, Cadet
College Hasanabdal and a few expensive private schools, maybe graduating 10,000
kids in total, we can be sure that these few kids will be at the top of most fields in
Pakistan in the future, just as their fathers are at the very top today.

Five decades ago, Dr Mahbub ul Haq identified 22 families who controlled two-thirds
of listed manufacturing and four-fifths of banking assets in Pakistan, showing an
inordinate concentration of wealth. Today too we can identify as many families who
control a high proportion of national wealth.
ELITISM
 12

Concentration of wealth is not unique to Pakistan: this happens globally, especially in

the developing world. Trouble is that five decades after Dr Haq’s identification, it’s
many of the same families who control the wealth.

A successful economy keeps giving rise to new entrepreneurs, representing newly

emerging industries and technologies, becoming its richest people. But not here in
Pakistan where wealth, power and opportunities are strictly limited to an unchanging
elite.

In Pakistan, wealth, power and opportunities are strictly limited to an unchanging

elite.

Look at the top businessmen in America like Bill Gates, Mark Zuckerberg, Jeff Bezos,
etc, none of whom owe their position to family wealth. The richest people of the earlier
eras — the Carnegies, Rockefellers — don’t still dominate commerce. Among recent
former US presidents, Ronald Reagan’s father was a salesman, Bill Clinton’s father was
an alcoholic and Barack Obama was raised by a single mother. Here almost every
successful Pakistani owes his success to his father’s position.

In Pakistan, doctors’ children go on to become doctors, lawyers’ children become

lawyers, ulema’s children become ulema, etc. Even singers have gharanas. There are
business, political, army and bureaucrat families where several generations have
produced seths, politicians, generals and high-ranking officers. In such a society, a
driver’s son is constrained to become a driver, a jamadaar’s son is destined to become a
jamadaar, and a maid’s daughter ends up becoming a maid.

Top corporate and other professionals only come from the urban English-educated
elites, especially from the two schools I mentioned above. The only influential
professions where non-elites can enter —bureaucracy and the military — are also set up
such that once their people enter the highest echelons, their lifestyle, like their elite
peers from other fields, becomes similar to the colonial-era gora sahibs, materially
removed from the lives of the brown masses composed of batmen, naib qasids and
maids.

Political power too is concentrated not in parties but in personalities. Except for one
religio-political party, there isn’t a party where the head is ever replaced. Politics is
based on personalities down to the local level, where politicians come from families of
‘electables’, where fathers and grandfathers were previously elected.

Read: Elite privileges

ELITISM
 13

Is it any wonder why Pakistanis don’t win Nobel Prizes? We properly educate less than
1pc of our kids. Of course, we have smart, talented people. But most of our brilliant kids
never finish school and end up working as maids and dhobis and not as physicists and
economists they could’ve been. Pakistan is a graveyard for the talent and aspirations of
our people.

According to Unicef, 40pc of Pakistani children under the age of five

are stunted (indicating persistent undernutrition); another 18pc are wasted (indicating
recent severe weight loss due to undernutrition) and 28pc are underweight. This means
86pc of our kids go to sleep hungry most nights and have the highest likelihood in
South Asia of dying before their fifth birthday. This is our reality.

Pakistan works superbly for members of social and golf clubs. But it doesn’t work if
you’re a hungry child, landless hari, a madressah student, a daily-wager father or an
ayah raising other people’s children. Pakistan doesn’t work well for most of our middle-
class families. This is why disaffection prevails and centrifugal forces find traction.

The real predictor of success is a person’s father’s status. Intelligence, ability and work
ethic are not relevant. Of course, some manage to become part of the elite: but those
are the exceptions that prove the rule.

Pakistan’s elite compact allows wealth and power to perpetuate over generations and
keeps everyone else out. This is what’s keeping Pakistanis poor and why it’s necessary
to unravel the elite compact. We need a new social contract to unite and progress as a
nation.

The writer is a former finance minister.

Published in Dawn, November 10th, 2022

Elite privileges
ELITE political bargains are informal, relatively stable agreements among
national elites about the pecking order of different ethnicities and classes
(in our case state institutions too) in accessing economic privileges. This
includes their relative access to economic resources and opportunities (eg
government expenditures, subsidies and licences, access to state and
private capital) and tax burdens.

The idea of elite bargains provides a powerful view of Pakistan’s political economy.
Soon after 1947, elites struck a bargain which has endured until today despite conflicts
among member elite classes. Under it, the military, and not politicians, assumed
ELITISM
 14

coalition leadership, while it co-opted landed elites, capitalists and religious leaders in
return for elite privileges. The limited state resources available due to low taxes are
largely spent on oversized military budgets and generous subsidies and other support
for military elites, landed elites and industrialists while social expenditures for non-
elites are minimised.

Elite bargains provide a powerful view of our political economy.

A recent UNDP report quantifies these privileges and the inequality spawned by the
elite bargain. It shows that inequality in Pakistan as measured by the share in income
of people in different strata is high. So the richest 20 per cent have nearly five times
more income than the bottom 20pc while asset inequality is even higher. The report
shows that inequality was higher during the fast-growth dictatorial era from 2001-08
but reduced under democracy after 2008 despite lower growth rates.

This shows that democracy produced better results for lower-income people.
Regionally within South Asia, Pakistan ranks towards the middle in terms of inequality.
However, its Human Development Index score is higher than only war-ravaged and
landlocked Afghanistan. Within Pakistan, Balochistan lags far behind other provinces.
Thus, 15 out of Pakistan’s least-developed districts are in Balochistan. Yet elites in
other provinces fail to understand the reasons for the perpetual unrest there.

