Much of what happens in South Asia appears bewilderingly confusing to outsiders, as centuries-old fissures erupt into the increasingly dangerous modern environment. The most elementary mistake to make here is to become emotionally involved in media stereotypes. Instead, focusing on the ultimate objectives of each interest group – in other words, employing an approach dictated by game theory – provides a logical framework within which to examine current events.

Nash in Pakistan

As I wrote in a previous article [1], Pakistan’s existence as an artificial construct imposed by the British on the people of South Asia was laid bare by the events that led to Bangladesh’s independence in 1971. Since then, the confusion about the country’s raison d’ etre has only intensified.

No longer serving its intended mission as a homeland for the region’s Muslim population, Pakistan has instead evolved into a perennially unstable country that lurches from one crisis to the next. In practice, Pakistan exists because it is unthinkable for anyone in Western capitals to have the country break down further.

It has certainly rejected democracy, but has much cause to be upset with Western allies such as the United States who have proved fair-weather friends more than once. Pakistan hasn’t done itself too many favors in the past few years by lurching between support for the US and the “traditional” antagonism demanded by its population to the bete noire of the Arab Street, the US.

I have made no secret of the regard in which Prime Minister Shaukat Aziz deserves to be held by both developmental economists and the world’s geopolitically sensitive population, for the honest and capable attempt made at turning around the economy [2]. Increasingly though, with his mentor sinking into an ever-greater hole, the prime minister’s position appears tenuous. His importance though is only likely to increase because of these events.

This is the person, not President General Pervez Musharraf, who can move Pakistan from its fractious past to a better future. By focusing on industrial development, infrastructure growth and freeing up the wheels of finance, Aziz has helped to spark the first real phase of sustained economic growth in the country for the past few decades. To be sure, the external environment of strong growth in various parts of Asia has also helped, but the fact that Pakistan isn’t lagging behind is certainly good news.

The biggest threat to his work comes not so much from Islamic fundamentalists, but rather the “democratic” alternative, namely former premiers Benazir Bhutto, or indeed Nawaz Sharif. The former is now reenacting the events of the late 1980s when the US swept General Zia ul-Haq under the carpet and ushered in a new era for democracy in Pakistan, albeit quite short-lived.

Even as many media outlets portray these two leaders as beacons of democracy, their record while in power proved dismal, with economic growth sliding to a standstill even as inflation increased. It was their record of corruption while in power and frequent squabbling that led the Pakistani people to distrust democracy, and it is quite ironic to see events coming full circle.

Employing game theory to understand Pakistan proves productive. The country is the sovereign equivalent of the Nash Equilibrium – a dilemma in which all the players accept sub-optimal outcomes because they simply cannot trust each other. Thus, while the US accepts cohabitation with a ruthless dictator because it distrusts the alternatives, the Pakistani people accept the lack of democracy because the record of economic growth under the military was better. This equilibrium prevailed from September 11, 2001, to its sixth anniversary, roughly.

For some reason, folks in Washington seem to have decided to throw out the rulebook and try to create a new game, in which they may have assumed that the wily general would accept a reduced role. The “savior” would be Bhutto again, this time to provide popular legitimacy to America’s biggest friend in the region.

The idea was probably to blunt the increasing popularity of Islamic fundamentalists among the Pakistani public by bringing in a leader with her own fanatical fan following. Thus it was almost guaranteed that the former would try to get rid of the latter – as seen in the suicide bomb blasts that greeted Bhutto’s welcome parade when returning to the country after years of exile.

Separately, the general had his own game, which demanded clinging at all times to the buttons that launch Pakistan’s nuclear weapons, to ensure his survival. Handing over those controls to a civilian prime minister was likely to make the general a toothless president, a ceremonial role that he was clearly going to be unhappy with.

That leaves everyone with the dilemma of whom to support – the general again, which could possibly increase popular support for Islamic fundamentalists, or the forces of democracy, that would almost guarantee substantial support for fundamentalism arising from the (likely) economic decline in years to come.

Beijing’s support

Then again, nothing in South Asia moves independently. The outcome of the game in Pakistan will likely be decided in other capitals around the region, most importantly Beijing and New Delhi. This time though, it is inaction rather than action that will lead the way forward.

Beijing is pleased with Musharraf, and has been eager to buttress both his military and political standing. Unlike the US, Beijing has been careful to stay on the side of Pakistan through thick and thin, in a series of cooperative agreements that have been in force since the early 1970s.

That said, Beijing’s strategic objective of restricting India’s military might is completely obsolete now given the vast capabilities gap that has grown with the latter, effectively meaning that no Chinese planner takes India’s military threats seriously. In contrast, the Indian market is hugely attractive to Chinese companies looking for a place to sell their goods away from the recession-headed US market. Additionally, a number of raw materials and semi-finished goods are being sourced by China from India. Thus, the strategic objectives in Beijing have changed, to ensure greater economic if not political cooperation.

As a thorn in the flesh of the US, a road to the Middle East and a trusted military ally, Pakistan is almost indispensable for China. That alone guarantees that Musharraf will attract support from Beijing in coming months, but only so long as relations with India aren’t damaged. Essentially, China is hamstrung on any intervention in the current crisis – it has no options in the Pakistan game.

Delhi belly

That leaves New Delhi. Normally, India would play a “negative” role in any crisis in Pakistan, due mainly to the historic animosity to India shown by all the important players in Pakistan – Musharraf, Bhutto and Sharif, not to mention any of the coterie of Islamic fundamentalists. In effect, the leader seen as kowtowing to India is most likely to lose out in Pakistan’s power struggle.

Additionally, my opinion of the current Indian government has always been low, driven by the absolute lack of strategic thinking in the corridors of power – a frequent problem with the Congress party. However, recent events in India itself will help change this. As I wrote in a recent article [3], the government at the center looks set to fall due to the machinations of India’s communists, who are busy re-enacting their age-old class warfare with the US. The rejection of the nuclear deal with the US, announced in a major policy reversal this week, will likely lead to new national elections within the next six months. Before that though, expect news from the economy to get worse – lower growth and higher inflation for starters.

In an environment of distrust between the Congress party and the communists, it is likely that the right-wing Bharatiya Janata Party (BJP) gains, especially given the recent wave of anti-incumbent elections across the country. Lacking leaders with national recognition, the BJP is now led by a motley collection of regional leaders, including some particularly unsavory characters who were accused of causing anti-Muslim riots.

I expect that any government formed out of this messy situation will be another coalition, albeit one that would exclude the communists. With many regional parties to the fore, and mounting problems with inflation and infrastructure, it is unlikely that any government in India will focus on anything but its own survival. Thus, even as strategic objectives may dictate otherwise, India too will not play the Pakistan game.

Slide to anarchy

All this leaves us to conclude that the biggest players in the new game in Pakistan will be the Islamic fundamentalists who appear set against both Musharraf and Bhutto, and the neo-conservatives in Washington who would like any alternative to the Islamists to emerge.

There is no easy way to solve the sub-optimal results, and with the middle classes apparently uniting under the banner of Pakistan’s lawyers, it becomes more likely that a violent change of government occurs at some point. In turn, this unfolds a key scenario in the slide to World War III that I discussed in an article [4] last summer, namely the acquisition of Pakistan’s nuclear weapons by Islamic fundamentalists. The rest, as they say, will be history.

1. South Asia’s schizophrenic twins
2. Lessons from Kashmir and Xinjiang
3. Ram-ming the Indian economy
4. World War III – what, me worry?