BY now, it should be abundantly clear that the authorities in Pakistan are not going to do anything to address the core dysfunctions that have dragged its economy down over the decades. They would prefer to learn to live with these dysfunctions. And one of the ways to do this is to increase the coercive powers of the state.
For decades, an agenda for change and reform has been advanced to help Pakistan’s state and economy adapt to a changing world. The agenda involved broadening the base of taxation and of exports, unlocking the productivity potential of the economy, strengthening the regulatory environment, documenting the economy and its transactions, reducing the role of speculation and manipulation in the stock market, improving judicial outcomes and access to justice as well as the legal framework for business, and so on. It was the long, hard road of reform that was supposed to safeguard the next generation of livelihoods and secure the prosperity of the common citizenry in a changing world.
Some of this was done in fits and starts. For example, the private power policy was supposed to be a stop-gap arrangement to help bring in power generation capacity quickly in the middle of a power crisis in the early 1990s. It was meant to be followed up with a series of other reforms that would unbundle the vast power bureaucracy, and slowly bring in market forces to determine the price of electricity, as well as the returns that private investors in power generation would enjoy. The state was meant to withdraw from its overarching role as the sole arbiter of prices, returns, capacity, demand and everything else in the power sector.
But all that happened was the induction of private power producers, enjoying lavish returns secured by sovereign guarantee. And there it stopped. Net result was that the power sector was burdened with the costs of private power producers and the inefficiency of government. And we have not moved beyond since then, despite more than three decades having passed since the private power policy was introduced. The result is we are left with a power sector that is better at producing circular debt than it is at producing and distributing electricity.
The same labour and capital inputs today will generate lesser output, produce fewer jobs and lift fewer people out of poverty.
The same failures have hit all other areas — from taxation to savings and investment. The result is, we are left with a state and an economy that is better at producing debt, both domestic and external, than it is at producing jobs or goods and services. We have research that tells us that, over the decades, Pakistan’s economy has been losing productivity, meaning it is producing less and less incremental output per input of labour. Now the World Bank is telling us that for each incremental quantum of output the economy generates, it produces fewer jobs and lifts fewer people out of poverty over the longer term.
This means the economy has been sliding down what economists call diminishing returns, a situation where every successive input gives you less and less output in return. The same labour and capital inputs today will generate lesser output, produce fewer jobs and lift fewer people out of poverty than it would have a decade or two ago. And this trend is set to continue into the future barring any major course correction.
And that course correction is not going to come.
So where does that leave us? It brings us to a situation where the state is learning to live with its dysfunctions rather than working to resolve them. It is preparing to face the future and the challenges it will bring with all its might, but without adapting itself to the requirements of a changing world. By now, it is not even possible to build a case for why a country like Pakistan should undertake a disruptive course correction in the name of improving its ability to participate in a global market, because this very global market is being torn down, chopped up and walled off by the very people who built it: the advanced industrial democracies of the West.
What are these future challenges? First is the geopolitical drift in the region after the withdrawal of American forces from Afghanistan. Second is the need to secure livelihoods and provide jobs to a growing army of youth in Pakistan. Stop here for a moment and consider the impact.
The first challenge produces a massive requirement for resources to pay for the arms that will inevitably be required to meet the rising arc of terror from Afghanistan in the west and growing belligerence from India in the east. The second challenge also produces a massive requirement for resources, since the only way to produce jobs and livelihoods that we are left with following decades of growth without reform, is through fiscal and monetary inducements.
The first challenge will trump all else, because in Pakistan there is no debate between guns and butter. The guns always win. That means the future will be domestically turbulent, unless an external patron is willing to underwrite the massive creation of livelihoods for another generation of Pakistanis (which may well happen, but is not yet a given).
It is to face this future that the state is centralising itself, retreating into its fortress, marshalling all its powers under the same head, growing its claim on the resources that are otherwise shared and, importantly, ramping up immunity for its leadership from any consequences for their actions. In the mix of repression and consent through which all states procure their legitimacy, the role of repression is about to increase. For decades an effort was made to try and persuade successive governments in Pakistan of the necessity to reform. Now we can lay that effort to rest. The rulers have decided to live with the country’s dysfunctions, that are primarily economic but also legal and political. They will navigate their future accordingly.
The writer is a business and economy journalist.
Published in Dawn, November 13th, 2025
