Ali 2002

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The historical lineages of

poverty and exclusion in
Pakistan
a
Imran Ali
a
Lahore University of Management Sciences
Published online: 08 May 2007.
To cite this article: Imran Ali (2002) The historical lineages of poverty and
exclusion in Pakistan, South Asia: Journal of South Asian Studies, 25:2, 33-60, DOI:
10.1080/00856400208723474
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The Historical Lineages of Poverty and
Exclusion in Pakistan
Imran Ali
Lahore University of Management Sciences
Introduction
Over half a century has now elapsed since the occurrence of the earliest
processes of independence from European colonialism. These
developments started in the South Asian subcontinent in 1947, when the
British Indian empire was bifurcated into the states of India and Pakistan.
The latter experienced a further break-up with the creation of Bangladesh
in 1971. From the early 1950s other territories of the old European
empires achieved decolonisation, to the extent that a sizeable number of
countries in Africa and Asia share this common legacy. Where the post-
colonial experiences seem to have diverged has been in the contrasting
patterns of public administration, political culture, social authority and
economic dominance. Many of these traditions and processes were
instituted under the colonial aegis. Developments thereafter have
emerged from varying degrees either of historical continuity or structural
departure. Much comparative analysis has concentrated on exploring
such similarities and differences between post-colonial societies. Other
research has been more nation- or region-based, and has dwelt on the
specificities and peculiarities of historical change at the country and local
levels.
One of the most ubiquitous 'realities' of both the colonial and post-
colonial worlds has been the persistence and entrenched nature of mass
poverty in the subjugated regions. The problem is so pervasive that it has
almost come to be regarded as the 'natural condition' of these societies: a
phenomenon that is inherent in their fundamental arrangements, premises
and structures. Such notions are strengthened by the premise that the
condition of the great majority of mankind throughout history itself
seems to have been one of economic deprivation and insecurity. Even
where the resource endowments relative to population levels were
abundant and generous, it appears that only a numerical minority of elite
groups enjoyed a freedom from poverty. In tribal societies, though,
34 SOUTH ASIA
institutionalised economic differentiation was probably never excessive

or extreme, whereas agrarian societies have been characterised by major
economic differences between social groups, with disproportionate and
inordinate wealth and resources being concentrated with the upper social
segments.
Wealth and poverty, therefore, are clearly functions of the economic,

social and institutional arrangements within society. Disparate and
distinctive formations can produce an identical end-product of poverty,
and often extreme poverty, for numerically significant parts of the

population, just as they can produce relative affluence and even extreme
wealth for other groups. The routes through which poverty emerged as a
pervasive and mass phenomenon must count as a major historical theme
of modern times. Linked to this theme is the issue of exclusion. If
poverty is the function or outcome of systems of exclusion from access to
resources, whether they be economic, social or institutional, then the role
of elites, the condition of people, and even the shaping of history, become
part of the annals of the creation and retention of poverty. While
contemporary outcomes might appear uniform, specific historical
sequences have clearly modulated this process.
It is the intention of this paper to examine how recent history can be

analysed to understand the processes that might have accentuated the
exclusion of the poor, and thereby entrenched and institutionalised the
incidence of mass poverty. The paper will concentrate on the South
Asian region, and more specifically on developments in the territories
that came to constitute the state of Pakistan. If exploring these themes
and structures proves useful for analysing this phenomenon and its
historical development in one region, it could also help us understand
such processes and outcomes in other lesser-developed countries. The
hindsight now of half a century of 'independence' in South Asia provides
a useful vantage point to better account for the implications and impacts
of the political, economic and social configurations that occurred during
the period of colonial rule there, as well as to assess the nature and
direction of these developments in the post-colonial period.
The more contemporary policy redirections towards economic

liberalisation have placed added strains on the moral economy of these
societies. The forces of globalisation in recent years have created both
opportunities and risks for national economies. The opportunities can
only be realised if productivity levels are internationally competitive,
while the risks involved could threaten the sustainability and even
survival of the poor in the more fragile, lesser-developed parts of the
world. Within this emerging schema, whereby national strategies are
HISTORICAL LINEAGES OF POVERTY AND EXCLUSION IN PAKISTAN 35
required to move towards more market-oriented and less welfare-based

postures, there has been of late a renewed interest by the Pakistani state,
certain elite stakeholders and some multilateral agencies in 'poverty
alleviation'. This follows upon a 'social action programme', from which
a sizeable amount of foreign debt was accumulated through projects of
doubtful validity and highly questionable implementation. The focus on
poverty in current public policy formulations provides an intriguing
topicality to the subject of this paper. Taking that focus as its starting-
point, the discussion that follows will address the contradictions between
professions of elite concern on the one hand, and actual elite functions
and the resilient and entrenched nature of the roots of poverty and
exclusion on the other.
The Mughal Legacy

Reviewing, however briefly, colonial and even pre-colonial structures can
help to identify continuities into the modern period. British rule extended
to the Pakistan territory in the early nineteenth century in the southern
portion, or the present day province of Sind; and in the mid-nineteenth
century to the central and northern regions, which currently constitute the
provinces of Punjab and the North-West Frontier respectively. The
previous 'universal state', the Mughal empire, had begun to decline in the
early eighteenth century. After 1750 its presence had effectively
disappeared from this region. Mughal rule was replaced by the
fragmented control of local magnates, whose lineages eventually either
accepted or succumbed to British suzerainty.
However, the Punjab provides a significant contrast to other Mughal

territories in the degree of social change that accompanied the transition
from Mughal rule. In 1947 the British Punjab was partitioned between
India and Pakistan; but even the portion that remained in Pakistan is now
its most populous province. Developments in the pre-colonial Punjab
need to be more closely examined owing to their pivotal impact on the
more contemporary political economy of the region.
Unlike the Punjab, most other former provinces of the Mughal empire
experienced a more 'orderly' transition to the successor states and
entities. When the British, several decades after the eclipse of Mughal
administration, began the piecemeal process of taking over the South
Asian subcontinent, they confronted in most cases regional 'kingdoms'
that were ruled by none other than the descendants of the viceroys and
provincial governors of the old Mughal empire. These Mughal officials
had asserted their independence as the authority of the old empire
receded; and they had succeeded in turning the territories under their
charge into hereditary possessions. Under these ruling lineages, the
36 SOUTH ASIA
agrarian hierarchy also appears to have experienced relatively little

disturbance. There was no major effacement or turnover in the status and
authority of rural magnate elements, beyond the exigencies of fortune and
the desertion of capabilities to which particular families and elite groups
were always susceptible. Lower levels of the social structure also failed
to break out in any significant way from the traditional patterns of caste
and class hierarchy. Therefore, and even if it is a generalisation, it could
be said that social change was minimised and continuities were retained
in the transition stages between Mughal and colonial rule.1
Only in two sets of areas were the upper echelons of the social hierarchy
extensively displaced. One was the territories that the Marathas of
western India overran and continued to control, thereby wresting powers
and privileges from the old Mughal elite. These areas now lie entirely
within the modern state of India, and will thus remain outside our present
discussion. The second region was the Punjab, which from the early
eighteenth century experienced a growing momentum of peasant
opposition to Mughal rule. This was essentially brought on by economic
pressures from the revenue extraction and purported economic parasitism
of the Mughal military-administrative structure. The efforts of Mughal
forces and the regional elite to control this growing peasant recalcitrance,
while successful at first, began with time to face increasing adversities.
By 1750 Mughal power itself had receded to the area around Delhi, while
the regional elite in the Punjab finally succumbed to the growing power
of the peasant warbands.2
In the century that followed, culminating in the annexation of the Punjab

