Evolution and Growth of Oligarchy in India and Pakistan

India is the world's third biggest and the fastest rising oligarchy with 17.2% of its GDP amassed by its 55 billionaires. India's system of governance has some of the worst of features of democracy and oligarchy in which the democratically elected politicians are bought off by the richest Indians, and both groups further enrich themselves at the expense of the vast majority of ordinary Indians. The biggest Indian oligarchs today are mainly industrialists like Ambanis, Adanis, Birlas, Mittals, Premjis and Tatas.



Like India, Pakistan is an oligarchy as well. But it is dominated by the feudal rather than the industrial elite. These oligarchs dominate Pakistan's legislature. Vast majority of them come from rural landowning and tribal backgrounds. Well-known names include the Bhuttos and Khuhros of Larkana, the Chaudhrys of Gujarat, Tiwanas of Sargodha, Daulatanas of Vehari, the Jatois and Qazi Fazlullah family of Sindh, the Gilanis, Qureshis and Gardezis of Multan, the Nawabs of Qasur, the Mamdots of Ferozpur/Lahore, Ghaffar Khan-Wali Khan family of Charsadda and various Baloch tribal chieftains like Bugtis, Jamalis, Legharis, and Mengals. The power of these political families is based on their heredity, ownership of vast tracts of land and a monopoly over violence – the ability to control, resist and inflict violence.

Pakistan, too, has an industrial elite. Its biggest names include Manshas (Nishat Group), Syed Maratib Ali and Babar Ali (Packages) Saigols, Hashwanis, Adamjees, Dawoods, Dadabhoys, Habibs, Monnoos, Lakhanis and others. But their collective power pales in comparison with the power of the big feudal families. The only possible exception to this rule are the Sharif brothers who own the Ittefaq Group of Industries and also lead Pakistan Muslim League (Nawaz Group), one of the two largest political parties. But the Sharifs too rely on political support from several feudal families who are quick to change loyalties.

The origins of the differences between Indian and Pakistan oligarchies can be found in some of the earliest decisions by the founding fathers of the two nations. India's first prime minster dismantled the feudal system almost immediately after independence. But Nehru not only left the industrialists like Birla and Tata alone, his policies protected them from foreign competition by imposing heavy tariff barriers on imports. In Pakistan, there was no serious land reform, nor was any real protection given to domestic industries from foreign competition.

Oligarchy is the antithesis of democracy. However, it's important to understand the differences between feudal and industrial oligarchies, and their effects on nations as observed in South Asia.

Industrial oligarchs of India have accelerated economic growth, created a large number of middle class jobs, increased India's exports significantly and paid higher taxes to the tune of 17% of GDP. This has created a trickle-down effect in terms of increased public spending on education, health care and various social programs to fight poverty. Unfortunately, the tax collection in Pakistan's feudal oligarchy remains dismally low at less than 10% of GDP, and the lack of revenue makes its extremely difficult for Pakistani state to spend more on basic human development and poverty reduction programs.



As to the future, the hope for Pakistan is that the feudal hold on power will eventually weaken as the nation sustains its rapid pace of urbanization. Pakistan has and continues to urbanize at a faster pace than India. From 1975-1995, Pakistan grew 10% from 25% to 35% urbanized, while India grew 6% from 20% to 26%. From 1995-2025, the UN forecast says Pakistan urbanizing from 35% to 60%, while India's forecast is 26% to 45%. For this year, a little over 40% of Pakistan's population lives in the cities. The political power shift from rural to urban areas may eventually produce a more industry-friendly government in the future. Such a government can be expected to help increase the tax base significantly, permitting greater spending on education and health care, and reduced dependence on foreign aid.

Related Links:

Haq's Musings

India: World's Largest Oligarchy

Who Owns Pakistan?

Tax Evasion Fosters Aid Dependence

Urbanization in Pakistan Highest in South Asia

India's 2G Scandal

Bloody Revolution in India?

Is There a Threat of Oligarchy in India?