The report analyses the privileges enjoyed by landed elites, capitalists, traders and
military elites compared with the severe neglect of lower classes via low social
expenditures. This includes tax breaks/evasions, privilege to buy inputs at lower prices
or sell their own outputs at higher prices than market prices due to state laws and
preferential access to land, capital and services.

Conservative estimates show that the privileges add up annually to nearly Rs370 billion
for landed elites, Rs725bn for the corporate sector, Rs600bn for traders and Rs250bn
for military elites. This is a total of nearly Rs2 trillion annually for a tiny sliver of the
population. In contrast, Pakistan spent only around Rs1.3tr annually in recent years on
education, health and other social expenditures to cater to the needs of its masses.
Even a chunk of this is siphoned off by the rich.

Being a UN report, it blandly suggests changes in tax, market and social expenditure
policies to reverse this elite bias. However, it ignores contentious power dynamics due
to which the chances of such policies being adopted are low as the same elite that
derives these benefits holds power. This can only happen when the masses are able to
organise themselves to wrest power from the elites.

ELITISM
 15

Challenges from non-elites have taken the form of ethnic rebellions and more peaceful
ones from civil society that have not displaced the elite coalition. Challenges have also
come from within the elite coalition for its leadership. Thus, landed elites under Bhutto
and industrialists under Nawaz Sharif attempted to wrest overall coalition leadership
from the military, instigating coups which soon re-established military dominance.
Had the attempts even succeeded, it would have just meant one elite group replacing
another one at the top. But the UNDP report shows that even a change in leadership
from military to civilian elite politicians incrementally benefits the masses, as shown by
the reduction in inequality after 2008.

This elite bargain perpetuates a low-growth economy given the reliance of

industrialists, commercial and landed elites on state handouts rather than innovation
and high-end outputs. Low economic growth is punctuated by periodic economic crises
caused by fiscal and external imbalances which in turn reflect lack of economic
dynamism spawned by the patronage-driven economy. This exclusionary elite bargain
is failing masses given increasing expectations among non-elites.

However, urbanisation, education and per capita income trajectories and a mapping of
the power and reach of groups representing non-elites suggest they are still decades
away from becoming strong enough to wrest power. In the interim, a genuine
transformation of the current elite bargain is unlikely. More likely are piecemeal
changes initiated by elites in response to periodic economic crises and violent
upheavals.

The writer is a political economist.

Elite illusions and delusions

SINCE the country suffered its largest balance-of-payments crisis in 2018,
Pakistan has been forced to borrow $35 billion (gross) from a variety of
sources, including the IMF, multilateral, bilateral as well as commercial
lenders. These loans have been contracted by mortgaging national pride
and putting the country’s sovereignty at risk.

Yet, over the same period Pakistan has imported cars, SUVs, extra petroleum to run the
new autos, and mobile phones totalling $8bn! This staggering amount beggars belief
and is equal to nearly 25 per cent of the total gross foreign loans contracted by Pakistan
during this period.

Unfortunately, the passion of Pakistani elites for ‘foreign’ lifestyles and consuming
imported non-essential goods is not restricted to cars, SUVs and mobile phones.
During this period (2019-21), new franchises of foreign fast food outlets and cafes and
ELITISM
 16

restaurants have opened up that not only import a range of expensive ingredients, but
also pay hefty franchise fees and remit profits in US dollars. In addition, new mega
malls selling imported branded goods have also opened up. The elite craving for fine
cigars, cigarettes, pipe tobacco, fruit juices, chocolates, exotic fruits and a bewildering
range of consumer products such as cosmetics etc. is over and above the foregoing.

Data compiled from the State Bank and the Pakistan Bureau of Statistics helps put a
number to this elite consumption feeding frenzy. The cumulative total since 2019 for
the goods considered here, which does not cover by far the complete spectrum of ‘non-
essential’ imports, amounts to a staggering $13bn spent on these imports. This
magnitude of wasteful expenditure is mind-boggling and beyond criminal. Why and
how has this been allowed to happen in a poor country struggling to stay afloat?
Especially when this lavish lifestyle is not financed by Pakistan’s own meagre savings
but by dipping into foreign savings, mainly in the form of expensive loans.

An illusion of prosperity, built on borrowed money, is a priority over actual

development.

(One answer lies in the fact that Pakistan’s “dollar-ised” elites are insulated from the
crises their feeding frenzy has created. In fact, every time the rupee weakens, the value
of their foreign currency assets rises — while the rest of the nation’s citizens are left
with the inflation tax and the burden of adjustment of an IMF programme).

This pattern of thinking and policy behaviour is not unique to the present government.
Past governments have exhibited the same poor thinking and questionable choices,
none more egregiously than between 2004 and 2007, when the government headed by
Mr Shaukat Aziz made the provision of an illusion of prosperity, built on borrowed
money, as a priority over actual development. ‘Cars on the roads’ and the opening of
foreign restaurant franchises became government policy goals, rather than provision of
mass transit systems for the major urban centres, preparing for the impending energy
crisis, or investing in the social sectors.

As a result of this deficient thinking, Pakistan has ended up importing cars/SUVs and
mobile phones alone worth $30bn cumulatively since 2006! This number is based on
published annual data from the State Bank. With franchise fees and profit repatriation,
the import of non-essential foreign consumer goods and services totals scores of
billions of US dollars over this period. To put this figure into perspective, this amount
could fund the construction cost of at least two Diamer-Bhasha dams, which Pakistan is
struggling to finance.

For a country running out of dollars to import essential energy, machinery and capital
goods, food and raw materials, such poor choices made by Pakistan’s elitist
ELITISM
 17

policymakers represent both capacity and mindset issues, as well as a Herculean

ignorance of the path of development taken by high-performing developing economies.