by the British in 1849, the political economy of this province diverged
from that of the other successor states of the Mughal empire. The latter
areas witnessed a relative continuity in power arrangements, within the
fiat of the transition of several of the uppermost Mughal functionaries
from provincial viceroys to autonomous kings. Under these newfound
potentates, the incumbent agrarian and power elites also remained
relatively undisturbed, in structure and even in composition. The absence
of any prolonged crisis enabled urban centres to remain viable. Levels of
urbanisation had increased under the Mughals, with a larger internal
trading area, growing volumes of trade, and increased manufacture.
Indeed, in the post-Mughal phase several urban centres flourished even
further, reflecting the buoyancy of regional economies. A further
1
There are numerous secondary works on the Mughal empire. For two useful accounts of conditions
under the later Mughals, see Irfan Habib, The Agrarian System of Mughal India (London, 1963); and
Muzaffar Alam, The Crisis of Empire in Mughal North India: Awadh and Punjab, 1707-48 (Delhi,
1986).
2
This process is discussed in more detail in Imran Ali, 'The Punjab and the Retardation of
Nationalism', in D.A. Low (ed.), The Political Inheritance of Pakistan (London, 1991), pp.29-52.
indicator of this smoother transition was the cultural efflorescence of

these regional urban centres, as they attracted the outflow of human skills
with the decline in Delhi of royal patronage for letters, music,
architecture and the like.3
In the Punjab, the violence of the transition and the breaks with the past
were much more tangible. There had been a prolonged period of armed
and violent opposition to Mughal rule. The social source for this had
come primarily from peasant landholding lineages, especially from the
more central parts of the province, which had the stronger agriculture.
This was a response presumably to the increasingly unacceptable
extractive demands on the agrarian economy by the Mughal centre and
the regional elite. More generally, it was a reaction to the ever-increasing
size, and with it the higher scale of resource consumption, of the
'unproductive' classes. These elements were either surviving off agrarian
rent, or were tied to the state's military, administrative and court
functions. Mughal over-consumption appeared most evidently in the
cities, where expenditures by the court, and the nobles and their
underlings, were concentrated. Little seemed to return to the agrarian
sector, which by the early eighteenth century was approaching
exhaustion. The scale and coerciveness of revenue and rental exactions
contributed further to the ensuing tensions.
The urban centres, while they received the largesse of the upper classes—
and many became important centres of trade and manufacture—failed to
play the innovative role that might have averted conflict. On the
technological side, there were no real innovations in manufacturing
technique and process. Had they occurred, such changes could have
raised levels of productivity in the secondary sector; or they could have
created rapid and significant demand changes for agrarian products, and
thereby helped to revitalise agriculture. On the organisational side, urban
production remained within its traditional, small-scale, guild-based
constraints. The division of labour continued within the parameters of
hereditary caste occupations, rather than moving towards the more
economistic forms soon to be identified and conceptualised by Adam
Smith. Moreover, even specialised artisanal groups remained socially
inferior, if not generally ill-paid. And in political economy aspects, the
'feudal', or state-military-magnate nexus, remained dominant and
essentially unchallenged by the commercial classes. The subordination to
the military-administrative structure, and to its power-based liens on
commerce, extended even to those exceptionally affluent merchants
3
See C.A. Bayly, Rulers, Townsmen and Bazaars. North Indian Society in the Age of British
Expansion, 1770-1870 (Cambridge, 1983).
38 SOUTH ASIA
whose peers were yet to appear on the European subcontinent, but who
eventually succeeded in playing such a decisive role in its restructuring.
Thus, the town in India was certainly a centre of civilisation, but it

showed little proclivity to becoming an agent of modern civilisation.4 It
remains problematical whether these urban centres possessed the
capabilities for the organisational, institutional and technological
innovations that were appearing in their western European counterparts.
These transitions were in turn responsible for eventually displacing the
conditions that embedded mass poverty in those societies. Equally
weighty, however, could be the argument that any potentialities these

Indian urban centres did have for qualitative change were progressively
denuded by the strategies of colonial rule.
The agrarian revolts of the Punjab in the eighteenth century had several
ramifications for the issues of equity and exclusion in later periods. The
old regional elite of Mughal times was almost completely effaced after
decades of social attrition by the peasant warbands. From among some of
these militarised groupings emerged some new fiefdoms, which were
later acknowledged by the British as 'native' or princely states.5 Over
large areas, however, village-level owners retained their autonomy.
These too were later recognised by the British, through direct revenue
settlements with such landholders. Thus, unlike other former territories
of the Mughal empire, the British found a newly arisen, and presumably
more malleable, elite in the Punjab (a point to which we will return
presently). While, clearly, a wider social base had benefited from the
removal of the old feudal class, the move to egalitarianism went only
half-way. The landholding lineages that had fomented rebellion were a
kind of village elite or dominant peasant segment. Under the caste
system, they stood hierarchically superior to the host of service and
labouring castes, generically called kamins, or menials. Such lower
castes actually constituted the majority of the population of rural Punjab;
and it could be said that the momentous political and social changes
recounted above actually did little to redeem them from their demeaned
status.6
A further impact of these changes was felt on the urban sector in the
Punjab. The agrarian uprising turned its wrath on the cities, which the
royal court, the nobles and the affluent merchants had endowed with
4
For a comprehensive account of economic and social conditions over this period, see The
Cambridge Economic History of India, 2 vols. (Cambridge, 1982).
5
For a documentation of eminent families in the Punjab, by districts and princely states, see L.H.
Griffin and C.F. Massy, Chiefs and Families of Note in the Punjab, 2 vols. (Lahore, 1940).
6
For an analysis of village society in the Punjab during the colonial period see T.G. Kessinger,
Vilyatpur, 1848-1968 (Berkeley and Los Angeles, 1974).
palaces, villas and pleasure gardens, and where they had deposited their
hoarded wealth. A dramatic representation of this urban downturn is
provided by the decline of the provincial metropolis of Lahore. At its
height in the seventeenth century as one of the three capitals of the
Mughal empire (along with Delhi and Agra), Lahore was estimated to
have reached a population of up to half a million. This figure might well
be somewhat exaggerated, or apply to those periods when numbers were
swollen from the presence of the royal court. But in any case, Lahore
was said to be larger than any European city until the expansion of
London and Paris in the eighteenth century. By 1849, when the British
took over, the city was in decline. Its population had been reduced to
around 85,000. There had been a downturn in trade and artisanal work,
and in the number of endowed educational establishments (or
madrassahs). Physically the city had retreated to within the confines of
its old city walls. All this was in marked contrast to the fortune of urban
centres in other ex-Mughal provinces noted above. Thus the urban sector
was considerably weakened in this region by the time of the onset of
colonial rule.7
The Colonial Contract

The 'British' period saw, if anything, a further consolidation of the
agrarian hierarchy in the parts of South Asia that later became Pakistan.
The British in other areas confronted embedded elites, and they were
faced with the choice of either displacing these or having to share with
them the revenue surplus generated from agriculture which was the main
source of income for the state. The armed conflict of 1857-58, popularly
known as the Indian Mutiny, provided a climactic resolution to these
tensions in the Gangetic valley, where British revenue policies had begun
to infringe upon the interests of older-established agrarian rentiers. In the
Punjab, however, the displacement of the old elite during the previous
century had already achieved this 'rationalisation'. There a generally
more congenial accommodation was arrived at with the agrarian
hierarchy through direct revenue settlements, either with village
landholders or with newly-arisen landlord intermediaries. In return, the
British acknowledged the property rights of the revenue payers, which
formalised the gains that the dominant peasant castes and superior right
holders had made over the previous decades.8
The century-old British presence in the Punjab and Frontier, and its
tenure of a century and a quarter in Sind, failed to result in any
7
See, for a survey of the extent of Lahore from architectural remains, S.M. Latif, Lahore (Lahore,
[1892] repr. 1981).
8
Revenue settlement reports at the district level and assessment reports at the sub-district level for
the Punjab are available in the Oriental and India Office Collections, British Library, London.
40 SOUTH ASIA
substantive demographic or economic transition towards an urban ethos.

