About a month ago, I travelled to my mother’s ancestral village located in district Charsadda. Its name is Rajjar, a mutated form of Roger, an Englishman who was once an important office holder in these areas. Thousands of years before, this and the adjacent areas were known as pushkalawati, the capital of the Buddhists kingdom which ruled these areas. Rajjar comes under the official classification of a ‘rural’ area.
I was travelling there after a long time to oversee a matter related to disposal of land belonging to my late uncle. It is an interesting story, one that I would like to share with the readers since without understanding this story, it would be difficult to convince you of the dead capital theory. My grandfather, a lawyer, had left a sizeable chunk of land to his children. Most of them moved out to either cities or to foreign lands. Only my younger uncle remained there to look after it. In the mid-1990s, he built a market on the ancestral land out of his own savings. That, unfortunately, was the start of travails for him and his young family. Organised gangs of bandits and troublemakers started making threatening calls and conveyed messages to him to leave the land or pay the price with his life. Many relatives, with no connection whatsoever to the land, filed appeals in courts to stop my uncle from collecting rents from the market.
By early 2000s, the situation had reached such an alarming proportion that my uncle had to flee Pakistan in order to save his and his family’s life. In 2011, while performing Umrah, he died of a heart attack. Since then, my father has been looking after the property and its affairs. He managed to thwart many attempts at confiscation by gangs (supported by some relatives and other interested parties), but only barely. Now, he has fallen ill due to cancer and is not able to look after it properly.
My aunt, a widow, has been trying unsuccessfully to sell the property and their house for a decade now. Yet interested buyers are hounded off through threats of physical violence or legal stays on disposal. In lieu of my father’s illness, she asked me to help her in this matter. Thus, I took a trip about a month ago to show the place to an interested party.
The place has been housing a family for some time now, which looks after the place. But no sooner had I left the place after showing it to the interested party, I could see the housekeeper in the car’s rear view mirror calling somebody. Not a surprise at all! And it was no surprise when I started receiving threatening messages, telling me not to visit the place and forget about the property since it was already “theirs.” The party that seemed so interested in buying the place has not called even once after that.
What I described is not unique to my mother’s ancestral village, or to the province of KP. In fact, entire Pakistan’s rural setting presents a similar picture. Land disputes are common, and false entitlements even more. There is a whole setup, both at public and private level that exacts rents out of this dysfunctional nature of governance. Public officials, private persons of influence (especially armed men) and others are available for the right price. Over the years, the vacuum left by the dismal governance has led them to master the process and rural setting in such a manner that they incite opposing parties in a bidding war for their services. Whoever can pay the better price usually gets his way.
In all this, a very valuable source of wealth and economic mobility – land, that is - becomes ‘dead capital’ since neither can it be sold nor can it be used to gain any monetary benefit. A substantial portion of that benefit would flow to development of the manufacturing and services sector in the rural areas, helping usher in the elusive transformation that everybody loves to talk about but nobody really understands properly. In fact, if it were not for the problems arising out of missing entitlements and weak application of property rights, Pakistan’s rural areas would have presented a much different picture than what they do today. The difficulties surrounding land disposal is the primary reason that whoever does manage to sell land in rural areas plough the earnings into urban areas as investments.
This aspect becomes important in the context of rural areas since there is no or little manufacturing and services sector in these areas dominated by agriculture. People bemoan this by ignoring the fact that if entitlements and procedures regarding private property could be simplified, a lot of the ‘dead capital’ land in these areas would be transformed into and used for some useful, productive investment.
In 2000, economist Hernando D. Soto came up with his bestseller by the name of Mystery of Capital, in which he discussed property rights and their importance, and also discussing the reasons that lead to dead capital. His research work sheds light upon assuring property rights as one of the most remarkable stories of Capitalism’s success, their power of transformation, and the negative repercussions for societies and economies where property rights are absent. Pakistan’s rural areas fall in the latter category, whereby the absence of secure property rights and a poor governance infrastructure governing property rights makes it difficult to transform land into something useful. In our case, for example, my father met the KP chief secretary (now chief secretary to PM Imran Khan) and the then chief minister (now defence minister) to help overcome this problem. Unfortunately, as we found, Naya KP was just a mirage and the status quo remained. As the above stated would clarify, we are still struggling to sell the property of a widow, who desperately needs money to pay off her debts and finance her children’s tuition.
Pakistan’s rural areas usually lag behind urban areas in terms of socio-economic indicators, whether they are in the form of per capita income or any of the categories human development index. What we also find is that essential services like sanitation, access to clean drinking water and electricity are in short supply in these areas, making them a relative backwater. In this respect, rural areas of interior Sindh, Balochistan, south Punjab and KP are some of the worst affected. But it is unfortunate to read the widely-held belief that put their backwardness solely on the lack of public sector investment.