Read: Trade deficit hits all-time high in November

Sadly, it’s not just scarce foreign exchange that has been expended on this useless
venture. As the number of cars on Pakistan’s roads has increased from 1.3 million in
2005 to an estimated 7.7m currently, precious resources from the budget have had to
be diverted to build the corresponding infrastructure — a network of roads, highways,
underpasses and flyovers — to accommodate the additional traffic. The resulting
vehicular emissions are a primary cause for pollution in cities like Lahore, which has
become the number one public health issue in Punjab and KP, while congestion and
traffic snarls are common features in the nation’s cities. The increase in traffic
accidents and its human toll is an added cost.

Unfortunately, the fixation with cars continues to this day. The PTI government has
given incentives to the auto industry as part of its ‘growth push’, while ministers have
spoken about having a ‘car in every household’ as a policy objective. The government’s
auto policy calls for importing 46 new makes and models in an effort to rein-in car
prices, with the ECC spending more time than warranted on this elite fixation.

Even during periods of balance-of-payments stress and outright crises, Pakistani

policymakers have generally abstained from a complete ban on imports of non-
essential goods, despite the allowance under WTO rules for temporary measures.
Instead, the preferred policy has been to increase import duties and impose cash
margins on letters of credit.

The fallacy of this approach has not been obvious to policymakers unfortunately. An
elite that is untaxed and unburdened in any way by responsibility to the state can well
afford the incremental import duties etc. on the cars — while the nation collectively
cannot afford the incremental foreign exchange spent on these senseless imports. (On
its own, it can be argued that there is nothing wrong with imports of consumer goods,
provided the country’s exports and foreign exchange earnings, rather than loans, were
paying for this wasteful expenditure.)

The conclusions from the foregoing data and argument are as follows: 1) Pakistan has
to learn to live within its means; 2) the country’s obsession with imported cars (and
other foreign consumer goods) is unaffordable as well as unsustainable; 3) elitist
policymakers would do well to study the development path and policies of successful
peer countries; and, 4) the country’s free-riding elites have to be made to carry their
share of responsibility.

ELITISM
 18

The writer is a former member of the prime minister’s economic advisory council,
and heads a macroeconomic consultancy based in Islamabad.

Published in Dawn, December 9th, 2021

Alliance for change

Dr Niaz Murtaza Published January 10,

We face many paths to doom today — both economic and security-related — but only a
few paths to avoid it. But the state doesn’t adopt these paths as they undermine the
interests of strong civilian and military elites who control policy.

While egalitarian ideas drove Indian, Bangladeshi and Sri Lankan freedom aims, ours mainly
reflected the fears of Muslim elites about their interests under Hindu rule and had few pro-poor ideas.
Since ’47, the Pakistani state has lived up very well to the objectives of its creation by ably guarding
elite interests and ignoring those of the masses, so much so that it now faces doom. In fact, the
Pakistani state may be in South Asia the one least focused on the people.

The limits of this elitism are vividly illustrated by the current perma-polycrisis. A crisis is bad enough,
a polycrisis (one encompassing multiple domains such as economic, political, natural, social, etc)
worse and a perma-polycrisis (a polycrisis that shows no signs of ending) more so. This crisis started
as an economic one under the PTI and was exacerbated by the political standoff between Pindi, PDM
and PTI; the global economic crisis; and finally the floods. No end is in sight to most of its immediate
causes or the elitism in which it is rooted.

The history of successful states shows that social movements play a critical role in improving the
quality of governance and making it more people-centred. Thus, it is critical for Pakistani society to
organise itself better and form an alliance or coalition for change to force elites to adopt egalitarian
policies that help avoid disaster. A coalition is a group of persons and/or entities that have common
aims and who agree to work together towards achieving them. Coalition work includes three
ingredients: agenda, partners, and strategies.

Our society needs coalitions to stand up to elites.

It is easy to list an agenda to avert doom. Economically, we must increase taxes and export revenues
to reduce our fiscal and external deficits that often lead to crises; reform state enterprise (including
milbus), power and water sectors; and increase investment and productivity to achieve sustainable
growth. It means adopting poor-led progress strategies that make increasing the incomes of the poor
as the main engine of national progress, by providing them with organisations, market power,
protection, assets, skills and social services. Politically, it means civilian sway over Pindi and its spy
agencies staying totally out of politics; devolution; police, judicial and bureaucratic reforms; peace
with Baloch rebels and end of TTP terrorism. Externally, it means peace with India and good,
balanced ties with all key allies like the West, Gulf states and China. Socially, it means ending
extremism and full rights for women, minorities and other weak groups.
ELITISM
 19

Progressive, grassroots, pro-poor groups are obvious partners for leading the coalition for this pro-
poor agenda. But Pakistan’s situation is so precarious, especially economically even in the short term,
that most components of this agenda would appeal to a much broader alliance, which is also
necessary given the enormity of the task involved in swaying strong elite interests.

Thus, a broader coalition is needed, that includes pro-poor advocacy groups, farmer and labour
entities as leaders, but also professional bodies of lawyers, doctors, teachers, engineers and others,
including media groups, business groups, academia and expatriate groups. This practically means all
organised society willing to support such an agenda outside the narrow range of elite interests that
currently control state policy or extremist and criminal groups. The starting step could be for
progressive grassroots groups to come together and then gradually expand the coalition by inviting
other societal groups to join it.

Finally, coalitions need effective strategies. Coalitions may be loose, when members work together for
a limited time until they achieve or abandon a specific aim. They may also become permanent, with
governing bodies, funding, and organisational structures. It will be naïve to expect such a diverse
coalition to achieve any permanence. However, even so, a three- to five-year period may still be
needed to influence state policy sustainably. The main strategy would be two-fold. First, it would
involve influencing policymakers through direct meetings with them, media work, public meetings
and protests. Second, it would involve educating the larger public about the issues and remedies to
garner greater support for the cause.

