“The watchdog is siding with the thieves”: Failing neoliberal policies and successful derisking in the Global South

Abstract

In this study, we examine how a State in the Global South implemented neoliberal policies aiming at derisking private investments whose outcomes were opposite to expectations. We focus on the strategy, tactics, and maneuvers used by the State to defend these policies formally. Through an in-depth case study of the Pakistani State’s privatization efforts in its electricity sector, we confirm that the State seeks to derisk investments but also to derisk neoliberal policies in general by assuming full responsibility for their failure. This acceptance of responsibility preserves the symbolic capital of the specific policies but also of the neoliberal project in general regardless of outcomes. Our findings add texture to the notion of derisking in the Global South and document the transfer of symbolic capital to multilateral lending organizations from the State. We observe the State is not only an enabler and enforcer of neoliberal policies but also their exonerator when failures appear.

“What social order could long survive the dual awareness that it was adopted with the firm expectation that it would solve certain problems, and that it clearly and abysmally fails to do so?”

Hirschman (1997: 131)

Neoliberalism is depicted as a hegemonic, expansive ideology (Müller, 2022; Tirapani and Willmott, 2023) envisioning a small “laissez-faire” State, ¹ and “unfettered markets as the surest road to shared prosperity” (Stiglitz, 2019; see also Peck et al., 2018). However, “work on neoliberalism has shown is that it is about strong states, which construct the kind of market society that neoliberals believe in” (Doherty, 2020), suggesting that a neoliberal project requires a “strong state and a free market” (Slobodian and Plehwe, 2020: 4). As The Economist (1995) claimed, “the world has changed, the global economy has indeed arrived: nonetheless, the notion of the emasculated state is a myth .” (p. 15–16, our emphasis ).

A “strong,” non-emasculated neoliberal State is one that has the willingness and the capacity to organize and enforce most aspects of life on the principles of markets and competition, materialized into laws and institutions but also into repression of demands for equality, democratization, and redistributive change (Slobodian, 2018: 4; Springer et al., 2016). What this means is that the State has agency (see Schindler et al., 2023) and recent scholarship highlights how this agency is deployed under a neoliberal project particularly in the Global South: the State escorts private capital to its national domain in the name of “development” by absorbing risks that would otherwise be borne by the capitalists (e.g. guaranteeing a return on investment). In short, the State “derisks” private capital (Gabor, 2021). The goal is to allow global finance and transnational firms to participate in and finance large developmental infrastructure projects through public private partnerships among other arrangements.

In this context, we examine a State in the Global South (i.e. Pakistan) that successfully implemented a neoliberal policy aimed at derisking private investments in its electricity sector, only to encounter outcomes contrary to those anticipated (a somewhat regular consequence of neoliberal policies; see Beckert, 2020): substantial debt, inaccessible expensive electricity, and long blackouts. Instead of “let there be light” (in the form of cheap abundant electricity, a requirement for industrial development) ushered in by these policies, the people of Pakistan seemed to have suffered a wrathful pronouncement of “let there be darkness” from the neoliberal gods. Thus, we ask: how does a State in the Global South defend a neoliberal policy that failed to deliver its promises? We scrutinize the strategy the Pakistani State used to defend a neoliberal policy in its electricity sector in the midst of failure and observe that it did not evolve into a critique of derisking. We conceptualize this defense strategy and discover that it consists of three principal components or what we call tactics: sanitizing the global, sensationalizing the local, and scapegoating the State.

In the following sections, we selectively review MOS literature about neoliberalism with an emphasis on the State’s role within it in the Global South. Subsequently, we describe the paper’s empirical methods and then present the findings from our case study that examine the spectacular failure of the neoliberal policies of the 1990s leading to the rental power plant (RPP) policy in Pakistan from 2006 to 2010. These failures resulted in electricity outages, foreign debt, a nationwide scandal, a high-profile Supreme Court (SC) case, and the indictment of a senior cabinet minister. We provide analytical insights derived from our findings in the conclusion, discussing their contributions to the dialog within MOS and broader social sciences on the role of the State in the Global South with regards to neoliberalism.

Neoliberalism, the State, and the Global South

There is “a broad consensus” that the “dominant perspectives for critically studying neoliberalism are Marxism and Foucauldianism” (Mirowski, 2019: 1). Here we focus mostly on scholars committed to the Global South and inspired by the concepts of class power, ideology, the logic of capital, and the dispossession of the commons (Birch and Springer, 2019). These scholars (e.g. Masood and Nisar, 2020) tend to follow Harvey’s (2005: 2–3) characterization of neoliberalism as:

[A] theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets, and free trade. . . Neoliberalism has, in short, become hegemonic as a mode of discourse. It has pervasive effects on ways of thought to the point where it has become incorporated into the common-sense way many of us interpret, live in, and understand the world . ( emphasis added ).

