The elite capture of policymaking in Pakistan has long been a significant impediment to the country’s economic development. The concentration of political power in the hands of a select few powerful groups, notably the military, feudal landlords, and influential business families, has perpetuated a system that works against the public interest. According to the International Monetary Fund (IMF) in 2020, Pakistan’s economy has been heavily impacted by the entrenched power of elite groups, which has hindered its development potential. Instead of fostering inclusive growth, this entrenched system has hindered the development of essential sectors, curtailed the potential of small and medium enterprises (SMEs), and stunted economic progress.
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Elite capture refers to the process by which a few powerful individuals or groups manipulate policymaking to serve their own interests, often at the expense of the broader population. This phenomenon has been a persistent problem in Pakistan, where policies are often shaped to benefit the wealthy and influential, leaving the majority of citizens to face the consequences of inequality and stagnation. The World Bank reported in 2020 that income inequality in Pakistan is among the highest in South Asia, with wealth concentrated in the hands of a few powerful families. The repercussions of this imbalance extend far beyond politics; they have undermined the country’s ability to develop a sustainable, inclusive economy.
One of the most profound effects of elite capture has been the concentration of power within a narrow circle of individuals and groups, a trend that has historically limited the potential for broad-based economic growth. Political power in Pakistan has long been dominated by a handful of elite groups, such as the military, feudal landlords, and influential businesspeople. These groups wield immense influence over policymaking, which allows them to steer the country’s economic policies in their favor. Research by the Pakistan Institute of Development Economics (PIDE) in 2019 found that a disproportionate amount of economic power lies with these groups, limiting competition and economic opportunities for the general public. Instead of formulating policies that address the needs of the general population, the policies crafted under their influence have often prioritized their own financial and political interests.
This concentration of power has led to a scenario in which the interests of the powerful few consistently overshadow those of the majority. According to the United Nations Development Programme’s (UNDP) Pakistan National Human Development Report (NHDR), the “three P’s of inequality—Power, People, and Policy” are tightly interwoven in Pakistan, with the elite’s privileges accumulating to billions of rupees, representing a significant portion of the country’s GDP. A 2020 report by the UNDP also found that the wealthiest 10% of Pakistanis own more than 60% of the country’s wealth, further cementing the divide between the elite and the general population. The economic policies devised by the elite thus disproportionately benefit them, while the broader population continues to struggle with poverty, unemployment, and limited access to essential services.
Moreover, the policies shaped by the elite have created an economic environment where growth is concentrated in the hands of the wealthiest segments of society, leaving little room for small and medium enterprises (SMEs) to thrive. SMEs play a crucial role in job creation, innovation, and broad-based economic growth. However, the lack of support for these businesses is a direct result of the policies formulated under elite influence. The Small and Medium Enterprises Development Authority (SMEDA) reported in 2021 that over 60% of SMEs in Pakistan face significant barriers to growth due to a lack of government support and competition from large conglomerates. Small businesses, often the backbone of any growing economy, struggle to compete with larger corporations that benefit from government subsidies, tax breaks, and preferential treatment in matters such as loans and credit.
While the wealthiest segments of society receive preferential treatment, the policies that could foster the growth of SMEs are sidelined. The Small and Medium Enterprises Development Authority (SMEDA) has reported that, despite efforts to establish Common Facility Centres (CFCs) across the country, many SMEs have faced financial constraints that have prevented their growth and development. SMEDA’s 2020 report on SME financing indicated that the credit gap for small businesses in Pakistan is over $6 billion annually, underscoring the lack of institutional support for SME growth. This lack of support is a major barrier to broad-based economic growth, which requires a thriving SME sector. Without the necessary policies to promote these enterprises, Pakistan is left with a skewed economic landscape, one that benefits a select few at the expense of the majority.
Furthermore, the elite’s influence extends to the country’s tax system, where tax evasion and a regressive tax structure are commonplace. Pakistan’s tax system relies heavily on indirect taxes, such as sales taxes, which place a disproportionate burden on the middle and lower classes. Wealthy landowners, industrialists, and influential business figures are often able to evade taxes, contributing to a narrow tax base that further exacerbates inequality. The Economic Survey of Pakistan 2020-2021 found that the country’s tax-to-GDP ratio was a mere 9.6%, significantly below the regional average of 14%. According to the Economic Survey of Pakistan, the tax-to-GDP ratio fell to 9.6 percent in 2019-20, a decline from the previous year, largely due to widespread tax evasion and the narrow reliance on indirect taxes.
The consequences of this system are far-reaching. The lack of tax revenue limits the government’s ability to invest in critical public services such as education, healthcare, and infrastructure. These sectors are essential for long-term economic stability, and their underfunding further perpetuates the cycle of poverty and inequality. A 2020 report by the World Bank emphasized that Pakistan's underfunded education and healthcare sectors are among the primary contributors to its slow human capital development. The regressive nature of the tax system also places an undue burden on the most vulnerable members of society, while the wealthy continue to evade paying their fair share.