Political Patronage in Pakistan

India at Davos 2011: Story of Corruption and Governance Deficit

Challenges to Indian Democracy

India After 63 Years of Independence

Comments

Riaz Haq said…
Here's an excerpt from Dr. Ishrat Husain's lecture remembering Pakistan finance minister Shoaib in 2009:

The period from 1958 to 1969 during which President Ayub ruled and Mr.
Shoaib served as Finance Minister for most of these years is considered as the
golden era of Pakistan’s economic history. The period had strong macro
economic management and the economic indicators were extremely impressive.
Agriculture grew at a respectable 4 percent while remarkable rates were
achieved in manufacturing (9 percent) and trade (7 percent) GNP growth rates
exceeded 6 percent on average throughout the period. Economic growth was
very strong on all fronts.
Structural changes that took place under the stewardship of Mr. Shoaib
laid the foundation for Pakistan’s subsequent economic performance.
Manufacturing sector which was quite nascent increased to nearly 15 percent of
DGP. Pakistan’s economic model was considered a benchmark for the
developing countries. By the end of the decade, Pakistan’s manufactured
exports wee higher than the combined manufactured exports of the Philippines,
Thailand, Malaysia and Indonesia. It is purely a matter of conjecture as to where
Pakistan would have stood today in terms of per capita incomes if it had
continued the economic policies of 1960s.
A country’s economic outcomes depend upon a host of factors (a) Initial
resource endowment; (b) External environment; (c) Strategy and policy
framework; (d) Administration capacity; (e) Political stability.
Pakistan inherited a weak resource endowment as the part that
constituted India was relatively advanced in terms of natural, human and physical
resources while the two wings of Pakistan separated by 1,000 miles of Indian
territory were quite backward.
Delivered as the 19th Shoaib Memorial Lecture organized by the Institute of Cost and
Management Accountants at Karachi on August 18, 2009
2
External environment facing Pakistan in the decade of the 1960s was
mixed. The war of 1965, however, caused immense economic damage to
Pakistan and foreign aid flows did suffer in the post 1965 period.
The strength of the economic performance in this decade can mainly be
explained by the strategy and economic policies pursued during this period, the
efficiency with which these policies were executed due to improvement in
administrative capacity and the political continuity and stability that prevailed until
late 1968.
The philosophy and policy directions can be gauged from the following
statement made by President Ayub Khan.
“ It has long been one of the cardinal policies of the government to allow free
enterprise full play in the development of the country. Experience has fully
justified the governments in private enterprise as is evident from the progress
Pakistan has made in the field of commerce and industry. The government
proposes not only to maintain this policy but reinforce it and try to give it still
greater scope, for we are satisfied that private enterprise can under appropriate
conditions bring the greatest good to the greatest number.””
Riaz Haq said…
Here's an excerpt from Dr. Ishrat Husain's lecture remembering Pakistan finance minister Shoaib in 2009:

The period from 1958 to 1969 during which President Ayub ruled and Mr.
Shoaib served as Finance Minister for most of these years is considered as the
golden era of Pakistan’s economic history. The period had strong macro
economic management and the economic indicators were extremely impressive.
Agriculture grew at a respectable 4 percent while remarkable rates were
achieved in manufacturing (9 percent) and trade (7 percent) GNP growth rates
exceeded 6 percent on average throughout the period. Economic growth was
very strong on all fronts.
Structural changes that took place under the stewardship of Mr. Shoaib
laid the foundation for Pakistan’s subsequent economic performance.
Manufacturing sector which was quite nascent increased to nearly 15 percent of
DGP. Pakistan’s economic model was considered a benchmark for the
developing countries. By the end of the decade, Pakistan’s manufactured
exports wee higher than the combined manufactured exports of the Philippines,
Thailand, Malaysia and Indonesia. It is purely a matter of conjecture as to where
Pakistan would have stood today in terms of per capita incomes if it had
continued the economic policies of 1960s.
A country’s economic outcomes depend upon a host of factors (a) Initial
resource endowment; (b) External environment; (c) Strategy and policy
framework; (d) Administration capacity; (e) Political stability.
Pakistan inherited a weak resource endowment as the part that
constituted India was relatively advanced in terms of natural, human and physical
resources while the two wings of Pakistan separated by 1,000 miles of Indian
territory were quite backward.
Delivered as the 19th Shoaib Memorial
External environment facing Pakistan in the decade of the 1960s was
mixed. The war of 1965, however, caused immense economic damage to
Pakistan and foreign aid flows did suffer in the post 1965 period.
The strength of the economic performance in this decade can mainly be
explained by the strategy and economic policies pursued during this period, the
efficiency with which these policies were executed due to improvement in
administrative capacity and the political continuity and stability that prevailed until
late 1968.
------------
Economic policies pursued by Ayub-Shoaib administration in the 1960s
were outward-oriented, liberal and supportive of the private sector. State played
a facilitating and enabling role by providing incentives, supplying infrastructure
(particularly in irrigated agriculture), institutions and technology. Macroeconomic
management was sound and prudent and fiscal and external balances were
managed well. Inflation remained in check and the annual rate of growth in
prices was only 3.3 percent. However, rapid economic growth and
industrialization resulted in income inequalties and regional disparities that had
serious political repercussions subsequently. Social sectors were neglected and
industries for capital goods were not set up. Import substitution strategy had a
positive pay off but also nurtured rent-seeking and pressures for protection
against external competition thus masking the inefficiencies of domestic
industries. Exchange rate policies created distortions and arbitrage
opportunities. But the positive contribution that made Pakistan self-sufficient in
wheat and rice was the adoption and diffusion of Green Revolution technologies
that also helped uplift the living standards of the rural population.
Riaz Haq said…
Here's a VOA report on Hazare's fast against corruption:

