Some Explanations for Delays in Political Stabilizations: the Case of India and Pakistan

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1 Some Explanations for Delays in Political Stabilizations: the Case of India and Pakistan May 10, 1999 Afzal S. Siddiqui Department of Industrial Engineering & Operations Research University of California Berkeley, CA Submitted as a term paper for IEOR 290R

2 Abstract In this paper, the aftermath of the nuclear tests by India and Pakistan is analyzed using some results from macroeconomic theory, viz., the interaction of competing socioeconomic groups engaged in resolving the fiscal deficit. These results essentially describe a war of attrition in which government fiscal policies experience delayed stabilizations. Some of the factors and characteristics of such delays are: polarization and instability of a country s internal politics the greater the political polarization, the longer the time to stabilization and the less equitable the resulting solution the resulting solution s being similar to one that was previously proposed but rejected the emergence of one socioeconomic side as the dominant one These factors figure prominently in causing India to proceed with its nuclear tests and in prompting Pakistan to respond in kind. Indeed, the political ideologies of the two nations have diverged since 1997 as India s most recent government was led by a Hindu nationalist party, while Pakistan s was dominated by the right-wing Pakistan Muslim League (PML). More important, the aforementioned characteristics can be applied to the aftermath of the tests in which the two nations experienced a tense standoff as the great divergence in the two nations political ideologies precluded them from holding constructive talks over regional issues until February 1999, more than nine months after the round of nuclear tests. Furthermore, both the Indian and the Pakistani governments experienced tremendous costs (in terms of sanctions and loss of prestige with the general public) from delaying the political stabilization. Consequently, they pledged to make some concessions that they had previously rejected, such as signing the Comprehensive Test Ban Treaty (CTBT) and informing each other of military exercises. The final step of the process towards stabilization, i.e., the emergence of one side as the politically dominant one, was not realized, however, at the time this paper was written. Nevertheless, the political developments following the nuclear tests on the Indian subcontinent can be described by the war of attrition model taken from the fiscal deficit setting. Hence, this lends encouragement to the notion that such a model from macroeconomic theory can be applied to other political conflicts such as those in the Middle East and the Balkans. 2

3 TABLE OF CONTENTS ABSTRACT INTRODUCTION WAR OF ATTRITION MODEL REASONS FOR THE NUCLEAR TESTS STABILIZATION AND BEYOND CONCLUSIONS...12 BIBLIOGRAPHY...13 TABLE OF FIGURES FIGURE 1: MAP OF THE INDIAN SUBCONTINENT... 5 FIGURE 2: THE BIRTH OF TWO NUCLEAR POWERS

4 1. Introduction In the aftermath of the Second World War, Great Britain found it increasingly difficult to maintain control over its territorial possessions on the Indian subcontinent. Led by Western-educated figures such as Mohandas K. Gandhi and Mohammad Ali Jinnah, Britain's Indian subjects sought self-determination after two hundred years of Imperial rule. Initially, the policy of the British government was to oppose independence for India. The onset of riots and civil disobedience by the Indian public, however, made it impractical for 100,000 British military personnel to try to maintain 300 million people. Hence, in 1947, Great Britain agreed to grant independence to the people of the Indian subcontinent. The fate of the Muslims in India was still unresolved, however. The position of the Indian National Congress Party was that there should be one democratic India, while the Muslim League (led by Jinnah) was skeptical of the increasingly powerful Hindu nationalists in the Congress Party, and thus, demanded a separate homeland for Indian Muslims. After intense negotiations, the British agreed to carve out East and West Pakistan as the two Muslim enclaves on the subcontinent. Thus, on August 14, 1947, Pakistan declared independence from Great Britain, and India followed suit the next day, thereby causing the mass migration of Hindus into India and Muslims into newly formed Pakistan. Unfortunately, such a large-scale transfer of people was not without incident. Indeed, it is estimated that 10 million people left their homes during this period of partition and at least 500,000 perished due to either the journey or ethnic violence 1. Moreover, the status of the princely state of Kashmir was unclear at the time of partition. On the one hand, Pakistan laid claim to the territory due its predominantly Muslim population, while on the other hand, India felt that Kashmir was its own since it had a Hindu prince. Adding to the confusion, the prince of Kashmir vacillated as to which country his land should belong. Consequently, both India and Pakistan invaded Kashmir and continue to occupy it (see Figure 1). 1 Burns, John F., "India's 50 Years of Progress and Pain," New York Times, August 14,

Figure 1: Map of the Indian subcontinent 2 Due to this violent partition and the lingering issue of Kashmir, India and Pakistan have had tense relations.

