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Pakistan is at war with itself, with blackouts, corruption and terror attacks. Now there are calls f

Pakistan has become a very unusual place. In Lahore, the heart of Pakistani cricket, the Sri Lankan cricket team was attacked in broad daylight by masked gunmen carrying guns and rocket launchers, because you never know when a rocket launcher will come in handy during an urban attack. The government had been warned of a potential terror threat but, true to form, ignored it. After killing eight people, mostly policemen, and wounding several others including the foreign cricketers, the gunmen ambled leisurely away. They were caught on CCTV camera calmly mounting their motorcycles and surveying the scene before deciding they had other places to be.

Immediately the cacophony of ludicrous claims hit the media. “The attack is to ruin our [the ruling party’s] image,” bellowed Raja Riaz, a Pakistan People’s Party hack. Er, no. “The motive was to damage the state of Pakistan and end cricket here,” said Imran Khan, head of the Tehreek-e-Insaf party. Er, no. The Pakistan cricket team are perfectly capable of ruining the state of cricket in the country on their own; masked gunmen are not required, thank you very much. Incidentally, on Monday night local police attacked the offices of Khan’s party brandishing Kalashnikovs and pistols. It’s probably not a coincidence that Khan has been openly critical of the Zardari government.

It’s fear. That’s what it is. It’s the state of a nation at war with itself. When vigilantes armed with sophisticated weaponry can attack a team of cricket guests (and there are no guests more esteemed in south Asia) in the middle of the afternoon, what they’re telling you is that no one is above the reach of the terror that has taken over Pakistan. It’s startling how adept this government has been at losing control of law and order, leasing out Pakistan’s stability for an increased role in the war on terror in preparation for the troop surge in Afghanistan, and generally running the country to rot.

“Droned” is a verb we use now in Pakistan. It turns out, interestingly enough, that those US predator drones that have been killing Pakistani citizens almost weekly have been taking off from and landing within our own country. Secret airbases in Balochistan – what did we ever do before Google Earth?

The PPP-led government, hailed as being “democratic”, capitulated to the Pakistan Taliban’s demands for sharia law in the Swat Valley in February. There was no vote, no referendum, nothing. The government, tired of fighting those pesky militants who’ve been burning down Sufi shrines and local girls’ schools, just declared that a part of the country would be ruled no longer by federal law, but by a myopically interpreted and Taliban-approved “Islamic” code. And verily it shall be.

We’ve just had senate “elections”. Of course, there are no actual elections involved: the ruling party puts forward winners and they end up in parliament. On Monday, in a shock move, President Asif Ali Zardari’s former attorney, who defended the erstwhile criminal on corruption and murder charges, was made chairman of the senate. What a gas!

Meanwhile, with Delhi still beating war drums over the November Mumbai attacks, our former dictator/president Pervez Musharraf travelled to India recently, and there he warned our neighbours of an all-out war should they strike Pakistan. He also let us know that he is ready to return to the call of political duty. Outsiders might be confused at this change in the situation – what’s he doing there? Didn’t he resign in August? Here’s the beauty of it all: Musharraf’s re-emergence has many middle-class Pakistanis excited and hopeful. Is he back?! A series of op-eds in a local English newspaper (not highly censored because no one reads them) was titled “Why I miss Musharraf”. When a dictator tickles your fancy, you know something has gone very, very wrong.

So, the mood in Pakistan is one of confusion. How did we come to this? How do we get out?

On the eve of spring, it is the same problems that blight the country’s poor – there is no electricity, there is no potable water, and food inflation continues to rise. The newspapers warned us this week that “load shedding” in the summer will be some 15 hours long, which is not that bad considering the fact that we’re sitting in darkness for 12 hours a day now. Pakistan has long missed its millennium target goals of eradicating polio, largely because we can’t keep the electricity going long enough for the vaccines to be properly refrigerated, so they keep going bad. And we’re a nuclear country, a grossly corrupt one at that.