Independent political analyst Prem Shankar Jha in New Delhi says the success of the anti-corruption movement marks a turning point in Indian democracy.

“We had a paternalistic government handed down to us from the imperial days …we draft a bill and we pass the bill, we never consult with you, we never bring any outsiders in," says Jha. "We want to do everything ourselves… which means we want to keep power in our hands. This total monopoly of power masquerading as paternalism has been smashed. In this particular occasion, the government was forced in parliament to approve the key elements of the people’s draft. Now that is the end of paternalistic government in India and the beginning of real empowered democracy.”

The political class, which analysts say was taken aback by the strength of the movement, appears to be heeding that message. Leader of the opposition Bharatiya Janata Party, Arun Jaitley, told parliament that people’s voices will have to be heard while framing legislation.

“In any developing society and any mature society, there will be a role for civil society," he said. "They are a hard reality, they will exist. Some of them may take positions which seem a little excessive, they may not be implementable, but we must realize that their role is one of a campaigner, a flag bearer, a crusader on several issues.”

Hazare’s movement and use of a hunger strike to achieve his aim has its critics. Some say it has set a dangerous precedent. Others say he used undemocratic methods to force his views on parliament.

Hazare has announced his focus on reforming the political system will continue.

In a country where scores of lawmakers face criminal charges, he wants to ensure that people with a clean record are elected to parliament and state legislatures. He says people should be given the right to recall lawmakers who do not perform.

But political analyst Jha says he does not expect Hazare and his supporters to use the same tactics in the future.

“I do not think they will use the confrontation route. This is a stick that can break very easily in your hands. It should be kept for an absolute emergency as it was now,” he says.

Political analysts say the recent protest highlighted that the political class was largely out of touch with the public’s concern over deep-seated corruption. They say the protest’s success will force officials to pay closer attention to public opinion.


http://www.voanews.com/english/news/Anti-Corruption-Movement-in-India-Seen-As-New-Political-Force-128583803.html
Riaz Haq said…
Sugar mills have been one of the vehicles of political patronage in Pakistan.

In an August 2011, Zulfiqa Mirza told the media that "Asif Zardari is so generous that if you gave himn a glass of water he'd give you a sugar mill".

In Mirza's case this is definitely true as he himself admitted that he had received the permit to install his sugar mill with the help of Asif Ali Zardari, according to Daily Times.

In a Friday Times Op Ed in Sept 2011, Najam Sethi wrote that "Mr Mirza owes his great wealth (sugar mills sanctioned during the PPP's two stints in power) and power (his wife is the Speaker of the National Assembly) to Mr Zardari's largesse".

No wonder so many politicians own sugar mills that they dominate the business and control its supply and prices to enrich themselves.

The fact that Pakistanis have a sweet tooth is not lost on the nation's ruling elite, particularly the powerful political families and the Pakistani military. While the military owns Fauji sugar mills, more than 50% of the sugar in Pakistan is produced in sugar mills owned by the most powerful politicians of all major parties and their families.

Multiple sources indicate that the mills owned by President Asif Ali Zardari’s family and the ruling PPP leaders include Ansari Sugar Mills, Mirza Sugar Mills, Pangrio Sugar Mills, Sakrand Sugar Mills and Kiran Sugar Mills. Ashraf Sugar mills is owned by PPP leader and incumbent ZTBL President Ch Zaka Ashraf.