We define neoliberal policies as “any measure intended to lessen the role of states and enhance the role of markets in at least one national economy” (Babb and Kentikelenis, 2018: 16). They aim to usher in and institutionalize what Harvey (2005, 2020) calls “accumulation by dispossession” (ABD) that he views as the defining characteristic of the latest and contemporary phase of capitalism. ABD builds upon Marx’s theory of primitive accumulation which described the process through which society transitioned from feudalism to capitalism. This required, inter alia, forcing the people off their lands, often through violent means, to deprive them of their livelihood in order to create a wage labor force essential for production and generation of capital (Harvey, 2003, 2020). For Marx, primitive accumulation ended with the advent of capitalism.

Harvey, however, sees primitive accumulation not as an antecedent to capitalism but as a continuous and defining process within it where wealth is continually transferred from the public or communal sector to private hands. It refers generally to the processes within current capitalism whereby assets are “dispossessed” from public or communal ownership and “accumulated” in the private sector through methods such as privatization of State assets, commodification of nature, financialization, and creation of new debt instruments.

Because ABD requires new regulatory frameworks, the State plays an important role ushering them in and thus acting as an enabler of neoliberalism. As more spheres of life (e.g. education) are to be governed by market relations, State violence (symbolic and/or physical) is often required to do so (e.g. commodification and privatization of lands, forceful expulsion of peasant and/or indigenous populations) because the end (i.e. development and prosperity) justifies the means. State, according to the literature, thus also acts an enforcer of neoliberalism ensuring that any opposition is pulverized so that neoliberal reforms can go their way unmolested (Pal, 2016). Hence, neoliberalism comes to be seen as an “elite class project combining the dispossession of the commons with forms of ideological hegemony” (Birch and Springer, 2019: 471) and, as a project, it needs State’s help in implementation and deployment.

Harvey (2005, 2020) has inspired a broad academic conversation about the State and neoliberalism in the Global South (see Cooke and Kumar, 2020; Pal, 2016), suggesting the State’s role in it as comprising three distinct but overlapping phases summarized in Table 1 below:

Table 1.

Neoliberalism’s phases and the State’s changing role.

Phase	Characteristic/Definitions	Representative authors
Roll back	The State shrinks and retreats from providing good and services serving a public welfare function.	Peck and Tickell (2002)/Fletcher (2019)
Roll out	The State crafts market-friendly regulatory structures and institutional reforms, under supervision of multilateral financial institutions, legalizing accumulation by dispossession in the process.	Peck (2010)/Fletcher (2019)/Alamgir and Banerjee (2019: 274)/Chowdhury and Willmott (2019)
	The State in this phase is “to repress dissent against economic reforms that favor corporate interest,”), helping transfer wealth from the poor to the rich.
Roll with it	Neoliberal solutions become hegemonic, inevitable, and naturalized to the point where key economic and political actors lose a sense of alternatives coming to see it “as commonsensically the only game in town.”	Pal (2016)/Keil (2009)/Fougère et al. (2017: 821)

Recent literature identifies a more ambitious function of the State in serving neoliberal project—derisking development assets (e.g. power generation infrastructure) in favor of “global institutional investors” (Gabor, 2021; 3–4). Derisking refers to the additional risk (the “country risk”) that a firm has by entering a “developing” nation, which is always superior to the risk of the same investment in a more “developed” economy. In that context, derisking are actions that the State takes to transfer partially or totally the risk (political, economic, social) from the private agent to itself. For example, firms receive guarantees of a minimum rate of return on invested capital, in hard currency, regardless of market conditions. Profits are protected from political risks that could endanger cash flows including nationalization, higher minimum wages, and new regulation in general. These risks are not eliminated. They are transferred to the balance sheet of the State which becomes the last-resort guarantor of that risk and pays for it when it materializes.

Derisking is about the State creating a safety net for investors. In the Global South, the State justifies this on the grounds of “development.” Derisking “development assets” (e.g. seaports) the State argues is needed to attract private capital from the Global North to participate in the country’s development from which it otherwise would shy away. Critics dub all this “the Wall Street Consensus” (Gabor, 2021). It is an update to the “Washington Consensus.” The State in the Global South is now tasked, under the tutelage of multilateral lending organizations (MLOs), to create increasing opportunities for global finance to invest in derisked and thus lucrative development projects (e.g. telecommunications infrastructure) under various investment vehicles (e.g. public private partnerships (PPPs)) to achieve sustainable development objectives (Gabor, 2021; Schindler et al., 2023).

