Why do nations fail? Why are some countries more developed than others? Why do some lead while others lag behind? These are some of the fundamental questions international development experts strive to answer. While it is not plausible to explain variations in prosperity and poverty through a single cause, Daron Acemoglu and James A Robinson in their seminal book Why Nations Fail identify the central role of institutions in their quest to understand the main source of difference. They contend that while culture (religion, attitudes, values) and geography (climate, topography, disease environment) are important for well-functioning societies, they are not as decisive as institutions. When analysing the case of Pakistan, it would be hard to disagree with their conclusion. Pakistan remains far from prosperity and transformation because it lacks strong and inclusive institutions. The aftermath of Panama leaks in Pakistan is a powerful reminder of that. Before contextualising Panama revelations within the institutional debate, it is important to understand what good institutions are and why they are important. Institutions are broadly defined as the rules that govern economic and political behaviour. They are known as ‘rules of the game’, which fundamentally structure and organise societies. Examples include law enforcement agencies, police and judiciary. Good institutions feature protection of property rights, contract enforcement, rule of law, market-competition and appropriate incentives. Institutions can be further classified into equitable and inequitable institutions. Equitable institutions ensure that property of all people is secure and that there is equality before the law. A good, inclusive institutional environment will provide access to services and public goods for all. By contrast, inequitable institutions concentrate power and opportunities in the hands of a few without constraints. Korea offers an illustrative example of the central role of institutions. Following independence from Japan, Korea was divided at the 38th parallel into two spheres of influence: the South was administered by the US, the North by Russia. Today South Korea counts as a highly developed country with high living standard, whereas North Korea has living standards similar to that of sub-Saharan African country. These differences are not ancient. They didn’t exist prior to the end of the WW2. But after 1945, different governments in the North and the South adopted very different ways of organising their economies. South Korea established institutions that protected property rights, promoted investment in human development and created a levelled playing field. On the other hand, North Korea introduced a rigid form of centrally planned economy where private property was outlawed and markets were banned. Both countries adopted divergent paths; economic performance diverged sharply. There is considerable evidence around us to suggest that institutions matter when it comes to success or failure of a country. Institutional development has been missing from the Pakistan story. Frequent military coups hindered evolution of political institutions. Since inception, personalistic interests of the ruling elite have dominated national priorities at the expense of wider public welfare. Policies have been motivated by selfish goals rather than ideals of collective good and social security. This was supported by setting up inequitable institutions that promoted privilege, political patronage and nepotism. Traditionally, the ruling groups have crippled laws and institutions of accountability for personal gain. Vested political interests destroyed the police by depriving it of merit and adequate training. It has subsequently evolved into a highly politicised entity marred by corruption and incompetence. In many areas, the police-crime nexus is responsible for poor law and order. PIA, once our national pride, has miserably collapsed because of nepotistic recruitment and bad governance. Feudal lords in rural areas have aggressively pursued anti-development agenda to keep their authority unchallenged. It is no surprise then that those in power enjoy insulation from checks and balances. It is due to extremely weak institutional capacity that the powerful and wealthy manage to sail through any corruption scandal. The Panama documents that have exposed the hidden offshore wealth of some of the world’s most prominent politicians have presented the ruling party with a formidable challenge. As the documents name members of Prime Minister Nawaz Sharif’s family, there is an unprecedented pressure and outrage from the public and opposition for accountability. Yet once again the fury and hysteria over Panama has brutally exposed the severe institutional deficit as this outrage has no way of being channelled into institutional action. There is not one solid investigating agency in the country that the public could trust. Organisations like FIA have been abused by governments so much that they have been reduced to mere instruments of those in power. Take the example of the National Accountability Bureau (NAB). Recently, NAB’s resolve to crack down on political corruption drew immediate opposition from some politicians who accused the institution of overreach. The prime minister even warned of clipping its wings if the scrutiny continued unabated. Given this backdrop, can we expect NAB to honestly investigate the family of a sitting prime minister? And how can we forget to mention the latest drama of the ‘Chhotu gang’ in south Punjab, which exposed the acute incompetence of the police. A common argument supporting higher development with non-democratic regimes argues that democracy creates politicians with short-term horizons who cannot think beyond the next election and instead focus on short-term gains. Unfortunately, this holds true for democracy in Pakistan where short-term thinking has dominated planning and policy. Instead of consolidating existing institutions for long-term gain, politicians have promoted short-term interventions often in the form of parallel institutions to fill every gap in the patchwork of the state. Terrorists are tried via military courts. Why not make our civilian justice system robust? Rangers are leading the on-going clean-up operation in Karachi. A new security force has recently emerged under the name of Dolphins. Why not fix our national police? In the short-run, the Chhotu gang has been defeated with the help of army. In the long run, the Punjab police still lack the capacity and resources to defeat such criminal gangs. The tragedy is that short-termism wins because it can buy votes. A disproportionate focus on mega-projects like Metro and highways is a clear manifestation of this thinking. The glitz and tangible nature of infrastructural projects and their vote-winning power fuel the trend. Institutions remain invisible. In sum, development is about social, economic and political transformation of societies. Development in its true sense mean that citizens are secure, healthy and empowered. Based on this criterion, there is a considerable amount of work to be done. We must start with the basics. Building strong and effective institutions that promote rule of law and inclusiveness is fundamental for empowerment and social justice. Unless we invest in consolidating our institutions, scandals like Panama will keep recurring with outcomes no different from previous ones. There will be rage and disillusionment. Judicial commissions will continue to be formed without ever reaching a solid conclusion. Media will eventually lose interest. Public will descend further into despair. A fresh scandal will break out and the vicious cycle will kick in all over again. If this continues, Pakistan will not experience substantial and lasting change. The writer is lecturer in International Development for University of London International Programmes