Urban society had already been emasculated in the post-Mughal 'time of
troubles' in the Punjab. It was never of much consequence in Sind,
where large landlords and clan heads had continued to exercise
dominance, unfettered by any major urban challenge. And the Frontier
and Baluchistan were very largely tribal societies, where the British either
formalised and consolidated the authority of the tribal heads or sardars,
or acknowledged the continuance of traditional tribal authority systems
such as the jirga?
The continued weakness of the urban sector was a function of the almost
complete lack of industrial development in the Pakistan area during
British rule. Despite its conversion into a region of major agrarian
surplus, as we will see below, it contained in 1947 only one textile mill
and one sugar mill. An intermediate agro-processing sector was
developing, but large-scale industry was non-existent. Between 1849 and
1947 the population of Lahore, so grand a city during Mughal times, had
risen from around 85,000 to a mere 250,000. This was hardly indicative
of the emergence of an industrial metropolis or a substantial secondary
sector. British rule did introduce western educational institutions, which
enabled the development of professions such as doctors, lawyers and
subordinate public servants. Merchant communities also arose,
especially in the new market towns that emerged to service agrarian
growth. But at independence Pakistan was still predominantly rural, with
a very low literacy rate and a primitive infrastructure. In
telecommunications, for example, the country had only 12,000 operating
lines for a population of 35 million; and even these were almost entirely
concentrated in a few cities.10 Large-scale hydroelectric power
generation, on which modern Pakistan's energy infrastructure is based,
also remained a post-1947 development.
In the light of this failure of economic diversification, what were the

parameters for the consolidation of the agrarian elite and the dominant
peasant castes during colonial rule? This process took several forms; and
it is our contention that these combined to constrain the mass of people
within the web of poverty and exclusion. One important and early
manifestation of the emerging alliance was that this area failed to rise
against the British in 1857, as did most other parts of northern India.
Indeed, its agrarian owners provided men and materials to help the
British fight and eventually overcome their adversaries.
9
See the chapters on Sind and Frontier in Low, The Political Inheritance of Pakistan.
10
See Imran Ali, 'Telecommunications Development in Pakistan', in E. Noam (ed.),
Telecommunications in Western Asia and the Middle East (New York and Oxford, 1997).
After the reassertion of colonial control, the economy of the Pakistan

region, and especially its northern part, began to acquire a more
militarised aspect. The British endeavoured to convert it into a logistical
base for pursuing their 'great game' with the Russian empire in
Afghanistan and Central Asia. Human and animal levees from the
Punjab helped support colonial military campaigns on the north-west
frontier. In time, these levees were being employed in the furthest
corners of the British empire. The Punjab alone came to supply over half
the recruits to the British Indian arrny; and it contributed major human
resources to both world wars.
Significantly, in social terms the British recruited soldiers exclusively

from among the more superior agrarian segment, or the so-called
'agricultural castes', of the Punjab. These were the very groups of
agriculturist landholders on whom the British had divested property
rights, and from whom they drew land revenue, the primary source of
income for the colonial state.11 Recruitment manuals were prepared to
assist army officers with information on the eligibility of social groups.
These documents represent the efforts of the colonial state to formalise
social distances by institutionalising exclusion from possible resources on
the basis of caste. Recruitment from non-landed groups remained
confined to cases where special political considerations prevailed, such as
with the three odd Pioneer regiments composed of lower-caste 'Mazhbi'
Sikhs. It was only during the two world wars, with the exigencies of
highly stretched human resources for war recruitment, that the social bias
was somewhat relaxed. The willingness to induct the lower orders in
wartime provides an interesting comparison with the more liberalised
absorption of female labour into the workforce in Europe itself during the
world wars.
The most far-reaching and historically important form of cooperation

between dominant agrarian groups and the colonial state occurred
through the development of canal irrigation, and the process of
agricultural colonisation that accompanied it. This opening of a new
agrarian frontier brought about radical changes in the economy and
ecology of the Indus basin, and created the foundations of the existing
Pakistani economy. From around 1885 the British enabled extensive
areas to be brought under cultivation through the construction of river-
spanning weirs and large networks of perennial canals. This occurred
11
See the chapters by Andrew Major and Clive Dewey, in Low, The Political Inheritance of
Pakistan. See also Imran Ali, 'Sikh Settlers in Western Punjab', in P.Singh and S.S. Thandi (eds),
Globalisation and the Region: Explorations in Punjabi Identity (India: OUP); and Imran Ali, 'Canal
Colonisation and Socio-Economic Change', in Indu Banga (ed.), Five Punjabi Centuries: Polity,
Economy, Society and Culture, c. 1500-1990 (New Delhi, 1997).
42 SOUTH ASIA
first in the interfluves, or doabs, of the Indus tributaries in the Punjab,

and then in the Indus plain itself in Sind. These tracts were hitherto either
arid waste or they supported semi-nomadic pastoralists, since rainfall was
too low for arable agriculture which remained confined to the riverine
belts. These areas were appropriated by the colonial state as 'Crown
Waste', to be utilised or disposed of by administrative fiat.12
In the agricultural colonisation schemes, the British once again favoured

the 'agricultural castes'. Thus incumbent agrarian landholders, from
districts that provided heavy military recruitment or were suffering from
population congestion, were preferred over the landless and service castes
of rural society. In Sind, the large landlords consolidated their position as
canal irrigation spread to their holdings. To this day they remain a
powerful force in Sind politics. And in the Punjab, too, the larger
landlords received in aggregate a substantial amount of land, generally in
the range of grants sized 100-500 acres each (though some favoured
individuals obtained much larger holdings). Demi-official duties for the
state, assistance with military recruitment, and increasingly the exercise
of social authority against nationalistic influences were important criteria
for selecting these larger grantees.
The major proportion of land though was reserved for 'peasant', or

abadkar, grants of up to 50 acres. This productive outlet further
cemented the ties between the dominant peasantry and colonial rule
already forged through military recruitment. It effectively constrained
the kind of economic pressures that in other parts of South Asia were
alienating agrarian groups from the British and moving them towards an
accommodation with nationalism. From barren waste this area was
converted by irrigation into an oasis for commercial cropping, with
exports of wheat, cotton and oilseeds to the Indian and foreign markets.
The poor and landless also moved to this area for employment, but they
continued to work as labourers, sharecroppers and petty artisans. By
contrast, agrarian incumbents entrenched their position even more, since
they monopolised the new landed resources. The highly concessionary
lease terms and purchase prices for the new lands marked another major
transfer of public resources to them. In the political arena it was this
class that achieved enfranchisement through the electoral and political
reforms introduced by the British. On the other hand, universal adult
franchise was never granted during British rule; and this further
consolidated the political exclusion of the agrarian underclass.
12
For information on this and the next four paragraphs, see Imran Ali 'The Punjab Canal Colonies,
1885-1940', Australian National University PhD thesis, 1980; 'Malign Growth? Agricultural
Colonisation and the Roots of Backwardness in the Punjab', in Past and Present (Feb. 1987); and
The Punjab under Imperialism, 1885-1947 (Princeton, NJ, 1988).
The military and bureaucracy were the other institutions strengthened

through the new hydraulic economy. Large areas of canal colony land
were devoted to military usage. Extensive land grants were made to army
pensioners and world war veterans. These allotments to military
personnel were a type of tangible resource-gratification that no other part
of British India was able to match. The other form of military
participation in the canal colonies was the extensive reservation of land
for the breeding of military animals. Large numbers of civilian grantees
were obliged to breed and supply cavalry horses, and transport camels
and mules. Every cavalry regiment was allotted a horse run, extending to
around 1,500 acres each, for breeding its own young stock. In addition,
some army remount runs of 10,000 acres each were further investments
in a type of military technology that was becoming rapidly outdated. The
more pervasive hold of the military over economic resources under
colonialism, and the more binding nexus between military service, social
authority and state power, served as a precursor to the direct exercise of
political control by the military in Pakistan after 1947.
The civil bureaucracy also emerged with greater authority. Canal