Prior research indicates the centrality of MLOs, such as the World Bank and International Monetary Fund (IMF), in this process (Babb and Kentikelenis, 2018, 2021; Murphy, 2008). These entities accord legitimacy to the neoliberal policies of the State in the Global South that further ABD and derisking (e.g. Babb and Kentikelenis, 2018, 2021; Carroll, 2018). MLOs become “legitimate” (by which we mean following Bourdieu, a social actor i.e. “dominant but unrecognized as such”; Martin de Holan et al., 2019) largely through symbolic work that, over time, establishes their “epistemic authority” (Kentikelenis and Babb, 2021) or what Murphy (2008), using Bourdieu’s framework, calls “symbolic capital” (a synthetic capital emerging from the integration of economic, political, and cultural capitals). When that happens and MLOs are seen as “legitimate” (i.e. authoritative), it allows them to frame a national policy debate by indicating their policy preferences (e.g. see Piroska and Schlett, 2023) which also limits the ability of critics to resist such policies (see Kentikelenis and Babb, 2019: 1751).

Most accounts on the deployment of neoliberalism assume that the dominance once achieved—continues. Little effort is required by these players because the alternatives are unthinkable in neoliberalism’s “roll with-it” phase (Fougère et al., 2017; Keil, 2009). We find this assumption oversimplified. There is sufficient evidence that crisis is a permanent feature of neoliberal dominance (Klein, 2007; Mirowski, 2014) and that interventions by the State are required so that the neoliberal thought and practice re-emerges from these crises—unblemished, and in many cases stronger than before (Biebricher, 2019; Slobodian and Plehwe, 2020). Often, such crises are triggered when a neoliberal policy fails (i.e. where the opposite of development materializes from State indebtedness to deepening poverty). Amid such failure, how does a State in the Global South carrying out neoliberalism defend such a policy? In other words, what is its defense strategy and the chief components comprising it? This is the question we address in this paper that has not been raised in the literature reviewed above that focuses on the workings of the State once a neoliberal policy has been enabled and executed but not when it hits crisis mode.

Methods

Case appropriateness

We ask broad and open-ended “how” questions and the case study approach lends itself for this purpose (Eisenhardt, 1989; Yin, 2009). We used an in-depth, longitudinal case study to analyze the electricity sector in Pakistan when the State moved from producing it itself to buying it from private companies. Because the goals of that policy were not achieved, it created controversy that led to a case of high-level corruption in Pakistan’s Supreme Court (SC).

Initial exploration confirmed the appropriateness for the study’s theoretical objectives (Eisenhardt and Graebner, 2007): the Government of Pakistan and its entities defended before the SC its decision to proceed with the policy option of RPPs despite that policy’s costly failures. In addition to the case study, the first author was a participant observer in a law firm directly associated with the SC case which gave ethical yet privileged access to it, including during the hearings (2009–2012).

Studying the strategy of the State

Here, we want to study the strategy of the State, defined as the “pattern in a stream of (its) decisions and actions” (Mintzberg, 1979) (for a methodological discussion of applying this logic to Nation-States, see Hafsi and de Holan, 1996). We follow Weber (1919: 78) definition of the State as the entity that, in a Sovereign Nation, “claims the monopoly of the legitimate use of physical force within a given territory,” but we use Bourdieu’s insight to include “symbolic violence”: the State is the entity who has the monopoly of legitimate violence, physical or symbolic, in a definite territory:

“It follows that the State, which possesses the means of imposition and inculcation of the durable principles of vision and division that conform to its own structure, is the site par excellence of the concentration and exercise of symbolic violence (Bourdieu, 1989: 9).

Operationally, we studied the acts of the Executive (the “Government”) and its different entities, as the executive branch of a Sovereign Nation is the visible manifestation of the State (see Fainshmidt et al., 2018 for a deeper discussion). In most modern representative systems, the executive is the visible representation of the State in its interactions with other entities both domestically and internationally ex officio; it speaks and acts on the State’s behalf. The executive is also responsible for implementing the laws and policies of the nation, directing its foreign policy in most cases, and serving as the public face of the country, which includes binding contractual agreements through its different bodies and entities. Government actions have a presumption of legality and are enforceable by bona-fide third parties. Here, we observed the behavior of the Government and its entities and drew patterns from it while also documenting disagreements and turf wars that did not fit the pattern.