The media reports also indicate Kamalia Sugar Mills and Layyah Sugar Mills are owned by PML-N leaders. Former minister Abbas Sarfaraz is the owner of five out of six sugar mills in the NWFP. Nasrullah Khan Dareshak owns Indus Sugar Mills while Jahangir Khan Tareen has two sugar mills; JDW Sugar Mills and United Sugar Mills. PML-Q leader Anwar Cheema owns National Sugar Mills while Chaudhrys family is or was the owner of Pahrianwali Sugar Mills as it is being heard that they have sold the said mills. Senator Haroon Akhtar Khan owns Tandianwala Sugar Mills while Pattoki Sugar Mills is owned by Mian Mohammad Azhar, former Governor Punjab. PML-F leader Makhdoom Ahmad Mehmood owns Jamaldin Wali Sugar Mills. Chaudhry Muneer owns two mills in Rahimyar Khan district and Ch Pervaiz Elahi and former Minister of State for Foreign Affairs, Khusro Bakhtiar have shares in these mills.

http://www.riazhaq.com/2009/09/solving-pakistans-sugar-crisis.html
Riaz Haq said…
Here's an interesting comparison between the coffee elite of Central America and sugar elite of Pakistan by Dr. Adeel Malik in The News:

In his famous book, Coffee and Power, Jeffrey Paige provides a vivid illustration of how a single commodity, coffee, is sufficient to explain the power structure of Central America. Despite the varying political complexions of its regimes, Central America has one thing in common: they are all ruled by coffee elites. For decades, Central America's coffee elites have thrived on state patronage, rent seeking, and distortion of private markets. As Jeffrey Paige concludes, these elites have generated in this process "unprecedented wealth for the few at the expense of the general impoverishment of the many". Despite this, the coffee elites have been remarkably resilient in Central America, surviving periods of both revolutions and authoritarian rule.

In terms of its links with political power, sugar is Pakistan's parallel for coffee. Sugar industry is Pakistan's second largest agro-based industry. Its linkage with politics, patronage and protection sets it apart from other industries. Available evidence suggests that it is economically inefficient, enjoys one of the highest rates of protection, and is dominated by a small number of political influential owners, making it an excellent illustration of the interconnection between business and politics. The analysis of sugar markets in Pakistan, and their manipulation therefore opens up a fascinating window into how the economic interests of our political elites are strongly entrenched in the current power structure. The operation of sugar markets in Pakistan offers a telling story of how both markets and public policy are routinely captured by vested political interests.


http://thenews.com.pk/TodaysPrintDetail.aspx?ID=198042&Cat=9&dt=9/12/2009
Riaz Haq said…
Here's a NY Times story on global protests showing rising disillusionment with democracies:

Hundreds of thousands of disillusioned Indians cheer a rural activist on a hunger strike. Israel reels before the largest street demonstrations in its history. Enraged young people in Spain and Greece take over public squares across their countries.

Their complaints range from corruption to lack of affordable housing and joblessness, common grievances the world over. But from South Asia to the heartland of Europe and now even to Wall Street, these protesters share something else: wariness, even contempt, toward traditional politicians and the democratic political process they preside over.

They are taking to the streets, in part, because they have little faith in the ballot box.

“Our parents are grateful because they’re voting,” said Marta Solanas, 27, referring to older Spaniards’ decades spent under the Franco dictatorship. “We’re the first generation to say that voting is worthless.”

Economics have been one driving force, with growing income inequality, high unemployment and recession-driven cuts in social spending breeding widespread malaise. Alienation runs especially deep in Europe, with boycotts and strikes that, in London and Athens, erupted into violence.

But even in India and Israel, where growth remains robust, protesters say they so distrust their country’s political class and its pandering to established interest groups that they feel only an assault on the system itself can bring about real change.

Young Israeli organizers repeatedly turned out gigantic crowds insisting that their political leaders, regardless of party, had been so thoroughly captured by security concerns, ultra-Orthodox groups and other special interests that they could no longer respond to the country’s middle class.

In the world’s largest democracy, Anna Hazare, an activist, starved himself publicly for 12 days until the Indian Parliament capitulated to some of his central demands on a proposed anticorruption measure to hold public officials accountable. “We elect the people’s representatives so they can solve our problems,” said Sarita Singh, 25, among the thousands who gathered each day at Ramlila Maidan, where monsoon rains turned the grounds to mud but protesters waved Indian flags and sang patriotic songs.

“But that is not actually happening. Corruption is ruling our country.”

Increasingly, citizens of all ages, but particularly the young, are rejecting conventional structures like parties and trade unions in favor of a less hierarchical, more participatory system modeled in many ways on the culture of the Web.

In that sense, the protest movements in democracies are not altogether unlike those that have rocked authoritarian governments this year, toppling longtime leaders in Tunisia, Egypt and Libya. Protesters have created their own political space online that is chilly, sometimes openly hostile, toward traditional institutions of the elite.