irrigation created a truly hydraulic society in the Indus basin, in which
water, the scarce and vital resource, was under the control of the public
administration. Not only was the cultivator more dependent on the
government than under rain-fed agriculture, but the centralised nature of
the management of gravitational-flow irrigation furthered the submission
of the citizen to the state. However, all did not need to be equally
obedient. The more powerful landholders could, and did, manipulate and
bribe the local officials to divert water to their lands, either out of turn or
in unfair proportions. Local level linkages between landholding lineages,
village officials and the native bureaucracy were not uncommon at the
nether levels of hydraulic management. Public power was tempered, and
indeed de-legitimised, by private vice. But in the process the barriers
excluding the mass of people from accessing resources were also
strengthened.
Furthermore, land distribution, at the level of hundreds of thousands of

acres for each canal project, was managed by the civil administration.
The higher bureaucracy was British and generally not personally corrupt,
being imbued with the higher mission of maintaining the empire. On the
other hand, the subordinate native officials, working through more
personalised priorities, did undertake—as the British were eventually to
realise through official audits—misdemeanours on a quite extensive
scale. The numerous types of transactions entailed in the transfer of land
from state to individual, and complicated by the various types of tenures
created on canal land, provided ample opportunities for irregularities.
44 SOUTH ASIA
Yet the British, in turn, did little to curb these practices, since reforming
society to the detriment of valuable support groups appeared too onerous
for the colonial purpose. Moreover, the rent-seeking behaviour of the
bureaucracy, with its ancillary distaste for accountability and
transparency, was to continue relatively undisturbed into Pakistan. These
mechanisms, along with a perhaps even greater aversion of political
functionaries to protocols and even to law, served to channel public and
private resources away from the common weal. They thereby helped to
retain class divisions and socio-economic differences.
The benefits of agricultural colonisation and economic growth also

enabled the middle class in the Indus basin to adjust more congenially to
colonial rule than its counterparts elsewhere in South Asia. Employment
opportunities were greatly expanded in government service, especially in
civil administration, law and order and the irrigation sector. The
expansion in agricultural trade and agro-processing activities provided
major and unprecedented commercial opportunities. The emerging
market towns created new space for doctors, lawyers and other
professionals, as well as for the upper artisanal and small-enterprise
'petty bourgeoisie'. Moreover, better-off non-agriculturists also availed
themselves of ample opportunities to obtain canal colony land, either
through grant allocations for retiring officials, or at state land auctions.
These developments impacted on the political economy, and in turn on

poverty and the processes of exclusion. While it certainly gained
economic ground, any power and authority subsumed by the middle class
remained subordinate to that of upper agrarian elements. Yet, the lack of
economic maladjustment or conflict with the state and the power
structure had two related consequences. First, it failed to incline this
class towards a radically nationalistic posture, and towards strenuously or
effectively developing political organisations to challenge British rule
and the rural hierarchy allied to it. Such a challenge did, to some extent,
shake the status quo in other parts of British India. Second, middle-class
radicalism remained weak, and was disinclined to articulate social and
economic inequalities, like the issue of poverty itself, as a basis for
challenging the state. Whether or not it might have pursued such causes,
the question remains whether the middle class in the Pakistan area
continued to be, in relative terms, organisationally unprepared, and
intellectually and emotionally desensitised, for addressing the
problematic of poverty and exclusion.
We have attempted to show above that the state of Pakistan as it emerged

in 1947 inherited various structures and processes that profoundly
impacted on the problems of poverty and exclusion. The weakness of the
urban sector, brought about by pre-colonial historical developments, but

with major continuities during colonial rule, meant that a concerted
challenge was unlikely to the entrenched interests of an inequitable
agrarian order. The ineffectiveness of both urban-based and nationalistic
political initiatives was seen in the dominance in the legislatures, until the
very eve of independence of Punjab and Sind, of pro-British political
nominees. This was over a decade after such formations had been
electorally overcome by nationalist forces, and specifically by candidates
of the Indian National Congress, in other parts of British India.13
Urban weakness in fact became much more critical in Pakistan. This

occurred because of the migration to Indian territory of Hindus and Sikhs
who had formed the predominant part of the middle class of professionals
and entrepreneurs before 1947. If the apprehensions of Muslim economic
nationalism regarding competition from non-Muslims led to a removal of
this threat with Pakistan, it also had the wider impact of retarding the
bourgeois ethos. And if such an ethos is to be regarded as a harbinger of
modern civilisation, then institutionalisation and the rule of codes and
systems in the society that was to follow became ever more
problematical.
The view that the 1947 winning of Pakistan represented a kind of rural
revolution against urban and capitalistic elements, deserves more
attention than it has yet received from scholars. The eighteenth century
revolt against the Mughal system by peasant warbands, discussed above,
had this dimension of the culling of urban power. Comparisons with
European developments over the past three centuries then become much
more ominous, in identifying some of the major parameters of
backwardness. Thwarting the social consequences of the emergence of a
market economy as well as creating mercantilist distortions, also become
related themes. The colonial state had itself adopted such remarkable
measures of paternalistic legislation as the Punjab Alienation of Lands
Act of 1901.14 This Act actually forbade non-agriculturists from
purchasing land belonging to the 'agricultural castes'. It was intended to
curtail the incursions of moneylending and commercial groups into
landholding, a process being expedited by the increasing indebtedness
and insolvency of agriculturists as they entered the brave new world of
commodity production for the market. While this law was not retained in
Pakistan, other forms of state intervention were not long in coming. They
were to have decisive effects, indirectly in respect of concerns about
13
See D.A. Low (ed.), The Congress and the Raj (New York, 1977).
14
See N.G. Barrier, The Punjab Alienation of Land Bill of 1900 (Durham, NC, 1966); and P.H.M.
van den Dungen, The Punjab Tradition (London, 1972).
46 SOUTH ASIA
equity and exclusion, and directly on the level of impact on poverty

during the second half of the twentieth century.
Pakistan: Politics and Governance

Let us first analyse how the political dimensions of these relationships
evolved in the new state of Pakistan. Political contrasts with India,
already noted, emanated from the lack of development of a maturing
political organisation like the Indian National Congress. In the period
prior to independence, the Congress Party was able to establish a
pyramidical organisational structure stretching from the grassroots village
level to the apex All-India Congress Committee. The Congress mobilised

the support of middle and rich peasants, whom it rewarded by breaking
up India's large landholdings in the land reforms of 1950. Financial
support to the party from large-scale business provided a strategic
balance between town and country. The strengths of Indian democracy
can easily be exaggerated, and over time many distortions have weakened
the system. Moreover, democracy seems to have done little to alleviate
the extreme poverty of such a disturbingly large proportion of people in
India. However, compared to Pakistan, the existence of such a large and
well-knit political organisation as the Congress clearly acted as a
stabilising force, deterring military takeovers, and enabling the
sustainability of other institutions such as the judiciary, the press and the
academy.
By contrast the major nationalist organisation supporting the Pakistan

movement, the Muslim League, remained largely a coalition of
individuals, factions and segmented political interests belonging mostly
to the landlord stratum. During colonialism, and unlike the Congress, it
failed to develop into a broad-based or well-knit party. In the Punjab, for
instance, a dissident faction of the pro-British Unionist Party came to
control the provincial Muslim League, thereby assisting the perpetuation
of successful landlord participation in politics.15 After 1947 the League
broke into further factions; and it or any other grouping was unable to
establish a wider organisational structure. Infighting among political
factions was accompanied by the absence of general elections until
civilian politics itself was overtaken by a military coup in 1958.16
The decade of military rule that followed was also antithetical to the
development of genuine political organisations. Ayub Khan, the military
15
See Imran Ali: Punjab Politics in the Decade before Partition (Lahore, 1975), and 'Relations
between the Muslim League and the Panjab National Unionist Party, 1945-47', in South Asia (No. 6,
1976), pp.51-65.
16
For a review of political developments in Pakistan, see Omar Noman, The Political Economy of
Pakistan (London, 1988).
dictator, did attempt to incorporate limited civilian participation under

electoral arrangements introduced in 1964. Again, though, the nominees
emerged on the strength of their own social and economic standing rather
than through any prolonged membership of political organisations. All
future experiments with democratic participation were to be beset by this
contradiction: namely whether properly articulated and internally
democratic political organisations would drive the electoral process; or
whether such political caucuses in the legislatures would merely serve as
expedient vehicles for strong individuals exercising arbitrary options.17
The question here arises whether the continued deinstitutionalisation of

