General Musharraf’s incentives

This is the sixth installment of my weekly column for Mint, Thinking it Through.

In our new age of terror, General Pervez Musharraf is both Gabbar Singh and Veeru. In the global War on Terror that began after 9/11, he is a frontline ally of the US, the man given the task of finishing off the Taliban and catching Osama bin Laden. He is also the pivotal figure in the local conflict between India and Pakistan, talking peace to the international community but taking a harder line with his domestic constituency.

Much of the talk about Musharraf that I see around me arises either from wishful thinking or from false preconceptions. Without passing any judgement on his performance, it would help to consider the incentives that drive him. If Musharraf is to look after his interests, as any rational person would, how should he behave?

Firstly, consider the War on Terror. I spent a couple of months last year travelling through Pakistan, and it was common among journalists and economists to speak glowingly of Pakistan’s “9/11 economy”. Akbar Zaidi, Pakistan’s best-known economist, told me that through its history the biggest spurts of growth to Pakistan’s economy have been fueled by foreign aid. (It has been happenstance that dictators have been in charge when this has happened, giving rise to the myth that Pakistan economy does well under military dictatorship.) Pakistan received these boosts of aid under Ayub Khan in the 1960s (when the US adopted Pakistan as a strategic hub in South Asia), Zia-ul-Haq in the late 1970s (when Russia invaded Afghanistan), and General Musharraf found himself a beneficiary after 9/11.

“We refer to Al Qaeda as Al Faeda,” a journalist told me in Islamabad. Pakistan’s economy under Musharraf was in bad shape before 9/11, but as Pakistan quickly became key to America’s plans of countering Al Qaeda, the foreign aid poured in. Farrukh Saleem, an economist, wrote an article last year estimating the benefit to Pakistan to be worth US$40 billion, which included the bilateral debt forgiven by the US, the US$100 million a month that the US department of defence reportedly transfers into Pakistan’s treasury, and the other bilateral debts that the US persuaded the Paris Club lender nations to “reschedule … on easy terms.”

Pakistan’s economy also benefited in other ways. Land prices shot up as non-resident Pakistanis, unsure about investing abroad, parked their money in real estate back home. An entire support economy sprung up around foreigners who came to Pakistan because of its strategic importance and newsworthiness, and I was told that the dollar would have been far stronger against the Pakistani rupee (one dollar equalling 90 rupees instead of 60) had 9/11 not taken place.

All this means that it is overwhelmingly in Musharraf’s interests to be an ally in the War on Terror. But is it in his interests to win it, to finish the Taliban and catch Al Qaeda’s top leadership, and secure his region from these influences? Would that not kill the goose that laid the golden eggs?

His incentives in the conflict against India aren’t tailored towards peace either. Musharraf’s power comes from heading the army, which is the most powerful institution in Pakistan by far. Armies thrive on conflict, and Pakistan’s military has used the conflict against India to acquire a dominant position in Pakistani society. If the two countries were to suddenly resolve all their problems, it would be harder for the military to justify its massive budgets, its untramelled power, its command over civil society. Dictators often use the threat of war to suppress civil liberties and concentrate power in their hands.

Musharraf has to talk peace, of course, to keep up the façade of respectability in the international community. And to be fair, the incentives described above are just part of the story. It isn’t easy to root out Al Qaeda and the Taliban from the NWFP, which is virtually autonomous, and elements within the Pakistani establishment might well be supporting them, as they probably do the terrorists who routinely cross over into India. But the important thing to note here is this: Musharraf isn’t the villain of the piece, per se, because any rational person in his position would behave exactly as he is. That is why the speculation over the US replacing him, if at all they’re capable of such a thing, is silly. The problem isn’t the man, it’s his incentives.

There are no easy solutions to this: increased trade could help Pakistan’s economy reduce its dependence on foreign aid, and create disincentives to conflict. People-to-people contact could counter the demonization of India in the eyes of Pakistan’s people. Both the US and India could try a different balance of sticks and carrots to make this come about, maybe by taking a harder line, which has its attendant set of risks. Dick Cheney’s visit to Pakistan last month, ostensibly to tell Musharraf to get his act together, was an indication that the US has changed its approach. Will it work? I don’t know. But it’s better than wishful thinking.

This piece is an elaboration on a series of blog posts that I’ve written on the subject in the last few months. Here are some of them: 1, 2, 3, 4, 5.