Pakistan’s entirely self-serving elite bargain cannot continue
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A much-coveted prize of belonging to the elite of Pakistan’s capital city is membership in the Islamabad Club. The club’s website proudly claims to be the “exclusive hub of many of Pakistan’s renowned citizens and diplomats and is known for its eminence and grandeur” where one can “experience the royalty.” Stretched over 350 acres in the heart of the city, the club provides its members with a “full range of indoor and outdoor sports facilities including polo, horse riding, a 27-hole golf course, cricket ground and much more.”
That should not be a reason to begrudge the fine establishment and the very few who patronize its splendid facilities, but the fact that it is housed on public land for which the club only pays an annual rental of less than USD150 does stick in the craw of common citizens. Imagine what Londoners might have to say if an exclusive facility covering over 350 acres for the privileged few in the heart of their city were leased for a grand sum that would not even pay for lunch for two in one of its fine restaurants.
When the erudite Vice President of Nigeria, Yemi Osinbajo recently spoke of noblesse oblige, reminding the audience that: “Every successful society is the product of a conscious, elite consensus: the implicit and explicit agreements of the elite to change their societies for good. But the elite must be prepared to make the sacrifices for the benefit of everyone,” Islamabad Club privileges would have served as a counterpoint. Unfortunately, this is not the only club or institution that is there only to serve the elite, but rather is emblematic of how Pakistan’s economy operates and whom it is designed to almost exclusively benefit. It is also not unique to Pakistan and has been seen throughout history, where powerful interest groups resist change and put in place structures that prevent inclusive development.
The threat of a breakdown of social cohesion and widespread instability provides an opportunity to force the elite to modify their entirely self-serving bargain.
Javed Hassan
However, over the last few decades, alternative models have emerged that demonstrate the possibility of inclusive development where both the elite and the general populace are beneficiaries. Professor of Economic Policy at the University of Oxford, Stefan Dercon, in his insightful book “Gambling on Development” discusses the role of the elite in “a development bargain” that has propelled some countries to grow rich and large sections of society to escape poverty. Through processes that can be described as elite bargains, Dercon argues that countries succeed if their elites agree to “a development bargain,” that is, “an agreement among those with power that growth and development should be pursued” even at a cost in the short-term to their privilege and relative economic control, to accrue longer-term benefits of growing the pie.
Powerful interest groups, and institutions that support them, can purely out of self-interest choose to commit to one another to determine outcomes for society that lead to inclusive development. Dercon provides examples of Ethiopia and Rwanda as deals-based development bargains, where one dominant elite grouping has been able to, through their control of the state apparatus, implement a pro-developmental agenda despite there being no clear rules and contestable institutions that are accountable to the public. It remains to be seen how sustainable the developmental model is in the absence of the elite transitioning from a deal-based to a more rule-based bargain.
The World Bank’s 2017 Development Report contends that to be durable and provide a basis for sustained development, deals-based bargains among the elite have to evolve into bargains that are rules-based. Sustained inclusive growth can only be facilitated by evolving institutions and rules of the game to constrain arbitrary behavior by decision-makers and embedding rules through institutional reforms that ensure contestation and accountability among a larger number of stakeholders in policymaking. This could be achieved by broadening “accountability within dominant political parties or opening the space for contestation only in specific domains or at the local administrative levels.”
The Pakistan elite, comprising, inter alia, politicians, large landholders, industrial and banking groups, bureaucrats, religious leaders, and real-estate developers wield considerable control over economic policy. The bargaining process among these elite actors to agree on a deal that can bring about more inclusive development, let alone change the rules of the game, has yet to start. They appear unwilling to develop institutions that can be the basis of long-term successful transformation such as those experienced in South East Asian tiger economies, China, and more recently India, Vietnam, and Bangladesh.
Although the slowing GDP growth, persistent external imbalances, and failure to deliver jobs and services to a fast-growing and youthful population paint a bleak outlook, it may nevertheless offer the emergent Pakistani middle-class cause for hope. The threat of a breakdown of social cohesion and widespread instability provides an opportunity to force the elite to modify their entirely self-serving bargain. The extractive model cannot indefinitely continue.
– Javed Hassan has worked in senior executive positions both in the profit and non-profit sector in Pakistan and internationally. He’s an investment banker by training.
Twitter: @javedhassan
