Rents and state authority

The bigger question mark then is why did India’s nationalisation programme for example — whose scale and reach was arguably greater than Pakistan’s — not destroy the psyche of its domestic capitalist class and render it incapable of accumulating at much higher rates several decades into the future?

In focusing only on this one particular action, any story of Pakistani capitalism remains largely incomplete. The reasons for its slowdown in the 1990s, a partial, geopolitically aided recovery in the early 2000s, and broad stagnation since 2005 onwards, must be sought elsewhere.

The demands of newly empowered groups have been actualised due to the fragmentation of state authority.

The political economy literature on South Asia and its subset that looks at Pakistan’s post-1977 trajectory is worth considering here. Particularly, Pranab Bardhan’s short 1984 monograph, The Political Economy of Development in India is relevant because its central case is a country which, despite reasonable factor endowments, suffers from low average expansion rates and persistently high poverty.

The book’s central argument focuses not just on the Indian state’s heavy footprint in the regulatory and ownership structure of the industrial sector, but also on the distributive claims produced on public resources, and thus on state power, by the three dominant propertied classes — the industrial capitalist, the large farmers, and the public sector bureaucracies (the last of which apply scarcity of credentials in a populous country to shore up their socioeconomic status).

What happened

Under conditions of electoral competition, different factions of these classes made competing claims on state policy in a bid to sustain their own privileges and to distribute privileges for political backing. Resultantly, the state neither acted autonomously from all competing forces to engender growth, nor did it work on behalf of a single, dominant class.

In the four or so decades since Bardhan’s work was published, two aspects of the Indian situation have changed. Growth rates have generally remained high alongside robust progress in poverty reduction. And coalitional politics has been absorbed into one political entity, the BJP. It legitimises its patronage of big business through direct mass-appeal with the electorate.

Today, the framework of the book may find Pakistan a more relevant subject of analysis, facing as it does the conjoined condition of low growth and persisting poverty.

Writings on Pakistan’s political economy anchored in Bardhan’s approach or the broader institutionalist or heterodox tradition, can be turned to for important insights. Asad Sayeed and Ali Cheema, among others, argue that the political rise of small and medium-sized capitalists during the 1970s and 1980s fragmented the capitalist class and introduced new claims on public resources (via subsidies, protection and corruption). My own work on the bazaar economy sees this pattern being replicated during the 2000s, with large importers and other traders subverting fiscal policy through the apply of political power.

The details

Through the years, the demands of newly empowered groups have been actualised due to the fragmentation of state authority. It allows for decentralised rent-seeking. Though not in the nationalisation programme as is often mistakenly assumed, a key element of the present condition thus does lie in the Bhutto years.

Instead, it was the civil service reform that ope­ned the state to a wider array of public pressures, reducing the socially insulated nature of the central services, and both expanding and fragmenting authority at different tiers of government. While nationalisation was rolled back unevenly and never expanded in the years that followed, the use of state authority to offer rents to various propertied classes (including state office-holders) has continued unabated in each subsequent regime.

This fragmented distribution of rents, one can argue, is inevitable, given Pakistan’s demographic diversity and the social transformation that accompanies modernity. New claimants on power and resources were bound to emerge. In the 1970s, the distribution of rents was a response to the social pressures built up during the Ayub period. In the years since, it has been the preferred strategy to maintain regime stability in the face of destabilising intra-elite conflict, especially when new actors emerge and stake their claim.

This destabilising conflict over resources among the propertied classes is not just taking place under democratic conditions, where one can argue it is a design feature, but also under authoritarian rule. In other words, even ostensibly dictatorial regimes that make little effort to obtain popular legitimacy are not immune to the pressures of growth-corroding rent-seeking. In fact, the rents are often distributed within the state (to officers or specific cadres) so as to shore up internal support.

Why it matters

This last bit is important for those who continue to anchor their hopes on expansion being delivered by authoritarian decree. Various undemocratic regimes have indeed delivered high rates of growth elsewhere, but the nature of those regimes was either outright revolutionary, ie, emerging from the destruction of a regressive social order, or highly insulated and autonomous and thus capable of disciplining rent-seekers when needed. Pakistan in its current condition fulfils neither of these two criteria.

The writer teaches politics and sociology at Lums.

X: @umairjav

Published in Dawn, August 17th, 2026