Russia and Pakistan: Two Different Economies With The Same Root Socio-Economic Problem

Russia and Pakistan have two highly different economies in almost every sense, ranging from the course and trajectory of development to local business models, to the kinds of goods produced. Yet in spite of this, both nations can learn much about how to tackle different economic challenges due to the fact that the root cause of the problems in both nations is very much the same.

In respect of Pakistan, I recently wrote a piece that outlined how a neo-feudal “business” model that has germinated throughout the course of decades of incompetence from the central government is holding back the vast potential of Pakistan’s economy and how Imran Khan’s anti-dynastic Naya Pakistan (New Pakistan) can only reach its zenith if the new government tackles neo-feudalism tendencies at a root and branch level. Below are key excepts from the aforementioned piece:

“While Pakistan luckily has neither the history of Apartheid nor the kinds of inter-sect violence that is currently blighting many parts of neighbouring India, Pakistan has a massive economic problem which is rooted in a wider and deeply regressive social problem. While Pakistan is a modern democracy where a legal state of equality exists between all provinces, all ethnic groups and between men and women, in practical terms a feudal mentality continues to retard Pakistan’s economic progress because the reality on the ground is that patronage still pays more short term dividends than merit and hard work do in many too many parts of Pakistan’s economy. This has made equitable tax collecting more difficult and  has resulted in a small number of feudal economic warlords getting rich at the expense of the hard working and otherwise enterprising majority.

In Apartheid South Africa a minority group got wealthy on the basis of racial segregation. In Pakistan, a system of semi-voluntarily feudalism in the business environment has seen a few families dominate key industries no matter how inefficient, unproductive and corrupt these businesses are. As a result, some of the best and brightest minds of Pakistan look to innovate in foreign economies because the domestic economically feudal mentality is incompatible with innovation, entrepreneurialism and efficiency.

The electoral victory of Imran Khan’s PTI party demonstrated that it is possible for someone born outside of a political dynasty to become the Prime Minister of one of Asia’s most strategically and culturally important states. It was this spirit of change which has led many people to speak of Naya Pakistan (New Pakistan). Nevertheless, Pakistan’s currently dire economic situation requires long term solutions so that the national economy becomes more productive on a long term sustainable model.

The best way to inject the Naya Pakistan spirit into the economy is for the government to enact seizures of corrupt, unproductive, exploitative or anti-national major businesses/property in Pakistan, temporarily bringing them under state control on the proposed South African land reform model and then selling them on fair terms to an upstanding buyer whether such a buyer is Pakistani, Chines, Turkish or anyone else from a national or personal background that indicates good will towards the Pakistani nation.  

The new owners will of course have to play by new rules with a caveat that if the business is not turned around within short order, the government can take the business back in line with new rules of due process and then begin the cycle over again until the business is fully successful and paying the appropriate amount of taxation to the government”.

After 1991, Russia’s economy also developed on a neo-feudal model, but adding insult to injury, Russia’s class of emergent piratical oligarchs of the 1990s were not derived from ancient or near ancient local and regional clans but instead from a former merchant underclass who after the collapse of the Soviet Union bought key Russian industries for perversely low prices before turning the nation into little more than a vehicle for obscene personal enrichment while the elderly died and many others starved in what was once a highly developed nation.

The living disaster that was 1990s Russia has been partly repaired as in the early 2000s newly elected President Vladimir Putin  began enforcing laws against oligarchs, forced the state to more assertively collect taxes and punish those who were fraudulent in this manner. After many criminal elements were arrested or de-facto exiled while others decided to forego lawlessness, the country’s economy grew and living standards returned to and in some cases exceeded late Soviet levels.

Yet even in 2018, Russia’s wealth is largely concentrated in a class of neo-oligarch elite whose practices are  as retrogressive and anti-national as the neo-feudal dynastic clans of Pakistan. About Russia’s contemporary problem with clannish oligarchs, I wrote the following:

“The Russian state is well aware that even among oligarchs who claim to feel a sense of Russian patriotism and who occasionally invest money back into Russia, that they have become too familiar with so-called western lifestyles to be willing to repatriate their assets in a time of global crisis. In this sense, their loyalty is not to Russia nor to the ancient principles of the Russian state, principles which no government, no matter how strategically emaciated can change. Instead their loyalty is to their Swiss banks, their New York apartments, their London hedge funds, “Israeli” companies and their French vineyards. The current Russian government realises this reality but instead of acknowledging the problem, it passively allows the problem to metastasize like a cancer.

Ordinary Russians whose wealth has been plundered by successive generations of oligarchs can now relate to the people of Syria who have been endangered by a Russian government which attempts to strike gentlemanly balances with oligarchs rather than put them in their place. Moscow is aware that if the Russian government formulated a policy reminiscent of that which existed in the Brezhnev era of total defence of itself and its allies, that western regimes would systematically harass Russians in their countries. Everything from wealth seizures to murder would be on the table for intelligence organisations particularly in Europe and the United States.
The solution for Russia is to adopt policies that the Chinese government has maintained for years which strictly limit the amount of capital that Chinese nationals are allowed to take out of the country. Russia must not only implement identical laws immediately, but the Russian state must purge both its public and private sectors of those with any connections to rich overseas oligarchs whose loyalty to foreign extravagance puts the safety of the Russian people and their fraternal allies in places like Syria at risk.

Here too, Russia can learn from China. President Xi Jinping is in the midst of a sweeping anti-corruption purge which is quickly ridding the upper echelons of the Chinese state of those guilty of graft, corruption, a lack of discipline, bribery, abuse of power, selling state secrets, and related offences. If in a government as disciplined as China such crimes can be committed one can extrapolate the problems in Russia by a magnitude of one-hundred fold. As a result, the entire world is afraid to harm China and those who hysterically dare end up being on the losing end of history.

By purging from power those with direct culpability, who through affinity are connected with piratical overseas oligarchs, Russia can purify its bureaucracy, political class and business sector in order to become less beholden to those whose interested are not tied to the Russian state but with Russia’s enemies. This is why China is able to exercise an independent foreign policy far more effectively than Russia. In China the wealthy answer to the legal authorities, in Russia both consciously and unconsciously, the legal authorities are beholden to the wishes of jet-setting traitors who have more passports in their name (and pseudonyms) than cards in a blackjack dealer’s deck.

This is the only way forward. If Russia was able to act independently of the corrupt, traitorous mafioso overseas oligarchs, Moscow would have been able to explain to the US and its client states that any attack on Syria would be interpreted as a direct attack on the Russian Federation – a state with more nuclear weapons than any other on earth. At such a point, the war would have subsided and the best the tripartite aggressors could have done is pass meaningless sanctions that only effect those in Russia dependent on the financial systems of enemy powers. Such a plan could guarantee peace for several generations if not a century”.

In this sense, a rising generation of reformists in Russia along with the  new PTI government of Imran Khan in Pakistan can learn from one another and indeed grow together as both look to free their respective populations of the economic bondage wrought by the supremacy of anti-meritocratic oligarchs and clans who plunder national wealth before engaging in irresponsible capital fight and all the while force young generations of entrepreneurs, thinkers and hard workers to look for opportunities abroad.

As Moscow and Islamabad grow closer in terms of cooperation over security issues, peace keeping and cultural engagement, both countries can also learn to open up their respective business environments to a less corrupt merit based system rather than one dominated by those who wield  economy might by virtue of gangsterism and familial heritage. Thus, while both nations have different economies, similar solutions can be employed to revive both.

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