Elite capture in Pakistan — II

The methods of elite capture include social networking and capitalising on symbolic

Elite capture in Pakistan — II


amza Alavi has argued that an unhealthy growth of civil and military bureaucracy, creating an “over-developed state” hampers the development of the country. In post-colonial nations, the ruling classes are seldom homogenous. They are mostly composed of several classes that interact with the state in different ways.

The survival of the post-colonial state relies on these distinct ruling classes as they engage in a reciprocal relationship of receiving and providing benefits. They include the indigenous bourgeoisie, metropolitan neo-colonial bourgeoisie represented by transnational corporations and the landed class. The state acts as a mediator between these ruling elites to maintain the social order that serves their interests and that of the state.

Asaf Hussain has expanded the concept of elites in Pakistan to encompass military elites that shape it as a praetorian state; bureaucratic elites contributing to its administrative structure; landowning elites establishing a feudal state; industrial elites shaping a bourgeoisie state; political elites driving a democratic state; and religious elites shaping an Islamic state.

Ayesha Siddiqa has introduced the concept of mil-bus, arguing that military capital is utilised for military personnel through business ventures of welfare foundations and military’s involvement in toll collection, shopping centres, petrol stations and providing land and business opportunities for retired military personnel.

Pakistan has been profoundly influenced by its colonial legacy. The subcontinent, unlike a settler colony, did not benefit from a significant trickle down. Instead, institutions were designed for extraction to fuel an industrial revolution in Britain.

The primary tool wielded by the elite is the state’s extractive systems, carefully crafted over decades. The elite not only shape the policy outcomes, they also exploit the state for personal gain. This phenomenon is not driven by institutions, political dynasties or individual traits, but by the elite’s perceived role within the state apparatus.

In Pakistan, real power lies not with the people but with Elites Ltd, a conglomerate of various kinds of elites. They work together to protect their political power, which they leverage for other benefits. Despite their apparent differences, these groups find common ground through inter-elite bargaining, cooperation and quid-pro-quos, ensuring that the state’s extractive machinery remains intact.

Real estate magnates, sugar barons and business elites all exert their influence on political decision-making through financial and political support, receiving guarantees of no meaningful reforms that might jeopardise their future.

According to the UNDP’s Pakistan National Human Development Report of 2020, titled, The three Ps of inequality: Power, People and Policy, eight groups have captured the state apparatus for personal gains. These groups include state-owned enterprises, the military establishment, high-net-worth individuals (top 1 percent earners), large traders, exporters, banks, industry and the feudal class.

In the year 2017-18, the “industry” category caused a staggering loss of Rs 528 billion to the economy. This amount could have been collected as tax revenue but was instead forgone through low taxes and favourable selling prices. Collectively, these groups were responsible for the losses, ranging from Rs 196 billion (banks) to Rs 528 billion (industry), averaging around Rs 332 billion each. Put together, these losses amounted to approximately Rs 2.7 trillion, almost 8 percent of the GDP.

This elite capture is perpetuated by their self-perceived role as custodians of extraction, both internally and externally. They believe that this extractive function is crucial for the survival of the state. This extraction takes the form of rents, which are effortless income streams. Relying on substantial external rent for state revenues, often observed in oil-rich countries, Pakistan fits into the rentier economic model. However, it should heed the cautionary tale of Sri Lanka, which failed to save its economy by relying on the rent alone. Pakistan still has an opportunity to change its course.

Pakistan’s elite are adept at seeking avenues for extracting external rents. They have diversified their dollar income streams from the West, China, and the Gulf, while neglecting internal capacity generation. Historically, Pakistan’s elite have profited from its geostrategic location. Today, the country’s geostrategic value has shifted to the Arabian Sea.

The United States and Europe remain interested in propping up Pakistan’s state apparatus, partly due to their concerns about a potential refugee crisis. They help in the form of IMF bailouts, deferred oil payments, diplomatic support and military rents. Domestically, this has allowed the policymakers to avoid imposing individual costs to sustain the extractive function of the state and maintain the rentier model.

The elite operate under the assumption that Pakistan’s favourable position in the world will continue to support their interests. However, as time passes and the politics, priorities and interests of the United States, China, Saudi Arabia and the UAE shift, Pakistan’s ability to sustain these income streams will be tested. Changes in the international system have diminished the importance of Pakistan’s elite. It is crucial for them to stop relying solely on rent extraction and focus on structural reforms at home.

The policymakers are aware of the necessity of fiscal reforms. Currently, only around two percent of Pakistanis contribute to the income tax base. More than sixty percent of the tax collection is through indirect, regressive taxation, burdening the poor disproportionately. Most of the individual wealth (around 80 percent) is stored in untaxed residential properties, which do not contribute to the economy’s productivity.

Most of the subsidies are directed towards industries like sugar and real estate, prioritising the political backers’ interests rather than fostering an entrepreneurial spirit. Pakistan’s primary export is blue-collar labour to the Gulf.

The waning significance of Pakistan’s elite in the evolving international landscape is challenging their ability to rely on past achievements. Replacing the rentier model requires reforms that confront elite capture and place the responsibility for change squarely on the elite themselves.

One potential approach is the implementation of a long-standing concept known as the Charter of Economy, although political will for it remains limited. While discussions about the charter historically aimed to prevent the politicisation of the economy for electoral gains, a substantive charter must go beyond this and collectively acknowledge and address elite capture as a core politico-economic issue. Policymakers can then strive to avoid cyclic crises and break free from rent dependency.

It is crucial to recognise that this undertaking necessitates a political mandate that can only be achieved through general elections.

Elite capture takes various forms like rent-seeking, patronage politics, embezzlement, and special privilege. These actions extract resources from the economy, preventing productive use. However, it can also serve as a diagnostic tool to correct incentive structures within institutions. The goal should be to enhance personal freedoms and generate collective wins, not just benefit the top echelons.

The concept challenges top authorities but shouldn’t disregard the importance of incentivising excellence. The pathway to the top should be open to competent individuals, addressing the needs of those lower down the ladder. Meritocracy and social mobility rely on quality institutions and economic prosperity.

In Pakistan, the ruling classes engage in power struggles, form alliances, and have distinct socialisation practices. Therefore, elites should be conceptualised as a differentiated and varied group. Elites primarily capture economic capital but their motivations are not always driven by economic reasons. They also seek to co-opt and create alliances through social capital, cultural capital and political capital, with the aim of attaining symbolic capital—the unquestioned respect and subservience of the general population.

The methods of elite capture include social networking and capitalising on symbolic capital. While the elite capture is widely discussed, most of the discussions remain a rhetorical fluff due to a lack of granular understanding.

The writer gratefully acknowledges an incisive analysis by PIDE on the subject from which he has benefitted while writing this column.


The writer is Professor in the faculty of Liberal Arts at the Beaconhouse National University, Lahore. He can be reached at tahir.kamran@bnu.edu.pk

Elite capture in Pakistan — II