a good client because they didn't want to do that trade for him anymore they wanted to do it for themselves. so it is so complex and raises so many important moral and ethical questions about behaviour and about what is important and what we value as a society and if this isn't illegal maybe it should be and that is probably what senator levin is getting at. i've talked to senator levin and he's extremely troubled about this conflict and a show last april goldman and goldman 's team but he's onto something quite real and remains desperately unresolved and needs to get resolved before we can figure out about what we what wall street to do. we want wall street to serve us . we don't want it to serve

itself. yes, it can do well by doing well for us, raising capital for the rest of the country and for the world. that allows companies to create new jobs and build new plant equipment or provide advice on the deals or investment advice to people who want that. those are services we can live with more like a utility we can live with those services but when it acts like a casino and starts making huge proprietary bets one way or the other which is what was happening during this crisis it is probably still happening that is not good and that is that the date we need to have, but unfortunately that isn't the the date we have had. ..

>> up next on book tv, author of pakistan a hard country is part of a panel discussion on the internal and external problems facing pakistan. this is about an hour and a half. >> thank you, thank you, all for coming. it's on the friday before easter. this is a big crowd to have at

the bank. i'm really can want tell you -- cannot tell you how happy i am to be chairing this not only because of the subject or colleagues from the old days and so on but really mainly because of the subject. it's an incredible book. i haven't read all of it, i will confess, but i've read most of it, and so just let me introduce quickly the speaker,s chair of the international relations studies at kingston in london and spent most time as a journalist in south asia and in the former soviet union. wrote a lot of books about the soviet union, about, you know, america's role in the world, and he has a ba in history and a ph.d. in political science of university of cam bridge. we have had some association with him in the past, i'm really

excited to have him here. he will speak for about -- >> 25 minutes. >> 25 minutes. i suggested a shorter time before we meant about the book, and he said, no. [laughter] right, and then we have two distinguished discussions, the international economics since march 2009 and before there, director of the middle east and central asia department and also the ivan institute where we've known each other for a long time. he's the editor of economic development in south asia, wrote tons of books on macroeconomic management, models for adjustment and islamic banking, ect.. he's a ph.d. from the lsc and other degrees which i won't go

into. josh white is a research fellow at the institute for global engagement and a ph.d. student at the john hopkins and he focuses on islamic governments and political stability in south asia. i think one of the things he has in his favor is he lived in pakistan in 2005-2006 and returned to pakistan in the summers of 2007 and 2008 visiting the research association in lahor, and so he's co-authored chapters in a book called "religion security, the new nexus in international relations." i'll stop there. 25 minutes or so for you. that would be great, and without further adieu. >> thank you so much, and thank you all for coming. i'm deeply flattered to be invited to the world bank.

it's great pleasures to speak along two people whose work i greatly admire, and i'm indebted to josh -- >> turn the mic on. >> oh, so sorry, and i'm indebted to josh for many insights in particular. well, i thought i'd begin with my latest visit last month in which i went to bashar because it's a good way of leading into the fact that despite a good deal of the western media commentary, pakistan is not a failed state nor even yet, nor in my view in the future, a failing state. these are terms in which like so many terms of this kind have been picked up as sort of catch phrases by academia and cornellism and used with --

journalism on used with wildly and in inappropriately places. it's unfair to think of pakistan as a fated state with somalia and such. the difference is very clear. it's also very important to note about pakistan, but a number of other countries around the world that having border lands which are not under controlled or under the full control of the state and army doesn't make you a failed state. russia, in some respects, not just a strong state, but too strong a state is, of course, facing a disturbed border land. india, under successful state in many regards, has really serious problems of that kind, so not a failed state. i found two things, actually very impressive on this occasion. the first was the success of the military campaign or be it as

human rights watch documented a company considered by a number of judicial excuses in counterkillings in that part of the world, though local journalists and whom i spoke with did say if any consolation, the army is generally getting the right people, so it is shooting -- [laughter] at the taliban hard liners rather than shooting people at random which i'm afraid in that part of the world does happen fairly often. there has not been a serious terrorist attack there in more than six months. the activists of the taliban and the local party, the tsm is driven out and most leadership is in afghanistan actually casting an interesting light on our problem with pakistan and pakistan's problem with us. part of the leadership of the pakistani taliban is in afghanistan.

anyway, the second thing more surprising, actually, and this indicates the success of the military campaign, that unlike the growing impression of a few years back up to the spring of 2009, the pakistani army is capable of defeating insurgency in some areas, con taping it, and at least to some extent rolling it back. in other words, the idea that pakistan is going to be overthrown by a spreading insurgency is wrong. that's not going to happen. the second, and actually i always expected that as soon as the army pulled itself together, motivated troops, and got significant backing. perhaps more striking is the reconstruction has also proceeded well. it is a district badly damaged in 2009 was more damaged by the floods of last year.

and the reconstruction after both of these episodes has been impressive in terms of the restoration of infrastructure, the attempt to create new local industries and so forth. this leads me into a wider point about pakistan, one of which is again one does have to read the western media with care sometimes, and i say that as a former journalist, but also that appearances in pakistan, at least immediate appearances can be dissentive. -- deceptive. at the time of the flood, there was real concern to which i reveal in the book could be catastrophic damage to their economy and stability. actually i found on this trip the long term damage appears to have been in some ways

remarkably limited. now, why is that? two reasons. the first which has something to do with basic stability in pack pakistan which is to put it brutally, the basic infrastructure, the housing, not the animals of course in the countryside, are at a level where they are relatively easy to rebuild, shall we say? the second point though is that, and this has not been brought out in much reporting, the state system actually worked. given the extent of the floods, i thought at the time it was rather remarkable that i mean, 1500 is, of course, in many ways a bad figure, but given the extent of the flood, it could have been worse and the destruction could have been much worse. the point is the barrages held and the water went to the designated floodplains, and the