Context

A State-owned enterprise (SOE) ran Pakistan’s electricity sector since its independence from British rule (1947). Pakistan’s Water and Power Development Authority (WAPDA) was established with help from the World Bank and USAID in 1958 and modeled after TVA ² in the US (Biswas, 1992; Lilienthal, 1951). Up until 1990s, WAPDA was the main electricity provider, fully vertically integrated, and 70% of its capacity came from hydroelectric generation (see Table 2 for a timeline of main transitions in the electricity sector of Pakistan). Electricity was considered a necessity and its provision a State’s responsibility: “In propaganda and popular consciousness alike, images of a society with universal and affordable electricity became important tropes of State-led development” (Williams and Dubash, 2004: 412).

Table 2.

Brief timeline of the electricity sector transitions.

Timeline—RPPs	Events
1959–1994	State Owned Entity (SOE) Era.
	Power generation, transmission, and distribution all under one vertically integrated SOE (WAPDA)
1985	State’s first policy directions for private sector involvement in the power sector.
1987	First private sector power plant -HUBCO. This 1.8 billion USD project was the biggest of its kind at the time of construction.
1994/2002-onward	Private Entities Era ( Mainly led by Independent Power Plants—IPPs)
1994	First power policy for Independent power plants (IPPs). The State hires 17 privately owned IPPs
2002	Second Power Policy. More IPPs are arranged under this policy. The IPP based electricity roughly becomes 50% of the total supply in a few years.
2005–2006	Severe electricity shortfall throughout the country
July–August 2006	Government decides to go for Rental Power Plants (RPPs)
September 2006	The government first time hires two RPPs.
2006–2008	Electricity shortfall crisis worsens.
2008–2009	Government signs contract with 14 more RPPs and made negotiations with additional 5 RPPs.
August 2009	Criticism in the parliament. Ministry of Finance asks Asian Development Bank (ADB) to conduct third party audit of RPPs scheme
9 September 2009	Supreme Court (SC) takes notice of the alleged corruption in RPPs on the plea by an opposition party parliamentarian.
22 January 2010	ADB submits its report to the government. Criticizes the RPP initiative
January 2011	Minister for Water and Power resigns from his post
Oct 2010–Oct 2011	SC increases pressure on private companies. Some RPP companies return advance payments
26 Oct–14 Dec 2011	SC conducts regular hearings of the RPP case
30 March 2012	SC gives judgment on RPPs case. Cancels all the RPP contracts.
Feb 2013	Some RPP companies go to international litigation
June 2013	The new government of PML-N takes charge after the general elections. Khawaja Asif, the petitioner in RPPs case, becomes the new Minister for Water and Power
2014–2015	The new government decides to rehire a couple of RPPs under a new arrangement. These are now labeled “Short term IPPs”
2015	The government makes a new policy mainly relying on indigenous fuel sources. However, the structure for IPP tariffs and risk allocation remains largely the same.
March 2020	The new government of PTI issued a report on the power sector criticizing the incentives given to IPPs.
2021–2023 onward	IPPs led private entities era continues.

The global neoliberal shift in the 1990s (Harvey, 2005; Klein, 2007) impacted the electricity sector in Pakistan. The World Bank and IMF, which earlier encouraged State led development, championed liberalization of the sector and active private involvement in it. Under their influence, Pakistan undertook important steps toward electricity sector liberalization, starting with a 1292 MW ³ USD 1.8 billion thermal power generation private sector project (HUBCO), the world biggest-in-category at construction time (World Bank, 1995). This was followed by a new power policy in 1994 that gave lavish incentives to run private thermal power generation (details below). This policy brought 19 independent power plants (IPPs) into the country worth around USD 4.6 billion with a combined capacity of around 3800 MWs (Fraser, 2005; Hill, 1999). More IPPs came thanks to the 2002 power policy, reinforcing the neoliberal shift.

These privately owned IPPs soon dominated Pakistan’s electricity sector, generating about 50% of the country’s electricity by 2006 (USAID, 2013). The State signed contracts (25–30 years) to buy electricity from these IPPs and then distributed it to consumers. The amount per unit paid to these IPPs (called tariff) had two main components: capacity and energy charges. Capacity charges covered fixed costs, working capital, insurance, loan repayment, and interest charges as well as a guaranteed return on equity of around 15% all paid by the State even if it purchased no electricity because it was a fixed cost. When it did, it would pay an additional expense called the energy charge, consisting of fuel cost and variable operational costs to generate electricity with sovereign guarantees covering payment obligations (Ministry of Water and Power, 1994, 2002), a variable cost.