The only feasible path forward for us now is for society to stand up to elites through coalitions. Even
this doesn’t guarantee success, given the low odds of, first, putting such an alliance together and,
second, it actually succeeding. But the chances of any other path succeeding are even lower. This sadly
reflects our poor odds going forward.

The writer is a political economist with a PhD from the University of California, Berkeley.

Elite have created system that benefits them: Miftah

ISLAMABAD: Former finance minister Miftah Ismail on Wednesday said Pakistan’s
core problem was creation of a system by a few thousand elite families that worked too
well for them and delivered too little to others.

He was speaking at a seminar at Quaid-i-Azam University (QAU) arranged by QAU History Society
and hosted by the School of Economics.

The seminar was conducted by the Department of History chairperson Prof Ilhan Niaz.

Mr Ismail explained the structural limitations and problems faced by governments over time and the
failure of all dispensations to deliver sustainable and just progress.

He said the consequences for Pakistan of this elite bargain are horrendous. Pakistan is falling behind
in relative terms to much of the rest of the world. And while the elite obsesses with dollar-rupee rate
or current account deficit, meaningful reforms in agriculture, exports, taxation, and education, are
neglected or deemed too politically difficult to execute, he said.
ELITISM
 20

The former finance minister called this the “wait till the next year” approach that all governments
adopted when confronted with serious questions of policy and reform.

This status quo is not working for the 90pc of the population that does not have enough to eat, safe
water to drink, or adequate access to education and healthcare.

Talking about the way forward Mr Ismail argued Pakistan must aggressively raise the Tax-to-GDP
ratio to 15pc, invest massively in primary and secondary education, raise female labour force
participation, and stop subsidizing elite waste and over consumption.

Fielding questions from students and faculty, Ismail took full responsibility for the collective failure of
successive regimes, including that of the PML-N, to tackle the difficult problems.

He asserted that he was touring universities precisely to reach out to the youth and encourage them to
understand how damaging and entrenched elite gate-keeping is in Pakistan and highlight the

need for them to mobilise around important questions of reform and policy as they have another 50-
60 years to either make Pakistan into something worthwhile or stand by as it deteriorates further.

It’s the elite capture, stupid

THE phrase ‘It’s the economy, stupid’ was coined in 1992 by James Carville, a campaign
strategist on Bill Clinton’s successful White House bid team, who saw the need to make
the US recession into a major election issue and carried the day.

Clinton campaign staffers were told by Carville to hammer in the message at every opportunity to
underline their stance that the incumbent, president George Bush, was out of touch with reality and
incapable of setting the economy right, even as the economy had, in fact, turned the corner.

The economy was coming out of recession and had posted several consecutive months of growth, but
the Carville-authored Clinton campaign mantra worked wonders. Clinton took 370 electoral college
votes to Bush’s 168. Breaking a three-term run of Republican presidents, he also won the popular vote
by a margin of nearly six million votes.

This, despite George Bush’s approval rating running at a staggering 89 per cent, as the president had
just prosecuted a successful war in the Middle East and kicked out Iraq from Kuwait.

Of all political slogans, the one that targets issues related to the electorate’s pockets will win.

The lesson in this campaign mantra win was that of all political slogans, the one that targets issues
related to the electorate’s pockets will win, unless there is an issue often transient in nature that
dominates an election on a one-off basis.

The reference here is to elections in more developed democracies where, apart from winning over
voters with legitimate or, as has been witnessed in recent years in the US and UK particularly,
manufactured issues, even messages of hate, there is little else to influence electoral outcomes.

ELITISM
 21

The military, the security services and the judiciary are not seen running parallel campaigns — subtly
or blatantly, manipulating election results and undermining elected governments with a mandate and
sending prime ministers packing or worst still to the gallows.

This has weakened democracy and the democratic dispensation to the extent that ‘elected’
parliaments and prime ministers and their governments have publicly conceded their helplessness in
even addressing issues such as enforced disappearances of dissident political activists.

Elected parliaments can’t even legislate to ensure the basic right to life and liberty of citizens. Let
alone that, they can’t even forcefully say that someone accused of having committed a crime should
face the charges in a court of law and not go missing.

In our case, geography, ethnicity, location, bad timing and a range of similar factors seem sufficient
grounds for the midnight knock and someone’s disappearance from the face of Mother Earth without
a trace.

The long-term effect of such pain, brutality on the traumatised family, friends and society at large is
beyond the scope of this column. Mental health experts have written volumes that are in the public
domain and easily accessible, if anyone at the helm is interested.

This is an issue that does not seem to be on the priority list of anyone in the corridors of power. In our
experience, the matter receives some attention from those aspiring to power or nearing it, but once
they are home, it is left at the door.

Many politicians privately argue that given the ground reality in our beautiful, yet blighted country,
they can’t really push very far and hard as they would run the risk of upsetting the apple cart and
losing whatever few democratic gains there have been after years of struggle.

Even if democratic gain was their solitary rationale, it would be a faint, weak one for what good is a
‘democratic gain’ if the citizens can’t even be assured of their right to freedom of expression, and their
liberty is threatened by the state itself?

For a moment, let’s say the politicians are indeed hamstrung by extra-parliamentary forces. Are they,
truly, free of blame themselves? International banker, author and economic analyst, Yousuf Nazar,
who happens to be my cousin, argues that is not the case.

