World Bank in its latest report on Pakistani economy revealed that Pakistan’s economy right now is captured by four influential groups. These groups have frustrated efforts to bring much needed reforms in the economy. According to the report, the country now stands at a crossroad and it has to decide whether it wants to become an upper middle-income nation or stay poor.
The World Bank report tells us why the elite dominating the political system because the elite owns the economy. The elite own the means of production, land and factories. They use their money and social position to dominate the politics.
The WB report states that a unique feature of Pakistan’s history is that economic, social and security policies gave rise to various elite factions that sustain economic and political power until today.
The report argues that in the 1960s, the chief economist of the Planning Commission of Pakistan, Dr. Mahbub-ul-Haq claimed that 22 families controlled 66 per cent of the industrial wealth and 87 percent of banking and insurance.
The report further elaborate that “more recent analysis suggests that elite capture continues to constrain economic policy making”. Since the 1980s, the share of industrialists in the National Assembly and parliament has doubled, blurring the barrier between politicians and businessmen.
Elite capture in Pakistan has affected policy making, as in certain circumstances political leaders lack incentives to formulate policies in response to citizens’ demands, or to work toward effective policy implementation,” says the report.
The report underlines that “there exist at least four influential groups that gained power through historic events and continue to leverage their influence on the political system for personal gain”. These are civil servants, landowners, industrialists, and the military.
The WB states that there was evidence that Pakistan’s elites have used this power in the past to undermine reforms that would have reduced their influence. For instance, landowners and industrialists have leveraged their political representation to oppose reforms that would have enhanced tax-revenue collection from agriculture and the private sector.
The influential military class favours a security-centric policy framework to maintain its influence and access to state resources, which reduces the scope for regional cooperation.
While each group affects development differently, they share the common trait of having gained and retained influence throughout Pakistan’s history.”
The report also argues that instability in the political system has reduced accountability and skewed leaders’ incentives away from long-term reforms. The characteristics of Pakistan’s political system have weakened the link between citizens and political leaders that is so crucial to sustaining the triangular relationship.
As a result, the direct accountability between citizens and political leaders is undermined, as politicians face the risk of being sanctioned even if they implement citizens’ demands, simply because they are incumbents. This shortens leaders’ incentives and time horizon, leading them to prioritise short-term projects and making them more likely to engage in extractive behaviour.
The WB also highlights the role of industrialists in financing political campaigns. It says campaign financing regulations in Pakistan provide a key channel for elites to gain political influence.
Pakistan lacks a transparent and public mechanism to fund political campaigns and instead requires candidates and parties to privately finance campaigns. As a result, in many instances parties must rely on wealthy patrons to fund their campaigns.
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25 April, 2019