Daily Times

The political debate in the ruling elite is shrouded in the issue of corruption. Its eradication is being portrayed as the recipe for the social and economic salvation of this country. The most vociferous leaders on this issue are an integral part of the military, civilian and bureaucratic elite, notorious for their corrupt practices and demeanours. However, almost nothing is said about its social, economic and political aetiology. The crude explanation is its attribution to the conduct of individuals.

Firstly, corruption is not the cause of the crisis of the prevalent socio-economic system but a symptom of the diseased capitalism that needs and breeds this curse. It is the inevitable byproduct of the misery, dearth and deprivation excruciating society. And corruption is not just a Pakistani phenomenon but wherever capitalism exists, corruption, prostitution and crime are its essential components. Corruption has rapidly soared in China ever since the process of the restoration of capitalism began under Deng Xiao Ping in the late 1970s. According to an official report, Indian capitalists have stashed away $ 1.4 trillion in Swiss and other offshore financial havens. This huge amount is from tax evasion and other corrupt practices of India’s national bourgeoisie. The Economist in its recent issue says, “The world has 50-60 active tax havens, with over $ 21 trillion invested virtually tax-free and over 30 percent of global foreign direct investment is booked through these tax havens and it does not stop here as domestic investment is routed offshore to qualify for tax breaks reserved for foreign investors. Some suspect this accounts for a sizeable portion of ‘foreign’ investment in India and China. This is also the case in America, whose companies face one of the rich world’s highest corporate-taxes, also has some of the most energetic tax avoiders.”

There is not a single capitalist country on the planet that can claim to be corruption-free. Multinational corporations set aside huge sums of money in their budgets for kickbacks to the military and civilian political elites with whom deals are done. These corporations also bribe parliamentarians, political leaders and military and civilian bureaucrats — the policy makers in ‘defence’, infrastructural projects and other massive economic undertakings. The financial sharks and corporate businesses invest heavily in election campaigns to get state bailouts, contracts and other financial privileges. The 2012 presidential race was the most expensive in US history. But with the worsening of the economy, the role of corruption and the black economy becomes more intensive. Economists at the Paris School of Economics have highlighted that the elites of 139 low-middle-income countries have parked up to $ 9.3 trillion of unrecorded wealth offshore and this turns some of them from big debtors into creditors. “Developing countries as a whole don’t face a debt problem, but a huge offshore tax-evasion and money-laundering problem.”

With the weak and debilitated economic base of Pakistani capitalism, this parallel or black economy has been expanding robustly. From about five percent in the mid-1970s it has soared to about 70 percent at present. At the present stage, the formal or the official economy is growing at a rate of less than three percent while the growth rate of the black economy is estimated to be nine percent. It is like a tumour that has overtaken in size the body in which it was rooted. This black economy is mainly based on the drug trade, human trafficking, extortion, kidnapping for ransom, counterfeiting, smuggling, illegal logging, software and music piracy and several other criminal activities. But a massive share of this black economy comes from the corruption in state and society. The black economy has had severe ramifications in politics, state and society, with spiralling terrorism, crime and mayhem. The covert fragmentation within the state reflects conflicts among different warring factions of this parallel economy.

Paradoxically, this corruption and black economy have been a buffer and a prop for the economic cycle of Pakistan. With the burgeoning crisis of the formal economy, the reliance on this corruption-induced market has increased. With the ever-increasing military expenditure and repayment of debt and its interest, there is hardly anything left to spend on the social and infrastructural sectors. Austerity, price hikes and blatant exploitation has pulverised the already impoverished masses. Due to the collapse of living standards along with the decline in the buying power of society, there has been a severe contraction of the market. Its alternate is this black market consumption, which keeps the economic cycle moving. This sector, apart from being a cushion for the formal economy, is responsible for 73.8 percent of the total employment in the country. Characteristically, its investments are in short-term sectors like real estate, transport, health, education, and other services. It is shielded by religious fundamentalist groups, several political parties, sectarian and nationalist set-ups, sections of the state bought off by these lords of the black economy and outright criminal mafias.

Those politicians parroting the rhetoric of eliminating corruption are either too naive or unashamedly deceiving the people. If corruption, the mainstay of the black market is eradicated, it will tear down the whole economic edifice of Pakistan, as it is so outsized and the formal economy is enmeshed in it. The stark reality is that Pakistan’s capitalism is in terminal decay. Just like a junkie who is addicted to his fix, this crumbling system is totally dependent on this informal economy. It is simply not possible to revive or recreate a healthy capitalist economy in this country. With little or no chance of the recovery of world capitalism in the near future, Pakistan’s exports, foreign investment and industrial growth are almost ruled out. The debt burden continues to pile up. In the last five years the incumbent coalition democratic regime has acquired more foreign and domestic loans than the ones acquired by the preceding regimes in the last 60 years. Any party in power in this system would not and could not have done much else. With the falling rupee the debt burden keeps mounting. With about two percent of the population paying taxes, declining exports and record deficits, the economy cannot run on foreign remittances alone. Pakistan’s economic future is bleak, to say the least. Within the present system, no miracle can pull it out of the abyss into which it is falling. However, the question is not to interpret or predict the system; the point is to change it.

The writer is the editor of Asian Marxist Review and International Secretary of Pakistan Trade Union Defence Campaign. He can be reached at ptudc@hotmail.com