Daily Times

In the first part of this two articles series on the role of elite published in these pages on 22 November 2019, we presented a few distinctive viewpoints. One school of thought argues that a tiny elite has rigged the market and controls that state to accrue benefits for itself at the cost of majority of people in Pakistan and it leads to the country existing in the ‘economy of an elitist state’. Another viewpoint argues that national elite through the “ruling class consensus” can put a poor country on the path of development. Broad-based and inclusive development through ‘cross-cutting coalitions’ of elite can bring about much-needed economic and political stability. In Pakistan’s case, the basic fault-line is the tension between the non-representative and political elite and it needs to be resolved for the country to move forward. In today’s article with the help of theoretical literature (North et al. 2013, Mushtaq Khan 2005 &2013), we further contextualize the role of elite, development, rents (income captured through extra-legal means), and political stability for developing countries.

North, Wallis, Webb and Weingast(2013)’s edited book discusses the notion of “limited access order”. In this type of regime, the elite earn rents that in turn constrain violence, leads to political stability, andit results in some level of economic development for the country. The authors in this book present a range of “limited access order” from fragile, basic, to mature. This “limited access order” is distinguished from the “open access order” marked by the rule of law, open competition, state’s monopoly over instruments of violence, and impersonalized governance.

The basic issue is many point out lack of ‘good governance’ in developing countries like Pakistan. It is common to lament the lack of impersonalized rule and across-the-board rule of law. It is often asked why we cannot have institutions of OECD countries and “open access order”. There is no doubt that institutions matter. However, to think that developing countries can just transplant the OECD countries’ working institutions in their contexts is not without its pitfalls. Just because some institutions seem to work better in developed countries (who may have other issues such as breakdown of community values/social cohesion, and individual alienation) does not mean that the very same institutions are meant to work in the same manner when they are shifted to developing countries. How well the governance, bureaucracy, rule of law works in any given country depends on its socio-economic and political structures. Unless those very structures are not in alignment with a particular regime type, mere copying the nature of institutions is not going to work. Institutions work within the broader structures.

The literature states that through “elite bargains” limited access order is established. In this type of order, rents are earned as a way of social arrangements that constrain violence and allow some level of stability. The important question is what types of “elite bargains” result in positive socio-economic development and what other types do not.

There is movement, progression and even regression along the spectrum of “limited access order”. If “elite bargains” can earn more rents, “limited access order” can move from fragile to basic and from basic to mature. However, they can also regress if they are unable to absorb shocks or if the new power configuration leads to instability when groups within the dominant coalition want to out-compete others to capture more rents. If the elite peacefully negotiate the new terms of rents, then progress happens and it does not lead to instability. However, if arrangements are settled through show of force, then it leads to instability. It reflects issues of progression or regression along the spectrum of “limited access order”.

The “good governance” school of thought considers rents to be inherently unproductive, damaging and a drain on society. While, the structuralist school of thought considers growth-enhancing rents as well as growth-damaging rents. The advanced countries historically changed property rights in favour of the capitalists during the process of their development. Rents are needed to constrain violence, maintain political stability and allow economic growth in the developing countries. The real dilemma is not that rents are bad per se, it is whether the rents are captured by the productive groups or unproductive groups. The issue is whether the process of rents creation leads to “elite bargains” that allow political stability and economic growth or whether it leads to further chaos and instability.

During the process of maturity of “limited access order”, the rule of law covers elite’s “public relationships” only. Later in the maturation process, the rule of law could be made applicable to the population at large or some aspects of it to be made valid across the board. Similarly, “limited access order” mature when the private organisations and opposition parties outside the ambit of the government can hold government accountable to its commitments. They play the role of third-party enforcement in the progression of the maturation process.

The authors claim that historically the rule of law was made applicable to the elite first. Once the elite interactions were guided by the rule of law, only then it spread to the wider public. It happened because making credible commitments to the property rights of elite in the initial phase was more enforceable than making such commitments to the property rights of the wider public to begin with. The whole process of the enforcement of the rule of law was linked to the growth of the developed public and private organisations that in turn made the commitments of the governments credible. It shows why reforms advocating establishing the “Weberian” rule of law as a prerequisite of development are flawed.

Discussing the transition from “limited access order” to “open access order”, the authors identify three “doorstep” conditions to move towards impersonalisation of relationships amongst the elites. Rule of law that covers the elite interactions is the first condition. Continuity of the public and private organisations beyond the lifetime of its leader/s and support for such perpetual organisations is the second condition. Having a “consolidated political control” over the instruments of violence including the state organisations (police and military) is the third condition. In this transition phase, characteristics of “Weberian” state cannot be implemented to the entire population; they aim to cover the elite interactions to start off with.

Mushtaq Khan states that the dominant discourse is to implement the “good governance” agenda to achieve growth. It does not address the costs required to maintain political stability and it does not give the elites in “limited access order” a workable solution. Some ways of accomplishing political stability may be better and more in sync with offering sustainability of growth than others. The reform efforts should focus on “incremental institutional and organizational changes” that would allow mutual co-existence for the competing elites and also maintain economic growth.Mutual co-existence is needed for the elite in the “limited access order” as “live and let live agreement”.

The “good governance” framework that works on the assumption of transplanting the institutions of OECD countries in developing countries is flawed because the inclusive political and economic institutions are in the developed countries are the result of much larger structural processes. Such analysis only focuses on the outcome rather than the processes themselves. There is need to apply a nuanced analytical lens to take into account the transition towards political stability and development.

The writer is an Islamabad-based social scientist. Email: fskcolumns@gmail.com