An important recent book by James Robinson and Daron Acemoglu, two economists from Harvard University and the Massachusetts Institute of Technology respectively, suggests a close link between political and economic development. To argue that politics is an important determinant of economic change is relatively rare for economists. That is not so for political scientists who have been postulating such a link for decades. Samuel P. Huntington of the ‘clash of civilizations’ fame, pointed out in a work published more than 40 years ago that the association between political and economic change runs in both directions. His important finding based on a number of case studies that included Pakistan, was that rapid economic growth can be politically destabilising in the absence of institutions that can absorb the shocks and tensions that inevitably follow.
Viewing change from the perspective of economics, Robinson and Acemoglu reach a number of important conclusions. Two of these are important for understanding what is happening in Pakistan at this critical juncture in its history. Political progress is not inevitable, they maintain. The outcome is “never certain and even if in hindsight we see many historical events as inevitable, the path of history is contingent”. The same point is made by Francis Fukuyama in his recent book on the origins of political order. According to him history is littered with examples of political development being followed by political decay.
The lesson for Pakistan is obvious: people as well as institutions interested in seeing the political system evolve in the right direction need to remain vigilant lest slippage occurs. This has happened many times in Pakistan’s torrid political history. Four times the military’s intervention was accepted by the people — sometimes with considerable enthusiasm — since there were no viable alternatives available to address the problems the country faced at that time. Also, the military did not face any challenge to its move into the political arena. This is no longer the case. Now the citizens are confident that the country can be better managed by their representatives. If the representatives disappoint they can be removed through the electoral process. The citizens have also learnt to have their voices heard. This happened during the ‘black coats’ movements that helped to restore to their positions the judges fired by President Pervez Musharraf, an autocrat. Now, with the powerful precedence of the Arab Spring, the citizens feel even more equipped to raise their voices and be heard.
The second conclusion is even more powerful from Pakistan’s perspective. Robinson and Acemoglu argue that “countries differ in their economic success because of their different institutions, the rules influencing how the economy works, and the incentives that motivate people”. In that context the book differentiates between two different types of political institutions, each producing its own economic dynamics. There are ‘extractive political institutions’, which serve the interests of the few at the expense of the many. This is where most of Pakistan’s political parties are today. They cater to the interests of the few at the expense of the masses. This is the reason why the country is following economic policies that provide rich rewards to narrow interests — the political elite. One sign of healthy political development will be to have these extractive institutions become ‘inclusive’.
The defining characteristics of inclusive institutions in both the economic and political fields are the combination of centralisation, the rule of law, and pluralism. Power resting with a strong political entity at the center of the system would ensure that private interests can be checked. At the same time, the power of the central authority must be constrained by law and by instruments that ensure accountability.
These two types of institutional structures influence one another. Extractive political institutions produce extractive economic institutions. The influence can move in the other direction as well. The same holds for inclusive institutions. Inclusive institutions in politics will create inclusive economic institutions. It is right to suggest that at this point in time, Pakistan’s political and economic development is stuck at the extractive stage. One way of moving from the extractive to the inclusive stage is to dispense with the control of families over political parties. Dynastic politics provides party governance at the national as well as the regional levels. Democracy must be practiced not only for providing good governance, it must also be adopted by the parties that dominate the political landscape.
Published in The Express Tribune, March 12th, 2012.
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Excellent analysis of politicle and financial situation and complexities in Pakistan.
Good article author. I must say you are one of the few people on ET, whom I love reading because I walk away having learnt something new. On the topic at hand, how political and economic growth feed off of each other is an interesting phenomenon; if I remember correctly, institutional weakness was also one of the key reasons that contributed to the reduced economic growth of South Asian Tigers and Japan where over-politicized financial institutions contributed to the problem.
Yes, Pakistan has elections but that in itself is not proof of progress towards democracy. As it currently stands elected officials are mere functionaries under a military junta, for they can be removed (or intimidated) any time the Pakistani military wishes. There is no effective civilian executive control of the military, nor effective parliamentary review of the armed forces.
The first step to asserting democratic supremacy should be easy: establish parliament-appointed, independent inspector generals to examine where the military spends its money; no officer or jawan will be permitted to say, "no". This mechanism was used from the very beginning in the American Revolution and has served the U.S. well ever since.
A couple humble suggestions and these with all due respects. I am suggesting these as I happen to be a political scientist (comparativist) with a focus on political economy. First, one has to move beyond Huntington's much celebrated essay at one time "Political Development or Political Decay" published in Word Politics in 1964 which later became a chapter in his book Political Order in Changing Societies." That whole stream of analysis named "developmentalism" is no longer valid and considered rusty and seriously flawed. Second Fukuyama's most recent book deals with political Order but in the historical sense.I have to identify with any stream, I would put it in the category of Barry Moore, Social Origins..... or state formation. I have not read Robinson and Acemoglu, but can understand the thrust from your essay. The relationship between economy and politics is an old thesis. Only bottles may be new. I am also little puzzled by your description of extractive political institutions. Extractive in our nomenclature are state institutions with responsibilities of extraction. like the FBR. It looks like you have a lot more to say but op.ed constraints do not let you to do so. Given this, the best approach is to narrow down the landscape of your essay and bringing rest of the things in your future essays. All the best.
John B so why are institutions deteriorating in US and India? Follow the money. Pakistan needs to start recycling water in the ag sector. The same goes for India. Other wise there will be mayhem in both countries.
Inclusive politics require time and will and understanding that all are equal, and no one is above the law, and institutions that operate above politics. PAK needs another thirty years of sustained democracy for the institutions to mature, including the institution of voters.
Robinson and Acemoglu argue that “countries differ in their economic success because of their different institutions, the rules influencing how the economy works, and the incentives that motivate people”.
While mainitaing above, my dear sir has succumed to the opposite of it in the last paragraph. Political stability is a far cry if there is no binding personalities like Bhutto and Sharif. You have every right to differ and stand high on a pedestal, but the reality is this that only these couple of families provide a pivot of political stability and Altaf Hussain is the biggest of them all. I have also regards for Gujrat's Chaudhries. Let them build a narrative jointly and after that we will take care of higher moral values and standards.