A malignant settlement

Published October 30, 2023
The writer teaches politics and sociology at Lums.
The writer teaches politics and sociology at Lums.

LAST week, on these pages, Khurram Husain published an insightful and timely piece on Nawaz Sharif’s return and its implications for the management of Pakistan’s economy.

Dubbing state-financed, consumption-dependent growth as the ‘Nawaz model’, the piece lucidly identifies why this model makes for (or made for) good party politics, but poor economic governance.

One could plausibly argue that, given the relative success that consumption and infrastructure-led growth spurts have had in shoring up political support, similar tactics have been adopted by other regimes as well, whenever allowed by the external environment.

Growth during the Musharraf period, as well as in the Shaukat Tarin phase of Imran Khan’s government, made use of (or created) liquidity conditions to spur domestic consumption. Both ultimately led to fiscal deficits and balance-of-payments pressures that required sharp corrections.

Such short-lived spurts are a standard feature of Pakistan’s development trajectory since the 1980s. In fact, it is not incorrect to suggest that the country is in the throes of a multi-decade-long period of development stagnation.

Over the same period, growth rates in comparable countries exceed Pakistan’s, with increasingly higher shares in global trade and relatively stable price levels. In comparison, Pakistan’s exports remain stagnant as a percentage of GDP, and inflation levels remain high. Social development indicators similarly lag as well.

In its simplest form, social and economic development is the outcome of how resources such as capital and labour are coordinated and put to use. The task of coordinating resources, and deciding how they will be put to use, usually falls on the state, and since the 1980s, the private sector. Their actions can be dictated by a range of factors — prevailing ideas and norms, the power balance across state and social groups, the actual ability of state actors, and so on.

A political settlement that can produce sustained development eludes the country.

The configuration of these factors at any given point is what economist Mushtaq Khan calls a “political settlement”. It does not imply a bargain or a consensus, in so far that all groups approve of the prevailing settlement. In fact, as Pakistan’s case shows, destabilising conflict between different groups (civil vs military, rural vs urban, ethnic divisions) can be a recurring feature of a settlement. What is also clear is that Pakistan’s particular political settlement or configuration is not producing sustained results.

The connections between destabilising politics and a stagnating economy work in both directions. A stagnating economy means less for everyone. Limited resources are shared among a range of claimants. Military officers apportion off their share and then some, bureaucrats grab something for themselves through perks and pensions, politicians require money to distribute patronage to secure re-election, industrialists require subsidies for their profits, agriculturists need support prices, and wholesalers, contractors, and developers thrive on tax evasion.

Frequently, these conflicting claims turn into destabilising politics, with civilian party elites vs the military high command being the most obvious fault line. The triggering cause can be a conflict over appointments or decision-making in foreign policy, but as others have alluded to, at its root it really is about who gets to call the shots on how a small pile of resources will get distributed.

Political instability, once in place, further shortens time horizons and provokes a free-for-all. It explains why governments make use of consumption booms and infrastructure patronage as a political strategy. It also explains why the military pursues real estate, posts in civilian organisations, and other sinecures with an unceasing appetite.

Overall, such actions taken under the context of instability makes the task of putting capital and labour to long-term productive use even more difficult, hence perpetuating economic stagnation.

This vicious cycle has now been in place for at least four decades. In the past two decades, economic booms have grown shorter, and the busts much harsher as an entrenched crisis of productivity places straitjackets on the economy. Political arrangements mirror this trend, with backdoor machinations, military overreach, and civilian polarisation inducing bizarre U-turns and ‘selections’.

As one very astute observer put it, Pakistan’s political stability is not tied to the electoral cycle, as is the case in other countries, but rather to the tenure-cycle of the army chief and the ambitions of those who aspire for that office.

Amidst all this, a political settlement that can produce sustained development eludes the country. There is not a single social or political entity with the capacity or the power to unilaterally reconfigure the status quo.

The military may have coercive strength, but it lacks capacity or legitimacy, which puts it in the awkward situation of cutting deals with the same political class it opposes. Political parties may have legitimacy or capacity, but do not have the strength to tackle an entrenched military. Deal-cutting for a share of the pie is their preferred strategy to survive.

Marxist analysis, which focuses on deeper structures, would argue that Pakistan’s capitalist class is too weak and almost entirely dependent on state largesse for its own survival to be a force that can set a direction of sustained development. And the other major actor of modern history, the working classes, are fragmented, disorganised, and reeling under decades of political and economic suppression.

This is the context in which Nawaz Sharif’s return must be placed. Identifying political saviours who can turn the country around — a fool’s errand in the best of times — seems even more bizarre right now, given the treatment dished out to the PTI and the military-dominated nature of decision-making in the country.

This return, then, does not seem to be a departure from the political and economic instability and stagnation of the last few decades. In fact, it is the natural outcome of it.

The writer teaches politics and sociology at Lums.

X (formerly Twitter): umairjav

Published in Dawn, October 30th, 2023

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