The press censorship continues unabated with future threats of an absolute blackout on any criticisms of the government safely enclosed within the Prevention of Electronic Crimes Act that the parliament is currently sitting on. The bill, which imposes jail sentences from three months (for having an email account not registered in your real name) to the death penalty, and criminalises the acts of “spoofing”, “spamming” and “character assassinating”, will apply to the width and breadth of the country and to any person, regardless of nationality or citizenship. It will crack down on all objectionable – the definition of what is objectionable is typically vague – messages sent via, but not limited to, “electrical, digital, analogue, magnetic, optical, biochemical, electrochemical, electromechanical, electromagnetic, radio electric, and wireless technology”. So any subversive content found on cell phones, computers, or toasters will soon be illegal. Your head should be spinning by now.

Pakistan is in a dire situation. Religious extremism, violence and a faltering economy have made the state of affairs here decidedly grim. Joe Biden and John Kerry see American dollars as the only way of helping Pakistan stave off extremism; but Yankee aid donations and senatorial money will not help us now. It is estimated that President Zardari and his late wife, Benazir Bhutto, stole between $2bn and $3bn from the country’s treasury during their two previous stints in power. Now Zardari has claimed his personal wealth to be somewhere in the ballpark of $1.8bn. Nawaz Sharif, leading coalition partner and head of the Pakistan Muslim League, declared his fortune to be not as grand, at only $1.4bn. You do the maths.

This article first appeared in the 16 March 2009 issue of the New Statesman, The year of the crowd

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What Marx got right

...and what he got wrong.

1. You’re probably a capitalist – among other things

Are you a capitalist? The first question to ask is: do you own shares? Even if you don’t own any directly (about half of Americans do but the proportion is far lower in most other countries) you may have a pension that is at least partly invested in the stock market; or you’ll have savings in a bank.

So you have some financial wealth: that is, you own capital. Equally, you are probably also a worker, or are dependent directly or indirectly on a worker’s salary; and you’re a consumer. Unless you live in an autonomous, self-sufficient commune – very unusual – you are likely to be a full participant in the capitalist system.

We interact with capitalism in multiple ways, by no means all economic. And this accounts for the conflicted relationship that most of us (including me) have with capitalism. Typically, we neither love it nor hate it, but we definitely live it.

2. Property rights are fundamental to capitalism . . . but they are not absolute

If owning something means having the right to do what you want with it, property rights are rarely unconstrained. I am free to buy any car I want – so long as it meets European pollution standards and is legally insured; and I can drive it anywhere I want, at least on public roads, as long as I have a driver’s licence and keep to the speed limit. If I no longer want the car, I can’t just dump it: I have to dispose of it in an approved manner. It’s mine, not yours or the state’s, and the state will protect my rights over it. But – generally for good reason – how I can use it is quite tightly constrained.

This web of rules and constraints, which both defines and restricts property rights, is characteristic of a complex economy and society. Most capitalist societies attempt to resolve these tensions in part by imposing restrictions, constitutional or political, on arbitrary or confiscatory actions by governments that “interfere” with property rights. But the idea that property rights are absolute is not philosophically or practically coherent in a modern society.

3. What Marx got right about capitalism

Marx had two fundamental insights. The first was the importance of economic forces in shaping human society. For Marx, it was the “mode of production” – how labour and capital were combined, and under what rules – that explained more or less everything about society, from politics to culture. So, as modes of production change, so too does society. And he correctly concluded that industrialisation and capitalism would lead to profound changes in the nature of society, affecting everything from the political system to morality.

The second insight was the dynamic nature of capitalism in its own right. Marx understood that capitalism could not be static: given the pursuit of profit in a competitive economy, there would be constant pressure to increase the capital stock and improve productivity. This in turn would lead to labour-saving, or capital-intensive, technological change.

Putting these two insights together gives a picture of capitalism as a radical force. Such are its own internal dynamics that the economy is constantly evolving, and this in turn results in changes in the wider society.

