A capable state

FOR right-wingers, the best state is one that shrinks its role in economic matters to a minimum — even in those areas that may indirectly affect them, for example, environment and social policy. Such neoliberal views dominate economic policy and debates globally. In Pakistan, their hold on actual policy is limited. Policy is always led by those who follow predatory crony capitalism. But the shrillest critique of such policies comes from IMF-type neoliberals.

States that have progressed in modern history displayed neither predatory nor neoliberal traits. In predatory states, officials adopt policies that provide largesse to their crony capitalists in return for kickbacks. State policies inhibit long-term equitable progress. Such states can’t even achieve the two most basic goals of progress: economic stability and durable growth. They largely benefit predatory elites.

The neoliberal state is a different beast. The state largely follows on delivering macroeconomic stability, rule of law and security while leaving economic development largely to the private sector. Predatory crony ties are replaced by policies that achieve stability and growth but ignore the other two key goals of progress — equity and sustainability. So, even stable economic growth unfairly benefits the rich.

But neither today’s advanced neoliberal Western states nor the relatively successful Asian states followed neoliberalism in their early stages of development as their private sectors then were not strong enough to ensure economic progress on their own. The state usually provided an overall intelligent design for economic progress and helped the private sector enter higher-end economic sectors via sound policies that provided technological knowhow, global market information, preferential loans, etc. but only to dynamic firms that delivered growth. They also helped ensure a fair share of economic growth to all sections of society. History clearly shows that hardly any country has progressed that didn’t have a capable state which went beyond bookish neoliberal prescriptions to play such roles.

The neoliberal mantra of states shrinking their size is wrong.

So, the neoliberal mantra of states shrinking their size is clearly wrong. The right one is that predatory states must shed their fat and develop muscles to deliver the roles played by developmental-cum-welfare states. Even today, as the neoliberal formula fails to ensure growth even in advanced economies such as the US, leaders like President Donald Trump are adopting activist state policies to reignite growth; Asian developmental states like China continue to do so too.

While neoliberals abhor state enterprises, the reality is that almost every state globally, except perhaps the Vatican, has them in strategic areas that serve critical national goals or where the private sectors can’t perform due to minimum firm size requirements. Of course, such units must be managed well to not incur needless losses, as ours do. But even with our units, buried below the headlines of their huge overall losses are more nuanced details. Around 35 per cent of our state units do make a profit regularly. Among the loss-making ones, a few account for the bulk of the losses, such as PIA, Pakistan Steel Mills and electricity distribution companies. Even the latter don’t incur losses due only to poor management and political interference — there are also the overall problems of our power sector linked to bad state policies such as poorly negotiated IPP contracts and line losses.

So, until we can have such a capable state, we can forget about progress and even peace. The million-dollar question is how to craft such a state. For conservatives, the answer lies in mindless formulas such as the establishment imposing a technocratic set-up (which presumably includes those giving such id­­eas). But there is not even one case of a successful technocratic state globally. A few Asian states have had successful non-elected set-ups run either by their revolutionary/ freedom parties, such as Singapore, China and Vietnam, or briefly by their armies as in Taiwan and South Korea. But neither option is feasible for us as our freedom parties disappeared within a few years while our military ruled for long but failed to deliver durable progress.

Technocratic supporters forget that competence is not just technical but also, and more critically, political. So a divided and conflicted state like ours that has almost always had hybrid or autocratic set-ups has hardly ever seen a democracy consisting of a fairly elected, fully empowered set-up which can achieve a capable state via the democratic process.

The writer has a PhD degree in political economy from the University of California, Berkeley, and 25 years of grassroots to senior-level experience across 50 countries.

murtazaniaz@yahoo.com

X: @NiazMurtaza2

Published in Dawn, March 3rd, 2026

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