Corruption and Social Order in South Asia

The media often presents a variety of views from seasoned journalists, bloggers, and aam admi (common man) discussions on corruption in South Asia; the tone and substance of the discussions generally have left me more confused than enlightened. We understand that corruption is not unique to South Asia; it is all across globe but at different levels.

In the WASP* (#1) culture dominated nations the social order has moved on from that developed by ‘the old boy’s network’ of elites representing the traditional upper crust of society. The new elite meritocracy took over about a couple of decades after the WWII (1970 onwards). The subject was discussed by David Brooks* (#2). Brooks had based his arguments after reviewing a book by Christopher Hayes* (#3). Both author’s arguments reflected the US and European cultures and social orders.

Both the old and new meritocratic elites were engaged in generating wealth but using two different models of economic growth. The old model for 100+ years (1870) following the industrial revolution*(#4) was based on establishing industries that created well paying manufacturing jobs for skilled workers. The idea was to produce consumer products using mass manufacturing processes and let the poor grow into middle class so that they can enjoy an improved quality of life offered by products they produced. The national economy grew as the skilled middle class generated wealth. This is the bottoms up model of economic growth that created bulk of the US middle class, reducing poverty to less than 20%.

The new elites used a new business model to generate wealth and it was designed to enriched the superrich (or 1%ers) in the US and Europe. Quite a few of superrich including the 2012 presumed GOP Presidential nominee, Mr Mitt Romney made their fortunes in financial sector, buying and selling assets rather than building businesses in the old-fashioned sense.

Corrupt practices degrade social order and set in motion a decline of the jobs market. The superrich starting 1970s exploited inexpensive skilled labor available in plenty in the emerging markets to outsource the US jobs to overseas destinations. They set up supply chain management operations spread across the globe to manufacture the US designed products by outsourcing the jobs to emerging markets. The well or high paying manufacturing jobs left the US shores; the US job market was left with low paying services jobs and jobs in marketing and sales of imported products.

Money is power; power corrupts and absolute power corrupts absolutely. Corruption creped in as the new economic model helped superrich generate very high returns without using expensive US labor.  The superrich engaged in creative financing as well as corrupt methods of generating wealth by manipulating financial institutions and banking and insurance services. Among the outcomes of corrupt business practices were the housing bubble (2005 – 07), subprime mortgage crisis, CDS (credit default securities) and other such insurance instruments. All such business collapsed as the global financial markets crashed in 2008* (#5).

I believe that in a broader sense the same basic principles discussed by the Brooks also apply to the leaderships of South Asian nations. In South Asia my generation and a few generations before me, starting with India’s freedom fighters (19^th and 20^th centuries) the old elites were the “idealist” in many ways comparable to ‘good guys” of the old elites in the West. With the 1947 partition of the British India the leaders of India and Pakistan created ‘old boy’s networks’ that began building new nations.

In Pakistan the old boy’s network disappeared very fast as most of the idealistic leaders either died of natural causes or were murdered in rapid success by agents of politically motivated feudal warlords (1948 to 1950s) to produced the new leaders* (#6). The idealists left behind a legacy of ‘the Objective Resolution’ that to me represents ‘the slave to Allah’ mentality* (#6).

Leaders who gained power were weak, paranoid and ambitious – may be delusional – to start laying ground for a new Caliphate through extraterritorial expansions. Jinnah started the process by unleashing tribal non-state actors into the princely state of Jammu and Kashmir (J&K); on 20 October 1947, tribesmen backed by Pakistan invaded Kashmir* (#7). The J&K remains disputed territory and is partly occupied by India, Pakistan and China, The 1965 to 1971 actions of the new breed of Pakistan led to the 1971 disintegration of Pakistan.

After 1971 the leadership tried to establish a new identity by discarding the South Asian Barelvi (Sufi) Muslim identity developed over 200 years (18^th to 20^th centuries). They aggressively pursued an association with the Arab tribal lineage and established the Islamization process. The process resulted in identity confusions related with shedding the “Sufi” roots and assimilating the Arab tribal traditions. A problem for aam admi is that Arabs consider them Miskeen or wretched poor of South Asia* (#8).

What we see happening in Pakistan now are the after effects of the political and social experiments of the past four decades. The unintended consequences of Islamization policies are now dominating Pakistan. The Islamization process is based on ‘the slave to Allah’ mentality associated with the Saudi Wahabi-Salafi interpretations of Muslim scriptures.

Corruption that was internalized during the British Raj period is pervasive and the meritocrats in power are exploiting it for personal gains as they have no clue as to how to build a nation that conforms to the 21^st century global norms of a modern nation.

The new leadership, both elected and military dictators, of Pakistan is dominated by the old superrich feudal class and new superrich from the army, business communities and scholarly clerics and retired army officers dominating the DPC (Difa-e-Pakistan or the Defense of Pakistan)* (#9). DPC is a coalition of 40 non-state organizations co-linked to al Qaeda terrorist ideology. These leaders have established a VIP/VVIP culture. They are using a business model centered on the rentier forces of regular army and non-state actors for economic growth and territorial expansions for a strategic depth while engaging in the internal tug-of-wars.

The leaders of the groups have yet to come to grips with the priority of establishing economy on a firm sustainable foundation. They are busy fighting for supremacy judging from the on going judicial battles against the civilian political leaders and the antagonistic relationship of army, political party leaders, and some elements of DPC, etc.