4. And what he got wrong . . .

Though Marx was correct that competition would lead the owners of capital to invest in productivity-enhancing and labour-saving machinery, he was wrong that this would lead to wages being driven down to subsistence level, as had largely been the case under feudalism. Classical economics, which argued that new, higher-productivity jobs would emerge, and that workers would see their wages rise more or less in line with productivity, got this one right. And so, in turn, Marx’s most important prediction – that an inevitable conflict between workers and capitalists would lead ultimately to the victory of the former and the end of capitalism – was wrong.

Marx was right that as the number of industrial workers rose, they would demand their share of the wealth; and that, in contrast to the situation under feudalism, their number and geographical concentration in factories and cities would make it impossible to deny these demands indefinitely. But thanks to increased productivity, workers’ demands in most advanced capitalist economies could be satisfied without the system collapsing. So far, it seems that increased productivity, increased wages and increased consumption go hand in hand, not only in individual countries but worldwide.

5. All societies are unequal. But some are more unequal than others

In the late 19th and early 20th centuries, an increasing proportion of an economy’s output was captured by a small class of capitalists who owned and controlled the means of production. Not only did this trend stop in the 20th century, it was sharply reversed. Inherited fortunes, often dating back to the pre-industrial era, were eroded by taxes and inflation, and some were destroyed by the Great Depression. Most of all, after the Second World War the welfare state redistributed income and wealth within the framework of a capitalist economy.

Inequality rose again after the mid-1970s. Under Margaret Thatcher and Ronald Reagan, the welfare state was cut back. Tax and social security systems became less progressive. Deregulation, the decline of heavy industry and reduction of trade union power increased the wage differential between workers. Globally the chief story of the past quarter-century has been the rise of the “middle class”: people in emerging economies who have incomes of up to $5,000 a year. But at the same time lower-income groups in richer countries have done badly.

Should we now worry about inequality within countries, or within the world as a whole? And how much does an increasing concentration of income and wealth among a small number of people – and the consequent distortions of the political system – matter when set against the rapid ­income growth for large numbers of people in the emerging economies?

Growing inequality is not an inevitable consequence of capitalism. But, unchecked, it could do severe economic damage. The question is whether our political systems, national and global, are up to the challenge.

6. China’s road to capitalism is unique

The day after Margaret Thatcher died, I said on Radio 4’s Today programme: “In 1979, a quarter of a century ago, a politician came to power with a radical agenda of market-oriented reform; a plan to reduce state control and release the country’s pent-up economic dynamism. That changed the world, and we’re still feeling the impact. His name, of course, was Deng Xiaoping.”

The transition from state to market in China kick-started the move towards truly globalised capitalism. But the Chinese road to capitalism has been unique. First agriculture was liberalised, then entrepreneurs were allowed to set up small businesses, while at the same time state-owned enterprises reduced their workforces; yet there has been no free-for-all, either for labour or for capital. The movement of workers from rural to urban areas, and from large, unproductive, state-owned enterprises to more productive private businesses, though vast, has been controlled. Access to capital still remains largely under state control. Moreover, though its programme is not exactly “Keynesian”, China has used all the tools of macroeconomic management to keep growth high and relatively stable.

That means China is still far from a “normal” capitalist economy. The two main engines of growth have been investment and the movement of labour from the countryside to the cities. This in itself was enough, because China had so much catching-up to do. However, if the Chinese are to close the huge gap between themselves and the advanced economies, more growth will need to come from innovation and technological progress. No one doubts that China has the human resources to deliver this, but its system will have to change.

7. How much is enough?

The human instinct to improve our material position is deeply rooted: control over resources, especially food and shelter, made early human beings more able to reproduce. That is intrinsic to capitalism; the desire to acquire income and wealth motivates individuals to work, save, invent and invest. As Adam Smith showed, this benefits us all. But if we can produce more than enough for everybody, what will motivate people? Growth would stop. Not that this would necessarily be a bad thing: yet our economy and society would be very different.

