The real story

Given the scale of the power shortage in Pakistan and the unending fiasco of loadshedding, it is quite astonishing that so few people have a real sense of what the problem truly is. Admittedly there is no singular explanation but by the same token the narrative is quite familiar, tired even.
It starts with the emergence of what is now called 'neo-liberalism' in the western capitalist countries following the coming to power of Margaret Thatcher in Britain and Ronald Reagan in the United States. Thatcher in particular was an astute conservative ideologue fully committed to an overhaul of the welfare state that was the pillar of liberal capitalism for almost half a century following the Great Depression. Thus began a comprehensive rollback of working-class power within Britain and the rest of Europe. Trade unions were systematically undermined and privatisation of state utilities, most notably commanding heights such as railways and telecommunications, began in earnest.

A similar process was unfolding in the United States, but the implications were less profound because neither was labour ever as powerful in the US as it was in Europe, nor did the American state own as substantial a proportion of assets as its European counterparts. Reagan's more important role was to deploy the International Monetary Fund (IMF) and World Bank in the third world to ensure that a rollback of the state was carried out in a manner similar, nay, more ruthless, to what was taking place within the western countries.

It is important to bear in mind that the global consensus until the late 1970s was not that public utilities should be privatised and that supply and demand of these utilities should be dictated by the principles of so-called 'free market competition', but instead that the state shoulder responsible for universal provision of utilities at affordable prices. The 'golden age' of 20th century capitalism was indeed between 1945 and 1975 when the interventionist state was anything but an aberration in orthodox policy circles.

Third world countries such as ours were all of a sudden given lectures about the unsustainability of deficit spending (even while western country governments' deficits soared), the inefficiency of state-owned enterprises, and the fact that the 'free market' was a panacea to all ills. In fact the third world was suffocated by external debt and the exponential rise in oil prices in the period immediately preceding the imposition of neo-liberal policies and this was the context in which the 'structural adjustment' nightmare unfolded. Rather than reflecting an objective analysis of the economic structure of third world societies, the 'rollback' of the state was an explicitly ideological project which benefited from the collapse of the Soviet bloc in the late 1980s.

So, for example, while it is true that the Water and Power Development Authority (WAPDA) and the Karachi Electricity Supply Company (KESC) suffered from various allocative and distributive inefficiencies, their performance in the late 1980s was not so much worse than in previous decades to warrant privatisation per se. Externally determined neo-liberal policies (supported by a healthy dose of Pakistani hangers-on who were earning cash as 'expert' consultants) were therefore transformed into a neo-liberal 'consensus'.

From here on the story is relatively uncomplicated. The World Bank proclaimed that the public sector had neither the capacity nor the operational know-how to be able to meet growing demand for power and that therefore corporatisation and eventual privatisation of WAPDA and KESC was required. Meanwhile new power generation would be the responsibility of private power producers to whom unbelievable incentives would be offered including exemption from taxation and tariff rates which may as well have been called government subsidies. Pakistan was clearly a world-leader in this regard as a 2001 World Bank report noted: 'Although the international development community had come to realize that the role of the public sector needed to be redefined and reduced, no other low-income country had made private investments a cornerstone of its energy policy'.

The plan proceeded apace in the early 1990s culminating in independent power producers (IPPs) becoming operational by the middle of the decade. Needless to say the attempts to dismantle the massive bureaucratic structures that were WAPDA and KESC were resisted at numerous levels (and not necessarily for the right reasons, of which there were plenty), but corporatisation was not halted. KESC was eventually privatised in 2005. Four years after its sale, and two decades since neo-liberal sensibilities came to guide policy in the power sector, we have an unmitigated disaster on our hands.

The current trials and tribulations have numerous immediate causes. Demand exceeds supply of electricity (although the shortfall would be much less acute if the existing public power generation plants that are sitting idle were made operational), some IPPs are not producing as much as they could (ostensibly because they are still owed buckets of money by the government), and oil prices on the international market have been extremely variable in recent times.

However, these short-run problems do not explain the larger mess we find ourselves in. So, for example, if the power policies throughout the 1990s had not granted such incredible concessions to the IPPs, including the guarantee of inflated prices, the government would not necessarily be struggling to pay them off at this particular juncture. Then there was the mindless extension of consumer credit throughout the Musharraf tenure without requisite public investment in power infrastructure, something that a corporatised WAPDA on a leash was simply incapable of conceiving, let alone doing.

More generally, the neo-liberal recipe of subsidizing the private sector regardless of the social cost has proven to be catastrophic in Pakistan, and indeed around the world.

The global financial crisis has created a parallel legitimacy crisis for neo-liberal capitalism. Yet the third world remains a laboratory in which failed experiments are being rehashed without any accountability of the IFIs that champion these experiments.

Neo-liberalisation in practice is in fact much more destructive than neo-liberalism in theory. The 'free market' rhetoric betrays a ground reality in which bending of rules, distortions of various kinds, and plain banditry are commonplace. It is about time that a powerful intellectual movement emerges within countries such as ours to challenge the neo-liberal 'consensus'. There is no need for us to premise this challenge with the proclamation that the public sector should remain as is. In fact our argument is that the public sector should be genuinely made public rather than the preserve of an obsolete bureaucracy. Privatisation is not the answer because it subjugates the public to the whims of private profiteers. If we do not resuscitate the paradigm of the public monopoly the present power crisis will simply give way to another one of greater intensity. And that will be our lot, forever and after.