Democracy and Oil Don’t Mix: Why Pakistan Stands a Chance

Posted: May 5, 2008

Where Pakistan differs from many other countries that waffle between democracy and dictatorship is that Pakistan lacks domineering amounts of natural resources. And that matters!

Working with politicians in Lebanon, Iraq, Jordan, Bosnia and Russia has, for me, crystallized a notion that democracy needs certain critical elements to be put in place before it can effectively take root.  Watching my clients in Lebanon and Iraq dodge, sometimes unsuccessfully, bombs and assassination attempts, and following events in Pakistan has begged the question of why these countries have chosen this particular path.

Yet, at the same time as these countries suffer from violent reactions to trying to achieve democracy, other countries make little or no effort to even pretend democracy is relevant. In this latter grouping of countries belong Saudi Arabia, Iran and client states like Syria. But let’s not stop there. We also see countries like Venezuela and Russia taking a detour from democratic norms! What is the obvious difference? Oil!

Oil has clearly allowed certain countries to underwrite the costs associated with their tyrannical dictatorships. It allows these countries to ignore the normal pressures of decentralizing their economies in order to create jobs, which creates a tax base, and which inevitably then funds government activities. Economic decentralization leads to a decentralization of power within the state and hands power to a working middle class. For oil-rich countries led by a power hungry leader, this is antithetical! For those without oil, however, maintaining power becomes exceedingly difficult. This becomes more apparent after the recent elections in Pakistan.

Ironically, the war on terror may still be a catalyst for democracy after all for those without oil. As Pakistan shows, without oil money to pay off an elite to either rig the election or suppress dissent, the high international scrutiny of Pakistan’s handling of the war on terror and the subsequent attacks against their own government have created the environment needed for a losing political party to actually concede an election.

Pakistan is arguably the most dangerous place on earth, even more so than Iraq. Why? Because it has nuclear weapons, which Iraq lacks. If Islamic militants were to gain control of those weapons, the potential for what has normally been reserved for international thriller movies could well become reality and launch World War III.  This is a country in which political assassinations and coups are common place and in which the Taliban and Al Qaeda have found refuge.

But there is another dynamic in Pakistan, and that dynamic has had repercussions for Musharraf and the Islamist parties. The dynamic I refer to is a semi-functional decentralized market economy. For all the disparaging comments anti-globalization advocates make about free markets, the fact is that free markets encourage moderation in politics. This is a saving grace for the free world because most Pakistanis, although Muslim, are also moderates that reject both military dictators and Islamic fundamentalists. They are empowered by a decentralized free market and vote to protect this empowerment and freedom.

Although there are many elements that must be in place for democracy to exist, a decentralized economy is an important catalyst. Pakistan is a lesson that may help us in our engagement with other countries. Its lesson may help us reanalyze our policy with Cuba, where free trade with the Island nation could help decentralize its economy and encourage the type of political moderation that today has kept Pakistan from exploding into WWIII.

It is important to acknowledge that the events in Pakistan were despite our country’s policies. Last month, according to a poll by the International Republican Institute (IRI), 89% of Pakistanis said Pakistan should not cooperate with the US in its war against terror. The US policy in Pakistan has helped foster a hatred of our country and for what it stands. The fact that Pakistanis voted for pro-democratic forces has more to do with their perceived self interest in retaining the power they have come to enjoy in a decentralized economic system. Under the leadership of Musharraf and the Islamist parties, 72% believe their personal economic situation worsened. Thankfully, Musharraf and the Islamists do not have oil to underwrite their dictatorship.

Daniel Odescalchi is President of Strategic Advantage International, a political consulting firm. He has worked in emerging democracies in Eastern Europe, Bosnia, Lebanon and Iraq. Odescalchi coauthored “The Handbook of Political Marketing” and lives in New York.