Rentier Capitalism : Disorganised Development and Social Injustice in Pakistan

thereafter Chairman of the Securities and Exchange Commission of Pakistan and of the Competition Commission of Pakistan, now teaching at the Lahore University of Management Science, who possesses a similarly acute perception of the cultural and institutional constraints that affect policymaking in the country. With both of them, I also shared some of my initial chapter drafts and received many suggestions that improved both the organization of the book and its contents. Against that general background, I should also express my profound thanks to two other friends, Shaharyar Ahmad and Saeed Iqbal Chaudhry, who were heads of two private sector banks that came into being in Pakistan in the early 1990s. Their grasp of the underlying reality of operating in Pakistan and their insights into the economic and business environment in the country were invaluable and, indeed, alerted me to the problem of rent-seeking in the country. Finally, very special thanks are due to another ESCAP colleague, Amornrut Supornsinchai, who responded to my request for help with preparation of the tables with extraordinary promptness. Needless to add, any errors or omissions in the book remain my sole responsibility. Cover 1 Contents 8 List of Tables 11 Preface 12 Acknowledgements 15 Introduction 17 1 Development, Social Justice and the Limits of Public Policy 33 Historical background 33 Development and poverty alleviation 36 The State and the origins of social justice: A digression 40 The State and development: Limits of public policy 44 Pakistan’s recent approach to development 49 The Millennium Development Goals and development policy options 53 2 Why Has Pakistan’s Economy Underperformed? 56 Performance and issues in the early years 56 Problems of the rural economy 61 The industrial sector: Weak and uncompetitive 66 The growth of financial services 72 Some concluding observations 76 3 The Social Sectors in Pakistan: A Story of Neglect 81 The social reality in Pakistan 81 The neglect of the social sectors in Pakistan: An explanation 86 Pakistan and the Millennium Development Goals 89 The Millennium Development Goals and beyond: What can be done? 92 Rethinking social services in Pakistan 96 4 The Cultural Setting: Patronage and Rent-Seeking 100 The background 100 A constrained policymaking process 106 Public–private resource allocation in a developing economy 109 Pakistan’s electricity sector fiasco: Bad policy and rent-seeking 113 5 The Political Economy of Pakistan’s Development 119 Why is political economy important? 119 The nature of political economy in Pakistan 120 The political economy of Pakistan in an historical perspective 126 The political economy of choice 137 6 Regional Economic Cooperation in South Asia and South-East Asia 144 Why regional economic cooperation? 144 SAARC and ASEAN 147 Regional economic cooperation: Some questions 149 SAARC and ASEAN in the context of globalization 153 The future of regional economic cooperation 157 7 The State, Private Enterprise and Development 160 An historical perspective 160 Are markets always efficient? 162 Development as a partnership between the State and private enterprise 164 Implications of the 2007/08 financial crisis 166 The neoliberal experiment in the United States and the United Kingdom 170 Lessons for inclusive development 172 8 Democracy and Development: Diagnosing Poor Governance 178 Some general ideas 178 Public choice theory 181 Egalitarian cultures: Their origin and significance 183 Is China a special case? 188 9 An Agenda for Pakistan’s Future 193 The main challenges ahead 193 Overcoming the energy crisis 196 Increasing public resources 199 Tackling the menace of growing social polarization 201 Preparing for climate change 202 Improving the country’s technological metrics and investing in human resources 203 Overcoming the constraints of being a soft State 206 Concluding thoughts 207 Epilogue 211 Appendix 218 Notes 226 Bibliography 232 Index 237 Since the early 1950s East Asia (China, Taiwan and South Korea) and South-East Asia (Indonesia, Malaysia, Thailand and Vietnam) have, despite war and other challenges, managed to transform the lives of their people, whereas South Asia (India, Pakistan, Bangladesh and Sri Lanka) has lagged behind. The success of East and South-East Asia has not been accidental – it has been driven by action to reduce rural poverty, by the provision of decent education and health services to the people, and by high quality physical and institutional infrastructure, such as roads, ports and railways, and targeted support from the State to develop particular industries. In contrast, Pakistan has never confronted the problem of rural poverty, nor invested in public services. This failure is a reflection of the power of the landed class and its urban allies. This has now taken the form of widespread rent-seeking in the economy with the country's ruling elite sharing out the spoils amongst themselves rather than taking measures to grow the size of the economy so that all might share in the resulting prosperity. Rentier Capitalism sheds light on the reasons behind Pakistan's failure to bring prosperity to its people when compared to other East Asian and South-East Asian countries. Front Matter....Pages i-xv Introduction....Pages 1-16 Development, Social Justice and the Limits of Public Policy....Pages 17-39 Why Has Pakistan’s Economy Underperformed?....Pages 40-64 The Social Sectors in Pakistan: A Story of Neglect....Pages 65-83 The Cultural Setting: Patronage and Rent-Seeking....Pages 84-102 The Political Economy of Pakistan’s Development....Pages 103-127 Regional Economic Cooperation in South Asia and South-East Asia....Pages 128-143 The State, Private Enterprise and Development....Pages 144-161 Democracy and Development: Diagnosing Poor Governance....Pages 162-176 An Agenda for Pakistan’s Future....Pages 177-194 Epilogue....Pages 195-201 Back Matter....Pages 202-230