Social pathology of elite capture

June 04, 2023

A lack of empirical evidence regarding elitism in Pakistan contributes to the exoticism surrounding the phenomenon

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lite capture refers to a corrupt practice where a small group of individuals with superior social status manipulate public resources, disregarding the well-being of the larger population. These elites hold decision-making power due to factors like social class, asset ownership, religious affiliation, political influence, historical discrimination, party affiliation or economic position.

This form of corruption occurs when elites divert public funds, originally designated for the benefit of the general populace, towards projects that exclusively serve their own interests. To gauge the extent of elite capture, one approach is to examine a specific public service and measure the disparity in per-capita benefit between elites and equitable distribution.

This entails evaluating the average consumption levels of the public programme with and without the presence of formal elites. Empirical studies commonly analyse societal welfare and utility functions, comparing the utility across three scenarios: the existing unequal distribution; a hypothetical equitable distribution; and the absence of public service or good.

By comparing these data, we can assess the impact of elite capture on the overall welfare. It should be noted that elite capture differs from outright criminal corruption, such as embezzlement or misappropriation of funds by public officials.

Analyst Muneeb Salman identifies three main ways to identify elites: positional, based on official or formal positions held; decisional, based on the authority to make and influence decisions; and reputational, recognised as elite members by other elites and credible observers. When it comes to defining and classifying the individuals and groups that comprise the ‘elite’ in Pakistan, the definitions and classifications are often obfuscated.

This corrupt practice thrives due to information asymmetry, ineffective regulation or inefficient allocation of resources. As a result, elite intermediaries exploit legal loopholes, such as noncompetitive contract tendering, excessive pricing and overcharging, leading to a decreasing proportion of the government project’s budget being utilised for its intended purpose. Consequently, the distribution of public goods and services becomes skewed, depriving certain segments of the population of adequate access.

Where elite capture persists, neither the welfare impact nor the equity of the situation can be considered Pareto optimal. Pareto optimality is the state at which resources in each system are optimised in a way that one dimension cannot improve without a second worsening.

Initially, decentralised governments were believed to be capable of overcoming the limitations of a single societal planner. Centralised governments, lacking sufficient knowledge and susceptible to lobbying, were seen neglecting some areas. Theory suggests, however, that involving people in governance and decision making leads to more efficient, equitable and sustainable public spending.

The outcomes of many development projects in decentralised governments have failed to meet these expectations. When power is decentralised to smaller units, the vulnerability of local governments to pressure groups increases. Failure occurs when specific subgroups mobilise resources for their own interests at the expense of the broader community. Local governments are even more prone to elite capture than national governments. Efforts to reduce elite capture in decentralised governments vary from returning to a heavily centralised planner to providing citizens with project-initiation funds.

The latter option is criticised due to potential weaknesses in citizens’ abilities - compared to local leaders - to implement programmes. The World Bank has highlighted that development assistance, regardless of its form, is vulnerable to elite manipulation during the transfer stage, which often involves intermediaries. Whether centralised or decentralised, ineffective delivery of public resources poses risks, resulting in unequal distribution among the local population and welfare consequences.

Elite capture and discrimination share certain similarities as both involve unequal power dynamics and the denial of public resources. However, the concepts are distinct. Elite capture stems from an unequal distribution of power, while discrimination may or may not be the cause of power imbalances.

Elite capture is a dynamic process where power structures change when a new elite emerges, whereas discrimination tends to be more static. Elite capture is a form of corruption while social discrimination reflects societal beliefs. Elite capture and state capture are related as they involve diverting public resources for private gain but differ in how power is exercised.

Elite capture is carried out by entitled elites with de jure power; state capture involves elites exercising de facto power, such as powerful unions or multinational companies, to influence decision-making processes. Both phenomena contribute to poor governance, creating a vicious cycle with long-term effects on institutional and bureaucratic performance.

A lack of empirical evidence regarding elitism in Pakistan contributes to the exoticism surrounding the phenomenon. As a result, people are reluctant to acknowledge their own elite status. This has led to a convenient generalisation, labeling all graduates of prestigious institutions, like Aitchison and LUMS, residents of affluent areas like DHA and Bahria Town, or members of the bureaucracy and armed forces as elites, without recognising those specifically responsible for state and societal capture.

When the term is mentioned without clearly defining the parameters of elite networks and identifying the core decision-making elites in Pakistan, it is crucial to ask who is responsible for elite capture.

Pakistan’s locus of substantive power and governance does not rest with the people; rather it lies with Elites Ltd, a conglomerate comprising business magnates, industrialists, feudal lords, religious figures and civil and military officials. They work in concert to safeguard their political dominance, leveraging it for mutually beneficial exchanges.

Despite apparent conflicts and exclusivity, these diverse groups find common ground. Inter-elite negotiations inevitably give way to cooperation, inclusivity and reciprocal arrangements aimed at preserving the state’s extractive functions.

Real estate moguls, sugar barons, influential military figures and the business elite exert their influence on decision-making processes, wielding direct and indirect financial and political support. In return, they secure guarantees that meaningful reforms, which could potentially hinder future support from the Elites Ltd, will be effectively thwarted.

Elite capture thrives on the self-perceived role of elites as guardians of extraction, both domestically and internationally. They justify this stance by viewing the extractive function as indispensable for the survival of the state. This extractive process primarily manifests as rents, which refer to effortless streams of income. Rentier economies heavily rely on external rent as a significant source of state revenues.

The writer is Professor in the faculty of Liberal Arts at the Beaconhouse National University, Lahore

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