The truth is that a substantial portion of the problem lies in not ensuring property rights and entitlements to them, thus making it excruciatingly difficult to convert valuable land into a useful investment or product. Governments, be it any tier, need to focus on this aspect rather than coming up only with the typical PC-1s for ‘rural development.’
The writer is an economist
I was travelling there after a long time to oversee a matter related to disposal of land belonging to my late uncle. It is an interesting story, one that I would like to share with the readers since without understanding this story, it would be difficult to convince you of the dead capital theory. My grandfather, a lawyer, had left a sizeable chunk of land to his children. Most of them moved out to either cities or to foreign lands. Only my younger uncle remained there to look after it. In the mid-1990s, he built a market on the ancestral land out of his own savings. That, unfortunately, was the start of travails for him and his young family. Organised gangs of bandits and troublemakers started making threatening calls and conveyed messages to him to leave the land or pay the price with his life. Many relatives, with no connection whatsoever to the land, filed appeals in courts to stop my uncle from collecting rents from the market.
By early 2000s, the situation had reached such an alarming proportion that my uncle had to flee Pakistan in order to save his and his family’s life. In 2011, while performing Umrah, he died of a heart attack. Since then, my father has been looking after the property and its affairs. He managed to thwart many attempts at confiscation by gangs (supported by some relatives and other interested parties), but only barely. Now, he has fallen ill due to cancer and is not able to look after it properly.
My aunt, a widow, has been trying unsuccessfully to sell the property and their house for a decade now. Yet interested buyers are hounded off through threats of physical violence or legal stays on disposal. In lieu of my father’s illness, she asked me to help her in this matter. Thus, I took a trip about a month ago to show the place to an interested party.
The place has been housing a family for some time now, which looks after the place. But no sooner had I left the place after showing it to the interested party, I could see the housekeeper in the car’s rear view mirror calling somebody. Not a surprise at all! And it was no surprise when I started receiving threatening messages, telling me not to visit the place and forget about the property since it was already “theirs.” The party that seemed so interested in buying the place has not called even once after that.
What I described is not unique to my mother’s ancestral village, or to the province of KP. In fact, entire Pakistan’s rural setting presents a similar picture. Land disputes are common, and false entitlements even more. There is a whole setup, both at public and private level that exacts rents out of this dysfunctional nature of governance. Public officials, private persons of influence (especially armed men) and others are available for the right price. Over the years, the vacuum left by the dismal governance has led them to master the process and rural setting in such a manner that they incite opposing parties in a bidding war for their services. Whoever can pay the better price usually gets his way.
In all this, a very valuable source of wealth and economic mobility – land, that is - becomes ‘dead capital’ since neither can it be sold nor can it be used to gain any monetary benefit. A substantial portion of that benefit would flow to development of the manufacturing and services sector in the rural areas, helping usher in the elusive transformation that everybody loves to talk about but nobody really understands properly. In fact, if it were not for the problems arising out of missing entitlements and weak application of property rights, Pakistan’s rural areas would have presented a much different picture than what they do today. The difficulties surrounding land disposal is the primary reason that whoever does manage to sell land in rural areas plough the earnings into urban areas as investments.
This aspect becomes important in the context of rural areas since there is no or little manufacturing and services sector in these areas dominated by agriculture. People bemoan this by ignoring the fact that if entitlements and procedures regarding private property could be simplified, a lot of the ‘dead capital’ land in these areas would be transformed into and used for some useful, productive investment.
In 2000, economist Hernando D. Soto came up with his bestseller by the name of Mystery of Capital, in which he discussed property rights and their importance, and also discussing the reasons that lead to dead capital. His research work sheds light upon assuring property rights as one of the most remarkable stories of Capitalism’s success, their power of transformation, and the negative repercussions for societies and economies where property rights are absent. Pakistan’s rural areas fall in the latter category, whereby the absence of secure property rights and a poor governance infrastructure governing property rights makes it difficult to transform land into something useful. In our case, for example, my father met the KP chief secretary (now chief secretary to PM Imran Khan) and the then chief minister (now defence minister) to help overcome this problem. Unfortunately, as we found, Naya KP was just a mirage and the status quo remained. As the above stated would clarify, we are still struggling to sell the property of a widow, who desperately needs money to pay off her debts and finance her children’s tuition.
Pakistan’s rural areas usually lag behind urban areas in terms of socio-economic indicators, whether they are in the form of per capita income or any of the categories human development index. What we also find is that essential services like sanitation, access to clean drinking water and electricity are in short supply in these areas, making them a relative backwater. In this respect, rural areas of interior Sindh, Balochistan, south Punjab and KP are some of the worst affected. But it is unfortunate to read the widely-held belief that put their backwardness solely on the lack of public sector investment.
The truth is that a substantial portion of the problem lies in not ensuring property rights and entitlements to them, thus making it excruciatingly difficult to convert valuable land into a useful investment or product. Governments, be it any tier, need to focus on this aspect rather than coming up only with the typical PC-1s for ‘rural development.’
The writer is an economist