In most parts of the developing world, private wealth is generated locally but invested in western world. There are restrictions on foreign exchange transfers and controls of varying degrees on capital movement in different developing states. An effective capital transfer regime would help in sustaining the value of the local currency; investment of savings at home for job creation; infrastructure development; and better control over prices of imported goods and services.
However, the capital continues to move through black-market foreign exchange syndicates; overseas export earnings retentions; and over invoicing of imports. These loopholes in capital regulatory regime result in privileged wealth of the rich and influential of the developing world being held abroad. Besides outflow of capital – commissions and kick-backs from debt transactions; foreign direct investment contracts; privatisation of state owned corporations; and civilian and military procurements are directly deposited into private accounts of ruling elite, operated at tax havens like Switzerland, British Virgin Islands, Hong Kong, Panama, Middle East and several other locations notorious for parking ‘dirty money’.
The capital so accumulated by the elite is then invested abroad. There are various motives and reasons which influence the elite’s choice of investment destination. However, the common factor which forces elite to invest abroad is: fear. They are afraid of their own people – most of whom live under the poverty line and desperate to survive – they are a potential threat to political and economic stability. Without exceptions, families of military, political, religious and business elite from the developing world settle down in politically and economically stable Western countries. They own assets and businesses abroad with the capital drained from their poor homelands.
Western imperialism offers protection for dirty money of the elite from the developing world in return for ‘some sweetened deals from home countries’. These include military procurements; infrastructure development contracts for Western contractors; expensive loans from international financial institutions; and preferential business rights for Western Multinational Corporations (MNCs). These shady deals further extract a greater share of Gross National Product (GDP) of developing states. Most of the remainder at home are hardly enough to cover military and government spendings.
The governments in developing countries resort to International Financial Institutions (IFIs) for more debts to cover these expenditures. The conditions of these financial institutions to extend loans invariably include political, economic reforms in shape of cuts on subsidies for health, education, essential commodities; lower public spendings and opening markets for Foreign Direct Investment (FDI) in consumer sector, which results in further drain of capital.
Capital outflow slows down economic activity – thus increasing poverty and unemployment – causes deterioration in public infrastructure; and aggravates political instability. Hence, further justifying need for huge international loans at higher interests – because of higher country risk caused by desperate populace and weaker economy. A major share of GDP in developing countries goes to debt servicing – and at times more international debt is needed to pay debts. Occasionally, requests for international debts are turned down – the debtor countries are forced in to default on its payments.
Apart from demanding political favors like military basis and foreign policy manipulation, stringent conditions are attached for further debts. These include opening the entire industrial and services sector for foreign direct investment and right to repatriate both capital and profits – followed by privatisation of state owned assets and corporations to multinational corporations and local elite. Thus the unholy alliance of Western capitalism and corrupt elite from the developing world – turns into vicious global empire.
Pakistan, like many other developing countries, is part of the slaves of an unholy alliance of corrupt local elite and Western capitalism. Besides economic and political exploitation of unholy alliance, the nation state continues to pay the price for its support in formation of a unipolar world. An honest analysis of the past would reveal that none else but the military establishment is responsible for the the country falling in this trap. Military establishment being the biggest stakeholder in state affairs has suffered the most. It is being engaged on multiple fronts and its capability is being compromised because of crippled economy – against its aspirations.
No military force can perform well in deteriorating socio-economic conditions. The institution has to reinvents itself – to face the domestic and international challenges. Military and economic power being mutually supportive and reinforcing require the military might to be backed by efficient productivity. To achieve sustainable economic backing, military establishment in Pakistan just has to end its dependence on elite-West alliance. It has to facilitate the genuine political process and engage the masses in decision making. The mistake of 1980s to replace the popular leadership with puppets needs to be reversed.
Although international political trends are difficult to assess with accuracy; but there is growing evidence of an emerging bi-polar world. Despite being ruled by regressive Brahaman fanatic BJP, India has a sizable left-oriented politic class to engage Russia and China in socio-economic dialogue. There can be no meaningful economic engagement with East without social and ideological engagement. The hegemony of the religious right in the political arena has isolated Pakistan from major economic and political powers in East – thus making it vulnerable to economic exploitation of the West. In changed global trends, military establishment should not repeat the mistake of putting all eggs in once basket.
A genuine political process itself builds a pressure within and divides society in to left and right political ideologies. The misery and exploitation inflicted upon masses in Pakistan by an alliance of Pakistani elite and Western capitalism has to be countered by political diversity and genuine leadership. In the process, military may have to recede some space for political forces to rectify institutional imbalance. By engaging effectively with emerging bi-polar world, it may also get the much needed economic power as backup to reinforce it's might. Such a move would be in greater interest of the military establishment itself – as a domestically less powerful military establishment would enjoy greater might and prestige at global stage.