cities were saved. that's what the system was meant to do. if the cities were flooded, the extent of damage would have been far worse. it's true, the other thing is the resilience and intelligence of the population in fact. a lot of worry that over the years, worry, that people have moved to live in these designated floodplains where they are not supposed to be, and that's true, but on the other hand, when they heard floods were coming, they left. they are not fools which is another reason the actual casualties were so low, so in one critical respect, and remember, i mean, this has been a critical republic in this part of the -- respect in this part of the world, and in china, for years the state system did actually work. now, in a number of other areas as well, and here under this government, i mean, the present pakistani government as well,

which has had in many respects a very bad press, partly deservedly, but it does have certain achievements to its credit from the point of view of this audience, the budget was passed last month while i was there with certain respects generally impressive in toughness especially in that it was reducing the benefits, shall we say to the ruling party's key constituency which is agriculture, and especially big agriculture. now, on the other hand, of course, two things. one is the budget was passed by decree by the president because it couldn't get through parliament for this very reason. the second thing is that it was passed under heavy pressure from the imf and from the army, publicly the imf and privately the army which were also responsible for putting in charge a better finance minister

in pakistan. this does indicate that pressure is necessary. it also indicates something i won't have time to go into, but known to us all, the am ambiguous role of the army in pakistan, certainly very bad for at least the continue newty of -- continuity of the civilian impost in the past and map tanning basic -- maintaining basic efficiencies in some areas. there were other areas where the army was not involved and the political system was impressive. the first was the national finance commission award of last year rebalancing revenues between the provinces. now, that is something which i'm sure you know is absolutely explosive in many countries of the world. in authoritarian and democratic states. the fact that pakistan was able to do this was a tribute to this

government, but also the pakistani system that they retained that degree of flexibility and toughness. another surprising thing in a way is the income support program intended to basically help the poor, identify the poor, and support them. i must honestly confess that when that was introduced, i simply wrote it out as another scheme, at least that's what i thought it would be. i'm not saying that is completely absent, but the consensus among observers is it's surprisingly good fulfilling what it was meant to do. a number of areas where the pakistani state still can succeed. the problem is, of course, that these are particular areas. when it comes to the overall picture, the key question is a, can pakistan survive?

that question has been answered for me unless there is some catastrophic geopolitical development that directly or indirectly destroys pakistan. i leave that aside. of course, we can talk about that in the discussion, but i won't discuss it here because it opens a new and huge set of questions. i think the question of whether things remaining as they are, pakistan can survive for the next few decades. a lot in the book talking about what world bankers have done a great deal of work on the demographic and water threat in pakistan which could become disastrous in the middle years of this century before factoring in climate change. i want to stress that. you can leave climate change out of it, and the water threat is still severe to disastrous. that leads to the second

question, however, who have pakistan can survive, but can it succeed and prosper in ways to deal with its deeper underlying problems including demography and water resources? can it, in fact, be what goldman sachs designated as the next 11 in joining the bricks in economic progress. if you look at goldman sacks' progress, they are above the bar. the central problem seems to me here is that the forces in society and political society which help to give the pakistani system its resilience in the face of revolution and disintegration are the same

forces holding it back in terms of economic, social, and cultural progress which is to say the elites, yes, but not quite the elites as they have been widely portrayed in pakistan as well as the west. feudal in pakistan is a term i greatly dislike because the essential nexus here is between property, yes, but property, kinship, and the power in which this combination gives through mostly the electoral process and a variety of other things as well to ploppedder the state -- plunder the state and to prevent the state from getting the resources it needs in the first place to perform central tasks. for me, the critical thing about the pakistani state not whether it's ruled by the military or civilians, but whoever is in charge of the state, the state is weak compared to society, and

the critical, the most obvious figure for that as for state weakness in the world in regime is revenue. pakistan with historic average of 8%-9%, and i think it's 9.7% at the last count, improved a bit, have the lowest rate of revenue collection in gdp in south asia, and i mean, the other states in south asia are not necessarily strong from that point of view. in the first place, the elites in large parts of society don't pay tax in the first place. that reminds me that perhaps i better not go there has. [laughter] we won't. when, however, the revenues are raised, they are extracted from the state to a very great extent as in every field of state expendture in the way in which the political elites from top to bottom really basically extract

resources from the state, but, and this is very important, the stability of the system, redistribute much of this as patronage. if you want to get wealthy in pakistan, you get it from the state. that is certainly the picture if you travel around smaller towns in pakistan and talk about the new political families coming up, but very often when you say feud l, you -- feudal, you think this is an ancient family, but very often not. it seems to me a very general patent, and i say thee regime patent is the now families coming up. they have to accumulate property to start with, but the breakthrough to big property is when they use their property to gain a measure of leadership over a kipship group. they get elected to the national assembly, and then they get

their hands on state patronage, and that is when they go up to wealth, but the point is to do that, you need support. to keep the support, you have to redistribute to some extent because otherwise you don't keep the support. there is always a rival, a cousin, brother, uncle, ready to take your place if you don't give. you don't give, you don't keep. now, this for me on top, of course, pakistan's lack of industry, lack of raw materials to export, is responsible for a figure that astonished me when i first came cruet it which is pakistan by the time it's a developing world, has one of the lowest ratings for social inequality, 30-point something at the last count i believe. america is 40. now, it could be, of course, that the measurements are wrong, but i think that there is an

explanation here, and it's about redistribution of patronage, and the point is it tapers off radically the further you go down, but it goes down far enough actually to help maintain loyalty and maintain stability and resilience of the system. urbanization is changing this, but considerably more slowly than many general models would have assumed. this is partly because of the informal of employment in the cities. lack of education has a lot to do with it. two things in addition. one is the importance of kinship which is the extraordinary importance, by the way, not just in the pakistani cities of pakistan, but in the pakistani cities of britain if you look at links and their tremendous importance. also in tieing in communities