The DPC leadership is a new entrant as a political group and it has started challenging ruling establishments judging from the news story, “Hafiz Saeed asks High Court to ban ‘VIP culture’,“* (#10).

While the nation is engaged in the political tug-of-war, economically Pakistan is on a steadily sliding downward slope. The poverty of the 200 million populations is spreading as the GDP growth rate is now lower than the population growth rate* (#8).

India is also now dominated by the new elites and it also has the same corruption rooted in the social order that has evolved out of the raj period. The legacy of India’s old boy’s network was a clear vision that India will be a secular modern nation and strive for building a progressive nation by firing its engines of economic growth through education, setting up manufacturing industrial or the home-grown military-industrial complex infrastructures and offering social justice by eradication of existing inequalities that denied opportunities to the disadvantage classes – essentially up to 80% Indians.

The new Indian meritocracy is better organized and they have managed to continue with a vision to take India into modern world. India is evolving along the predictable path originally devised by the old boy’s network of elites. The process of economic growth was significantly improved starting 1990s to put India on a solid path by exploiting its abundant human resources through world class education with emphasis on accelerating production of highly educated technologists, etc.

Rest is history in making. The divergent paths taken by two South Asian nations have established a relatively superrich feudal class to dominate Pakistan. The Indian politicians are steadily helping the middle class to grow economically and help many from the disadvantaged classes to escape the generational cycle of poverty through wealth generation and help improve the quality of life with consumer products they help produce and market.

Why nations fail? According to Daron Acemoglu and James Robinson, “leaders of failing nations have three characteristics – greed, selfishness and ignorance of history”* (#11).

References and notes

1. WASP = White Anglo-Saxon Protestant; http://en.wikipedia.org/wiki/White_Anglo-Saxon_Protestant
2. David Brooks, “Why Our Elites Stink,” http://www.nytimes.com/2012/07/13/opinion/brooks-why-our-elites-stink.html?_r=1&ref=davidbrooks
3. Christopher Hayes, “Twilight of Elites” (2012)
4. Martin Kelly, “Overview of the Industrial Revolution” in the United States and the Industrial      Revolution in the 19th Century (1820 – 1870); http://americanhistory.about.com/od/industrialrev/a/indrevoverview.htm

• Industrialization in America involved three important developments. First, transportation was expanded.  Second, electricity was effectively harnessed. Third, improvements were made to industrial processes such as improving the refining process and accelerating production. The government helped protect American manufacturers by passing a protective tariff. The First  Industrial Revolution that began in Britain in the late 18th century that then spread throughout Western Europe and North America.

• Wikipedia, “Second Industrial Revolution or the Technological Revolution, was a phase of the larger Industrial Revolution corresponding to the latter half of the 19th century until World War I. It is considered to have begun with Bessemer steel in the 1860s and culminated in mass production and the production line. The Second Industrial Revolution saw rapid industrial development in Western Europe (Britain, Germany, France, and the Low Countries) as well as the United States and Japan.

5. Wikipedia, “2007–2012 global financial crisis,” http://en.wikipedia.org/wiki/2007%E2%80%932012_global_financial_crisis

• The crisis played a significant role in the failure of key businesses, declines in consumer wealth estimated in trillions of US dollars, and a downturn in economic activity leading to the 2008–2012 global recession and contributing to the European sovereign-debt crisis.
• The bursting of the U.S. housing bubble, which peaked in 2006, caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally. The financial crisis was triggered by a complex interplay of valuation and liquidity problems in the United States banking system in 2008. Questions regarding bank solvency, declines in credit availability and damaged investor confidence had an impact on global stock markets, where securities suffered large losses during 2008 and early 2009. Economies worldwide slowed during this period, as credit tightened and international trade declined.

6. Wikipedia, “List of Prime Ministers of Pakistan”; http://en.wikipedia.org/wiki/List_of_Prime_Ministers_of_Pakistan
7. Jammu and Kashmir, http://en.wikipedia.org/wiki/Jammu_and_Kashmir
   • After Pakistani tribals attacked J&K on October 20, 2012, the Instrument of Accession, a legal document was executed by Maharajah Hari Singh, ruler of the princely state of Jammu and Kashmir, on October 26, 1947; http://en.wikipedia.org/wiki/Instrument_of_Accession_(Jammu_and_Kashmir).
8. Kishan Bhatia, “Non-state Actors, Miskeen, Education, Economy and Chalta Hain 0525 2012 – 2,867 words; http://www.indiacause.com/blog/2012/07/01/non-state-actors-miskeen-education-economy-and-chalta-hain/)

• Following two sections of the article offer details on economy of Pakistan

1. Demographics and Governance and
2. Faltering National Economy and Terrorism
3. • Mehboob Qadir, “The deadly sand fly — I” at http://www.dailytimes.com.pk/default.asp?page=20127\18\story_18-7-2012_pg3_5 : This article offers some interesting in sights in to prevailing social order in Pakistan.

9. DPC or Difa-e-Pakistan; http://en.wikipedia.org/wiki/Difa-e-Pakistan_Council
10. The Express Tribune, “Hafiz Saeed asks High Court to ban ‘VIP culture’,“ July 13, 2012
11. Daron Acemoglu and James Robinson, “Why Nations Fail: The Origins of Power, Prosperity, and Poverty” Crown Business; 544pp