The Demise of Path Dependency: Pakistan’s Economy

As inflation continues to soar and global market tumult intensifies, Pakistan’s economy continues to face “serious challenges on [both] the fiscal and external fronts.” In the past three months, Pakistan has experienced rising non-performing bank loans, plummeting exports, as well as soaring inflation and plunging stocks as recently as February of this year. Despite the growing signs of economic turmoil, Prime Minister Imran Khan was apparently informed of the contrary by advisors, reassuring him that the economy was entering a phase of recovery. With such escalating economic turmoil, one is left to wonder how it is affecting the public: the cost of living has steadily increased over the last year and a half due to increases in utility prices all the while interest rates have sky-rocketted.  

With merchandise exporting earnings offering little resolution, Pakistan is facing a serious dilemma, namely, how is it going to lift its large-scale manufacturing sector out of recession? The economic issues facing Pakistan today are daunting, but they are not the product of a few failed financial plans—rather, they can be traced back to Pakistan’s colonial past and the infrastructure and social systems that were left in the wake of Britain’s imperialism.

A Little History

In 1947, Pakistan became independent from the British empire following the partition of the former Indian British colony, promising a future of self-governance and self-reliance. The British judge responsible for sketching the partition lines, Cyril Radcliffe, had only spent six weeks in India before departing, failing to visit the points where the land was to be divided. On August 14th, 1947 Pakistan gained its independence, both ten months before the officially scheduled date and prior to border finalizations.

Following Britain’s hasty and arbitrary partition, an estimated 500,000 to 1 million people died as territorial disputes broke out between India and the newly founded Pakistan. The lack of sagacity and concern for South-Asian populations illustrated by Britain’s actions is but a premonition for the kinds of contemporary politico-economic relations existing between dominant nations and countries that have experienced colonial oppression.

A Path of Dependency

According to Theotonio Dos Santos’ Dependency Theory, the historical conditions that underpin the structures of the global economy make it such that it favours certain countries to the “detriment of others and limits the development possibilities of the subordinate economics”. The economic development of certain countries is conditioned by the “development and expansion” of the economy of the country to which they are subordinate. Whether we choose to approach the Pakistani case from a post-colonial or neo-colonial lens, Dependency Theory reveals the degree to which the dominant capitalist system enforces a rigid international division of labour that contributes to the inter-state and intra-state wealth inequalities of many areas of the world.

Following independence, Pakistan inherited an ‘overdeveloped bureaucracy’ from Britain that had been used by the colonial regime to bolster its control over India’s local resources and its people. This congenital bureaucracy’s status in Pakistan has led to the development of a unique form of bourgeois mentality that has monopolized state capitalism by assuming developing infrastructure and acting as a subsidiary to multinational corporations in “core capitalist countries.” Pakistan also has a rather powerful landowning class that is capable of levying crucial sway over the country’s rural regions, enabling them to monopolize party politics. With such influence, landowners are able to ensure that those elected at both the provincial and federal level uphold policies that inherently benefit their interests. Significantly as well, Pakistan’s bureaucracy and military factions predominantly recruit senior officers from wealthy landowning families, thus further instantiating their place amongst state elites. 

The image of Pakistan’s internal power structure, however, gets even blurrier when we account for the interplay between their bureaucracy and a second oppressive class, what Hamza Alavi calls the metropolitan bourgeoisie. As a Marxist Sociologist, Alavi identifies the metropolitan bourgeoisie as the perpetual influence of European states and multinational corporations over domestic Pakistani affairs. He also argues that it is precisely the autonomy exercised by Pakistan’s bureaucracy that allows dominant international actors to influence and shape Pakistan’s public policy in accordance with their own interests.

A popular rhetorical argument often levied by economists is that policies in favor of industrialization offer both increased production and income, however, applying this kind of process to developing countries with colonial histories arbitrarily assumes that development projects, such as those that spontaneously occurred in 18th century Britain, can be shoe-horned in. Dr. Abid Ghafoor Chaudhry and Dr. Hafeez Ur Rahman Chaudhry contend that many of the development programs and approaches that Pakistan has put into effect have carried with them Western ideology, “prolonging the capitalist ethos”.  In essence, Pakistan’s economy situates stakeholders as the utmost priority and has increasingly become dependent on external players.

Where to Next?

The West’s rhetoric of ‘development’ and progress towards modernity carries with it three key promises: economic growth, social equality, and political liberty. However, in Pakistan these promises have been compromised by foreign capitalist interest. In the 1950s and 60s, Pakistan experienced its most significant manufacturing growth, but subsequent capital allocation failed to invest in technological advancement therefore  manufacturing eventually stagnated. Today, Pakistan is playing technological catch-up in industries that have meaningfully evolved since their early days of independence such as in information, communication technology, and biotechnology.  

In a system where profit is king, there is little material incentive to diversifying outside of industries wherein powerful stakeholders have interests. Although tempting, blaming Pakistan’s entire economic demise on capitalism is somewhat reductive—what is important to pay attention to are the pathologies associated with the capitalist system and their entrenchment in Pakistan. With European notions of ‘modernity’ in mind, many elites within Pakistan regard traditional agricultural skills and cultural practices as “devoid of sense and out of context” in comparison to Western innovations. For context, although averages have decreased since the 1960s, agriculture in 2018 still made up 22.85% of Pakistan’s GDP while the global average is around 10.39%. Agriculture is still a mainstay for Pakistan’s economy, employing approximately 42.3% of the country’s total workforce

Western projects of modernization often invalidate traditional economies by implementing strategies of development that are reliant on foreign tools, policies, and models of capitalism. Although Pakistan’s demise is complex and solving a problem created by centuries of occupation and the perpetuation of colonial legacies is, even more so, Dr. Abid Ghafoor Chaudhry and Dr. Hafeez Ur Rahman Chaudhry argue that revitalizing Pakistan is contingent on engineering and administering development models that are based on traditional Pakistani modes of being

Edited by Naya Sophia Moser

Photo credits: Skardu City” by Ali Zahoor. Published 17th of August, 2016. This work was sourced under a Attribution 2.0 Generic (CC BY 2.0) license. No changes were made.

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