and families of pakistan and britain together. another factor, however, which applies almost as much in the cities as in the countryside is that even where kinship ties decline and patronage is less important, protection is still very important. that is certainly a feudal aspect of pakistan. in pakistan, you need protection. you need protection against your neighbors. you need protection against the police. you need protection against the courts who may be used by your neighbors against you. you need powerful protection. even when there is not genuine kinship, you have artificial kinship groups or faction for the sake of protection against all the predatory forces in which you're surrounded. quickly, this is quite a gallop being left out, but there is a balance, and, of course, it is

dominant in pakistan, and they have 60% of the population, 75% or so of industry and so forth, but it is a very ambiguous province and when they talk about the establishment, it's something which is only quite a small chunk of even the wealthy, by even in pakistan, there is more similarity perhaps to india than immediately meets the eye in the term the establishment cannot dictate. there is often element of compromise. the classic example of this is the dam held out by pashtuns. the dam was talked about 60 years ago. three decades later, it still has not been built because of provenn issue resistance and the need to the to drive provipses

to the point where they break up the country. the problem about this is, of course, is that while on the one hand a force for balance, it is in many ways also yet another span in the works when it comes to sufficient decision making in the economic field. there's a number of reasons, for example, why pakistan's massive coal reserves in the tar desert have not been exploited but also the endless friction of the governments over what to do and the deep new true suspicions. one or two other things i'll leave out because time is running out. just say briefly what hope of change? radical change in pakistan, radical quick change i would in terms of economic development and progress, i would hold out few hopes for.

incremental change, perhaps. what can we do to help? now, here, obviously, i defer to this far more expert audience, so i won't say very much. one thing i say very strongly to anyone here from the american government is that one shouldn't aim at short term popularity. trying to buy popularity of the west or of american policy through development in my view is both hopeless and deeply misconceived because it will totally skew what ought to be longer term development projects. i would hope that we might be able to do two things. the first is possibly concentrate on certain infrastructure projects and ring fence them to a agree against corruption. the chinese appear to have had some success with this, and we

might, perhaps, try to study how they've done this. the infrastructure that i would concentrate above all because i do regard it -- well, two things. in the short term, not for our popularity, but the stability of the system, electricity because that is something as anyone who lived through power cuts knows that is something which makes people very angry. so far, it's led to expressions of public furry, but there's the risk of orchestrated by radical forces. that's the shorter term. the longer term is water though there it's not just infrastructure, but it is producing a new kind of state and society. for that, education is necessary. i would, as an outsider, concentrate on higher education simply because when it comes to extending education at the local level, especially in the countryside, one absolutely

essential is to patronage and it's difficult to inspect on the scale of pakistan. if, however, we can raise the level of higher education in certain centers of higher education, we will hopefully be able to feed into both industry, the economy, and the civil service in ways that will incrementally improve the economy and the state. that i fear is probably about as much as we can hope for in the case of pakistan. thank you very much. [applause] >> thank you very much, anatol, especially speaking in time. you have 10 minutes or so. >> thank you very much. let me start by with all of this it's a fascinating book. for a foreigner and one whose

been adopt the by pakistanis to understand this is pretty amazing to me. the facts that have been presented, the insights that have been gathered from these facts, the conclusions you've drawn, i really are all indicators how much research and expertise you have, how much research you put in and how much expertise you have. i don't have a hard copy of the book, but you can see here it's not a one sit r read. [laughter] this book. it runs 560 pages, and i really haven't got through it all, so i can confess to that. it's actually an easy read and especially an easy read for people who know nothing about pakistan other than perhaps that it is one of the world's most dangerous countries, that you get from the press. at the end of it, you'll know a lot about pakistani history, a

lot about politics, you'll know some part of economics, yes, you'll know a lot about an -- an trough poll ji, and it tells the facts and stories as i call it warts and all, and yet the author remains optimistic about the country, and i think about the country's survival in particular. he mentioned that himself, and really there's not too many on the mists -- optimists around, even in pakistan. there's silver linings you can see and islands of prosperity and hope in the country, and anatol found them and pointed them out. i divided mine into four parts, some to do with the book and some my own views. my take on the political insecurity challenges that

pakistan faces, the economic and political consequences of the 2010 floods which anatol pointed out was a catastrophe and in his book at that point, you didn't know the outcome, but he's mentioned it now. the near term outlook for the economy which pakistanis are obsessed with and the pakistan economic team talks about and leadership is totally obsessed by the short term, and the way i see it out for pakistan from the bad economic e quill lib yum that the country is trapped in, so i'll start with the political insecurity challenges. well, anatol rightly has gone through very well in discussing the ongoing battle in pakistan, you could call it the battle for the soul of the state, between the islamic fundamentalists and, of course, the secular

moderates. also, you have to pay attention to another battle raging within the sort of mondaymentalists or within the islamic community in which an emerging minority with a loud voice and louder weapons, the exclusioner islamists influenced largely by views born in saudi arabia and the traditional spiritual muslims infliewpsed by the more moderate schools of through the from india -- thought from india. they represent the largest minority group in pakistan, but through violence and threats, they have successfully cowered the politicians, opinion makers, the public in general, and what is -- they've really steadily

increased thaifer hold on public discourse in the country. what is noteworthy, of course, is even the majority religious leadership of the moderate kind has been threatened and sleepsed so the ex-- silenced, and so the extremists are winning out for this battle of the soul of the state. the conflict between the extremists and the moderate pakistanis is coming to a head at a time when pakistani is facing a serious economic crisis. that happens frequently in pakistan. it's weak coalition government which is important here, and in weak coalition government is blackmailed by its own partners on key economic reforms. pakistan's internal struggles are likely to take a huge toll in its war against militants on the western frontier and

