INanearlier columnonthese pages,`Inefficient by design`, I had argued that many of Pakistan`s economic distortions persist not because policymakers misunderstand their costs, but because they benefit groups capable of defending them.

That argument raises a further question: what institutional machinery sustains this distribution of benefits? One answer is the bureaucracy.

The answer begins with bureaucracy`s origins.

The British did not construct the colonial administrative state to maximise productivity or deliver public services. Its primary tasks were revenue collection, territorial control, and political order.

The district collector embodied this design: an appointed officer with extensive executive and revenue powers, answerable to the colonial government rather than the people he governed.

Information flowed upwards; instructions flowed downwards. Concentrating authority in a small administrative elite allowed the British to govern a vast population at relatively low cost.

Much of this design survived independence.

Pakistan and India retained powerful generalist civil services recruited through competitive examinations. These may identify intelligence and diligence, but they cannot establish expertise in public finance, urban management, health systems, industrial policy, or digital regulation. Yet the governing assumption remains that success in a single examination, followed by general training, prepares an officer to move across such specialised fields, often supervising professionals who have spent their careers working in them.

This is not an argument against meritocratic recruitment or the need for administrative coordination. Generalists have a role in both. The problem arises when generalist status confers authority over specialised knowledge. A capable administrator is not automatically a capable regulator, economist, engineer or public-health manager. Too often, specialists provide the expertise while generalists retain the final decision.

Frequent transfers limit opportunities to develop sectoral expertise, while promotion within a centralised hierarchy can reward navigating the system rather than improving the performance of the institutions being managed.

Why does this matter for development? Institutions determine who controls economicdecisions and whose interests those decisions serve. When officials exercise broad authority without bearing the costs of their decisions, their incentives can diverge from those of investors and workers. Such institutional arrangements can outlive the purposes for which they were created.

For example, economists Banerjee and Iyer showed that areas in India where the British assigned land rights to landlords subsequently experienced lower agricultural investment and productivity than those where rights went to cultivators. Their study concerns land tenure, not bureaucratic recruitment, but illustrates a broader principle: rules that allocate economic power also shape incentives to invest and produce. The question is how the inherited concentration of administrative authority affects these incentives today.The contemporary mechanism is discretion. A business seeking a land title, an industrial permit, construction approval, or regulatory clearance must navigate a series of administrative decisions. Regulation can serve legitimate purposes; arbitrary dependence on permission does not. When officials can delay, reinterpret or selectively enforce rules, access to the state acquires economic value. Firms devote resources to connections and intermediaries that could otherwise finance technology, workers or new products.

The costsareunevenlydistributed.Established firms can afford legal teams, influence, and prolonged delays; new entrants often cannot.

Predictable rules encourage investment and experimentation, while discretionary permissions favour insiders. The result is more than petty corruption or administrative delay. It distorts the allocation of capital and talent, weakens competition and holds back productivity.Why does an arrangement that imposes such costs on the economy prove so resistant to reform? Because its costs are dispersed across businesses, investors, and citizens, while the benefits of discretion are concentrated among those who exercise or influence it. The authority to grant an approval, interpret a rule or allow an exemption is itself valuable. Those who control such decisions have little incentive to surrender them.

This creates a political bargain. Bureaucrats derive influence from the authority attached to their offices; politicians gain leverage by influencing how that authority is exercised.

Appointments and transfers can reward cooperation and penalise resistance. Desirable postings, in turn, can give officials influence well beyond their formal responsibilities. The two groups may compete over particular decisions, but their interests converge in preserving the system that makes those decisions valuable. Reform threatens not merely administrative procedures but an established distribution of political and economic power.

This is not a claim that every official is corrupt; it is an argument about the incentives embedded in the office. Reform, therefore, should not be reduced to new examinations, training courses, or digital platforms. These may improve administrative processes without changing who controls decisions, how that power is rewarded or to whom it is accountable.

Pakistan`s development debate rightly asks how to raise investment, exports, and productivity. It should also ask who has the authority to obstruct them, how that authority is rewarded, and why its holders would surrender it. The answer requires more than building bureaucratic capacity; it requires limiting arbitrary discretion, creating space for specialist expertise, and making officials accountable for outcomes. We inherited a state designed to control economic life. The enduring constraint is not simply the bureaucracy`s lack of capacity, but a political bargain that rewards the exercise of administrative power at the expense of economic development. • The wnter is an associate professor of economics at the Lahore School of Economics.

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