Pakistan's 'other-people's-money' problem

The Kerry-Lugar Bill is about giving Pakistan money. For the Americans, the legislation may have evolved into becoming an instrument of democratisation, an instrument of imperialism, or an instrument of development--and it may even be possible that it is all three, or none of the three. But for Pakistan, the bill has always been about one thing: money. The debate and discourse it is stimulating today is peripheral to that central issue, and it conceals the realities of the incentives that drive the Pakistani elite's behaviour. Military, feudal or capitalist, the elite have always had a serious thing for other people's money.

The Pakistani military loves other people's money. It has sustained a reputation as an important investment for American power by perpetuating its role as a frontline force that acts as a guardian against evil things, for example, Communism throughout the Cold War, peaking in the 80s and then the lull in business from 1989 onwards, followed by the swinging 90s. And then in 2001 came the violent extremism of Al Qaeda.

The Pakistani capitalist loves other people's money. The country's capitalist elite has always sided with the almighty dollar. Not the almighty rupee, but the almighty dollar. And capitalist Pakistan is as knee-deep in elite patronage politics as the PPP is. While recent indicators may suggest that the PML-N has turned a corner -- with its unequivocal support for the lawyers movement -- its history is no secret. Moreover, Nawaz Sharif's genesis as a political entity during the Zia years is not a solitary tale of the military's patronage of big business-cum-big politics. Dozens of heavy-weight politicians that inhabit all versions of the PMLs today (particularly those of the PM- Q) owe their monetary and political fortunes to favourable notifications emerging from the corridors of power during the military regimes of Ayub, Zia and Musharraf.

The Pakistani feudal loves other people's money. It has cemented a reputation as an important investment for American power by perpetuating its role as a victim of the Pakistani military. But strangely, feudal Pakistan has always been a willing and able partner of the military in all its campaigns against democracy, and the predictable and stable civilian institutions that should underpin it. The feudal centrifuge of Pakistani politics, the PPP, has shed blood in service of democracy, but its record is far from pristine. It has been enabled by and has been an enabler of the military's power plays throughout history. Zulfikar Ali Bhutto rose to prominence as a trusted stud of Field Marshall Ayub Khan. So while his heroism for standing up to Zia's deception and having the courage to live and die by the sword can never be questioned, his political genesis has an unquestionable khaki shade. More recently, while Shaheed Mohtarma Benazir Bhutto perpetuated the Bhutto family's legacy of making the ultimate sacrifices for their politics, her return to Pakistan was negotiated with Pakistan's military. May God rest her soul in peace, but she too left a khaki tint on the proud red, black and white flag of the PPP's now largely feudal colours.

Within this political culture -- a culture in which other people's money is a fundamental and existential element of strategy, tactics and operations -- the Pakistani elite have been operating in synchronicity with their attendant political conditions.

The military elite, personified by the Corps Commanders meeting at the General Head Quarters (GHQ) on Wednesday, struck first and struck hard, playing to public sentiment and "standing up" for Pakistan. This was a perfect pill for the military. It has been desperately seeking to re-establish its credibility, its legitimacy as a major centre of political power in Pakistan, and by extension its political bona fides. It is understandable that it would seek these things, having had its image dragged through the mud by the fag-end of the Musharraf years, as he alienated and antagonised millions with his bullying of the Chief Justice, and his contempt for civilian institutions.

The capitalist elite, guided by crony capitalism, is a two-faced monster. It is personified by the Karachi Stock Exchange (KSE) on one hand, and by the opposition parties on the other. The KSE element helped sway the market downward, signaling to investors everywhere that Pakistan is such a sorry stack of cards that it will collapse into a Taliban hell, if the US taxpayers don't send that $1.5 billion -- public outcry be damned. The political opposition element helped to ratchet up the temperature, in lock-step with the military elite, mind you. Tellingly, none have had the gall to reject the money -- only the conditions.

The feudal elite, personified by the obduracy of the president and the audacity of the foreign minister, has chosen to cheerlead for the Kerry-Lugar Bill. Much anger and hysteria is focused on Husain Haqqani but the ambassador, despite his considerable supernatural powers, is not the cause of the PPP's addiction to other people's money. Other people's money is part of the very DNA of feudal politics in this country. How else will the PPP pay for the public sector's expenditures? Expenditure that the PPP itself has caused to grow through opaque vote-getting schemes (like the Income Support Programme being run by that vaunted economist, Farzana Raja). Expenditure, for which concurrent domestic revenues will never be raised -- because doing so would entail taxing the only group left in the country that doesn't get taxed through the nose -- the feudal elite. And what kind of feudals would tax themselves?

Feudal, military or capitalist, the Pakistani elite love other people's money. The country's perennial indebtedness and unquenchable appetite for other people's money however, is not inevitable. Contrary to the conventional wisdom peddled by Citibank salesman pretending to be economists, and World Bank economists, pretending to be human -- Pakistan can survive without bailouts. Reduced public sector expenditure, increased revenue mobilisation and a government held accountable at the local, provincial and federal level are not just mantras -- they matter. Their absence, systemic to an elite patronage system of governance, is the reason Pakistan seems to be aid dependent. But it is not.

On October 28, 2008 (almost exactly a year ago), I argued that Pakistan must default in order to break out of a cycle that sustains the elite's largesse to itself. Sadly, instead of forcing the Pakistani state to confront administrative, structural and strategic demons, the international community's response to the Pakistani elite's poker-faced bluff has been to raise the stakes.

Pakistan's elite have already won this round, once again. The Kerry-Lugar Bill discourse in Pakistan is characterised by patriotism and greed or both, but it is not guided by reason. No one, neither the military nor the capitalist elite have questioned Pakistan's seemingly limitless appetite for financial assistance, which is the basis for the formulation of the Kerry-Lugar Bill. Instead, there is elite consensus around the need for other people's money. The only disagreement is about how to cash in.



The writer advises governments, donors and NGOs on public policy. He can be reached through his website