neighboring countries, and at the same time reducing the government's ability to stop or reverse the economic melt down that is occurring in the country. against this background, and anatol points this out, the strongest and most disciplined institution in the country, that is the army, is not ready to step into the political arena to change things on the home front. even though while it's won some ground against the insurgency on the borders, but its victories on the battleground could be sort of borrowing general petraeus' recent words about afghanistan, they are fragile and reversible, the wins that the pakistan army has had. without a civilian government prepared to take over and administer the territory's cleared by the military, it's quite possible the army would be caught up in a sort of never-ending conflict on the border. the combination of political uncertainty and economic

disstress will most certainly diminish national security, and we're seeing that, an outcome that i think pakistan and certainly the world at large can not afford. what about the consequences of the 2010 floods? as anatol said, climate change does not account for. the 2010 floods were a stark example of what climate change can do. the immediate impact on the population is truly staggering, the calculations that were made. yes, it's true, loss of life, 1500 people, 1500 too many, but that wasn't a big loss. 20 million people were affected by the floods in the country. 8 million in need of water, food, and shelter, 4 million homeless, 15 million people displaced. the devastation hit every sector of the economy, but the main

thing is they hit the agriculture obviously. the pakistan government estimates at that time done with the help of the world bank, were approximately $15 billion, 10% of pakistan's gdp, damage to infrastructure, roads, power plants, telecommunications, dams, irrigation systems, school, health clinics, and so on, was around $10 billion. now, at least at that time, this was viewed as because of the agriculture loss as a complete disaster, and yet, as anatol points out, the country came through the disaster with minimal assistance from the outside world. donor fatigue was used a lot in those days demonstrating two things. one, the positive, the

resilience of the country. the second is more sip call which is -- cynical which as some people say pakistan played up the damage a lot to be able to gather resources from the rest of the world. the truth probably right somewhere in between there. that was the sort of economic consequences of the floods. there were political consequences too of the 2010 floods, and this is very important because they have a bearing on what's going on today in the country. since pakistan's provinces are largely based and have different ethnic groups, they are driven by tensions that e represent into sort of violent conflicts. adding to these are the sectarian conflicts concentrated in central and southern of the country between the shia and --

some parts benefited from the flood relief, other parts felt excluded. the central government, of course, at that time, the people's party coalition led by the president there was viewed as weak and ineffective at the time of the floods, but it did survive the turmoil, the political turmoil. one would have expected perhaps that the government would fall, but it didn't. it didn't fall because why? not because it was strong, but because the opposition there was completely divided on regional grounds, and the largest opposition party, former prime minister, pmln, remains largely a pajunby party. the act never got together to

unit. this is pakistani politics as usual of course and as politicians bicker and fight, what happened? well, the army's position strengthened and the army's position strength ped because it gained support rt flood relief activities. they were instrumental in first providing flood relief, and that's when the stories started to break that the army would take over. why? because the peoplemented the army to -- people wanted the army to take over. that happens with others coming into power and that's exactly what happened when there was a cause, you know, the army should take over, the country is going downhill, the army should take over, so the army's position strengthened, and that's where we are today. the army does call a lot of the shots. it doesn't call for them publicly, but it calls for them in private. certainly, privately. what is the outlook for the economy? my third point. the economy continues on a

downward slide that started in 2007-2008. these are the days of the last year of general's government, the caretaker government taking over, and a lot of people say quite rightly the current government says we inherited a bad situation. yes, they did. they inherited a bad situation and made it worse, but they did inherit a bad situation. you can't blame them entirely. there's a growth rate. the rate is hovering around 2% in pakistan when actually 8-plus percent is needed in the country just to have jobs for the people coming into the job market. these are the demographics that anatol talks about in the book, a fiscal deficit i estimate would reach 8% of gdp by june of

this year despite the budget that has been announced, but it doesn't matter what it is. the target was 4.7% of the year. it's going to be well exceeded. these are all signs of a serious financial -- serious economic crisis. now, the good news in my view is that pakistan does have a strong economic team. there's a bunch of really smart people in my economic team. they don't have bench strength as they say in any team, but the front line is very good and very impressive. they have diagnosed problems. they are not difficult to diagnose and identify the right solutions to a large extent. that's the good news. the bad news is the political will effects fundamental changes and enacting economic reforms is

missing. while the foreign friends and partners like all around you in the world bank can provide financial resources to stave off a total economic collapse maply because it might be in the geopolitical interest of the united states and the west to do so. unfortunately, political will cannot be imported or imposed by the imf or the world bank. absent political will among pakistan's leadership, the country really faces a dismal economic future. if the politicians do not get their act together and do not see pakistan beyond the near term, which is what they tend to look at, the country will sort of limp along in a semicrisis state both economically and politically. that, again, i would say is not a very desirable prospect for pakistan and for the world, so

what's the way forward? well, anatol points to the role of the u.s., the role of donors, what type of investments they should be undertaking, ect.. these are all well-known. in times of economic crisis, pakistan normally looks to the west, principally the u.s.. the rich gulf arab states, china more recently, and the multilateral institutions, the world bank, imf, asian development bank, but it does not look to india, and i think that that is straightforward. i'm not telling anyone anything new. of course, india is viewed by many as the enemy, certainlily the military when general says i'm india centric and says it proudly. that tells you something about the way the pakistani mentality

goes. in turn, india, of course, has no wish to assist that country they feel supports terrorist groups on its own territory, so to me, i think, you know, our -- i hope to most objective observers, that both countries stand to gain from improved relations and lowered tensions, and i think most people would agree to that. pakistan would gain -- in my view, pakistan would gain economically almost immediately by lowering of tensions between the two countries. india's gains would be more moderate, but positive. india is a much bigger country. i'm sort of arguing that india being the major power in south asia has to be looking at the overall development of the region, for example, looking beyond india to the region, and

i would argue that it is really in india's interest to have a peaceful and prosperous pakistan on its borders, and not an unstable and impoverished state of 2 million people. that's a disaster for that region. let's not think i'm being naive about this. a comprehensive solution governing kashmir and so on is a long ways off, and that, to me, has been the basic problem on at least, not too familiar with the indian side, but with the pakistani side, that has been the problem. whenever you talk about improved relations with india, you rush off to what we economists call a solution where you have to solve all the problems in, you know, you have to have a comprehensive solution. we've heard that in the case of israel and pal stein as well, a