Although we are at least twice as rich as we were half a century ago, the urge to consume more seems no less strong. Relative incomes matter. We compare ourselves not to our impoverished ancestors but to other people in similar situations: we strive to “keep up with the Joneses”. The Daily Telegraph once described a London couple earning £190,000 per year (in the top 0.1 per cent of world income) as follows: “The pair are worried about becoming financially broken as the sheer cost of middle-class life in London means they are stretched to the brink.” Talk about First World problems.

Is there any limit? Those who don’t like the excesses of consumerism might hope that as our material needs are satisfied, we will worry less about keeping up with the Joneses and more about our satisfaction and enjoyment of non-material things. It is equally possible, of course, that we’ll just spend more time keeping up with the Kardashians instead . . .

8. No more boom and bust

Are financial crises and their economic consequences part of the natural (capitalist) order of things? Politicians and economists prefer to think otherwise. No longer does anyone believe that “light-touch” regulation of the banking sector is enough. New rules have been introduced, designed to restrict leverage and ensure that failure in one or two financial institutions does not lead to systemic failure. Many would prefer a more wholesale approach to reining in the financial system; this would have gained the approval of Keynes, who thought that while finance was necessary, its role in capitalism should be strictly limited.

But maybe there is a more fundamental problem: that recurrent crises are baked into the system. The “financial instability” hypothesis says that the more governments and regulators stabilise the system, the more this will breed overconfidence, leading to more debt and higher leverage. And sooner or later the music stops. If that is the case, then financial capitalism plus human nature equals inevitable financial crises; and we should make sure that we have better contingency plans next time round.

9. Will robots take our jobs?

With increasing mechanisation (from factories to supermarket checkouts) and computerisation (from call centres to tax returns), is it becoming difficult for human beings to make or produce anything at less cost than a machine can?

Not yet – more Britons have jobs than at any other point in history. That we can produce more food and manufactured products with fewer people means that we are richer overall, leaving us to do other things, from economic research to performance art to professional football.

However, the big worry is that automation could shift the balance of power between capital and labour in favour of the former. Workers would still work; but many or most would be in relatively low-value, peripheral jobs, not central to the functioning of the economy and not particularly well paid. Either the distribution of income and wealth would widen further, or society would rely more on welfare payments and charity to reduce unacceptable disparities between the top and the bottom.

That is a dismal prospect. Yet these broader economic forces pushing against the interests of workers will not, on their own, determine the course of history. The Luddites were doomed to fail; but their successors – trade unionists who sought to improve working conditions and Chartists who demanded the vote so that they could restructure the economy and the state – mostly succeeded. The test will be whether our political and social institutions are up to the challenge.

10. What’s the alternative?

There is no viable economic alternative to capitalism at the moment but that does not mean one won’t emerge. It is economics that determines the nature of our society, and we are at the beginning of a profound set of economic changes, based on three critical developments.

Physical human input into production will become increasingly rare as robots take over. Thanks to advances in computing power and artificial intelligence, much of the analytic work that we now do in the workplace will be carried out by machines. And an increasing ability to manipulate our own genes will extend our lifespan and allow us to determine our offspring’s characteristics.

Control over “software” – information, data, and how it is stored, processed and manipulated – will be more important than control over physical capital, buildings and machines. The defining characteristic of the economy and society will be how that software is produced, owned and commanded: by the state, by individuals, by corporations, or in some way as yet undefined.

These developments will allow us, if we choose, to end poverty and expand our horizons, both materially and intellectually. But they could also lead to growing inequality, with the levers of the new economy controlled by a corporate and moneyed elite. As an optimist, I hope for the former. Yet just as it wasn’t the “free market” or individual capitalists who freed the slaves, gave votes to women and created the welfare state, it will be the collective efforts of us all that will enable humanity to turn economic advances into social progress. 

Jonathan Portes's most recent book is “50 Ideas You Really Need to Know: Capitalism” (Quercus)

Jonathan Portes is senior fellow The UK in a Changing Europe and Professor of Economics and Public Policy, King’s College London.

This article first appeared in the 22 June 2017 issue of the New Statesman, The zombie PM

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