The present government is asking the people to make huge sacrifices to stabilise a near-bankrupt
economy by raising energy prices in line with the global price escalation (which has spurred over 20pc
inflation), raising personal income taxes of the salaried classes, and levying a 10pc one-time super
tax on industries making multiples of billions in profits.

Against this backdrop, Yousuf Nazar looked at the published figures of the taxes paid by the
parliamentarians themselves. The summary analysis of incomes and taxes paid by MNAs for the tax
year 2019 showed shocking details.

On an income of 312 MNAs totalling Rs9,575m, the effective tax rate, that is at which income tax was
paid, was 4.28pc. The rate was even lower at 3pc for those claiming a part of their income from
agriculture.
ELITISM
 22

The highest-earning MNA paid tax at the rate of 7.5pc of his declared income of Rs1,876m and the
lowest rate of tax turned out to be 0.7pc on an income of Rs146m. This range of tax rates from 7.5pc to
0.7pc was reflected in the cumulative effective rate of 4.28pc.

The easiest and safest tax haven is ‘income from agriculture’ and is more or less tax-free. If anyone
had the will and tasked a seasoned investigator to look into this, rest assured billions of non-
agricultural income would also be found sheltered here. In any case, not taxing income from
agriculture that accounts for over 20pc of GDP is mind-boggling.

Whether it is a provincial tax or federal is only a matter of detail. Untaxed agricultural income,
alongside debt-servicing, the sacrosanct defence expenditure and subsidies to the ultra-rich, leaves
very little leeway in the hands of the country’s financial managers.

Our very own mantra ought to be: It’s the elite capture of the economy, stupid. All else is no more
than a red herring.

The writer is a former editor of Dawn.

A new charter
A MISTAKE that a section of the commentariat continues to make is to painstakingly
separate factional/power competition from lofty, ideological politics as far as
consequences for civilian supremacy are concerned. The reason why this separation is
less relevant in the current moment is that both may lead to similar outcomes — a
reduction in the military’s influence in the political domain.

Arguments that Imran Khan is not sufficiently ‘anti-establishment’ because he doesn’t believe in
constitutional and parliamentary supremacy are important. But in a larger conversation about the
health of Pakistan’s democracy, when it comes to the narrower domain of trying to limit the military’s
influence in the present moment, this point becomes less relevant, as it was for Nawaz Sharif’s
opposition in 2018-2019 or any previous leader in earlier periods

In any case, it is ironic that everyone fails the litmus test of ‘true democrat’, given that both the PPP
and PML-N are currently happy to barter political survival for sustaining a coercive hybrid regime.

While there is much legitimate hand-wringing on political instability and polarisation, I also think the
current moment opens up possibilities for greater political stability in the future. This is primarily due
to widespread scepticism against the military’s role in politics among not just the current out-of-
favour party, but also among voters of other parties. In some ways, we are in a moment similar to
2007.

Read more: Benazir, Nawaz sign Charter of Democracy in London

The Charter of Democracy from that period was a bargain between elites designed to undertake a
transition back to civilian rule, while fixing constitutional perversions caused by the dictatorship. It
was an imperfect arrangement, not least because of frequent violations by both main parties, but it
remained a pressing requirement of that time.
ELITISM
 23

Pakistan is in a phase when another bargain between political elites is both plausible and needed.
There are three distinct points which this bargain or new charter needs to cover for it to lead to a more
mature political dispensation: free and fair elections; a ‘de-judicialization’ of politics; and devolution
that actually matters.

The first point is a fairly straightforward requirement of any functioning democracy. The timing of the
election is less relevant at this point than is the notion of it being free from the malignant influence of
the establishment. This means allowing parties the space to mobilise and to allow all candidates to
freely contest on the party platform of their choosing.

Curated defections in south Punjab and midnight disqualifications on flimsy pretexts need to be done
away with, and reversed where applicable. A case can be made for earlier and on-time elections, but
the quality of this election is what remains crucial. A failure on this aspect will only lead to another
sustained cycle of political instability, opening up the space for further arbitration by the
establishment.

The second point is unique to the kind of politics that’s developed in this country over the last decade:
an end to resolving political conflicts through the judiciary. This judicialization of politics has only led
the populace to form an impression of partisanship in the superior judiciary and of acclaim-seeking
behaviour in judges, as well as of continued ingress in domains beyond their remit such as
management of the economy and urban planning.

Achieving this de-judicialisation would involve greater faith being placed in parliamentary
commissions and inquiries, and multipartisan committees to steer through key reforms. There is
precedence for this, such as the process of electoral reform between 2015 and 2018 and the 18th
Amendment between 2008-2010. Asking the judiciary to intervene on issues of whether overseas
Pakistanis should be granted the right to vote or whether EVMs should be used is a terrible way of
diluting the authority of parliament itself.

Finally, the third point for a new charter would be a constitutional enhancement of local governments
as a distinct third tier of government. The current Article 140-A has proved insufficient, as has
pressure from the courts. All mainstream parties have either failed to hold elections, or, where these
have been held, have seen the withholding of financial and administrative power from the third tier.

There are a number of reasons why mainstream parties are so reluctant to devolve beyond the
provincial tier. Absence of party strength at the grassroots and the reliance on local government
functions to win provincial and national assembly elections are two important reasons. But the best
analysis of this comes from Aqil Sajjad who calls this reluctance a form of ‘class politics’.

The simplest explanation is that urban and rural upper classes that populate the MPA and MNA tier
of politics have no desire to open up a democratic channel that would widen access of other
socioeconomic groups.

This is precisely why a charter of democracy without actual devolution will fail to resolve the most
central failing of Pakistan’s politics — its unrepresentative character.