5 Figure 1: Map of the Indian subcontinent 2 Due to this violent partition and the lingering issue of Kashmir, India and Pakistan have had tense relations. Indeed, since 1947, they have fought three wars, the most recent of which led to the creation of an independent Bangladesh out of East Pakistan in Furthermore, this tension has fueled a mini arms race in the subcontinent, with India spending $8 billion and Pakistan spending $4 billion annually on defense, high enough to be ranked 13 th and 22 nd in the world, respectively. 3 It is against this backdrop of a bloody partition, a low-intensity war in Kashmir, and unmitigated defense spending that nuclear weapons officially entered the foray in May 1998 (for a chronology of the two nations' nuclear development, see Figure 2). In spite of probable economic and diplomatic setbacks, India declared itself a nuclear weapons state after conducting a series of tests (May 11-13, 1998). Facing similar pressure from abroad to not proceed with its own tests, Pakistan nevertheless followed suit on May 28, New York Times, May 29, Hellman, Chris, "Last of the Big Time Spenders," Center for Defense Information, 5

6 Chronology 1948 India establishes an Atomic Energy Commission for exploration for uranium The Pakistan Atomic Energy Commission is established India begins designing and acquiring equipment that could lead to atomic weapons A Pakistani nuclear research reactor reportedly starts functioning. Prime Minister Zulfikar Ali Bhutto announces: "If India builds the bomb, we will eat grass or leaves, even go hungry. But we will get one of our own." 1968 The Non-Proliferation Treaty is completed. India and Pakistan refuse to sign India tests a device of up to 15 kilotons and calls the test a ''peaceful nuclear explosion.'' Pakistan's Prime Minister Bhutto reportedly tells a secret meeting of Pakistan's top scientists of the intention to develop nuclear arms President Bush imposes military sanctions on Pakistan for pursuing a nuclear weapons program Pakistan says it has the components and know-how to make at least one nuclear explosive device India announces development of supercomputer technology that can be used to test nuclear weapon designs. May 11-13, 1998 India conducts five underground nuclear tests; declares itself a nuclear state. May 28 Pakistan detonates nuclear devices. Figure 2: The Birth of Two Nuclear Powers 4 In the aftermath of the tests, there was short-lived ecstasy in both nations. But, even as economic realities set in, i.e., the impact of sanctions, there were neither constructive talks on the issue of Kashmir nor any efforts to sign the Comprehensive Test Ban Treaty (CTBT). In fact, there was an escalation of hostilities as border clashes along the ceasefire line in Kashmir intensified and each government accused the other of sabotage. This was, in effect, a delay in the stabilization of the situation created by the introduction of nuclear weapons to the region. The purpose of this paper is to analyze the causes for this delay in stabilization and speculate on its consequences using some results from macroeconomic theory. The organization of this paper is as follows: 4 New York Times, May 29,

7 Section 2 discusses results from macroeconomics that treat how the conflicting interests of competing socioeconomic groups can lead to a delay in stabilization of government policies (essentially, a war of attrition model). Section 3 uses these results to identify some reasons why India and Pakistan felt compelled to weaponize their nuclear programs. Section 4 uses the same results to characterize the aftermath of the nuclear tests as a delay in stabilization and to speculate on what might unfold according to the "war of attrition" model. Section 5 summarizes the results of this paper. 2. War of attrition model In order to understand the behavior of the Indian and Pakistani governments around the time of the nuclear tests, it is first helpful to become familiar with models that characterize the actions of competing political groups. Most notably, the "war of attrition" model from theoretical biology has been used successfully to explain delayed stabilizations in government fiscal policies. It is hoped in this paper that such scenarios from macroeconomics can be used to analyze the standoff resulting from the India- Pakistan nuclear tests. The first such paper considered here is [TA90] (G. Tabellini and A. Alesina. "Voting on the Budget Deficit," American Economic Review, 37-49, 1990) which analyzes a model in which a group of rational individuals votes over the composition and time profile of public spending. In this case, all groups of voters dislike the federal government's running a budget deficit, but they cannot agree on a balanced budget due to political differences. More specifically, voters are not in favor of any specific measure to reduce the deficit. The explanation for this seemingly inconsistent behavior is that voters don't have the ability to bind future voters' choices. Subsequently, there is a bias towards 7

