Rethinking development—III When prices become politics

Inflation in Pakistan is not a single monetary disease. External shocks, administered tariffs, indirect taxation, concentrated markets, fragile supply chains and policy-created scarcity all enter the price. Treating every increase with interest rates or police raids conceals who gains and who pays.

The previous Part II ended with prices because a captured State becomes visible in the distribution of scarcity. A tax exemption, import permission, energy tariff, procurement price, credit subsidy or regulatory waiver eventually enters somebody’s cost and somebody else’s income. Prices are therefore not merely signals exchanged in anonymous markets. They are also records of institutional power.

Isabella Weber’s forthcoming book, Anti-Fascist Economics: In Defence of Affordability, Dignity and Democracy, deserves attention for precisely this reason. It is due in October 2026. A scientific discussion cannot pretend to review a book not yet available. What can be evaluated is its announced thesis and the research Weber has already published: democracy loses material credibility when food, housing, energy, care and dignified work become unaffordable, while economic policy treats that failure as an acceptable side effect.

Inflation is not one thing

Conventional macroeconomics explains persistent inflation through excess demand, monetary accommodation, fiscal imbalance, currency depreciation and wage-price dynamics. All matter in Pakistan, especially deficit financing and external vulnerability. The error lies in converting one mechanism into a universal diagnosis.

Weber’s work on ‘sellers’ inflation’ asks how firms behave after an economy-wide cost shock. A 2025 study with Evan Wasner, Markus Lang, Benjamin Braun and Jens van ’t Klooster examined 138,962 earnings-call transcripts of 4,823 listed United States corporations. It found that large input-cost shocks, especially when combined with supply constraints, were associated with more positive executive discussion of cost increases.

The interpretation is that a common shock can coordinate price increases implicitly: customers expect prices to rise, competitors face similar costs and firms can pass through more than they could in normal conditions.

This is a serious hypothesis, not proof that every inflation is caused by corporate greed. The evidence concerns listed American firms; correlation in executive language does not establish the size of excess margins in Pakistan. Ben Bernanke and Olivier Blanchard’s analysis of pandemic inflation also shows that supply shocks, commodity prices, labour-market pressure and expectations can dominate at different stages. The practical lesson is diagnostic: decompose an inflation episode before prescribing its cure.

Monetary restraint can limit second-round effects, support the exchange rate and anchor expectations. It cannot grow wheat, import liquefied natural gas, repair the grid or break a cartel. Used alone against a supply shock, it lowers inflation partly by suppressing investment, employment and household demand.

Pakistan’s anatomy of prices

The latest official numbers demonstrate why an aggregate rate is inadequate. The Pakistan Bureau of Statistics’ July 2026 release placed annual national inflation at 9.2%, urban inflation at 8.72% and rural inflation at 9.93%. Food inflation was 10.64% and transport 15.08%. Food carries 40.87% of the rural basket. Wheat and wheat flour prices in urban areas were respectively 77.71% and 67.56% higher than a year earlier. These are not marginal disturbances for households near subsistence.

The national CPI stood at 296.97 against a 2015–16 base of 100: the representative basket cost almost three times its base-year amount. Lower inflation means prices are rising more slowly; it does not restore purchasing power.

The Pakistan Economic Survey 2025–26 reports that the poverty headcount rose to 28.9% in 2024–25 and the poverty line increased from Rs3,757.85 per adult equivalent per month in 2018–19 to Rs8,484. Disinflation is not restored affordability.

Pakistan’s essential prices have several layers. Imported fuel, edible oil, fertiliser and medicines transmit exchange-rate and world-price shocks. Electricity and gas tariffs incorporate fuel costs, capacity charges, system losses, taxes, cross-subsidies and prior contracts. Petroleum carries a substantial fiscal levy. Wheat, sugar and fertiliser pass through procurement, trade permissions, storage constraints and concentrated processing.

The State is  not standing outside the market attempting to control it. It is one of Pakistan’s largest price-makers. Government raises revenue through energy prices, socialises losses through tariffs, changes trade policy after lobbying and then asks the central bank to contain the resulting inflation. Retailers are raided while the cost structure above them remains opaque. This sequence converts institutional failure into a household bill.

Where Weber helps—and where she does not

Weber’s emphasis on essentials recovers an older political economy. Amartya Sen demonstrated that hunger can arise from a collapse of entitlement even when aggregate food availability is not the central problem. Karl Polanyi showed that subordinating society to self-regulating markets provokes destructive political reactions. Affordability is consequently not charity. It determines whether freedom and citizenship possess material content.