-- palestine as well. you have to race to the final. i have argued that you have to start somewhere, and you can start with baby steps, even in this, and i think the best place, as an economist i argue, the best place to start is trade between to two country, and in this context i would argue that pakistan's reluctance to be seen as sort of being appeasing in this, india has to make the concessional and be the first mover on this, and as it can increase economic trade and integration between the two neighbors. the potential gains from economic integration between india and pakistan are incredibly large. trade between the two countries is unnaturally small. as the scopes for gains from trade are cor responding are

very large. currently, official trade between the two countries is approximately $2 billion a year up from what it used to be at $300 million a decade ago, $300 million, that was the entire trade. people throw around numbers of $2 billion coming by other sources and ect., i'm just going by the official numbers here. pakistan accounts for 1% of india's trade, less than 1%. india accounts for under 5% of pakistan's total trade. these are neighbors to countries with borders. now, this goes back historically a little bit to the very large share following independence of the two countries in 1947. in 1948-49, 70% of pakistan's trading transaction was with india and 63% of india exports went to pakistan.

we do the calculations again, and basically as economists we do it with gravity models what could be the potential trade between the two countries. we have estimated that trade between the two countries could be 10-20 times larger based on proximity, based on the distances, based on common language, common heritage, and so on and so forth. this, if it were to rise to that, even partly, i think this would really raise gdp in pakistan substantially, india less so, and household income in both countries. let me end with just pointing out what keeps trade so low between the two countries because on paper you will not try to see what are the constraints on trade. on paper, you won't find too many. there are high tariffs in some cases, but they are what we call

non-tariff barriers. inadequate infrastructure, inertia, and opposition, excessive red tape, and district political opposition. pakistan -- india granted most states, and pakistan has not reciprocated and will not grant that. on the other hand, pakistan's position is that india's tariff rates remain very high on a select number of goods. it turns out those are the goods that pakistan exports, agriculture being the principle one, textiles, leather, onyx, and of course, transportation links, they have poor -- makes trade very costly. railway and road connections are inadequate, but they exist, they

are just not allowed to be used. my favorite example is the traffic that takes place between lahor and across the border at the waga post. there is a hear that runs, or a road -- [laughter] a nice road that runs between the two countries. trucks are employed to deliver goods on either side of the border. what is interesting is that that border, the road, opens at 5 a.m. in the morning. why it's not open 24 hours is a security matter, but open at 5 a.m. in the morning, but it closes at 2 p.m. in the afternoon. why at 2 p.m. in the afternoon? the reason is they have to prepare for the flag ceremonies on either sides of the border which take place at sunset, so the borders are closed at two o'clock in the afternoon because they have to prepare.

i mean, these are things that do not require parliamentary approval. these are not things that require major negotiations. all you can say is, okay, you still want to have the ceremony? fine, have the ceremony. build a road around the ceremony. anyway, that's my story. now, i think that -- let me end by saying reducing trade barriers, again, i'm not being naive and don't think of, you know, being polyanish in any way, but improving trade relationships has the support of businessmen on both sides of the border, the chambers of commerce in particular, and it is critical in my view to build constituencies in each country for greater bilateral trade threw liberalization. the trade will not solve all problems between the two countries, but could help in improving attentions. these are the baby steps i'm

talking about and luring tensions between india and pakistan, a benefit and strengthen economic ties would improve the climate for up vestment and economic development -- investment and economic development in both countries as well as the whole region. the bottom line is on this side, on the trade front in the case of india-pakistan trade relationship, it's really obvious that good fences do not make for good neighbors. thank you. >> thank you. thank you very much. [applause] >> josh. >> thank you. it's very good to be here, and i just have to say to the point about the water border, one of the images i will never forget is watching an entire truck of tomatoes being unloaded and transported from one side of the bright line, the pakistan side to the india side, and the truck could not cross, so it took an hour of porters moving boxes on

their heads five feet drenched in tomato juice just to get a truck across the border. i think this is illustrative being the only land border which goods regularly move between the two countries. just what a challenge this is. it's great to be here in washington. we run into each other in strange parts of south asia at very odd times, and it's good to be with him in this setting. he quotes in his book pakistani general who is now, i think, the chairman of the joint chiefs of staff committee who says that you need to be a little bit of a rascal to understand this part of the world, and to that i say, exactly. [laughter] that's what makes this book so interesting and so thoughtful, and so colorful. i really commend it to all of

you. there are just a couple things. i'll keep the commentings really brief. a couple things i wanted to mention regarding things i really appreciate about this book. i think, i think in terms of the big picture as anatol mentioned, this book is about how pakistan works and how it doesn't work, but mostly how the state is more resilient than we make it out to be, and i think both the stories and the analysis go to highlight just how pakistan has a particular and workable kind of dysfunctionalty that we need to come to appreciate if we're going to understand how it's stable and the ways in which it has some signal weaknesses. the two things i want to highlight that i particularly appreciated were first anatol has a realistic view of pakistani politics. on the one hand, it's not a particularly sympathetic view.