After only a few years, this IPP arrangement crippled the electricity system and almost bankrupted the State. It was buying expensive electricity and supplying it to the consumers at subsidized rates they could afford, bleeding the public treasury when it absorbed the difference in a currency (the US dollar) it did not control. When the State would run out of hard currency, IPPs would stop electricity production with outages while capacity payments would continue accumulating increasing the State’s sovereign debt. The outages, in turn, disrupted economic activity hence reducing the volume of taxes collected, further eroding the State’s ability to pay but without extinguishing the fixed cost obligation. Thus, the IPPs would be profitable even if they did not sell any electricity to the State while subsidized electricity prices offered by the State to its citizens encouraged consumption but also waste. By 2006, the whole country faced long, countrywide power outages caused by a combination of increased consumption and underutilized IPP capacity due to pending payment obligations.

In 2006, the State looked for a quick fix and chose Rental Power Plants RPPs (for the main difference between IPPs and RPPs please see Table 3 below).

Table 3.

Main differences between IPPs and RPPs.

Feature	IPPs	RPPs.
Relevant period	1990s–2023 onward	2006–2010
Buyer	The State Organization	The State Organization.
Seller	Private organization	Private organization
Plant ownership	Privately owned.	Privately owned.
	After expiration of the contract State owns the plants	After expiration of the contract the company packs up and shifts the machinery.
Contract duration	Long term (25–30 years)	Short term (3–5 years)
Installation time	2–5 years	Less than a year
Machinery	New plants	Mostly used plants
Average estimated cost (price paid by State)	USD 0.173 /unit of electricity	USD 0.179/unit of electricity
Multilateral lending organizations role	Actively promoted, backed, and protected by the World Bank (World Bank) and IMF	Not backed by any multilateral agency. Asian Development Bank (ADB) audited and criticized the policy
Financing	The government requires projects’ financial closure details.	Arranging finances for RPPs were the sole responsibility of the investors. The State offered around 14% of the contract amount, as advance payments, to some RPPs.
	Up to 40% of financing was provided through the World Bank (and ADB) arrangements in the 1990s.

It hired two RPPs (280 MW) from the private sector to provide electricity to severely hit areas. The plants remained off grid roughly during 70% of the contract period due to erratic gas supply for their turbines yet a combined monthly rental payment of USD 6.02 million was paid (Asian Development Bank, 2010). Due to the State not being able to finance its hard-currency obligations with IPPs, it continued to hire more RPPs and by August 2009 the State had signed contract with 14 RPPs of combined capacity of 2250 MWs (roughly 15% of the country’s demand) for an estimated USD 3.9 billion (Asian Development Bank, 2010: iv). Power outages, however, continued unabated (see Figure 1 below for RPP timeline).

Figure 1.

RPPs timeline.

The number of plants and the price at which these were hired drew criticism from various quarters of Pakistani society, including the parliamentary opposition, national media, and Transparency International Pakistan leading two opposition members of parliament to file a petition in the SC against the government.

The case took place between September 2009 and March 2012. The SC in its ruling declared RPPs void ab initio (i.e. “having no legal effect from inception”). It then directed law enforcement agencies to begin criminal investigations of high-level corruption against the Minister of Water and Power that had inducted this RPP policy as well as other senior ranking government officials and private sector actors involved with it (Supreme Court of Pakistan, 2012: 87). The accused Minister in the RPPs case continued with his political career after the SC judgment. He became the Prime Minister of Pakistan (06/2012–03/2013) and is currently the Speaker of the National Parliament. During the entire SC RPP case and in the midst of power blackouts, burgeoning public debt including paying RPPs and IPPs, led to allegations of corruption yet the State vigorously defended its RPP experiment in court.

As an epilog to the case, in 2013 a different government came into power. It unlocked funds reserved for other purposes, such as State development projects, and cleared the roughly USD 4.7 billion owed to the privately owned IPPs (Kiani, 2013). Electricity supply improved for the time and thus nobody questioned the decision to hand over electricity generation to the private sector even if the promised benefits had failed to materialize. This was implemented by the new Minister for Water and Power, who incidentally was a petitioner in the RPPs case. As he became minister, two of the RPPs, against which he had inveighed in the SC and outside of it, were re-labeled “short term IPPs” and allowed to function because of their new label. The Ministry allowed them to continue operations along with IPPs in an arrangement that continues to this day in Pakistan with high electricity generation costs, mounting State debt burdens toward the private sector, risk free arrangements for the private firms, and power outages affecting the overwhelming majority of the country’s citizens.

