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July 11, 2019

Effective accountabilityand power imbalance


July 11, 2019

Corruption has been in the national discourse for as long as Pakistan existed and with greater emphasis since the PTI started to function as a party and came into power. It might be appropriate to contextualize corruption and institutional instability in Pakistan to bring the long-term perspective and some clarity to the debate.

We refer to some literature (Akmal Hussain’s own as well as collaborative work with co-authors in one undated document on ‘Power Dynamics, Institutional Instability and Economic Growth: The Case of Pakistan’; Sayeed 2010) to illustrate the discussion.

Institutional instability is traced back to the power structure dynamics in Pakistan. There is ‘incongruence’ between the formal rules enshrined in the constitution and the informal norms governed by the power structures. Repeated violations of the constitutional order point towards institutional instability.

Pakistan saw imbalance in the institutional powers from the very beginning. Its economic growth has been based on a rent-oriented economy and its governance managed on the basis of patron-client relationships like other developing countries. Such a growth process has been unstable and engendered poverty.

Such an economic model lacks to provide incentives for entrepreneurship, innovation, and investments. Similarly, in a patron-client model of governance, economic incentives are distributed to a limited number of people at the cost of excluding the majority.

Patronage has been granted in the past to the private sector in the form of licences, loans, subsidies, and government contracts. Compared to the favours bestowed upon the formal business sector, the informal economy has to deal both with high costs and uncertainty. It does not work as an incentive for the growth of ‘indigenous enterprise’.

Sayeed (2010) has contextualized corruption as “not the cause but the symptom of socio-political tensions that Pakistan as a nation-state has been unable to resolve over the years”. Corruption means the public resources are transferred to accumulate gain at the private level; it is called ‘rent-seeking’ in economics literature. It usually takes place in collaboration with state officials and through many channels available for the transfer of resources. One such prime resource is land transfers which reflect large-scale corruption. Its genesis goes back to the allocation of evacuee property after Independence and it constituted the first form of ‘primitive accumulation’.

Collaboration between state officials and the private sector through transfer of resources and award of quotas, licenses, subsidies, and loans is not viewed unfavourably in political economy literature. It is perhaps a necessary condition to give boost to early industrialization in developing countries; the East Asian model of state-led capitalist development model used it effectively to induce productivity.

The long-term impact of such rents-creation overcomes the transitory loss to the economy due to sustained growth. However, the problem with Pakistan’s pursuit of this developmental model has been that rent-seeking became ‘an end in itself’ rather than a conduit to accumulate resources for ‘productive purposes’. Since rent-seeking did not introduce productivity, dynamism, enterprise, innovation in the economy; Pakistan largely remained stuck in producing low-value added products rather than undergoing genuine capitalist transformation. This forms of rents-creation also funded factions in the mainstream political parties and other powerful institutions in the country.

Just in terms of misuse of bank loans, it might be worthwhile to quote Ayesha Jalal (2014) who states, “The banking system was reeling under the cumulative effect of bad debts that had grown to a whopping Rs130 billion by 1996 from Rs13 billion in 1984 and Rs84 billion in 1990. Most of the debts involved government and opposition politicians, their relatives, and business associates. Systemic corruption neutralized the corrective measures that the federal government was prepared to take, leaving the culprits secure in the knowledge of eventually walking free”.

Sayeed (2010) also talks about similar forms of accumulation of resources through extra-legal means through the pursuit of foreign, defence, and security policies over the past decades by powerful institutions.

One of the motives behind introducing economic liberalization might have been to overcome rent-seeking practices. However, it did not achieve its purpose fully as transfer of resources through quotas and licences has been replaced with ‘unregulated cartels’ in many industries including banking, sugar, cement, and automobile. These ‘unregulated cartels’ lead to a cut in the surplus for consumers in the same manner as the licensing regime did in pre-liberalization phase.

The prevalent anti-corruption mechanisms are perceived to be ‘ineffective’ and ‘discriminatory’ and are made even worse due to the lack of institutional capacity to deal with corruption. Institutional instability is intrinsically linked to existing imbalances in the power structures.

In terms of recommendations, for an effective accountability drive, it should be carried out across the board including all institutions. There should be a constitutional body to oversee across-the-board accountability of all power centres in the country. There is also the need to enhance the capacity of the Auditor’s Office to make it effective.

Similarly, without resorting to using corruption only as a slogan, there is a need to carry out reforms in the bureaucracy at all levels since the civil service is the first point of contact between the citizens and the state. Bureaucratic reforms should be made with compatible incentives and ensure both the security of tenure as well as credible penalties for corruption.

The writer is an Islamabad-based social scientist.