politics not only impeded the implementation of sustained strategies of
poverty alleviation, but even reversed the prospects of such strategies by
consolidating a governance environment better positioned towards
fulfilling segmented and elite interests.
The impacts and consequences of these arrangements were not long in

following. An accelerated rate of industrial growth during military rule
in the 1960s led to the growing perception of increasing income as well
as regional inequalities. Wealth from industry was seen to become more
concentrated within a few business groups. Especially conspicuous were
the so-called twenty-two families, who appeared to be acquiring
resources rapidly, while the real wages of workers stagnated. The then
East Pakistan, later to become independent Bangladesh, also experienced
growing resentment over lack of political representation, as well as
resource transfers from its agricultural exports for industrial investment in
West Pakistan. The popular agitation that brought down Ayub Khan's
regime led to elections in 1970; and in these the underlying tensions and
contradictions came to the fore. Failure to meet the economic and
political demands of the elected representatives from the eastern wing led
to a civil war, and eventually to a break-up of the country in December
1971. Pakistan is the first nation to have suffered such a fate in the post-
World War Two period.18
In the rump Pakistan, the largest party in the national legislature was the
Pakistan Peoples Party under the leadership of Zulfiqar AH Bhutto. A
member of Ayub Khan's cabinet on the basis of his large landlord
background, Bhutto had resigned to form his own party. He contested the
1970 elections on a socialistic platform, appealing to the working class
and peasantry against industrial and agricultural wealth concentration.
We will return to his economic policies later, but here it is important to
17
For the Ayub years see Tariq Ali, Pakistan: Military Rule or People's Power (London, 1970), and
Lawrence Ziring, The Ayub Khan Era: Politics in Pakistan, 1958-1969 (Syracuse, 1971).
18
See Rounaq Jahan, Pakistan: Failure in National Integration (New York, 1972), and G.W.
Choudhury, Last Days of United Pakistan (Bloomington, 1974).
48 SOUTH ASIA
note that strong equity considerations had led to an effective retaliatory

response, expertly orchestrated by Bhutto, against the market-economy
developments of Pakistan's first two decades. Also, even if he had the
inclination, Bhutto lacked the time—what between forming a party and
assuming office—to establish a democratically-structured organisation.
As incumbents, there was little incentive for the PPP to dilute
personalised power; and the party remained internally authoritarian. The
development of democratic institutions relapsed further with Bhutto's
personal authoritarianism, and with his arbitrary treatment of rival
politicians. The next elections, in 1977, led to a sustained agitation
against perceived widespread electoral manipulation by Bhutto's party.

These disturbances culminated in June 1977 in a military coup, led by
General Zia-ul-Haq. Bhutto himself was executed in 1979 for complicity
in the murder of a political opponent.19
The eleven years of military rule that ensued from the 1977 coup could be
viewed as an extremely negative period for the prospects of developing
political equity in Pakistan. An institutional process for building
representation or consensus was effectively impeded by the military
junta's posture that democracy was not suited to Pakistani society.
Rationalisations for authoritarianism appeared through the intrusion of
religious dogma and obscurantism, assiduously propagated by Zia
himself. The severity of punishments meted out to enforce political and
moral obedience purportedly accorded with the dictates of religious law,
but this was Islam as arbitrated by the military mind. The lack of
democracy in these years can again be seen as a retardation of the move
towards more balanced forms of governance, and of a greater diffusion of
power, which could create a sounder basis for incorporating the needs of
the general population.
However a more sinister agenda than the need for internal control also
emerged at this time. This period witnessed, once again, the conversion
of Pakistan into a 'front-line' state in the 'great game' of international
geo-politics. This was the war in Afghanistan, which proved so pivotal
for the disintegration of the Soviet Union. The suppression of internal
democratic rights, in order to facilitate the strategy of military
confrontation, was only part of the heavy human and economic costs
borne by the people of Afghanistan and Pakistan. While the sacrifices
were certainly extracted from this region, the benefits were felt
elsewhere, in the shape of a painless and bloodless acquisition of freedom
by eastern Europe and the former Soviet republics.
19
For the Bhutto years see S.J. Burki, Pakistan under Bhutto: 1971-77 (London, 1980); and
Lawrence Ziring, Pakistan: The Enigma of Political Development (Boulder, 1980).
Several political agitations for the restoration of democracy were put

down by the military regime. Capital punishment, and the reversion to
the medieval practice of public flogging, were often the regime's
response to political opposition. However, after 1985 it did allow the
holding of 'non-party' elections. Candidates could stand as individuals,
but not through tickets from any political party. This tended to further
strengthen personalised, as opposed to institutionalised, politics.
Individuals who began to spend large sums of money on their elections
came to expect, and obtain, many times these amounts through a variety
of concessions and allocations of public resources. Since the national and
provincial legislatures so formed remained subordinate to the ruling

military regime, the element of economic gain rather than political reform
became the uppermost consideration for these new politicians. In 1988 a
plane crash, whose causes are still said to remain a mystery, killed Zia
and brought this period to a close.20
In the decade after 1988, four general elections were held. These brought
to power, in succession, the Peoples Party under Benazir Bhutto in 1988,
a coalition led by the Muslim League under Nawaz Sharif in 1990, again
a Peoples Party-led coalition under Bhutto in 1993, and a Muslim League
government under Sharif in 1997. While Bhutto had maintained
opposition to military rule, Sharif had in fact emerged in politics from an
industrial background under the military's aegis. All four governments
were unable to complete their prescribed five-year tenures. The first
three were dismissed by the country's incumbent presidents under a
constitutional provision introduced by Zia and known as the Eighth
Amendment. The fourth was ousted in 1999 by a military coup led by
General Pervez Musharraf. Thus by century's end, Pakistan's politics
had come full circle—back to military dictatorship, and by way of
civilian regimes that were either incompetent, or were not allowed by the
military, to govern autonomously.
After such prolonged periods of authoritarian rule, the transition towards

democracy since 1988 could nevertheless be regarded as an important
step in the incorporation of the civilian spectrum into political activity.
Accompanied by the perceived needs and imperatives of economic
deregulation and liberalisation, the new developments in governance
could have promised the removal of former distortions and
maladjustments. They could have led to a more balanced basis of
decision-making with regard to the growing problems of economic
sustainability in a society such as Pakistan's.
20
For the Zia years see: Craig Baxter (ed.), Zia's Pakistan: Politics and Stability in a Frontline State
(Boulder. 1985), and S.J. Burki and Craig Baxter, Pakistan Under the Military: Eleven Years of Zia
ul-Haq (Boulder, 1991).
50 SOUTH ASIA
We are discussing now very recent events and processes, many of which
are still unfolding, and some of which are at their inception. However,
the nature of their impact is likely to be such that assessment and
evaluation even at this stage are germane. There is, for one, an increasing
disquiet that, despite the developments with democracy, or perhaps
because of them, the state seems to be moving towards a crisis of
governance. This is accompanied by the perception of a downturn, or at
least a structural stagnation, in economic conditions (an issue we will
discuss later). The accumulated problems of economy and polity provide
an adverse context for the implementation of the liberalisation process. If
the strategy of economic liberalisation is well conceived and soundly

formulated, it could bring positive benefits by actually strengthening the
economic structure.
However, the country's business weakness and adverse political

environment might not allow such benefits to accrue. If liberalisation is
ill-conceived, and likely to have harmful effects, then the prevailing
conditions will further accentuate the severity of such impacts. One
complicating factor in analysis, stemming to some extent from the
currency of these processes, is that both pessimistic and optimistic—or at
least not so pessimistic—views prevail regarding the existing situation
and projections for the future. Often political alignments determine the
positions that analysts assume, since much of the discourse is not yet
scholarly or thoroughly researched, but exists among protagonists and
media. Keeping such provisos in mind, let us examine the implications
of the extant structures and their possible future consequences.
The personalisation of politics that we had earlier identified has