Moreover, corruption remains a pervasive issue in Pakistan, exacerbated by elite capture. Policymakers and state officials often engage in rent-seeking behavior, extracting financial gains from public resources through a patronage network that rewards those with political connections. This rent-seeking not only limits transparency but also weakens the effectiveness of public policies. The 2021 Corruption Perception Index (CPI) from Transparency International ranked Pakistan 140th out of 180 countries, signaling high levels of corruption within the public sector. According to the Corruption Perception Index (CPI) published by Transparency International, Pakistan ranks 140th out of 180 countries, highlighting the pervasive nature of corruption within the public sector.
The consequences of this corruption are detrimental to the country’s economic stability. Public resources are siphoned off by elites, leaving less for vital development programs. This has led to large fiscal deficits, as public funds are diverted from crucial sectors such as healthcare, education, and infrastructure into the pockets of a few powerful individuals. The 2020 Pakistan Economic Survey reported a fiscal deficit of 8.1% of GDP, exacerbated by corruption and inefficient public spending. The lack of accountability and transparency within the system has further weakened Pakistan’s economic prospects, making it more difficult for the country to address its long-term development challenges.
The influence of the military in policymaking has also contributed to the country’s economic stagnation. Pakistan’s military has historically played a significant role in shaping policy, particularly in areas related to defense and security. While the military’s role in national defense is essential, its influence has extended far beyond this domain. The military’s involvement in economic decision-making, particularly in sectors such as real estate, telecommunications, and energy, has led to the diversion of resources away from critical social development sectors. A 2019 report by the Center for Strategic and International Studies (CSIS) highlighted the military’s significant financial interests in various industries, including real estate and telecommunications, which have affected government priorities. This has resulted in the shrinking of available resources for education, healthcare, and infrastructure, which are essential for fostering long-term economic growth.
Furthermore, the military’s involvement in policymaking has contributed to weak governance in Pakistan. The lack of transparency and accountability in the decision-making process has made it difficult for the country to address its most pressing challenges. A 2020 World Bank Governance Report revealed that the centralization of power in military-controlled sectors has significantly undermined democratic governance in Pakistan. Without strong democratic institutions and a commitment to the rule of law, Pakistan will continue to struggle with ineffective governance and a lack of progress in addressing its economic challenges.
To address the damaging effects of elite capture, comprehensive institutional reforms are urgently needed. These reforms should focus on strengthening public institutions, promoting transparency, and ensuring that policies are designed to serve the interests of the broader population. One potential model for reform is Brazil’s Anti-Corruption Drive (ACD), which successfully targeted political and business elites, disrupting corruption networks and strengthening the rule of law. The World Bank in 2019 commended Brazil’s Anti-Corruption Drive as a successful example of reforming political and business systems that allowed for greater accountability and transparency. Pakistan could adopt a similar approach by strengthening anti-corruption institutions, such as the National Accountability Bureau (NAB), and ensuring that those who engage in corrupt practices are held accountable.
Moreover, reforming the country’s tax system is essential for reducing the influence of elites on policymaking. Pakistan could draw inspiration from countries with more progressive tax systems, such as Sweden, where higher earners pay a greater share of taxes. This would help to broaden the tax base and ensure that wealthier individuals and corporations contribute more to public services. A 2021 study by the International Monetary Fund (IMF) proposed progressive taxation as a critical step to reduce inequality and improve government revenue in developing countries like Pakistan. By reducing the regressive nature of the tax system, Pakistan can create a more equitable system that benefits all citizens, not just the powerful elite.
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Additionally, decentralization of power could play a key role in reducing elite influence. By empowering local governments and civil society organizations, Pakistan can create a more inclusive political system that is less susceptible to manipulation by the elite. The United Nations Development Programme (UNDP) in 2021 supported the idea of decentralizing power in Pakistan to foster more transparent and inclusive governance structures. Furthermore, strengthening the independence of institutions such as the Election Commission of Pakistan (ECP) can help to ensure that the political process is more transparent and representative of the broader population.
In conclusion, elite capture has been a significant barrier to Pakistan’s economic development, with the concentration of power in the hands of a few elites stifling progress in key areas such as SMEs, taxation, governance, and corruption. The policies shaped by these elites have perpetuated inequality and hindered the country’s ability to invest in its social and economic future. The World Bank in its 2021 report on Pakistan highlighted that the concentration of power in a few elite groups has significantly hindered economic growth and development. To break free from this cycle, Pakistan must undertake urgent reforms that prioritize transparency, accountability, and inclusive growth. Only by addressing the root causes of elite capture can the country hope to achieve long-term economic stability and prosperity for all its citizens.