8 excessive budget deficits or surpluses. Furthermore, historical studies indicate that countries that are more polarized and politically unstable have larger stocks of outstanding debt than those that are politically stable. Also concerned with such fiscal policy matters is [AD91] (A. Alesina and A. Drazen. "Why Are Stabilizations Delayed?" American Economic Review, , 1991). In this paper, the main issue of discussion is why do countries continue to follow fiscal policies that are infeasible in the long run. One possible explanation for the persistence of bad policies is irrationality, i.e., lawmakers must wait until things get "really bad" before taking action. This argument is unconvincing, however, because the deterioration in the federal deficit can often be foreseen. Instead, the process towards stabilization of unchecked public spending should be construed as a war of attrition in which competing socioeconomic groups strive to shift the burden of stabilization onto other groups. In other words, a delay in stabilization occurs due to a stalemate over the distribution of the costs of stabilization. As in [TA90], all socioeconomic groups may be in agreement that stabilization requires policy changes, but differ over how to share the burden of stabilization. In the case of fiscal policy, the costs of stabilization are higher taxes; thus, it is in the interest of any given socioeconomic group to not have to bear them. Intuitively, if there is a high degree of political polarization among various socioeconomic groups, then the time to stabilization is prolonged. Moreover, the expected allocation of the relevant costs is less equitable the longer the time to stabilization. Hence, stabilization leads to a political consolidation in which one socioeconomic group (or coalition) becomes dominant. The final characteristic of fiscal deficit stabilization is that successful stabilizations are 8

9 preceded by failures, and the resulting agreement is often similar to the one that was previously rejected. To support these claims, ample empirical evidence is presented in [AD91]. A textbook case of a distributional war of attrition occurred in France in the 1920s due to disagreement over feasible fiscal plans. The centrist party in power at the time was unable to pass a 20% across-the-board tax increase due to opposition from both the socialists and the conservatives in the legislature. The former sought a progressive tax policy, i.e., a capital levy, while the latter favored a regressive policy based on indirect taxes that would burden the poor. This polarization led to an 18-month stalemate in the legislature, which was resolved only with the emergence of a dominant right-wing party sympathetic to the interests of businessmen. Thus, its tax policy (which was similar to one that was proposed earlier by the conservatives and subsequently rejected) burdened the working class. Indeed, this example exhibits many of the aforementioned characteristics that are supposed to be common among delays in stabilizations, but it is not the only one. The reader is referred to [AD91] for more empirical examples. 3. Reasons for the nuclear tests The events surrounding the nuclear tests on the Indian subcontinent in May 1998 are similar in nature to the characteristics of the version of the war of attrition model described in Section 2. First of all, in the months preceding the nuclear tests, the political ideologies of the two nations diverged: in Pakistan, the Pakistan Muslim League (PML) was elected to office in 1997, vowing to enforce Islamic laws, while in India, the Bharatiya Janata Dal (BJP) came to power in early 1998 as part of a coalition government. Since part of the 9

10 BJP's political agenda was to restore the pride of the Hindu people, shortly after taking office, it opted to weaponize India's nuclear program. While opposition groups, such as the Congress Party, argued that the reason for the tests is that the BJP's coalition is paralyzed by internal strife and the bomb is, thus, a brilliant diversion, they nevertheless, supported the BJP's decision in public. 5 In Pakistan, too, right-wing religious groups (such as the Jamaat Islami) hold considerable sway and were able to galvanize public opinion in favor of replying to India's nuclear blasts to the extent where the PML government had to go ahead with the tests just to remain in power. Hence, as in the public debt crisis model of [TA90], the two groups (here, governments) proceeded with the course of weaponization of their nuclear programs even though its dangers were evident, i.e., the two sides' politics were polarized to the degree that the risks of a potential nuclear war were considered acceptable. 4. Stabilization and beyond In the months following the nuclear tests, the two nations made no efforts to hold formal talks to defuse the situation. In fact, they continued with their regular military exercises, often close to the border area. During this uneasy stalemate, each nation felt that it could gain leverage over future negotiations involving regional issues by refraining from signing any non-aggression pacts. Hence, like the war of attrition model from [AD91], each side sought to shift the burden of stabilization onto the other. Indeed, according to The Economist: 5 "Why India Loves the Bomb," The Economist, May 16,