continued into the post-1988 period. While political parties have
contested the elections, their nominated candidates have essentially
fought elections on their own account, and through the liberal use of
private resources. This is not to say that policy differences between
parties have not affected voting patterns. But the members who have
been returned to the legislatures have not really been pre-selected along
organisational principles, or even for their contributions to party
operations and development. Most candidates have not needed to rely
significantly on organisational funds. Therefore, even if party manifestos
and policies, as well as cadre aspirations, have a social welfare and a
redistribute focus, the upper party hierarchies can remain detached from
these commitments and continue to follow personalised and sectional
agendas.
The lack of internal democracy within the major political parties has
facilitated this arbitrariness in the choice of candidates, and thence in the
composition of legislators. Accompanied by the now-pervasive lack of

accountability, to the subordination of the electoral process for economic
resource transfer has been added an even more deleterious dimension:
this is the quite large-scale entry of outright criminal elements into formal
politics through the electoral process. Numerous legislators, or their
close sponsors, have serious criminal backgrounds. Accusations of
murder, heroin smuggling and racketeering have been levelled against
them. Many constantly use their local influence to thwart investigation of
their crimes. Alliances have been consolidated with the state's 'law
enforcing' agencies—which are themselves said to have become largely
criminalised—and with the middle and lower bureaucracy.
The erosion in the efficiency, effectiveness and integrity of state

functionaries is the other major challenge to governance facing the
country. As noted above, corruption existed even in colonial times
among the subordinate, native officials. Their successors after
independence extended corruption to the highest levels of the
bureaucracy. Over time, constraints on the public display of wealth
gained from irregularities have also disappeared; and this has acted as a
further incentive for committing misdemeanours. Corruption is also said
to have spread to almost all branches of government service, whether it
be the police, the revenue collecting agencies, the civil service, the
irrigation department, and even the social sector services, such as health,
education and local government. Moreover, it has been considerably
fuelled by the recent but blatant incursion of politicians, including the top
leadership, into the nexus of corruption, irregularity and illegality.
The costs of weak and distorted governance are considerable.

Collectively, the rents imposed on society by government functionaries
and political operatives, the miscarriage of equity that this violation of
procedures involves, and the direct transfer of resources to those with the
means and ability to bribe and be bribed, marks a major form of damage
to national life. The increasing incidence of corruption, accompanied by
the growing inability of the state to reform or curb these practices, is a
challenge to national sustainability and to the rights of the poor.
Mismanagement in public affairs further embeds poverty, since it
enervates the delivery mechanisms for any poverty alleviation strategies.
Lack of transparency and accountability allows rent-seeking functionaries
to divert resources allocated for social sector expenditure towards their
own beneficiaries. Schemes like the 'social action programme' of the
1990s illustrate the major leakage and misuse of funds liberally loaned by
international agencies such as the World Bank.
52 SOUTH ASIA
Such profligate ventures have contributed to the country accumulating an

unsustainable level of foreign debt, which amounted to around $US40
billion in 2000. Not by coincidence alone, the overseas foreign currency
holdings of Pakistanis also approximate to this amount. One of the major
factors in the statistically-observed increase in poverty levels in Pakistan
in this decade is the high proportion of public expenditure devoted to debt
servicing. Along with military expenditure, this amounts to around
eighty percent of budgetary resources.
Apart from the diversion and misallocation of economic resources, the

distortions that are now beginning to question the legitimacy of the state
are also accompanied by a breakdown in systems and procedures. This is
threatening, when combined with the other adversities and shortcomings,
to seriously undermine the country's capacity to halt any slide towards
chaos and to reinstitute the norms of civilisation. The Pakistani state
inherited from the British a range of manuals and codes for the operation
of the public service. But any society that wishes in the late twentieth
century to position itself for progress, or even viability, needs to
incorporate its own effective protocols and systems.
One of the indicators of the downturn in public affairs in Pakistan has

been increasing personalisation and de-institutionalisation. Examples of
this abound, and are quite regularly reported in the print media.21 While
such exposure is itself an improvement from the days of severe press
controls under the earlier military regimes, more substantive gains in
respect of accountability have still to eventuate. In this sphere things
have arguably gone backwards since the 1980s, when an authoritarian
regime tolerated internal contradictions in order to placate support groups
and to follow the confrontational posture on Afghanistan. The emergence
of a 'heroin economy' also occurred at this time, with its inevitably
damaging impact on public discipline.
Clearly, the appropriation of resources and the violation of systems attack

the rights if the poor who constitute the vast majority of the population.
These processes represent the denial of the laws, regulations and codes
that help to protect the weaker sections of society •'om the depredations
of the better off. They also amount to a virtual rejection of those values
that now go towards defining the term civilisation. When to this general
institutional decline are added the structural adjustments that, at least in
the short run, appear to threaten the subsistence security of the poor, then
the volatility and instability of the system are further enhanced. One
21
English language newspapers that now regularly report on corruption, induced public losses and
misappropriation include Dawn, Frontier Post, The Muslim. The Nation, and The News. Two
monthly magazines, The Herald and Newsline, also contain periodic exposés.
indicator of this is the spawning of militant religious organisations, whose

mobilisation and propitiation benefit from the seeming violation of the
moral economy. Resentment and frustration often take the form of
sectarian and ethnic conflict, both of which have spread ominously in the
country.
Added to these destabilising trends is the virtual withdrawal of state law

enforcement from entire localities. These areas are now controlled, and
often fought over, by private armed groups connected to racketeering,
land grabbing, smuggling, the drug trade, and political factions. The
police and judiciary, both now said to be thoroughly interpenetrated by
corruption and politicised recruitment, appear quite ineffective in
upholding the law in terms of the rights of the citizen. Such situations, of
course, harm the poor, but they can actually benefit the better off.
Pakistan: Economy and Liberalisation

At independence Pakistan was a purely agrarian economy. The sway of
the larger landowners over politics was reflected in the absence of an
effective land reform. While three land reform measures have actually
been enacted since 1947, they have failed to result in a real transfer of
land to the peasantry. Thus, one of the ongoing themes of Pakistan's
political economy remains the efforts of the upper elements of the
agrarian hierarchy to preserve their class interests. One remarkable
example of the success of this strategy has been the absence to date of the
imposition of an effective income tax on agricultural earnings. This has
shifted the burden of state revenue generation to urban-based incomes,
though the rural lobby has argued that this is compensated for by several
forms of implicit taxation on agriculture.22
In the early 1950s a major policy imperative of the government became

to try and establish an industrial base. The efforts to achieve this goal
provide an instructive case study on both the constraints on, and
dynamics of, development in a backward economy. The administration
tried to induce industrialisation through the utilisation of foreign
exchange earnings generated from trading profits during the Korean War;
and by maintaining an overvalued exchange rate. This made raw
materials and capital goods imports cheaper, and consumer goods more
expensive, thereby moving the terms of trade against agricultural
commodities. Further assisted by subsidised credit from development
finance institutions and by protective tariffs, members of trading
communities moved into industrial production, and began to expect
22
A useful economic survey is Viqar Ahmad and Rashid Amjad, The Management of Pakistan's
Economy, 1947-82 (Karachi, 1986).
54 SOUTH ASIA
windfall profits. Mostly they invested in consumer goods and textile

industries; but the larger business groups were also aided by
disinvestments from public sector enterprises. However, both
agricultural incomes and the real wages of workers stagnated, producing
weak consumer demand. With the crisis of the ensuing recession came
the military coup of 1958.23
Ayub Khan initially spoke out against business malpractices; however the
regime soon moved to a more pro-business stance at the behest of the
civil service, which controlled the sanctioning of business projects as well