The first two points mentioned above will provide us a stable bargain between elites, without
necessarily improving citizen-led accountability of those elites. It is only through devolution that this
ELITISM
 24

accountability opens up in any meaningful way. The previous charter failed to do it, perhaps partly
out of circumstance (a transition from a centralised dictatorship) and perhaps partly out of
expedience (the interests of the political elite). The current moment offers a chance to rectify this
mistake.

Each point of this proposed charter goes against the current politics of one party or another. Free and
fair elections held early will be favored by an ascendant PTI, but unlikely to be in the present interest
of the PDM coalition. The ‘de-judicialisation’ of politics and greater reliance on parliament forces the
PTI to accept other parties as legitimate actors. And devolution is opposed by all parties to varying
extents. Regardless, though, these are the costs of a more stable political future and they need to be
borne by the mainstream parties.

The writer teaches politics and sociology at Lums.

Elite politics
UNREMITTING political confrontations have left the country exhausted and emaciated.
Political tensions show no sign of abating. Political leaders often claim the next round
of battle will be decisive but their war rages on. The war paradigm guides their political
behaviour. Opponents are seen as enemies, not competitors. Politics is about
vanquishing the enemy and eliminating them from the political scene in a terminal
conflict.

This of course is not new. This pattern of behaviour has resonated throughout Pakistan’s history and
is part of an unedifying political tradition characterised by intolerance and lack of respect for
democratic norms.

Those in power have rarely accepted the need to engage with the opposition, while those in opposition
have often sought to destabilise the government of the day. There have been moments of rare
cooperation, as for example, in the consensus that led to adoption of the 18th Constitutional
Amendment. But for the most part, Pakistan’s fractious politics has seen fierce government-
opposition conflict and mutual efforts to upend each other.

These endless political feuds opened space for the military’s manipulation of politics and frequent
return to the political stage.

There was another cost to the country. The lack of a stable and predictable environment proved a
huge hurdle to solving the country’s daunting problems, which were either left to fester or met by
imprudent short-term policy responses. Pakistan’s economic troubles are in no small measure a
consequence of this.

Since 2008, the country has seen a period of uninterrupted civilian rule, despite the so-called ‘hybrid
experiment’ of recent years that gave the army an informal but extensive role in national affairs. This
period should nonetheless have involved a strengthening of democracy. It should have seen efforts by
political parties to create a democratic culture. But this didn’t happen.

ELITISM
 25

An opportunity was also lost to rebalance and reset power among state institutions as well as realign
politics with the economic and social changes sweeping the country. These changes included greater
urbanisation, expansion of a more assertive middle class, emergence of a diverse and vibrant civil
society and a more ‘connected’ and informed citizenry, thanks to the spread of technology.

Instead of a new form of politics emerging, it remained in a mostly old mould.

The rise of PTI, which came to represent the aspirations of the middle class and youth and also tapped
into public resentment against the elite, promised a departure from politics-as-usual. But it became a
cult following rather than a modern political party that could act ‘independently’ of its establishment
benefactors once it assumed power. Like other parties it included members of the old political elite,
local influentials and habitual turncoats — prominent figures who were previously part of the two
traditional parties that the PTI condemned as corrupt and bankrupt. Expediency denuded it from the
chance to chart a new political course for the country. The primacy of personality over party
organisation also made the new party resemble older ones.

Bereft of ideas intra-elite conflict offers no escape from the quagmire Pakistan is trapped in.

As a result, there has been little break from the past in the way politics functions, the narrow social
base of party leaders and what status quo-oriented parties have to offer the public in whose name they
play the power game.

It also means there is no significant change in the relationship between the state and citizens, despite
the transformed social and political environment. Politics remains a competition between and among
political elites. It is sadly bereft of ideas or a vision — other than platitudes — about where opposing
parties want to take the country. There are barely any significant policy differences between rival
parties who nonetheless declare each other unfit to govern.

Pakistan’s disappointing economic record illustrates this.

Governments, even when run by different political parties, have adopted a similar economic stance,
despite their claims to the contrary. Rather than undertake reform and raise domestic resources to
address the country’s widening budget and balance of payments deficits, they all resorted to excessive
borrowing.

The availability of external resources as a result of Pakistan’s foreign policy alignments during the
Cold War and beyond created a habit of dependence on ‘outside help’. This habit urged successive
governments — representing rural and urban elites — to avoid economic reform, mobilise adequate
revenue or tax its network of influential supporters. Aid-fuelled or ‘borrowed’ economic growth may
not necessarily have been a bad thing if the fiscal space it provided was used to launch reforms to
solve the underlying structural problems of the economy: broadening the tax net, documenting the
economy, diversifying the export base, and encouraging savings to finance a level of investment that
could sustain an economic growth rate higher than the rise in population. But none of this happened.
The availability of external resources along with high levels of remittances from overseas Pakistanis
simply enabled ruling elites to paper over the structural problems of the economy. Every government
sought IMF bailouts to avert insolvency.

ELITISM
 26

Economic management that relied on someone else’s money permitted the country’s rulers — both
civilian and military — to postpone much-needed structural reforms, including tax reform, that could
have placed the economy on a viable, self-sustaining path. Successive governments borrowed heavily
to finance development as well as consumption. In the process, the country accumulated
unsustainable debt both by borrowing abroad and at home. This burden continues to cripple the
economy today and fuel record levels of inflation.

With few if any exceptions, governments formed by different political parties preferred to pursue
‘pain-free’ ways to manage public finances. This has left the country lurching from one financial crisis
to another. While playing to populist constituencies their policies perpetuated the status quo.

This can be only explained in terms of a political elite or ‘privilegentsia’ averse to measures it saw as
eroding its political position or undermining its class interests. Their economic policies testify that
elite capture of public resources is an abiding reality.

