Price of elite capture

By Maleeha Lodhi
Published in Dawn on February 20, 2023

PAKISTAN’S bane has long been a narrow, oligarchic power elite that has dominated its politics and controlled its economy at the cost of people’s welfare and the country’s progress and development.

Its entrenched position over decades meant that governance challenges multiplied with force and intensity, leaving the country with daunting problems of solvency, security and mounting energy and water shortages.

These were left to fester rather than be addressed. Chronic instability and an oligarchic political order impeded the evolution of modern governance.

Patronage-based politics practised by elected and military governments alike relied on working networks of influential political families, kinship groups and biradaris to maintain them in power. But this mode of governance failed to meet the needs of an increasingly complex society. Yet the mass of unfulfilled public expectations never persuaded the elite to meaningfully respond to the needs and demands of the people.

This power elite resisted meaningful reform — whether land reform, tax reform or reforms in governance. It also acquired ‘rentier’ characteristics: using access to public office as a means of leveraging state resources to transfer wealth and acquire sources of unearned income.

This has been a common feature of both civilian and military elites. Both used patron-client relationships to reinforce their dominance and protect their economic interests and privileged status.

With successive civilian and military governments living beyond their means, unwilling to mobilise domestic resources and averse to economic reform, that fact alone contributed to miring Pakistan in perpetual financial crisis, with virtually every government in the past five decades leaving the economy in much worse shape for its successors to manage.

Borrowing both at home and abroad became its preferred way of managing public finances, which has landed the country today with an unprecedented and unsustainable level of debt.

Can the stranglehold of a narrow elite over the economic and political system be broken?

The politics and economics of elite ‘capture’ has long been discussed in the country. Published some years ago, Ishrat Husain’s impressive book, The Economy of an Elitist State, highlighted how one per cent of the population constituting an elite group maintained a stranglehold on the affairs of the state. Its power and dominance persisted through different forms and changes of government. As did inequality, which continues to characterise Pakistani society.

Husain’s main argument was that the respective roles of the state and market had been reversed as a narrow elite rigged the markets and hijacked the state to advantage itself. It concluded that this concentration of wealth and political power at the expense of the majority of the population had created a situation that was neither socially acceptable nor economically sustainable.

Now an important new book has joined this debate and generated many webinars and podcasts across the country that take this discussion forward. Big Capital in an Unequal World: The Micropolitics of Wealth in Pakistan by Rosita Armytage offers a fascinating insight into Pakistan’s ‘uppermost’ elite, and its networks and methods that help to maintain its position and reinforce inequality in the country.

The author casts her book as an ethnography of the micro-politics of elite lives, which she had the opportunity to observe during the time she spent in the country, working and then researching here. It is as much a study of the daily experience of modern capitalism among Pakistan’s business elite as an insight into the social conduct, relationship building, marriages and political connections of its members.

She describes Pakistan as a compelling case of elite power, which, like many rapidly developing states, is run by an oligarchy of economic and political interests and afflicted by high levels of instability. But this instability is encouraged by powerful families that benefit from it through what she calls the “culture of exemptions”.

More on this later. Armytage sets out to investigate Pakistan’s elite and configuration of power involving the institutions and structures that determine the allocation of wealth and political influence. But she finds that beneath the formal structure lie networks of power and influence linked by family and social connections through which economic and political competition, deals and alliances are, as it were, pre-negotiated.

The book argues that major wealth in the country is concentrated among a limited number of families that dominate the principal political parties and leading firms and have family links with the senior echelons of the military.

She observes that marriages among the slowly expanding elite help to create bonds between families and promote ‘political dynasty making’, which insulate elite members from threats to their power and influence.

In many respects, chapter six is the core — and the most interesting portion — of the book. In this, Armytage details the “culture of exemptions” that enable members of the elite to maintain and buttress their positions and thwart competition. The use of law as a mechanism, plus extra-legal and sometimes illegal activities constitute the means of wealth accumulation and preservation as well as tax avoidance.

She writes that, “Like the global elite of which they are a part, the Pakistani elite direct the legal and regulatory structures that determine the flows of wealth and opportunity within the country, while simultaneously operating outside of, and above these structures”. This she calls the culture of exemptions.

The broader conclusions she draws from her study are that elite capitalism in Pakistan is far from being an anomaly but the specific nature of its elite and highly localised form of business and finance contradicts the widely held assumption that the world is moving towards an era of globalised and standardised capitalism. An important finding is that Pakistan’s elite-dominated economy shows little sign of transitioning to a globalised high-finance economy.

What rings so true is how its “hyper-provincialised” character gives its members an inward-looking economic and political focus. Most of the economic elite are not globally focused players and have also acquired an anti-West orientation.

This is a must-read book that should encourage more debate about the role of the elite and especially how its stranglehold over the economic and political system can be broken by a growing middle class that seeks, but has yet to secure a bigger voice in national affairs.

Your Comment:

Related Posts

16

Apr
Print Media

Concessions, debt & reforms

By Riaz Riazuddin Published in Dawn on April 16, 2024 THE FBR had been publishing its Tax Expenditure Report since 2020. Each report estimates the ‘tax expenditure’, ie, the tax foregone or the revenue loss because of the built-in tax concessions and exemptions in our federal tax laws. Such concessions are legally doled out to various power […]

15

Apr
Print Media

Time to act is now

By Stefan Dercon Published in Dawn on April 09, 2024 OVER the last three decades, including as the chief economic adviser for the UK’s development work, I have witnessed economic transformation across large parts of the developing world. This transformation manifested itself in various forms, such as rapid income rises of Ghanaian farm workers, education access for[…]