To understand why the Pakistan state has failed while fundamentalism has risen, we need to delve deeper into the political economy of Pakistan. My research suggests that dictates of nation-building as well as economic development have led to a strong centralization of government in a large and diverse country. As is well documented this led to state interventions in education that sought to unify the country through religion and language at the cost of productivity enhancing skills. What is often not noticed is that centralization of policy and funding has made capture easier for strong vested interests to capture.
These policies have gone unchallenged since policy continues to follow funding. There is little internal capacity –no social science research, no universities, no think tanks--for developing policy; nor are there policy debates in Pakistan. As a result policy retains a short term focus and has no domestic ownership and no constituencies for change develop.
Pakistan has a very young population. Neither the education system nor their environment offers them any modernity. Policy continues to fund brick and mortar development and subsidize and protect the usual sectors. An unintended consequence of this policy has been the suppression of domestic commerce limiting urban and market development and hence opportunities for youth and the poor. Lack of urban development based on domestic commerce limits their economic opportunities. Lack of any serious policy ideas and debates leaves them with only one vision that of the fundamentalist.
Policy and donor funding must deepen such political-economy analyses before making further interventions. The assumptions on which such funding is based-that the state is a partner in development-- are clearly wrong. Organs of the state-the civil service and the army-- have now developed a strong system for capturing donor funds for reinforcing rentseeking and resisting reform. These organizations are now more interested in the distribution of funds received than in their central functions.