his -- and i'm going to use kind of a word particular to my generation here -- his take down of the ppp as a political party, as a political movement is quite severe, and i think that he -- but in many ways is very realistic about what pakistani politics looks like and this juncture between the rhetoric, particularly the rhetoric of a leftist center pro-poor party like the ppp and the actual reality of what that politics looks like. it's also unsympathetic in characterization of what pakistani politicians do with their time. i was thinking about this reading the book and recalling a conversation i had with a friend just a few days ago who is a staffer on capitol hill, and she was complaining to me that her congressman asked her to write some legislation, and she said,

well, what do you want it about? he said, i don't care. i just need legislation to introduce so that i'm doing what i'm supposed to be doing here on the hill. [laughter] a balance of her time spent dealing with constituent servicings -- services. all of the other things that staffers on the hill usually do, and that was sort of discouraging in its own right, but we look at a pakistani context in which what politicians do is more discouraging. there's no thought given to legislation for the most part with the exception of very few, very few politicians who are notable and wonderful exceptions in this regard, and many politicians as anatol tells in story after story spend their time not trying to deliver to their constituents what the state has promised them, but to deliver what the state's usually

can't do or perhaps should not do. politicians spend a lot of time getting their constituents out of jail or trying to deal with the state at a local level which is dysfunctional, and i think that, that take on politics is both realistic and unsympathetic. i also appreciate the sympathetic take to the pakistani poll decision if i can say that on the record. [laughter] that is being a pakistani politician is a lot of hard work for the most part. these politicians spend hours and hours every day dealing with basic kind of requests that in a more developed sort of some would be processed by a local bureaucracy or any informal institutions, and i think that perspective alone is a valuable contribution told through

stories and analysis to see what patronage looks like and the role it has on the political process. the other thing i really appreciated, and again somebody who studies politics, but i think anatol takes a very realistic view of islamism in pakistan, what it looks like, and the threats that it does and does not pose, and this clear-eyed view, i would like to say, is, you know, shared by a wide number of people, but i think, i think unfortunately does not. especially in washington, there's a lot of hyperventlating about islamics and islamic politics. i think on the one hand this book is realistic in saying, "islamic takeover" whatever that means is not likely in pakistan, and if you look at those instances in which the taliban have got closest to the state

either structurally or geographically, they have actually not been very close to seizing any substantive measure of control, and the realistic prospect of a sort of rag-tag bunch of taliban coming out of the swath to confront the sixth largest army in the world in islambad is not as frightening as it might seem. i think he also takes a similarly real lis take -- realistic view in politics. there a rather frightening politicians in afghanistan. we met a number of them, and i'm not one to down play the corrosive quality of their rhetoric and also the corrosive quality to the ways they provide quiet material support to the militant groups from time to time, but in general, i think

that anatol does a good job of dismantling the idea that all islamic actors are stalking horses for the taliban and does this by showing they are fundamentally political with interests related to patronage, social standing, related to the basic stuff of politics that makes them in many ways quite similar to all of the other heros and rascals in the book. i think that's a great contribution as well. ..

which factors in pakistan are in fact highly pat dependent, factors related to a culture, related to kinship and which factors on the other hand actually represent strategic options for the state to whether those be macroeconomics options or military options options related to military posture and that is to ask for the pakistani leadership today given all of their incumbrances what is the realm of the possible and what does it look like and to ask this question with respect to the ecological challenges the untold highlights of the end of the book is perhaps the greatest challenge pakistan faces and also to ask regarding the problems of the militancy what is in the realm of the possible given the kind of thick web of social norms and history that

is so well documented. with that we have time for more conversation that i commend the book to you. >> thank you. [applause] >> let me use the privilege to turn over to the vice president of south asia to kick us off, please. >> thank you so much [inaudible] a nice balance of what is the possibility but also from pakistan it would be a wonderful opportunity.

[inaudible] what would it take for that can ship -- the transformation would that look like [inaudible] >> well, my hope would be and of course it is a checking argument, because as i said, these kinship networks aren't in any way obstacles to progress. even, i have to see once again among the pakistani community in britain flown back in pakistan. but the hope would obviously be the economic change, social change, the organization --

urbanization would gradually not abolish but what we can the new forms of the formal employment and class interests and the cultural, the new cultural world that these create. this of course has to be accompanied by tremendous improvement in pakistan's standards of education particularly as far as women are concerned. which of course as we know from so many other countries also has the most direct impact on the birth rate. and of course pakistan's very slow rate of women's education. but, being so things -- i'm responding to something joshed said through so many of these

as hi kleypas dependent unfortunately, and that therefore to be changed only as part of a very complex process which the outside of world can only influence that's why i talked about certain things about concentrating on the higher education but the obstacles are great and i didn't talk of the security situation otherwise i would have gone for an hour and a half but especially when it comes to people going into the higher education and training in pakistan. but while this intolerance and harassment isn't going to bring down the state it certainly doesn't encourage educated pakistan is to stay in their country and go into business. i do think the cause is lost, but it will take time.

it will take steady pressure as well as help from the outside world even to achieve limited gains. and the question of course is how much time does pakistan have. i think perhaps it has more time than we think faced with milton c. -- rollin deinze but it's important to distinguish which can be detained and terrorism which wouldn't bring down the state but once again a doesn't encourage educated pakistan is to stay in pakistan . but i think pakistan is more resilient in the face of these threats there is nonetheless a race against time and even if it is a race against time over decades against demography, water and so forth, it's still a race against time. >> yes?

