Daily Times

Pakistan is classified as a rentier state, trading its strategic utility for military and economic assistance. Its tiny ruling elite has regularly rented out the country’s strategic location and burgeoning military strength to the highest bidder to maintain the economic and political status quo. The country’s early evolution into a rentier state skewed its politics, society and economy towards distribution rather than production, and authoritarianism over democracy. Pakistan requires a course correction away from the ‘rentier’ model, if it is to become a truly democratic state.

Literature on rentier states posits that states that derive most of their revenue from external sources rather than taxation tend to be more autonomous in their decision-making, making them less accountable to citizens. Consequently, the rulers’ success rests on their ability to provide an uninterrupted stream of external rents rather than on developing a viable and representative political system. Moreover, encouraging internal capacity building and converting a rentier economy into a productive dynamic economy is a complex and difficult journey. The production and innovation record of public sector enterprises runs from mediocre to poor with low productivity, dependence on government subsidies and being prone to mismanagement. Public sector executives demonstrate very little capacity to innovate, invest in new technology and locate market niches. Instead, they rely on the rentier state for subsidies, captive domestic markets and easy low interest public loans or grants.

In Pakistan, the primary consequences of this abnormal reliance on a steady flow of external rents are: a) the (false and misleading) pockets of affluence in the country, and b) the pursuit of flawed state policies (and ideology) that would never have been sustainable in a truly democratic system. The inflow of rents arguably entrenches Pakistan’s political economy of patronage and power, and continues a trend in which Pakistan’s elite is buttressed by foreign funds in times of flux and crisis. The state basically ‘bribes’ the citizenry with the promise of a continued flow of external aid. Pakistan’s democracy remains shallow because, in the absence of taxes, people have less incentive to place pressure on the government to become responsive to their needs.

Between 1950 and 2015, Pakistan received sizeable inflows of economic and military assistance with $ 60 billion in direct aid from the US alone. However, despite decades of being a ‘frontline’ state and receiving billions of dollars of economic and military aid, there is little to show for it in terms of enhanced security or prosperity. Despite the frequent juggling of numbers, Pakistan’s economic performance has been erratic largely due to twisted priorities. The military has traditionally devoured the bulk of budgetary allocations at the expense of education and health. Also, economic growth has not matched population growth and the country has had to rely on external loans, aid and remittances to cover the burgeoning budgetary gap. Furthermore, with only around two million people currently registered to pay income tax, Pakistan has a worrying tax to GDP ratio of 8.6, one of the lowest globally.

Moreover, the mostly Punjabi feudal-military elite serves as the ‘the father’, setting the national agenda and generally remaining immune from domestic criticism. Pakistan’s ideological orientation divorces itself from the country’s historical, geographical and cultural roots by embracing an essentially exclusive and negative non-South Asian identity. For the elite, the national ideology, rooted in orthodox Sunni faith and geography, endows Pakistan with a strategic value that its leaders trade. Pakistan is positioned as an Islamic state, born to defend Islam and the “ideological frontiers of Islam”. This harmful strategy has entrenched religious dogmatism and extremism in society, which could have devastating consequences for a country’s future.

What lies ahead for Pakistan? Externally, conditions are favourable for the rentier model to remain. Pakistan is a geopolitical rentier state because of its position between Afghanistan (of US interest) and India (of Chinese interest). Now, it may also be a rentier state because of its border with Iran (of Saudi interest). The country remains too important for the US to sever transactional ties based on common interests. It is hard for the US to walk away when concerns exist over the shrinking writ of the Pakistani state and its control over growing stockpiles of nuclear weapons and fissile materials. The educated guess is that future deals with the US will involve smaller sums with China and Saudi Arabia picking up the tab for the US’ diminishing investments.

Internally, Pakistan’s transformation away from a rentier model can only takes place if both its strategic circumstances and the ideas and assumptions that the leading elite holds change fundamentally. There is little evidence that Pakistan’s elite is willing to give up the political privileges, vast wealth and access to opportunities that they enjoy. The key could be that the general populace, given increased access to media and education refuse to accept the lives of semi-servitude that their fathers are likely to have lived. Clearly, Pakistan’s future lies in ordinary people believing they have a stake in the country’s economic and political system. The passing of sovereignty from the elite to the people is an absolute requirement for economic and political progress.

The writer can be reached at shgcci@gmail.com