Fuelling the feudalism...

Political assassinations, government corruption, state of emergency rule and an ongoing guerrilla war have brought Pakistan to its knees. Under such pressure, life still goes on though and Pakistan's economy - having shown steady growth over the last decade - has yet to be infected by the widespread political turmoil. But a sudden downturn in Pakistan's economy could be the tipping point. The diversity of Pakistan's economy fuels this political discord - the military retain vast industrial assets reinforcing their stranglehold on the state; whilst poverty and the collapse of state education fills madrasas and bloats radical jihadist movements. Recent power shortages and creeping inflation are signs of an impending economic collapse. The economy is moving up the long list of issues for candidates to discuss at the much delayed election. As India booms next door, the middle classes become further disillusioned - the group that politicians ultimately appeal to in elections.


The feudal system - that empowers landowners in a close knit clan society - has been Pakistan's backbone since its inception. Agrarian holdings provide economic power for aristocrats, from which - through corruption - political and military power is derived. And now this tradition has spread to the military establishment. The seminal text by Dr Ayesha Siddiqa on this hidden industrial empire estimates that the military holds £10bn of assets, 12m acres of public land and a third of heavy manufacturing output. Whilst this infrastructure accumulates untold wealth for a cadre of generals - a national network of bakeries, banks, insurance companies and universities funded by the army benefits Pakistani society. This omnipresent role has been accepted as part of Pakistan since partition and Pakistanis clearly benefit from the stability provided by such a behemoth. But since 2001, American aid has gone directly to reinforcing the military's dominance, undermining moves towards democratic economic transparency and perpetuating a culture of corruption and feudalism.

The black economy also plays a vital role in arming and supporting violent Islamist groups' war against the state. The hawala money transfer system has enabled an influx of funds from the Gulf and Europe. Despite efforts by Pakistan and American treasury intelligence to outlaw such transfers, Pakistan's porous financial system and foreign donations disguised as charitable gifts make prevention impossible. So this source of funds - with additional finances from the opium trade - leaves militant groups relatively unaffected by economic downturns. Recruitment to militant groups via madrasas also benefits from poverty, as through their dual position as welfare centres, religious schools provide shelter to the needy. Further poverty will maintain this flow of militant recruits, but the situation is already bad.