The term ‘anti-fascist economics’ cannot be transplanted mechanically. Pakistan’s authoritarian structure predates the latest inflationary wave; military dominance, judicial legitimisation and elite capture will not disappear when food prices stabilise. The narrower proposition is valuable: persistent insecurity strengthens authoritarian promises, while a democracy unable to secure basic dignity discredits itself.

Weber is frequently caricatured as advocating universal price freezes. Her published programme is more selective: identify systemically significant prices, create buffers against emergencies, restrain price gouging, tax windfall gains and build resilient supply. This distinction is decisive for Pakistan. A price ceiling imposed below sustainable cost, without stocks or supply support, creates shortages, black markets and official discretion. In a captured State, that discretion becomes another rent.

From price control to price governance

Pakistan needs price governance rather than theatrical price control. PBS, the Competition Commission, the State Bank, sector regulators and provincial market authorities should publish a monthly anatomy of essential prices: farm-gate or import cost, freight, taxes and levies, wholesale and retail margins, stocks, market concentration and administered charges. Part II proposed a capture ledger; for essentials it should become a price ledger showing every subsidy, waiver, quota, tariff change, stock release and import or export permission, together with its beneficiary and measurable result.

Strategic buffer stocks can stabilise wheat and selected staples, as Weber, Jayati Ghosh and their co-authors argue, but Pakistan’s procurement history demands strict rules. Stock bands, purchase and release triggers, quality testing, rotation, storage losses and beneficial ownership of suppliers must be public and independently audited. Trade restrictions should follow announced triggers, not lobbying. Competition enforcement must address collusion and exclusion; it should not be confused with fixing every market price.

Temporary caps may be justified during a declared emergency for a narrowly defined essential price, provided supply is guaranteed, costs are verified, losses are transparently financed and the measure carries an expiry date. Any windfall levy should apply to evidenced excess profits generated by the shock, with ordinary costs and losses recognised. Pakistan’s familiar turnover and minimum taxes are not substitutes: they tax revenue whether or not economic profit exists and can themselves enter prices.

Household protection should rely on targeted, automatically indexed cash support and lifeline quantities of energy, accompanied by investment in storage, public transport, efficient grids, renewable power and competitive wholesale markets.

The Council of Common Interests must coordinate federal responsibility for trade, currency, competition and energy with provincial authority over agriculture and markets. Elected local governments under Article 140A of the Constitution are essential because transport, market infrastructure and enforcement are local public goods.

Weber’s announced book asks the right moral question: what happens to democracy when ordinary life becomes unaffordable? Pakistan must add the institutional question developed in this series: who has the power to pass every shock, tax, contractual failure and monopoly margin downward? Interest rates alone cannot answer it, and price magistrates cannot conceal it. A price in a captured State is never only a number. It is evidence of who possesses the authority to make others pay.

References

Bernanke, Ben S. and Olivier Blanchard. 2023. “What Caused the U.S. Pandemic-Era Inflation?” NBER Working Paper 31417.

Competition Commission of Pakistan. Competition Assessment Studies.

Government of Pakistan. 2026. Pakistan Economic Survey 2025–26: Inflation.

Pakistan Bureau of Statistics. 2026. Press Release on Consumer Price Index Inflation for July 2026.

Polanyi, Karl. 1944. The Great Transformation.

Sen, Amartya. 1981. Poverty and Famines: An Essay on Entitlement and Deprivation. Oxford University Press.

State Bank of Pakistan. 2026. Monetary Policy Report, August 2026.

Weber, Isabella M. 2026. Anti-Fascist Economics: In Defence of Affordability, Dignity and Democracy. Penguin. Forthcoming.

Weber, Isabella M., Evan Wasner, Markus Lang, Benjamin Braun and Jens van ’t Klooster. 2025. “Implicit Coordination in Sellers’ Inflation: How Cost Shocks Facilitate Price Hikes.” Structural Change and Economic Dynamics 74.

Weber, Isabella M., Jayati Ghosh, Sophie van Huellen, Merle Schulken and Sudeep Jain. 2025. “Food Price Stabilization in an Age of Overlapping Emergencies.” PERI Working Paper.

(To be Continued)

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Dr. Ikramul Haq, Advocate Supreme Court, writer, literary critic, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds an LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.