The Status Quo Is the Catastrophe: Pakistan Between a Failed Industrial Policy and a Digital Panopticon

As a response to sluggish growth, a well-trodden and worn-out narrative regarding the need for an industrial policy is again making the rounds in official circles, being proclaimed as the centrepiece of the remedy and a forward-looking growth strategy. Yet it is not clear what such a policy would actually represent, what its scope would be, whether it would be confined only to manufacturing or whether its domain would extend to the huge and varied services sector, IT, digitally delivered services, tourism, medical treatment, and others. The case for it stems from the belief that reliance on markets alone cannot deliver growth and bring about a fundamental transformation of the economy, and hence the government should pick winners or some strategic industries by supporting and protecting them against well-established manufacturing enterprises globally and enabling them to go up the value chain, while providing employment opportunities domestically.

Infants that never grew up

In reality, the concept of industrial policy belongs to an antiquated era. The examples generally quoted are those of Japan and South Korea, and much earlier, the US and Europe, which adopted this approach and provided selective shelter and achieved remarkable success. However, this was accomplished in a different era, one of closed or semi-closed economies and at a time when technologies developed at a laggardly pace. More importantly, preferential policies were operational only temporarily; the objective was to assist industries to grow to eventually become competitive internationally. In Pakistan’s case, while a handful of industries have profited enormously from government interventions, including subsidies, tax and lending rate concessions and tariff protection, it is notable that despite decades of support, none of the state-assisted industries, for example automobile, fertiliser, steel, sugar, polyester and energy, have grown up to become competitive internationally. These infants have not become adults, none have grown up to get recognition as winners, and policies have merely ingrained their dependence on continued sustenance and handouts.

Protection in a world of value chains

This failure is even more serious in today’s highly competitive world, in which global trade is anchored in supply chains. According to the WTO, around 70 percent of international trade now takes place through global value chains. In such a world, protecting domestic industry will not only make Pakistan uncompetitive globally, it can also induce reciprocal retaliation. Industrial policy, therefore, is not a strategy for growth; it is a recipe for stagnation and inertia. One dreads the thought of control-freak bureaucrats, with their limited knowledge and lack of versatility, being tasked to pick winners for direct state support. There is a greater likelihood of the sectors being selected entailing policy measures replete with freebies. The result will be an industrial structure which is inefficient and uncompetitive globally, and one that fails to exploit new openings with promising potential. Moreover, given Pakistan’s own experience, there is every reason to fear a strategy being driven by political convenience or captured by well-connected special interest groups. In other words, the economy will end up encouraging losers, leading to the diversion of resources from advantageous and productive uses in order to keep afloat those destined for extinction.

Rapid technological change is likely to make the supported industries redundant and archaic sooner rather than later. The uncertainty induced by technological advances will cause massive disruption, fast rendering irrelevant and outmoded even the best-crafted interventions. Such intermediations will be made ineffective, and the competitive advantage, if any, arising from policy interventions will be neutralised. It will be markets growing at a mind-boggling speed, and not governments, that will determine the comparative advantage of a country. Moreover, the fiscal cost of propping up industries that can only survive on crutches will be high, all at the expense of sustainable growth-boosting objectives like export enhancement. Bolstering such industries will not only burden the consumer, it will also drain the government’s scarce financial resources and divert investible funds from areas that could have pushed the economy onto a higher sustainable growth path and enhanced its competitiveness. Pakistan’s manufacturing sector, which contributes only around 12 to 13 percent to GDP, and whose export complexity remains low by global standards, cannot be revived by repeating a model that has already failed for forty years.

The status quo is the catastrophe

While this old economic debate is being revived, a new and far more dangerous reality is closing in on the political side. As Walter Benjamin wrote, “That things are ‘status quo’ is the catastrophe. It is not an ever-present possibility but what in each case is given.” Hell, in other words, is not something that awaits us, but this life here and now. Talk of crisis in Pakistan is cheap. If the economy is not tanking, then endless palace intrigues and abuse of power make politics into a perpetual game of thrones. And now there is the daily reality of ecological crises, from terrifying flash floods to suffocating smog. Arguably the biggest social crises are least spoken about: consider the 30 million landless people in rural areas and the intensifying incidences of dispossession everywhere, the more than 25 million children out of school, the daily injustices meted out by the thana, katcheri and patwari, and the epidemic of sexual violence against girls, women, boys and trans persons.