>> i think a microphone is coming to you. a week ago we had the minister of finance in this very room with his entire economic team, and i need to tell the story. we had a very frank discussion with him. he decided to stay on a two and a half hours because of the questioning coming into was a very innocuous support report the next day on what happened here, and the eighth paragraph had a sentence that said the difficulties in introducing the tax regime, which the government needs to get the revenue kokesh question as part of the inability to convince the parliament to the proposals of the government. three days later there was a seven column split in the largest newspaper accusing the

finance minister of accusing the parliament of being the cause of the economic problems in pakistan and he had a reference against him that he's trying to explain now so we shouldn't underestimate the challenges of a coalition government and parliamentary system where a very sensible proposals get blocked by their own coalition partners. so i am very glad to hear what you are having to say about it may be a little bit higher than mine. i was wondering whether you could comment on to things you didn't mention. one is in these challenges would seem to be recreating themselves every decade where do you see the role -- the barriers and the challenges of these kinship networks and second, you didn't say anything which has an insurgency which is i wouldn't exactly call it

low-grade insurgencies that it's serious repercussions. thank you. >> thank you for interesting presentation. two questions. the first is we economists always like to measure things, so you know, you say that you have a lot of reason for optimism and a lot of things that you're seeing. if you look a lot of the metrics in pakistan over the last five years, whether you look at suicide bombings, whether you look at social discontent, the fight against the minorities, you know, look at macroeconomic and as pointed out on inflation, gdp, they are all on a downward spiral. so i was wondering what kind of metric are using to see progress?

if you can tell us a bit more about that and the second one is kind of one of the elephants in the room that we usually don't talk about much but we should is a predator to run -- pitcher the ground. the obama administration has increased the droned in one year of obama than four years of bush and that very little coverage in the media and the u.s. seems to have a lot of coverage in pakistan. so the question for you is based on your kind of being on the ground, do you think the policy is working? and do you think there is a backlash going on and is the backlash leading to an exacerbation of the settlement? thanks. >> i was wondering if during your last visit to pick up any feedback on the 18th amendment

and the efforts to decentralize . my question is whether or not you think this particular form of decentralization has been mandated which is basically to transfer funds from the central's of a local provisional governments, but this will not compound the protection patronage nexus that you've described, and what alternative forms of the decentralization were what the warnings would you give with regard to this? >> why don't we take those and then if there are one or two more, we can. you've got them? >> on the whole question of progress in the 18th amendment, i'm sure certainly joshua will have something to say about drones and the security situation. to begin with the limited the

solution to the government, yes , there is a tension here. it's often been set to ayaan considerable extent that while overall standards of government differed little between military and civilian rule because actually they end up moving through the same people sooner rather than later there is one way in which there is limited but still quite significant difference which is the military rule tends to make provincial relations worse because there is more of a tendency to centralize in islamabad. military rule is never absent in pakistan and is seen in the other provinces right or wrong the civilian rule and not by any means always but to some extent leads to more of a

provincial balance the problem is i refer to this question of the fields it can be hellishly that when it comes to actually getting things done, decisions made. add to that something that we haven't talked about, the sluggishness of the bureaucracy , the fact as somebody mentioned the front teams are often good especially in the area of finance and economics because the of the true professionals after all many of them have worked here. elsewhere in the government system problem is that not professional lists but it's the system they got for the british . so the provincial central rivalry between the provinces, rivalry detain bureaucratic institutions, bureaucrats who frankly don't know what they are doing much of the time because the family stepped into the job a few weeks before. all of these things are a terrible problem. when it comes to the urbanization progress, well, i talked about this. one thing here i would say very

strongly is that quite frankly we don't know. and the reason for that is that the research hasn't been done. it has been done in karachi to some extent but that's a very special case. it is extremely striking that the basic political and economic, sociocultural even anthropological work in the cities which is after all the core of the country from so many points of view have is simply not been done. there aren't any ph.d. is on this. so, to a great extent it is anecdotal and guesswork and i admit this candidly in my book yet it's very striking if you go to any library and look on the thune job you will have a big book case on the indian punjab. pakistani which is ten times the size of indian you have one national and many of the books now literally decades in the past. as i said, my sense however the

effect of urbanization and we know very well from other countries particularly africa. that tremendous growth of cities doesn't necessarily lead to fundamental changes in the political pattern at all or at any rate much more ambiguous and slow ways than we think. the biggest hope is china and india out by which i mean input from china. the establishment as china's population ages, as china's wages go up and living standards go up, so labor-intensive low-tech industries will move out of china and pakistan of course greatly helped by the geopolitical relationship with

china. china's tremendous rise as a great power perhaps a superpower is qualified in some respects but one important thing which is china has no pity it is the only real ally. now so far it has to be set the haven't been good exploiting that. one of the reasons being that the chinese are being pretty hard headed a lot, they've looked at all the problems in pakistan that we've been talking about and said we will give pakistan enough to prop it up and enough to benefit us of all that comes to the transport as energy and so forth but when it comes to pouring money into pakistan for private

have to settle for terrorist attacks not to happen shall we say rather than for pakistan actually dismantling -- guinn not explicitly to dismantle the infrastructure. we haven't talked about all those issues here but i don't think pakistan is going to do that. however with the admittedly huge exception of mumbai of course, pakistan hasn't been

sponsoring terrorist attacks and mumbai is somewhat ambiguous and we don't have time. there is a huge change from the 1990's albeit of course under the u.s. pressure, the patent since 2002. this would of course have to continue if there is once again isi fielder prince there would be none. but i would encourage them to look at pakistan restraining the groups within pakistan rather than actually going out to abolish them. one reason for that is we haven't talked about the cause, but a tremendous problem -- will not just when it comes to terrorism. you may have seen the news today that the man accused of gang raping it might have just been equal to by the supreme court. it was a terrible problem in the courts in pakistan. the courts were convicted the