as the fiscal and trade policies. The upper bureaucracy had begun to
forge mutually beneficial financial alliances with business. By the 1960s
the trend had started of its families, as well as those of higher military
officials, moving directly into business with entry facilitated through their
lien on extra-economic power. In any event, this was a period of
accelerated growth rates, especially in the manufacturing sector. Then, in
the 1960s, agriculture also began to respond to green revolution inputs.
In the absence of democracy, decision-making was firmly in the hands of
the civil service and the military leadership, while a group of Harvard
economists provided the planning input for the growth model. An
overvalued currency and a protected market continued to benefit
industrial producers, while exporters were compensated for the
unfavourable official exchange rate by a payments system known as
bonus vouchers. State intervention in food security occurred largely
through subsidised prices at ration shops, essentially for the basic
commodities of flour and sugar.24
However several tensions soon began to emerge. An economic downturn

in the mid-1960s coincided with a war with India over the unresolved
problem of Kashmir. The simultaneous cut-off in United States foreign
assistance, presumably caused by Pakistan's friendship with China, added
to the economic stringency. Regional disparities, continuing poverty
through the stagnation of real wages, and the greater concentration of
industrial wealth among emerging monopoly houses, became further
sources of potential conflict. Some of the larger business groups opened
private banks, which were perceived as diverting people's deposits to in-
house projects on subsidised credit terms. The so-called twenty-two
families were said to control sixty-six percent of the country's total
industrial assets, seventy percent of the total insurance, and eighty
percent of the total banking assets. In contrast, public expenditure on
23
See J.R. Andrus and A.F. Mohammed, The Economy of Pakistan (London, 1958), and G.F.
Papanek, Pakistan's Development: Social Goals and Private Incentives (Cambridge, Mass., 1967).
24
For this period, see L.J. White, Industrial Concentration and Economic Power (Princeton, NJ,
1974), and Rashid Amjad, Private Industrial Investment in Pakistan, 1960-1970 (London, 1982).
infrastructure and the social sector, such as health, education and

workers' benefits remained low, in keeping with the Harvard-induced
model of 'functional inequality'. Meanwhile, defence expenditure
acquired a major share of the national budget. The distorted and
protected domestic market created by policy measures from the 1950s led
to inefficiencies in industrial production, as well as to grievances over the
growing political influence of vested industrial interests.25
Zulfiqar Ali Bhutto's Peoples Party government of the 1970s oversaw a

major reversal of the economic strategies of the 1960s. The party's

populist election manifesto, promising redistributive priorities, was
translated into a quite sweeping nationalisation of the large-scale
industrial sector. This was followed up by devaluation, a new labour
policy, and by the nationalisation of banking. Analysts have speculated
that the anti-industrial bias of these reforms, while accompanied by
socialistic terminology, stemmed from the 'feudal' concerns about
political and economic competition of this rapidly emerging class of
industrialists. These could have been concerns that Bhutto himself
shared, through his large landlord background. Subsequent economic
policies would tend to support this view: certainly Bhutto remained wary
of and quite hostile to private business.
Policies towards the agricultural sector were more supportive. A land

reform measure was also enacted, though it again failed to result in any
substantive redistribution of agricultural land. The export of cotton and
rice was taken over by public sector trading corporations, as was the
internal procurement and distribution of wheat, the major food-grain
crop. Moreover, the government then undertook the nationalisation of
edible oil, cotton-ginning, rice and flour factories, all of which belonged
to the intermediate, smaller-scale and agro-processing sector. Large parts
of agribusiness then passed into the hands of managers of public sector
entities; and many of these were said to be nominees of large
agriculturists. With this exclusion of the private sector, the Peoples Party
was able, by the mid-1970s, to seek greater political support from the
landlord element, by which time Bhutto had also effectively silenced his
more socialistic party colleagues.26
Not surprisingly, private sector investment rates declined in the 1970s as

the larger Pakistani entrepreneurs began to relocate overseas. In the
1980s, efforts by Zia-ul-Haq's military regime to attract capital
investment were only partially successful despite major concessions on
25
See S.A. Kochanek, Interest Groups and Development: Business and Politics in Pakistan (New
Delhi, 1983).
26
See Burki, Pakistan Under Bhutto, op. cit..
56 SOUTH ASIA
the legalisation of 'black' money. From around 1985, however, private

investment did pick up, though most of this was concentrated in the lower
value-added parts of the textile industry, namely spinning and weaving.
This industry had not been nationalised by Bhutto; and new entrants were
encouraged by the historical pricing anomalies on which it thrived.
These price distortions arose from the depression of the domestic price of
cotton below international rates, thereby providing a subsidy to the
processor.
Cotton textiles had thus assumed primacy in Pakistani industry; and the
'textile lobby' now became even more significant through new
investment. Indeed cotton became Pakistan's staple commodity: around
two-thirds of total exports are in cotton-based products. The post-1990
international recession in this industry, accompanied by a downturn in
Pakistan's raw cotton production, therefore hit the national economy
particularly severely. Most of the new textile projects were over-
leveraged, with investor risk reduced by the fraudulent but pervasive
transfer of much or all of owners' equity to foreign bank accounts
through such stratagems as the over-invoicing of machinery imports. If
the Pakistani people were to look to any section of their elite as saviours,
they would surely have the right to feel particularly bereft.
The enlarged public sector that had emerged in the 1970s remained
almost completely intact through the 1980s.27 Zia did denationalise the
flour and ginning mills soon after assuming power; but the only major
form of deregulation occurred in the prices of some types of fertilisers.
While a more liberal import policy was adopted, protective tariffs still
remained in place, thereby continuing to safeguard the inefficiencies of
Pakistani manufacturing. It could be said that the country missed the
opportunity to achieve competitiveness, and to liberalise and deregulate
the economy, while economic and political conditions were fairly
favourable. Perhaps a false sense of security was obtained from the large
doses of foreign aid th^i accompanied the Afghan war, from the lowering
of inflation rates, from the absence of any major international economic
shocks, and from the relatively higher annual growth rates compared to
other South Asian economies.
The less benign aspect of this conservatism was the huge vested interest
of the state-owned enterprises, most of which ran up major annual'losses
which had to be absorbed by the public exchequer. Whether in
production, infrastructure, transport or commodity distribution, they
became a major arena of inefficiency, graft and nepotism. The
27
See Robert LaPorte, Jr., and M.B. Ahmad, Public Enterprises in Pakistan (Boulder, 1989).
nationalised banks, for instance, have run up loan defaults estimated at

RslOO billion (about $US3 billion), and are to all practical purposes in a
state of bankruptcy. Meanwhile the chimera of religious dogma
continued to be employed to add confusion to any realistic or rational
discussion of economic strategies.
In the meantime, the population growth rate reached over three percent,
one of the highest in the world. Population levels by the year 2000 have
probably reached close to 150 million, having risen to this magnitude
from a mere 35 million in 1947. Barring any demographic reversals,

projections of present trends indicate that by 2020 Pakistan will surpass
the current population of the United States at 250 million. Clearly
Pakistan faces major problems of sustainability, which appear hardly
likely to be addressed by the present capacities for income generation and
economic competitiveness.
After 1990, Pakistan did actually embark on what might be termed a

'liberalisation' process. But the stimulus for this came very
unambiguously from external rather than internal sources. Multilateral
agencies such as the World Bank and the International Monetary Fund
had been pressing for a reduction in the fiscal deficit from the perceived
unsustainable rate of six percent to around four percent. Other
deliverables in the structural adjustment package, which began to assume
the dreaded status of loan conditionalities, included privatisation of state-
owned enterprises, progressive removal of protective tariffs, substitution
of subsidies by user charges and market pricing, and the maintenance of
realistic exchange rates. The reforms also visualised greater private
sector involvement in infrastructural services, and the development of
new regulatory frameworks for the liberalised sectors of the economy.28
Perhaps an indigenously-generated set of economic reforms would not

have assumed such parameters. They might have been more practically
adapted to the possibilities of implementation, given the complex nature
and particular sets of problems of Pakistani society and political
economy. To that extent, structural adjustment programs that emanate
from the metropolitan, donor end, and are assumed to have a sweeping,
cross-national validity, do tend to provide mechanistic and rather
simplistic solutions for the problems of highly complex local
environments. The adverse reactions that they incur could, therefore,
result either from their inapplicability or, given the weak public policy
delivery mechanisms of many host economies, from the mismanagement
28
For a review of the performance of the business sector in Pakistan and related themes, see Imran A.
Ali, 'Business and Power in Pakistan', in A.M. Weiss and S.Z. Gilani (eds), Power and Civil Society
in Pakistan (Karachi, 2001), pp.93-122.
58 SOUTH ASIA
of the implementation process. In the case of Pakistan, though, it is also