Every so often, an episode of oppression, violence or neglect generates a fit of outrage on digital platforms. But within a day or two the news cycle moves on, and the underlying crisis is never seriously interrogated, let alone redressed. There have certainly been big victories for pro-people forces in Pakistan’s history. Most notably, three long martial laws have eventually been toppled by popular movements. In more recent times, many have openly confronted the establishment’s political engineering and economic empire, the barely disguised interventions of imperialist forces, and the brutalisation of the peripheries. But all of the courageous voices and movements that are taking on the current hybrid regime and its propagandists now face an emergent, dystopic reality that has no precedent in Pakistan’s history. Disclosures by Amnesty International in September 2025 confirmed that the state has established a vast digital surveillance network with the assistance of various foreign companies. There had been murmurs for some time about the setting up of a giant firewall to regulate social media. Instead, we are now dealing with something closer to the proverbial panopticon.

From firewall to panopticon

The truth is that all of the world’s states are heading in a similar, dark direction. It has been known for some years now that the biggest social media platforms, including Google and Facebook, routinely log their users’ data, and then sell it off to advertisers and governments alike. The only question was the extent to which the rapid growth of the digital surveillance regime would be held back by progressive forces around the world. As it turns out, the apparatus being gradually installed in Pakistan is ahead of most other countries insofar as all presumed norms of accountability have been bypassed, including judicial oversight. One should not really be surprised. We live in a world where a genocide is being live-streamed, making a mockery of the so-called liberal rules-based order. Even autocratic kingdoms like Qatar have found themselves being bombed. Meanwhile, Pakistani statecraft, steeped in its colonial inheritance, has always had a greater affinity for legal instruments that subjugate rather than those that guarantee the people’s freedoms.

Two crises, one logic

The connection between the two crises is deeper than it appears. Both industrial policy and the digital panopticon are attempts to preserve the status quo by protecting losers and controlling people, rather than by empowering them. In the economy, the state wants to keep alive industries that cannot stand on their own feet. In politics, the state wants to keep alive a system that cannot survive open debate, and therefore it watches, filters and intimidates. Think about the floods, which have barely made a dent in the political and intellectual mainstream, despite evidence that the ruling class itself presides over the production of disaster. Consider the Baloch women protesters whose pleas to be heard only led to their being cordoned off in the federal capital for almost two months in 2025. All avenues for pro-people and peaceful politics in Balochistan are being foreclosed. Fits of digital outrage do not amount to a meaningful political challenge to the panopticon.

If we do not attend to the task of forging a transformative and ideological politics, the status quo will engender more ecological breakdown events, brazen class war and violent state repression. All of this will be normalised through the digital surveillance regime. There is enough reason to believe that AI in the hands of oligarchs will become the means through which human freedom is crushed. It would be naïve to pretend that the dramatic effects of AI will not extend to politics.

The way forward

Pakistan no longer needs more attempts at assisting, through subsidies and protection, industries which cannot stand on their own feet. What is required in this era is a governance system characterised by nimbleness and flexibility, so that it is able to adjust and adapt to rapidly changing circumstances. We should therefore be focusing on creating an open, competitive, modern economy that can quickly acclimatise to the fast-transforming global economic environment. This would involve necessary support and encouragement in complementary areas and factors, such as education and skill development in keeping with the emerging ecosystem, digital connectivity infrastructure, reliable and affordable energy, modern infrastructure and innovation. Only these factors will be able to erect a competitive economy, and not tax concessions, subsidies and protection.

At the same time, debate and consensus on the emergent digital surveillance regime is necessary amongst all progressives. Only then will it be possible to outline alternative modes of politics in the short, medium and long term. The 2025 convulsions in Nepal confirm that young people are deeply attached to social media. We need to convince them that their freedoms require a politics to socialise both the means of production and the means of information. For Pakistan, industrial policy is a concept that has come to grief and can at best serve as a case study of the past. It should not underpin any future growth strategy, just as a surveillance state cannot underpin any future democracy.