terrorist in most cases, so if you to do something about her wrists, where the subtitle in my book comes from the statement by the senior superintendent in southern punjab you basically go half and shoot them in the back of the head which is what we've been doing. you go and start shooting national in the back of the head you have a problem not just in punjab but in bradford because of the sympathy for the kashmiri jihad. i, myself, think if one is looking at incremental progress , i mean, i hope that this will come with trade, i believe that a solution to kashmir is a long way off. what i think it's possible and here perhaps i looking more of the european soviet relationship in the american in the past but the idea of detente, the phrase they taunt

interests me when it comes to pakistan and india. because what we saw during the cold war in the united states and europe, nato and the soviet union was that of course the structural hostility lasted from late 1940's to 1989 or so and to some extent america at last to this day. but even during the cold war that did not prevent either limited agreements between the soviet union and america to reduce tension either generally in detente or in particular areas, and of course between the european continent and the soviet union it didn't prevent the creation of a massive infrastructure project of tremendous potential importance to india and pakistan namely the russian gas exports to the e.u.. that is something which interests me very much because that happened even as the cold

war was still progressing even when the cold war was at one of its particularly bad moments. in the week of the soviet invasion of afghanistan and so forth. the other thing that interests me but i can't go into that because it is a huge subject, is it does seem to me i've been involved in a good deal of track ii stuff baquero cashmere is still very intractable, that may be the beginnings, just the beginnings of a more pragmatic attitude on both sides to every man over afghanistan and the core reason for that is i think that sensible people in both security establishments know that they won't get everything they want in afghanistan. that's the first thing. the second is an indian general said to me you don't have to be a historical genius to realize to judge by history afghanistan isn't necessarily the place we need to get deeply involved in. so baluchistan, yes, my sense

is that is still an insurgency that can be contained. in the past pakistan has pleaded very successfully on a british models of behavior. the problem now is in so many parts of the world you have a massive semi and educated partly de jul nist -- and jobs commensurate with the status. but so far, the rebellion is limited. there are opportunities for the rule and once again the thing about the ethnic and the provincial is it's not just between the provinces but in most cases within the provinces as well and critical to what is going on in baluchistan is the fact that not merely what everyone knows is usual but about 40% in the population pashtu in and others with a capital is a manly pashtu and

city. that is a major drag ultimately on the move to independence. >> thank you. maybe you can talk of the drones. [laughter] >> on the 18th amendment in the national finance report award i just want to say three quick points. first of all it was a political move, part of the people's party manifesto and was a devolution of political party provinces and therefore to make pakistan more representative, more representative democracy so it was a political move, and a good one at that point. from the economic standpoint a was a big mistake, and i think

this is where the problem arises in the decentralization. what happened really is that while there was a transfer of revenue from the federal government to the provinces there wasn't a similar transfer of expenditure responsibilities , and the idea that the then finance ministers had this would be settled in the future. this is never a good move in the case of pakistan to say what's deal with this now. the other side of the problem we will face we will deal with in the future. well, it couldn't be dealt with in the future and the third thing that happened of course, there were no commitments by the provinces on what expenditures would they undertake come and now they have the transfers from the central government.

also pakistan is a notable thing. what happens if the provinces don't raise taxes themselves, they don't actually -- there was no agreement on let's say agricultural income tax which is a constitutionally provincial issue and it should be decided. they have not -- realistic tax, property tax, responsibilities of the province they have never in fact -- the always had the ability to impose the sanctions but they never have. they are relying on transfers and the idea that you would start doing these expenditures and get these transfers, transfer from the federal government wouldn't cover expenditures you have to raise your own funds and taxes. they won't do that. i personally believe -- i am pessimistic they will do that because what do they do instead ? they will learn from the federal government. you run deficits and print

money. how can the province print money? they create their own banks. basically when job is the classic bank, a complete scandal. well, now we have sighn bank as well. they will spend and they will borrow in order to spend and they will loot the banks that have been set up for this purpose. i think also that the other big mistake if i may just mention was not putting the vat as a condition for the national finance award. he should have said this is a quid pro quo. you either accept the vat. well, again, it was we will settle that matter later. well, we know where we are with the vat. it's dead in the water and so pakistan's revenue problems continue. finally, i would say the of their big mistake in that is -- and this i think you are aware

of this of the transfer of responsibilities is always a problem from the political and social point of view for example there's a battle going on right now on, transfer of high your education to the provinces. but let me tell you what happened, with the other ones are. there is a move to transfer women's affairs to the provinces. away from the federal government to the provinces, and you can imagine what problems that can create when there's a transfer of women's affairs, women's rights etc. to the northwest to baluchistan, they are responsible. the government finally -- and this is probably one of the only things that the government of pakistan has done post the assassination of the government of punjab is to not allow the minority interest to be transferred to the provinces.

that was, again, a proposal, transferred minority affairs and to transfer the minority fears on right now the to the provinces, in this case and not the other ones, but in my view, to transfer it to the punjab is a big mistake and the government sold that, and so the women's affairs is under discussion, higher education is under discussion -- at least they kept minority affairs in the federal system. so i think on balance if you come at it politically and say good move, if you come at it from where i sit, i think a was a big mistake that basically it was not well thought out as to what the consequences would be. >> let me just add to that another one of the eve of subjects is going to be a primary education curriculum at least to some extent, and in the frontier province if an

islamist government wins the next election in a couple of years, which is not entirely unlikely, then they would probably want to make some appropriate changes to the curriculum at that time so that is another thing to watch. before i talk about the drones i want to make one more quick comment about urbanization. anatol said we don't have enough information to be able to judge how the urbanization is going to play out in terms of its economic and political facts but i will say that in my experience if i would ask myself who was most excited about urbanization, it would be the two political parties, pakistan muslim league and the islamic which are the two more right of center political parties. and, they are excited because they have traditionally an urban base especially in the middle class and lower middle class and the merchant community. they feel like urbanization is g