Data collection and analysis

Primary data

Data gathering happened between 10/2010 and 03/2012. Given the media attention and the SC interest, people were reluctant sharing information. In early 2011, the first author established contact with a law firm involved in the case, which gave access to all the documents submitted in the SC and allowed attendance to the case proceedings. Each party to a SC case is required to submit a written synopsis of its arguments along with supporting documents. This led to around 60 paper books totaling over 16,000 pages of arguments and evidence, all used in this study. Participant observations of the SC case produced extensive field notes resulting in about 300 A-4 sized pages, duly cataloged.

The field notes and the massive trough of documents submitted in the SC comprise the main primary data for our case study, but interviews were undertaken. They helped understand the context of the data contained in the field notes and the documents; Table 4 below contains information about the interview respondents:

Table 4.

Interview respondents information.

Organization	Position	Number of people
NEPRA (Regulator)	Managing Director	1
NEPRA	Manager	2
PEPCO (State Owned entity for power generation)	Managing Director	1
PEPCO	Manager	1
International Consulting Company	Senior Consultant	1
Law firms (Supreme Court of Pakistan)	Senior Lawyers	2
Law firms (Supreme Court of Pakistan)	Junior Lawyers	2
Private consultancy firm	Consultant	1

The average length of interviews was 90 minutes [min 40 minutes–max 180 minutes]. All interviews were transcribed at the time of the interview or shortly after and were conducted mostly in English although the primary author is bilingual and understood, recorded, and translated later any utterance in Urdu.

Secondary data

The World Bank and USAID provided detailed reports on the sector as they have robust organizational memory systems since inception (1950). Also, the websites for the regulator (NEPRA), the State-owned electric power company (PEPCO) and transmission company (NTDC) provided extremely useful information. Documents obtained from these sources made up the study’s secondary data.

Research ethics compliance

Data for this study come from the doctoral dissertation of the primary author, supervised by a PhD thesis committee as customary. All data collected met all the research ethics norms and guidelines of the university and country where the primary author enrolled as a doctoral student. All respondents were administered an oral interview protocol and any primary/secondary data that were not in the public domain were obtained with knowledge and prior informed consent. All documents obtained from the law firm were provided to the first author with full knowledge and informed consent that these documents would be used for research purposes. Finally, participant observations were from a SC case in Pakistan that was open to the public under the law, hence not needing permissions.

Data analysis

To ensure validity (Eisenhardt, 1989; Yin, 2009), we triangulated between different sources (i.e. between documentary evidence, observations, and interview findings); within sources (e.g. different accounts of an event given by different interviewees or judicial hearings vs private accounts, see Patton, 2002); and between different accounts of an event given longitudinally (whether in documents, observations, or interviews). We reinforced validity through cross-referencing with key sources and active participants (Patton, 2002): the first author assisted a senior lawyer and had developed rapport with other relevant persons in the law firm and in the electricity sector and shared our findings with them to know their reaction and response (Glesne, 1999; Patton, 2002). We gained and maintained reliability by documenting various steps of the research, using case study protocol, and developing a case study database (Yin, 2009).

Our theoretical categories emerged through an abductive reasoning process (Niiniluoto, 1999; Peirce, 1878; Timmermans and Tavory, 2012), known as inference to the best explanation (Ketokivi and Mantere, 2010). While our initial exploration was closer to inductive in nature, we had in mind some theoretical domains of interest (Tavory and Timmermans, 2019) so we iterated between data and research questions to bring conceptual clarity. Initial coding documented arguments given in the SC RPP case based on their main objections (e.g. objections on the real need of RPPs, violation of due process in the contracts, and violations during implementation). In its SC defense, the State—through the Executive Branch—not only justified its actions but also through this justification created a coherent story of itself and of other entities involved, creating the ideal conditions for our study.

The most salient aspects mobilized in the State’s defense were those of the Pakistani poor (the “people”) who were suffering because of electricity outages, and MLOs who favored a particular form of privatization. This was synthesized to capture the role (and duties) of the stakeholders: global actors, local populace, and the State, which invoked its legal and moral obligations to various entities in its defense. Looking at these moves and categorizing them under various subheadings (see Table 5 below), we were able to crystalize them into the three main elements of the strategy deployed by the State’s to defend its failed policy.

Table 5.

Data, categories, and aggregate themes constituting the state’s defense strategy.