This intra-elite conflict is hardly obscured by the highfalutin rhetoric which it is wrapped in. Its most
troubling aspect is that it offers no escape from the quagmire the country is trapped in — of
dysfunctional politics, mounting governance challenges, visionless economic management and
crumbling public faith in state institutions.

The writer is a former ambassador to the US, UK & UN.

Property is power
dire. The yawning trade and current account deficits, galloping inflation and default
prospects have generated significant comment. It is noteworthy, though, that the
working masses, who bear the biggest brunt of the downward economic spiral, barely
feature in most analyses.

Most commentary has focused on the efficacy of short-term fixes like the ‘Dar peg’. But there have
also been prominent contributors on these pages who have presented prescriptions to stabilise and
restructure the economy in the medium to long-run.

I disagree both with the foundational assumptions of most analytical treatises in vogue, as well as the
long-term vision accompanying them. What follows is a reasoned attempt to engage with the
dominant — what I’d characterise as liberal — notion of ‘economic reform’, alongside a case for a class
politics and redistributive policies which better represent the interests of Pakistan’s working class.

Proponents of liberal economic reform start from the premise that Pakistan’s economic woes are
rooted in the state’s excessive role and the unwillingness of politically motivated decision-makers to
adopt market-based solutions. They say that it is by eschewing political pressure and making
commitments to market-based solutions that the principle of merit can be resuscitated, the absence of
which has led to the consolidation of a highly unequal economy where there is little or no prospect of
social mobility for the majority.

The working class should be the object of economic policy.

ELITISM
 27

There is undoubtedly concentration of wealth, inequality of opportunity and a self-serving ‘elite’ here.
Yet the arguments that generally accompany these facts are tautological and selective; eg, how does
one square the fact that a self-serving elite engages in rent seeking yet makes a pitch for a new ‘elite
bargain’ to undertake policy shifts? Is it accurate to claim that privatisation of SOEs and further
corporatisation of education are novel reforms?

A more meaningful historical analysis reveals that, over almost eight decades, Pakistan’s ruling class
has presided over a political economy that cannot be captured by a simple binary of state and market.
The state has always enabled private enterprise to a significant extent, while both private interests
and state institutions/functionaries comprise the ‘elite’, which means that rent-seeking is a set of
practices that has historically been founded upon different configurations of state-market relations.

While it is true that social mobility has been limited for working people, the ruling class has evolved
over time; eg, individuals like Malik Riaz who do not hail from privileged backgrounds. The religious
right and commercial segments have pushed themselves into the structure of power ‘from below’,
particularly during and after the 1980s.

It was in the same decade that the privatisation of SOEs was initiated. Many were sold to friends of
people in power for a pittance. The once profitable PTCL was sold at gunpoint to Etisalat, a company
in which the UAE government enjoys a 60 per cent share! There is little evidence to suggest that
PTCL’s privatisation has contributed to better service for the undifferentiated category of consumers
that liberal economic reformers believe should be the primary beneficiary of economic policy.

In contrast, I believe that the working class majority — across both formal and informal occupations
in agriculture, manufacturing and services — should be the object of economic policy, and, relatedly,
the subject of a politics to overturn Pakistan’s long-standing ‘elite bargain’.

This majority is largely propertyless and relies on wage slavery and various types of precarious self-
employment to make ends meet. It spends most of its measly income on rent or under-the-table
payments for informal housing because the formal housing market — sanctified by the state — is
dominated by speculators and rich investors. It is increasingly forced to turn to private providers for
health and education, even where the quality of service is poor. It is the class most affected by hikes in
prices of basic amenities, food and petrol.

None of this can be explained through a binary whereby an otherwise ‘efficient’ market is not being
allowed to operate by an ‘inefficient’ government. Instead, we should name the nexus of state and
capital that privileges profit-making in agro-industry, real estate and similar sectors. Acute
concentration of property in a few hands is exacerbated by the pillaging of what remains of the
commons.

The domestic political economy is reinforced by powerful interest groups outside Pakistan.
Multilateral donors like the IMF and World Bank also lament the unwillingness of Pakistan’s
economic decision-makers to undertake ‘painful structural reform’ like privatisation. But none of
these elite interests, home and abroad, will ever put (rural and urban) land reform along with other
redistributive measures at the top of their wish list.

ELITISM
 28

Elite privilege consumes $17.4bn of Pakistan’s economy: UNDP

In an exclusive interview with Al Jazeera, UNDP’s Kanni Wignaraja says Pakistani leaders have promised action
over the damning UN report.

UNDP Assistant Secretary-General Kanni Wignaraja [Handout photo]

By Asad Hashim

Published On 13 Apr 2021

13 Apr 2021

Islamabad, Pakistan – Economic privileges accorded to Pakistan’s elite groups, including the corporate sector,
feudal landlords, the political class and the country’s powerful military, add up to an estimated $17.4bn, or
roughly 6 percent of the country’s economy, a new United Nations report has found.

Released last week, the UN Development Programme’s (UNDP) National Human Development Report (NHDR)
for Pakistan focuses on issues of inequality in the South Asian country of 220 million people.

The report uses the prism of “Power, People and Policy” to examine the stark income and economic
opportunity disparities in the developing country.

“Powerful groups use their privilege to capture more than their fair share, people perpetuate structural
discrimination through prejudice against others based on social characteristics, and policies are often
unsuccessful at addressing the resulting inequity, or may even contribute to it,” says the report.

Kanni Wignaraja, assistant secretary-general and regional chief of the UNDP has been on a two-week “virtual
tour” of Pakistan to discuss the report’s findings, holding talks with Prime Minister Imran Khan and other top
members of his cabinet, including the ministers of foreign affairs and planning.