The critical mass of wiki and mapping tools, video and social networking sites, the communal news wire of Twitter and the ease of donations afforded by sites like PayPal makes coalitions of like-minded individuals instantly viable.

“You’re looking at a generation of 20- and 30-year-olds who are used to self-organizing,” said Yochai Benkler, a director of the Berkman Center for Internet and Society at Harvard University. “They believe life can be more participatory, more decentralized, less dependent on the traditional models of organization, either in the state or the big company. Those were the dominant ways of doing things in the industrial economy, and they aren’t anymore.”.......


http://www.nytimes.com/2011/09/28/world/as-scorn-for-vote-grows-protests-surge-around-globe.html?pagewanted=all
Riaz Haq said…
Here's a News story on increasing private wealth in Pakistan:

KARACHI: Pakistan has seen significant increase in the number of wealthy people as compared to a total of approximately 22 families during the era of Field Marshal General Ayub Khan in 60s, experts told The News.

According to a study of a financial think-tank from Switzerland, there are 415 people in Pakistan, who own more than $30 million each as compared to 310 last year, registering an increase of 33.9 percent, which is a record in Asia. Collective income of these people remained around $50 billion, the study revealed.

Only seven to eight business groups of the 22 families continue to operate their businesses significantly and the remaining families have either closed their businesses or have shifted abroad.

Dr Ishrat Husain, former governor of the State Bank of Pakistan (SBP), and a renowned economist, said only Dawoods, Adamjees, Sehgals, Shaikhs, Nishats and a few others have survived the economic ups and downs during this period, while Haroons, Batlas, Valikas, Isfahanis, Noons, and Rangoonwalas, have disappeared from the economic scene.

The nationalisation process in 70s also affected their economic position, he said, adding that some of the families went abroad and later shut their businesses due to one reason or the other. “Disputes and rivalries within the family and group also forced them to wind up their businesses,” Dr Husain said.

In 1947, the first budget projected a revenue of Rs150 million and the government had to borrow Rs80 million from the Habib Bank Limited to pay salaries to its employees and meeting other contingencies.

Likewise, Dentonic tooth powder was the first industrial project launched in the country followed by the inauguration of the first soft drink, Pakola, which was launched by the then prime minister.

Dr Riaz Shaikh, head of Social Sciences at Shaheed Zulfikar Ali Bhutto Institute of Science and Technology (SZABIST), said that several well-established individuals and families had emerged after the nationalisation process initiated by Zulfikar Ali Bhutto. “Now the number of such individuals and families has increased to hundreds, if not thousands,” he said.

Families of Agha Khan, Kasuri that owns a school chain, Patel family that owns hospitals and Malik Riaz, top real estate developer, along with several others are some of them.
----
A few top families in the list included Sehgals, Habibs, Dawoods, Adamjees, Crescent and Valikas.
---------------
(Shahid) Rahman wrote that nationalisation retarded Pakistan’s growth in many ways but its worst consequence was the scars inflicted on the psyche of the big businesses, which were flourishing even after passage of two decades. “It alienated the industrialists from the economic mainstream and, as if by a collective decision, several of the original 22 families who pioneered development in Pakistan switched off investment in the long gestation projects,” he wrote.

The Pakistani businessmen who were planning mega projects in 1971 and are still capable of setting up mega projects resigned to remain spinners, sugar manufacturers or at best cement manufacturers.

Field Marshal Ayub Khan’s decade of development (1958-68) divided the society into two categories, privileged and underprivileged, which led to the explosive situation of the 1970’s, culminating in the severance of Pakistan and induction into power of a socialist government of Bhutto.

The second phase, (1971-77) under Pakistan People’s Party was the era of dismantling monopolies, nationalisation, hitting at the power base of industrial barons and clipping their wings, while 11 years rule of General Zia-ul-Haq was the period of status quo for the economy....


http://www.thenews.com.pk/Todays-News-3-217083-Record-increase-in-number-of-wealthy-people-in-Pakistan
Riaz Haq said…
Here's a BBC report on "paid news" in Indian elections:

In recent years, India has seen a growing phenomenon called 'paid news'. This is where money changes hands in return for sympathetic press coverage.

There have been hundreds of cases involving politicians, celebrities and businessmen paying for favourable reports in the media dressed up as real news.

With the country gearing up for elections soon, the issue has been in sharp focus, but is there any chance of tackling the problem?


http://www.bbc.com/news/business-26689192

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