likely that, left to their own devices, the rent-based stakeholders in the
decision-making structure would have withheld any move towards reform
and liberalisation.
The privatisation process in Pakistan was also quite actively pursued in

the 1990s. Sales were completed of a sizeable number of production
units belonging to the large sector-based corporations that emerged in the
1970s, notably in cement, fertilisers, automobiles and engineering, edible
oils and fats, and chemicals. Two of the smaller nationalised banks were
also privatised, though efforts to sell off one of the larger ones soon ran
into difficulties. Privatisation of infrastructural operations has also
proved problematical. A start was made with a limited share issue of the
telecommunications parastatal; but the capital markets remained
unresponsive after two tranches of share floats. The search for a strategic
investor who would also take over operations has also remained
unsuccessful.
Efforts have also been made to set up regulatory agencies in

infrastructural sectors such as telecommunications and energy. However,
these bodies have failed to achieve effective autonomy from government
control and military or civil-servant domination. While there have been
several accusations of irregularities in privatisation, with many units the
sale process has also enjoyed acceptable transparency. Labour
resentment of these adjustments has been balanced with relief at the
removal of the distorted environment of public sector ownership and
management.
Import liberalisation also poses a renewed challenge to a business sector

seeking to move from a protectionist to a competitive environment. This
transition threatens much of the manufacturing sector, as do the prospects
of opening up trade with Pakistan's archrival, India, which is a part of the
World Trade Organisation protocols. While tariff reductions have
commenced, the administration has failed to remain in line with the
required IMF timetable for this process. Therefore, the real impact of
these adjustments still lie in the future, with the administration weighing
its dependence on foreign loans to underwrite current expenditures, with
the political admissibility of such reforms. Economic adversity has
perhaps increased in the late 1990s with the collective repercussions of
the nuclear tests of 1998, the ongoing conflict in Afghanistan, and the
continuing hostility with India.
Pakistan still has to achieve the equally painful process of deficit

reduction and increased revenue generation. The political response to the
question of whether elite stakeholders and rentier groups are to be

squeezed, or whether the burden is to be transferred to the masses through
regressive taxation and the removal of subsistence-based subsidies, is
likely to be volatile. Added to this hapless position of the state are
charges of unprecedented corruption among the civilian governments of
the 1990s. This has further aggravated questions of state legitimacy,
since a reversion to military rule and a rejection of democracy also seem
unacceptable. Additionally, there do not appear to be visible prospects,
even in the medium term, of the country achieving any dynamic growth
accelerators, new industries, significantly higher levels of export

performance, or even sizeable foreign investment flows. Thus the
economic options for achieving poverty alleviation appear constrained
and limited.
To add to these structural weaknesses at the elite level, the masses

themselves now lack the human resource capability to move rapidly
enough to more productive modes. Low literacy rates of twenty-five
percent or worse, major gender discrimination reinforced by cultural and
religious atavism and the social contradictions of the caste system, the
singular historical neglect of health, education, housing and sanitation by
the state, and a critical population structure where about half the
population is now under fifteen years of age, are just a few of the social
and economic problems afflicting modern Pakistan. No wonder that the
people of Pakistan are threatened with a grave future. Certainly
liberalisation and the market economy pose further dangers to the poor;
but then they were surely ill-served by the previous systems as well.
Moreover, there can be a deeper malaise than the impasse in

implementing, and now even evolving, national strategies for change and
modernisation. The challenge of the continuity of cultures and values—
elements that were functional at best for pre-industrial societies—has to
be addressed. Some nations suffer more than others from a sense of
confusion, and a lack of consensus, over arriving at collective missions
and strategies. These uncertainties can stretch into conflict and hostile
opposition where the core issues involve extant systems of thought and
social practice. Such societies can be adversely positioned for adapting
to, or benefiting from, the changes and periodic opportunities that arise in
the international economy.
Here, too, the successful role of elites in inculcating change values in

some societies can be compared to the conservatism, and even atavism, of
social forces in others. With its strongly articulated religious discourse,
and with a seemingly deeply-entrenched culture, Pakistan provides an
instructive case study of the dialectic between socio-political continuities
60 SOUTH ASIA
and the challenges of economic transitions. The failure to reach a

dynamic and purposive resolution to these issues means that the poor, the
vulnerable and the weak have less chance of redemption from their
fragile condition. Both the existing ordering of things, and the historical
patterns so largely responsible for extant arrangements, appear to
reinforce an embedded and almost unchanging configuration, one
completely opposite to a scenario of metamorphosis and transformation.

Ali 2002

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This article was downloaded by: [University of Tennessee, Knoxville]

On: 17 August 2015, At: 14:55

South Asia: Journal of South

The historical lineages of

To link to this article: http://dx.doi.org/10.1080/00856400208723474

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Lahore University of Management Sciences

institutionalised economic differentiation was probably never excessive

Wealth and poverty, therefore, are clearly functions of the economic,

and often extreme poverty, for numerically significant parts of the

It is the intention of this paper to examine how recent history can be

The more contemporary policy redirections towards economic

required to move towards more market-oriented and less welfare-based

The Mughal Legacy

However, the Punjab provides a significant contrast to other Mughal

agrarian hierarchy also appears to have experienced relatively little

In the century that followed, culminating in the annexation of the Punjab

indicator of this smoother transition was the cultural efflorescence of

Thus, the town in India was certainly a centre of civilisation, but it

weighty, however, could be the argument that any potentialities these

The Colonial Contract

substantive demographic or economic transition towards an urban ethos.

In the light of this failure of economic diversification, what were the

After the reassertion of colonial control, the economy of the Pakistan

Significantly, in social terms the British recruited soldiers exclusively

The most far-reaching and historically important form of cooperation

first in the interfluves, or doabs, of the Indus tributaries in the Punjab,

In the agricultural colonisation schemes, the British once again favoured

The major proportion of land though was reserved for 'peasant', or

The military and bureaucracy were the other institutions strengthened

The civil bureaucracy also emerged with greater authority. Canal

Furthermore, land distribution, at the level of hundreds of thousands of

The benefits of agricultural colonisation and economic growth also

These developments impacted on the political economy, and in turn on

We have attempted to show above that the state of Pakistan as it emerged

urban sector, brought about by pre-colonial historical developments, but

Urban weakness in fact became much more critical in Pakistan. This

equity and exclusion, and directly on the level of impact on poverty

Pakistan: Politics and Governance

level to the apex All-India Congress Committee. The Congress mobilised

By contrast the major nationalist organisation supporting the Pakistan

dictator, did attempt to incorporate limited civilian participation under

The question here arises whether the continued deinstitutionalisation of

The impacts and consequences of these arrangements were not long in

note that strong equity considerations had led to an effective retaliatory

against perceived widespread electoral manipulation by Bhutto's party.

Several political agitations for the restoration of democracy were put

provincial legislatures so formed remained subordinate to the ruling

After such prolonged periods of authoritarian rule, the transition towards

the strategy of economic liberalisation is well conceived and soundly

However, the country's business weakness and adverse political

The personalisation of politics that we had earlier identified has

composition of legislators. Accompanied by the now-pervasive lack of

criminalised—and with the middle and lower bureaucracy.

The erosion in the efficiency, effectiveness and integrity of state

The costs of weak and distorted governance are considerable.

Such profligate ventures have contributed to the country accumulating an

Apart from the diversion and misallocation of economic resources, the

One of the indicators of the downturn in public affairs in Pakistan has

Clearly, the appropriation of resources and the violation of systems attack

indicator of this is the spawning of militant religious organisations, whose

Added to these destabilising trends is the virtual withdrawal of state law

Pakistan: Economy and Liberalisation

In the early 1950s a major policy imperative of the government became