In Pakistan, the question of economic governance remains unsettled: should the state keep flying planes, running water utilities, and owning industries—or limit itself to market-friendly rule making, oversight and facilitation, leaving enterprise to the market? Yet; history tells us enduring lessons.
The Roman Empire thrived when emperors taxed and secured, while private traders, guilds, and contractors moved grain, built ships, and fed the empire.
However, when taxes ballooned and regulation hardened, commerce withered into a captive arm of imperial survival. The lesson endures: states that smother enterprise sink with it.
From the souks of Baghdad to the bazaars of Delhi, it was traders, not rulers, who kept the world moving. The Abbasids minted coins and guarded roads, but caravans and markets were in private hands, weaving Asia, Africa, and the Mediterranean into one commercial fabric. Venice and Genoa built maritime empires from counting houses; the Hanseatic League humbled kings with its ledgers; and the fairs of Champagne birthed Europe’s financial instruments.
The Ottomans leaned on guilds, the Mughals on Gujarati and Bengali merchants, while Europe’s chartered companies blurred trade with conquest. Across a thousand years, one lesson endures: states taxed and commanded, but the real lifeblood of civilization flowed through the hands of private enterprises.
However, Marxism cast the private sector as the source of exploitation, arguing that capital could never reach equilibrium because crises and contradictions were built into its very core; the cure was to abolish private ownership altogether.
Socialism softened this edge, keeping space for limited private activity while placing the commanding heights of the economy—industry, resources, welfare—under collective or state control to balance inequality. Mercantilism, by contrast, saw merchants and markets as instruments of the crown, regulated and steered to hoard bullion and expand national power.
Liberalism turned this logic on its head, celebrating the private sector as the true engine of wealth and trusting supply and demand to find equilibrium, with the state reduced to a night-watchman of property and contracts. Four visions, four answers to the same question: whether markets should be shackled, steered, or set free.
China’s recent economic ascent began when a communist state quietly let markets breathe. Deng Xiaoping’s reforms opened special zones, welcomed capital, and gave entrepreneurs room to turn coastal towns into the world’s factory—private wealth creation inside a state-managed frame. India’s turnaround came with crisis in 1991, when Narasimha Rao dismantled the license raj, cut tariffs, and unleashed private capital. IT, services, and consumer markets surged, pulling millions into the middle class. Two very different systems, yet one lesson: growth came not from rigid command, but from letting private enterprise drive the engine while the state kept the tracks in place.
Since 1947, Pakistan has swung between private promise and state overreach. Entrepreneurs built the first banks and mills, but 1970s nationalization dragged even schools into state custody, collapsing productivity and efficiency.
The 1990s privatization revived banks and telecoms, yet red tape and predatory taxation kept private capital shackled. SOEs and power sector have become fiscal black-holes. By 2019, SOEs held 44 percent of GDP in assets but lost over Rs 400 billion a year (IMF), with PIA, Pakistan Steel, and power sector bleeding the exchequer.
Exports stagnate below 10 percent of GDP, investment remains weak, and productivity trails peers. The lesson is clear: Pakistan’s economy will not revive under an omnipresent state, but under credible regulation that enables private enterprise to breathe.
PIDE estimates that the Government of Pakistan has 70 percent as its footprint in the economy— via trade, markets, power, aviation, regulation, SOEs, and other interventions. Pakistan’s private sector contributes only 30 percent to its GDP whereas in US it contributes 64 percent, China 60 percent, and Bangladesh 80 percent. The number of private sector firms registered in Pakistan is around 0.26 million whereas in India 2.8 million, Bangladesh 0.28 million, China 60 million and in US 5.5 million.
In progressive economies, the state only sets vision, not sells tickets. The UK runs buses and rail on private wheels under public oversight; the US leans on Lockheed, Boeing, and SpaceX for defense and space; India’s ISRO draws on hundreds of private suppliers for its recent space expeditions. Bangkok and Manila show how even water utilities thrive when private operators deliver under regulation. Pakistan, by contrast, clings to buses, airlines, water, energy and steel, all bleeding over Rs 9 trillion annually (7 percent of GDP) as an accumulative cost of doing business and yet fencing out private capital. When given space, private sector delivers: solarisation in Pakistan has surged to 35 gigawatts in just five years, achieved solely by the private sector.
In Pakistan, “corporate greed” is the shield bureaucracy raises to keep private enterprise at bay and use it to strengthen their extended hold. The fear of profiteering and collusion has justified a state that runs everything from airlines to irrigation water, while draping business in red tape. Yet history shows the real drain lies in rent-seeking governance, opulence, inefficiency, and failing SOEs, not private innovation.
The remedy is not sidelining markets but governing them better with independent regulators, strong competition laws, consumer protection, public oversight, transparency and collaborative PPPs.
The state must step back as an operator and act as a referee, ensuring rules and curbing abuse. Pakistan’s failures stem not from too much private space, but from too fat a state in business. The takeaway is simple: state must only envision, guide, regulate and facilitate, not run businesses.
Copyright Business Recorder, 2025
The writer is a development professional with over three decades of diversified experience while working in urban development, social sector, cities, climate and inclusion. He can be reached on Twitter @nadeemkhurshid