She says Pakistani leaders have taken the findings of the report “right on” and pledged to focus on prescriptive
action

“[In our remarks in meetings] we focused right in on where […] the shadows are, and what is it that actually
diverts from a reform agenda in a country,” she told Al Jazeera in an exclusive interview.

“My hope is that there is strong intent to review things like the current tax and subsidy policies, to look at land
and capital access.”

Can the opposition unseat Imran Khan? | Inside Story

The paradox of privileges

ELITISM
 29

The biggest beneficiary of the privileges – which may take the form of tax breaks, cheap input prices, higher
output prices or preferential access to capital, land and services – was found to be the country’s corporate
sector, which accrued an estimated $4.7bn in privileges, the report says.

By signing up, you agree to our Privacy Policy

The second and third-highest recipients of privileges were found to be the country’s richest 1 percent, who
collectively own 9 percent of the country’s overall income, and the feudal land-owning class, which constitutes
1.1 percent of the population but owns 22 percent of all arable farmland.

Both classes have strong representation in the Pakistani Parliament, with most major political parties’
candidates’ drawn from either the feudal landowning class or the country’s business-owning elite.

The UNDP’s Wignaraja noted that this creates a paradox where those responsible for doling out the privileges
were also those who were receiving them.

“If with one hand you are providing a gain that benefits yourself, and taking the gain with the other hand, then
what we have lost is that sense of separation of powers and oversight,” she said.

The country’s military was found to receive $1.7bn in privileges, mainly in the form of preferential access to
land, capital and infrastructure, as well as tax exemptions [File: Salahuddin/Reuters]

The country’s powerful military, which has directly ruled Pakistan for roughly half of its 74-year history, was
found to receive $1.7bn in privileges, mainly in the form of preferential access to land, capital and
infrastructure, as well as tax exemptions.

The report noted, however, that Pakistan’s military is also “the largest conglomerate of business entities in
Pakistan, besides being the country’s biggest urban real estate developer and manager, with wide-ranging
involvement in the construction of public projects”.

“These things are not neatly separate entities,” said Wignaraja. “You do see some of… these are overlapping
so you almost get a double privilege by the military. The minute in a country the military is a part of big
business, it obviously doubles the issue and the problem.”

In a country like Pakistan, where the military continues to hold power over many aspects of governance, she
warned that it would take “almost a social movement” to displace structures of power that were so
entrenched.

“It’s a tough one that has to be taken on because this is about power politics and it would be naive of me to
expect or to recommend to leaders on what to do in this respect,” she said.

“I’m very clear that we can provide the analytics, we can put the impartial story out there and then it is up to
the country, both the state and the people to say: ‘Enough, here is how we need to take break up these
strongly-held power groups and dynamics in this country.’”
ELITISM
 30

Deep-rooted inequality

The wide-ranging NHDR provides detailed data on deep-rooted inequality in Pakistan’s economy.

While the richest 1 percent held 9 percent of the country’s income of $314.4bn in 2018-19, the report found
that the poorest 1 percent held just 0.15 percent.

Overall, the richest 20 percent of Pakistanis hold 49.6 percent of the national income, compared with the
poorest 20 percent, who hold just 7 percent.

While the richest 1 percent held 9 percent of the country’s income of $314.4bn in 2018/19, the report found
the poorest 1 percent held just 0.15 percent [File: Arif Ali/AFP]

“The poorest and richest Pakistanis effectively live in completely different countries, with literacy levels,
health outcomes, and living standards that are poles apart,” writes Aliona Niculita, deputy resident
representative of the UNDP in Pakistan, in the report.

Of further concern to Pakistani policymakers will be a shrinking of the middle-class, with the UNDP’s data
showing middle-income earners fell from 42 percent of the population in 2009 to 36 percent in 2019.

The data highlights regional inequalities in service delivery and shows how higher-income areas also see
higher rates of public expenditure.

“The NHDR 2020 reveals that Pakistan’s people do not benefit equally from public expenditure,” reads the
report. “The overall share is 14.2 percent for the poorest income [category], compared with 37.2 percent for
the richest [category].”

‘Extra rupee for girls’ education’

As part of its recommendations, the UNDP has suggested Pakistan’s government take on increased spending
as part of a macroeconomic model that focuses on closing the gap between its Human Development Index
(HDI) of 0.570 and that of other countries in the region.

Pakistan ranks second-to-last in South Asia based on HDI, outperforming Afghanistan but lagging behind all six
of its other regional neighbours.

Pakistan ranks 153 out of 156 countries on the World Economic Forum’s Global Gender Gap Index, with 32
percent of primary-school-aged girls out of school [File: Faisal Mahmood/Reuters]

“This is something actually that the leadership brought up themselves, as to this conundrum of feeling like one
is stuck at a certain point,” said the UNDP’s Wignaraja. “Is there a glass ceiling to human development and
why, and what is needed to crack it?”

ELITISM
 31

The UNDP has recommended policies that focus on removing privileges and targeting spending on outcomes
that provide both structural support for the country’s poor and on the infrastructure – such as education and
healthcare – that would provide them further economic opportunities.

“If I had just that one extra […] rupee, and you asked me where would I put it, I would put in girls education,”
said Wignaraja.

Pakistan ranks 153 out of 156 countries on the World Economic Forum’s Global Gender Gap Index (PDF), with
32 percent of primary-school-aged girls out of school.

“The evidence across the world on one of the biggest returns on investment comes from educating all of our
children and getting them and keeping them in school,” said Wignaraja.

“But a huge return is that all of those missing girls from school and missing women from the workplace, it’s
investing in that.”

Asad Hashim is Al Jazeera’s digital correspondent in Pakistan. He tweets @AsadHashim.

ELITISM