Illustrative first order quotations	Second order categories (Maneuvers)	Aggregate themes (Tactics)
The Private Power and Infrastructure Board (PPIB) was created in 1994 as a “One Window Facilitator” (original emphasis) to promote private sector participation in the power sector of Pakistan. (PPIB, 2014)	Valorizing neo-liberal myths	Sanitizing the Global
[]resource mobilization on such a massive scale in the face of fierce international competition for attracting foreign direct investment, and a rather limited domestic capital market, will not be achieved, unless major policy reforms and structural changes are undertaken to make the investment environment attractive for foreign and domestic investors. (Ministry of Water and Power, 1994: 2)
[the government] was thereby constrained to shift its focus on the Power Acquisition Program limited to the RPPs as the investors were not willing to commit funds on long term basis in the power sector of Pakistan. (Ministry of Water and Power, 2010: 3)
If I could satisfy this court that there is a shortage because ADB report is mentioning that then I would have completed one target. (State counsel in the SC)	Appealing to international institutions
Even the Asian Development Report has estimated the cost of Equipment of US $ 600,000 per MW. (Ministry of Water and Power, 2010: 18)
According to conservative estimates based on low demand scenario worked out by IMF, the peak demand in the country ranges from 20,545. . . to 23,059 MW (Ministry of Water and Power, 2010: 7)
[B]ecause one of the points raised by the petitioner was that there is no shortage. . . I thought that this [ADB report] is the document being relied upon. . . why not quote from that. (State counsel in the SC)
We were standing on a turn where a huge genie was standing in front of us. . . [It was affecting] the economy, industry and most of all the public. (Minister in the SC)	Dramatizing public sufferings	Sensationalizing the local
RPP program has been approved. . .in the backdrop of enormous cost of load shedding to the economy which according to certain estimates is Rs. 504 billion, job losses of 400,000 and stifling/retarding economic growth by 2% (Ministry of Water and Power, 2010: 23)
At that time [when rental contracts were made] there was wide spread public agitation, there were road protests, trains were being burnt, and WAPDA offices were being attacked. This was an election issue. (Minister in the SC)
There is a difference between a biased policy, a flawed policy, and the implementation of that policy. . . I’ll show you [through a series of arguments] that this is not a case of corruption. (RPP counsel in the SC)	Marginalizing policy failures
The approval and policy to install RPPs was already in place when I took over on 31st of March. [2008]. (Minister in the SC)
Policy is not made by an individual. (Minister’s counsel in the SC)
Two Ministers have made the policy before me, given the guidelines. Nobody has called them. (Minister in the SC)
[You had asked] why I gave one unsolicited [RPP]? What is my affiliation with Naudero? Naudero was done as an election workout. These are around 1500 villages. Nobody was ready to go there. When their (RPP company’s) application came, they said he is somebody’s relative. I said even if he is a knavish thief, if he is giving electricity – NEPRA approves the tariff – then it is acceptable to me. Opposition will drag me regardless. That is what they are supposed to do. (Minister in the SC).	Accepting blame (shielding private corporations from any responsibility)	Scapegoating the State
Pakistan Power Sector had no prior experience in 2006 with regards to RPPs and therefore was not equipped to provide detailed Terms of reference through Request for Proposals and therefore had to negotiate and seek proposals from individual sponsors (Ministry of Water and Power, 2010: 13).
Moreover, it was the buyer’s (The State’s) default in not being able to open confirmed SBLC (Letter of Credit), which is classifiable as fully liquid instrument (that resulted in increase of advance payment to RPPs post contract). (Ministry of Water and Power, 2010: 16)
Why not ask the government? (RPP counsel requesting SC judges to ask the government of a particular charge with the confidence that the latter will take responsibility for it)
What choice did I have? We did a lot of brainstorming. . . expert [sic.] sat and discussed the problem at length. (Minister in the SC)	Inevitability of a failure
I continued that policy because it was the only shortcut (original emphasis) remedy. . . the contention that the whole RPP plan was not necessary is preposterous (Minister in the SC)
Nevertheless, delays in the RPP Program have occurred due to factors beyond reasonable control of the parties. (Ministry of Water and Power, 2009: 21)

Findings

We looked for the patterns in behavior that constitute an organization’s strategy (Mintzberg, 1979) by looking at the actions and declarations of the State (i.e. the Executive branch of government, and the various organizations comprising it). Recognizing that tactics underpin strategy, we focused on the tactics employed by various State actors. We define tactics as the primary components of a strategy that propel it toward a specific aim—in this study, the defense of neoliberal policy despite its shortcomings. They consist of a series of distinct actions or “maneuvers.” Through these maneuvers, the tactics—and by extension, the strategy—are executed with the aspiration of realizing the intended strategic goal(s). In the following sections, we delineate the primary tactics and their corresponding maneuvers employed by the Pakistani State in its defense strategy to uphold the credibility of its neoliberal energy policy.