11 India thinks it has blasted its way to recognition as a world power, shrugging off pressure over Kashmir along the way. Pakistan believes it has won the world's backing to move the dispute over divided Kashmir up the international agenda. 6 In this context, stabilization would include holding formal talks and signing the Comprehensive Test Ban Treaty (CTBT). Another characteristic of the war of attrition model is that the costs of stabilization increase with time and their allocation tends to be less equitable. In this case, the burden of stabilization is measured by the degree to which a government's prestige (both domestically and internationally) is weakened. By the beginning of 1999, both governments were weakened, either by internal squabbling (BJP) or by judicial proceedings (PML), to the extent that they agreed in principle to sign the CTBT by September Indeed, internal strife caused the BJP-led coalition to fall to a vote of no confidence in April 1999 due to India s deteriorating economic circumstances. Even significant military advances, such as the testing of the medium-range Agni missile (which is capable of carrying nuclear warheads) in March 1999, could not save the BJP. Similarly, in Pakistan, the PML found its power in the national legislature diminished due to the corrupt practices of several government figures. Hence, the costs of delaying the stabilization mounted with time as the prestige of each government receded (as predicted by [AD91]), but they weren't necessarily less equitable in a distributional sense. The final phase described by [AD91] is one in which stabilization occurs and one side emerges as being politically dominant, viz., by forcing the other side to accept a previously unsatisfactory proposal. In the context of the India-Pakistan nuclear debacle, it appears as if steps towards stabilization have started to take place as the costs of delaying the stabilization have mounted. For example, in February 1999, the Indian 6 "Nuclear Complacency," The Economist, October 17,

12 Prime Minister, Atal Behari Vajpayee, visited the Pakistani Prime Minister, Nawaz Sharif, to inaugurate the New Delhi-Lahore bus route. This meeting served also as a chance to resolve some differences, and although no concrete measures were taken, each nation agreed in principle to sign the CTBT by September 1999 and to inform the other of any future military tests and to re-open bilateral discussions on the issue of Kashmir. The notions of signing the CTBT and informing the other side of military plans was once clearly unsatisfactory to both sides, but as part of the movement towards stabilization, they are now considered acceptable. And, on the issue of Kashmir, Pakistan's decision to affirm bilateral talks is an about-face from its previous position that any such discourse involve the United Nations. 7 Hence, nearly a year after the nuclear tests, both sides have begun to yield somewhat from their entrenched positions as the costs of the delay in stabilization mounted. It is too soon, however, to determine whether one side will emerge as being politically dominant as predicted by [AD91]. 5. Conclusions Ever since independence from Great Britain, India and Pakistan have maintained an intense rivalry in everything from military power to sports. The nuclear tests of May 1998, thus, escalated an already hostile situation. The reasons for such an escalation can be explained by the war of attrition model taken from fiscal deficit crises. Indeed, the factors that drive socioeconomic groups to delay stabilization of the fiscal deficit are present in the geopolitics of the Indian subcontinent. Furthermore, it was shown that the process towards stabilization in the aftermath of the nuclear tests shares many 7 "On the Bus to Peace," The Economist, March 1,

13 characteristics of the delayed stabilization model described in [AD91]. And, although the final event of the stabilization process from [AD91], viz., the emergence of one side as being politically dominant, has not yet transpired, the ability of the war of attrition model to explain certain aspects of complex geopolitical incidents lends encouragement to the notion that it can be applied to other political conflicts, such as those in the Middle East and the Balkans. Bibliography 1. [AD91] A. Alesina and A. Drazen. "Why Are Stabilizations Delayed?" American Economic Review, , [CDI] Hellman, Chris, "Last of the Big Time Spenders," Center for Defense Information, 3. [ECON] Various articles, The Economist, 4. [NYT] Various articles, New York Times, 5. [TA90] G. Tabellini and A. Alesina. "Voting on the Budget Deficit," American Economic Review, 37-49,

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