When Prince Muhammed bin Salman insisted that the Saudi state was at least 25 years behind on diversifying its political economy, most were aghast at the admission. But as Saudi Mission 2030 continues apace, its becoming clear that reforming the Saudi family business isn’t something light, nor easy to implement. Orders of scale have their own intrinsic metrics, one cannot simply reverse in linear fashion a previous failed engagement. Beijing is learning this admission the hard way; the Saudi’s have a global commodity, Beijing doesn’t. Ironically, the Asian Infrastructure Bank is beginning to look a lot like a Saudi initiative; even Beijing believes that it should have initiated proceedings in search of currency reserve status long ago. The Communists in Beijing fervently believe that they can sustain themselves by living off monetary velocity. No thought is given to the cultural mores that sustain the wests growth, like all positivists they believe the empirical is the key to sustained growth, hence bloated government statistics etc. . . like accountants, paper is reality, until its not.
This sustained, willful blindness is called the disease of kings, evidenced in oversize infrastructure projects that beckon growth, they embody an old curse dressed in new clothes. Without sustained human capital, the rule of law and functioning independent social institutions these boondoggles fail.
When Beijing sought a warm water port in Gwadar Pakistan, it believed that financing a Chinese-Pakistani-Economic-Corridor (CPEC) would secure Beijing’s interests. It won’t because it can’t. Here’s the reason why.
Keynesian thought, like all scientism, is harnessed to positivism which ignores both the social base of any demographic claim as well as the principle of subsidiarity. By ignoring the locals, these boondoggles are tying up client states that cannot secure Beijing’s interest.
The investment in infrastructure can only work if the underlying social base is mobile, if a nation state has a sound currency, a semi-literate industrial base and minimum comity, to say nothing of functioning governing institutions. There are divergent, dispersive social relations that cannot be captured by any positivist claim. This is best evidenced ethnically and racially inside Pakistan. But there’s more to CPEC than redundancy in roads.
Pakistan has always sought and fielded favorable big-client nation states to underwrite their geopolitical ambitions. Islamabad has never gone it alone, like a teenager without sufficient identity development, they’re lost without an adult.
Having skirted a balance of payments crisis to rebuild its foreign exchange reserves, it remains hampered by two distinct features of any praetorian state: subsidies and taxes.
Pakistan’s governing class is very much like India’s. They have a woeful compliance rate for taxes and an inability to reform energy (electricity) markets. This says nothing about the state of terrorism inside Pakistan, but its woefully insufficient tax base sustains Islamabad’s drive for cartel reigning industries. India’s upper chamber has an identical problem.
With its regional neighbors gaining on exporting textiles, the Punjabi’s that run the praetorian state need to deliver better governing fundamentals if they are to compete and close ever widening gaps in major indexes. Only 0.6% of Islamabad population pays taxes, nearly 50% of its children never attend school. Pakistan’s long term development requires more than boondoggles. The land of the pure doesn’t need hardware, it needs software.
But that misses the point: the arrogated racial superiority of Punjabi rule hastens any sound movement toward reform. Like all rent-seekers, its working for them.
When Islamabad’s ruling class finally decides to reform civil-military relations, it can start competing. Until then, lavish empty corridors is all that will remain.