What is the One Percent Republic? – 19 Nov 2022
Last week, Dr Miftah Ismail initiated an important debate by terming Pakistan a “One percent Republic” – a society that works for the few and reproduces elite privilege over time. This is a damning verdict of Pakistan’s political economy, particularly since it comes from a former finance minister who has seen the intimate link between educational, political and economic power that coalesces within our state.
Yet, his comments were mostly of a descriptive nature as he stated the malice of entrenched inequality in society without delving into the reasons why it continues to haunt our society. In fact, real ideological cleavages always emerge not by describing the symptoms but on identifying and explaining the underlying disease. Moreover the problem of inequality is no longer specific to Pakistan. According to an Oxfam report in 2017, eight richest men owned more wealth than the poorest 50 per cent of the world’s population, a grotesque form of inequality unworthy of human existence. In this article, I present the Left’s perspective on explaining the roots of this global economic and moral crisis.
First, despite the apparent neutrality of the aforementioned article, ideological affiliation nonetheless did slip in. In contrast to generational wealth in Pakistan, the former finance minister approvingly cites the US example, where the Rockefellers and Fords were replaced overtime by innovative entrepreneurs who did not stem from elite backgrounds. A meritocratic form of capitalism is counterposed to the plutocratic nature of economic and political power in Pakistan.
Yet, the very language of ‘One Percent’ used by Ismail is borrowed from the Occupy Wall Street Movement in 2011 that was directed against the one per cent elite in the US that has monopolized economic interests against the 99 per cent who are suffering from declining living standards. The Occupy Wall Street protesters blamed economic policies that started from the 1970s onwards and which came to be known as ‘neoliberalism’; these included promoting free markets, free trade, cuts in government spending (austerity) and low corporate taxes.
These policies, inspired by the University of Chicago economist Milton Friedman, were premised on an unprecedented attack on the working class including cuts to welfare, dismantling of trade unions, disinvestment in industry/public infrastructure and a rise of financialization of the US economy. As a result, while real wages of the working class remained stagnant for over 40 years and household debt increased exponentially, the corporate sector (particularly financial vultures on Wall Street) made record profits.
When the financial system crashed in 2008, Western governments that had imposed austerity on their working classes acted immediately to pour in billions of dollars to save the banks, leading to the phrase “Socialism for the Rich”. CEO salaries have continued to soar, while corporations have made record profits during the pandemic as workers struggle with low wages, indebtedness and high inflation. This decoupling of the financialized economy from the ‘real economy’ and the rise of gigantic tech monopolies has led former Greek finance minister, Yanis Varoufakis, to term the current era as one of “techno-feudalism”, with a vast majority of humanity reduced to helpless serfs against the daunting power of the billionaire class.
The slogan of ‘One percent vs the 99 percent’ was a rallying cry precisely against the billionaire class, which has locked the youth out of chances for social mobility as increasing numbers of young people are suffocated by rising debts and costs of living. The simultaneous rise of Donald Trump and the democratic socialist Bernie Sanders reflected the immense anger against the neoliberal status quo in the US which faces a crisis of legitimacy. Recently, US President Joe Biden acknowledged that the neoliberal model had failed, an acknowledgment that came after imposing four decades of relentless market fundamentalism across the world.
These policies had an even more disastrous impact when they were imposed on the Global South after the debt crisis that plagued the world economy in the early 1980s. Known as the Washington Consensus, the US imposed neoliberal policies across the world (often through CIA-supported military coups), leading to years of economic stagnation in the Global South. Naomi Klein argued that these policies function according to the “shock doctrine” where an economic emergency is invoked to justify massive restructuring of the national economy to meet requirements of global Capital while abruptly reducing living standards for the working class.
The worst manifestation of this concept was witnessed in the former Communist Bloc, where public institutions were privatized and markets were deregulated overnight, leading to a bonanza of financial predators who looted public wealth while leading to a sharp decline in life expectancy in the former Soviet Union.
This context is necessary to understand how the global system in which Pakistan is embedded is premised upon the exploitation of working people and national resources. By the 1980s, Pakistan’s elites abandoned even the pretext of a sovereign national project of economic development and began mimicking policy prescriptions emanating from the US. Trade unions and student unions were systematically destroyed, corporate regulations were reduced, speculative housing societies were encouraged at the expense of agricultural land, a private education mafia flourished while public schooling declined, and banks engaged in short-term speculation rather than providing credit to industry or agriculture.
Dr Hafiz Pasha has in his work detailed the ways in which successive ‘reforms’ have helped consolidate inequality and class power over the past four decades. In his calculation, state subsidies received by elites annually equal an enormous Rs2700 billion, making Pakistan a welfare state for the rich. The elites in Pakistan have chosen to use these subsidies to fuel consumption-driven lifestyles, building luxurious housing societies rather than investing in the productive sector. This unsustainable system is powered by foreign loans, which the ruling classes continue to acquire with two assumptions: one, the US will forever rescue Pakistan as long as the military rents out our geostrategic position; and two, the burden of loan repayments can be transferred to the public without effective resistance.
Since the first option seems highly unlikely as US interests in the region change, the second option was on full display under Miftah Ismail’s brief stint as finance minister. In a Pakistani-styled shock therapy, the price of oil was liberalized, energy prices soared, food inflation became unmanageable, and layoff from factories continued, while the government did not touch the wasteful subsidies enjoyed by the rich. In other words, the public was asked to bail out a moribund economic structure and irresponsible elites at the expense of its own well-being.
This ‘Socialism for the Rich’ has allowed Pakistan’s elites to inhabit separate housing societies, separate schools, separate public spaces, separate hospitals and even separate language for themselves. Their ceaseless attempts to separate themselves from the rest of society easily make our ruling classes leaders of the most successful separatist movement in the country’s history.
No ruling constellation ever gives up its privileges due to a change of heart. A few individuals may break ranks to become traitors, but one cannot expect a collective class suicide. Only a new constellation powered by the forgotten and the excluded can present an alternative vision and lead the fight against inequality.
In Pakistan, we can learn lessons from Latin America where we are witnessing the rise of such an alternative coalition that includes trade unionists, farmers, students, intellectuals and professional classes that are challenging the elites and rejecting the US-imposed economic order. Left-wing movements have managed to win elections on this anti-neoliberal platform, including one led by a school teacher in Peru, a student activist in Chile and a trade unionist in Brazil with the formidable return of Lula De Silva in the recent elections. Three essential pillars of their campaign included economic sovereignty, redistribution of wealth and re-establishing a relationship between developmental objectives of the state and the private sector
The ‘One Percent Republic’ represents a global system where financial predators control the resources of society and override state sovereignty. Whether a few faces change at the top is irrelevant to the fact that a vast majority of humanity remains excluded from the planet’s resources. There is no exact blueprint on how to defeat the logic of neoliberalism, but it is crucial not to mimic the failed policy prescriptions from Western technocrats when their own governments are abandoning them.
It is not easy, but we must remember that moving beyond the limits of a system is always deemed impossible by those guarding the status quo. Considering the stakes involved, we have no choice but to violate these limits and turn politics into the art of the impossible.
The writer is an historian and a member of the Haqooq-e-Khalq Party.