THE journey of privatization, set in motion under the influence of international financial institutions, has cast a long shadow of financial crisis over Pakistan. As this path was trodden, the safeguards that could have shielded the people from the clutches of capitalists were cast aside. Even in the presence of democracy and accountability institutions, the burden of this financial turmoil has been borne by the common people and the stain on the reputation of the state remains indelible.
On the flip side of this financial predicament, had political parties not relinquished control to local governments, they could have maintained their connection with the people. Democracy could have thrived within them, manifesting as a transparent system of accountability from bottom to top. This, in turn, could have acted as a counterweight to the power of the capitalist class, ensuring that not only the populace was safeguarded but also that foreign capital found its way into the country.
Back in the early 1990s, international financial institutions were extending loans to Pakistan’s civilian governments, envisioning not only economic development but also the democratic stability that followed the collapse of the Soviet Union. The western world had embraced a mission to promote capitalism and support global financial and development institutions. Local governance and robust accountability systems were pivotal for the equitable allocation of resources and sustainable development. Independent media, encompassing newspapers, FM radios, and news channels, were meant to play a significant role in shaping policies at all levels of government.
The privatization drive kick-started during Nawaz Sharif’s first term and continued through the Musharraf era. During this period, profitable state-owned enterprises were offloaded at fire-sale prices, giving rise to monopolies that, on one hand, strangled consumers and, on the other, deterred domestic and foreign investors. When these profit-driven entities faced losses, they burdened the national exchequer.
The economic crisis and the surge in the democratic deficit are a consequence of the unintended fallout of a free-market economy’s promotion. This intricate interplay of deficits, reinforcing each other, is a result of privatization that unwittingly nurtured monopolies and empowered profit-driven elites, pushing ordinary citizens to the periphery of the political landscape.
Interestingly, as these issues escalated, regulatory bodies found themselves hamstrung on one hand and constitutionally mandated on the other. The local government system was either suspended or paralyzed, despite its proven potential for positive transformation. This chain of events unleashed a cascade of unintended consequences. The impact of privatization extends beyond the economy, leaving politicians beholden to economic institutions.
A close examination of the privatization process in Pakistan paints a vivid picture of rigging, where business interests exploit state resources with scant regard for efficiency or productivity gains. It’s worth noting that 51 out of 60 defunct units are in private hands. In sectors like banking and energy, the effects of privatization are tangible, contributing to a ballooning fiscal deficit and placing the burden of taxes and inflation squarely on the public’s shoulders. While profitability surged in the banking sector post-privatization, loans to productive sectors, particularly small industries, dwindled significantly, negatively impacting the country’s economic growth prospects. The concentration of wealth continued, even in the presence of autonomous regulatory bodies, underscoring the enduring influence of a select few families.
The power sector, in particular, guaranteed independent power producers (IPPs) a fixed return on capital, irrespective of power generation. Privatization primarily focused on profitable industries that catered to basic needs, contributing to a financial crisis and diminished access to essential services for the average citizen. The most pernicious effects manifested in the privatization of education and healthcare, two fundamental pillars of human development.
As the chasm between the state and its citizens widened, the government took to imposing taxes such as the General Sales Tax (GST) on the common people, sparing the elite from their fair share of the burden. Meanwhile, incentives continued to flow, be it in the form of subsidized electricity, gas or export benefits.
Within the intricate tapestry of dual deficits, the emergence of grassroots democracy and constitutionally mandated local government serves as a beacon of hope. Empowering these local authorities holds the transformative potential to rewrite the narrative of economic development, essentially restoring the liberties that were stripped away during the colonial era and facilitating the equitable distribution of resources across the nation, thus propelling inclusive growth.
By granting administrative, fiscal, and political autonomy to these local bodies, a bridge can be constructed to span the widening chasm between political parties and the people. This approach liberates the citizens from the undue influence of monopolies and rekindles their sense of agency in shaping the destiny of their own communities.
The ground-level pressure for policies and accountability, with a steadfast focus on human development, has the power to fundamentally reshape the political and economic landscape of the nation. In essence, the revitalization of local governance and the restoration of equitable resource allocation can pave the way for a more just, democratic, and economically prosperous future for the country.
—The writer is politico-strategic analyst based in Islamabad.
Email: riaz.missen@gmail.com