Sanitizing the Global

One major tactic of the State’s defense strategy is labeled “Sanitizing the Global,” involving a solid defense of the neoliberal ideals and of the MLOs that represent them, both presented as an obvious choice. Our use of the term “Global” borrows from literature on neoliberalism (e.g. Harvey, 2003, 2005; Stiglitz, 2002; and more recently, Babb and Kentikelenis, 2021; Gabor, 2021), and by Global we mean the ideas, institutions, policies, and practices which have a Western origin but claim universal and undisputed validity, including for economically marginalized countries. Under this strategy, the State carried out two types of maneuvers: valorizing myths, and appealing to international institutions to which we now turn.

Valorizing myths

At the time of the SC RPP case (2009), the negative consequences of the privatization of power generation (IPPs then RPPs) were apparent. Experts could see the real “elephant in the room”—the IPPs, and they were also able to link this with the neoliberal policies of the 1990s. During informal conversations, the electricity sector experts, including managers from SOEs, the regulator and the consulting companies all conceded that the existing IPP arrangement has taken the sector hostage.

Sector experts further estimated that the State would not have to go for RPPs had it been able to settle its debt obligations to these IPPs. This circular debt—which the State mainly owed to the IPPs, kept rising as the State’s fiscal ability withered. It was around 145 billion PKR (≈1.85 billion USD at the time) when majority of these rental plants (RPPs) were being arranged in 2008. The amount had swelled to 365 billion PKR by 2011 (≈4.2 billion USD) when the government was contesting the RPPs case in the SC (USAID, 2013).

Despite this realization, the same experts never brought the core issues up during the SC discussions and continued to glorify State’s neoliberal turn in the 1990s. The overall environment in the SC was sympathetic to IPPs and less so to RPPs. This was fueled by the ADB report and by the court’s and petitioners’ frequent admonishes to the State counsel that they had sufficient capacity available in the form of IPPs and yet they had gone for RPPs. To counter this onslaught during the court proceedings, the State counsel which initially was trying to differentiate between RPPs and IPPs (“this is not an apple to apple comparison”) were later drawing parallels between the two types of arrangements (“these are similar animals”).

As a result of this strategy by the RPP defenders, the sanctity of the State’s overall neoliberal shift remained intact. Private investment, especially foreign, could solve the capacity and generation cost problems and IPPs and RPPs were beneficial to the country. The State used the arguments given earlier for private sector involvement through IPPs to justify why they had gone for RPPs. In the words of the Ministry of Water and Power (2009: 16), “IPPs not only brought billions of dollars but also proved their professional expertise over and above the government system.” Similar expectations were argued to have held for RPPs.

Two other myths circulated to preserve the legitimacy of the neoliberal policies. One, emphasized by the State, was the primacy of investors’ over other competing interests and stakeholders. The second was that foreign capital was not to be subject to national jurisdictions. For the first, the State counsel cautioned that any attempts to alter the terms of RPP contracts to lessen the burden on the public treasury would be “jeopardizing investors’ confidence.” For the second, it stated that doing so would likely trigger adverse consequences for the Pakistani State such as being sued by investors repeatedly emphasizing that any such litigation taking place, according to the terms of the RPP contracts, would be outside national jurisdiction in multilateral tribunals not subordinated to any State sovereignty:

There was no requirement for re-bidding as these terms and conditions were extended across the board on non-discriminatory basis to all successful bidders that were at the same stages of development and any cancelation of the bidding process could have resulted in claims for termination charges and invocation of international arbitration procedure by the RPPs (Ministry of Water and Power, 2010: 15–16).

The State’s defense did not address the obvious structural cause of electricity shortage: the imbalanced nature of contracts in favor of the private IPP and RPP companies. This remained outside the scope of judicial debate, and the role of MLOs in forging such imbalanced contracts did not have any critical scrutiny during the trial. Even the petitioners and judges’ panel, who were otherwise critical of RPP contracts, did not extend this line of argument to previously hired IPPs despite the fact their unit price was comparable and, in some cases, higher than the RPPs. Thus, the MLOs that supported that regime and the IPPs that benefited from it continued to enjoy their status as legitimate actors in the electricity sector despite the failure to achieve the stated goals: abundant and cheap electricity.

Appealing to international institutions

MLOs are presented as invested with deep expertise and novel ideas, and these are used by the State to legitimize its decisions as such: MLOs are legitimate because they have a large amount of social capital in the Global North and they and their ideas should be legitimate here too (see a description of the phenomenon in The Economist, 1995: 15–16). Once they are, their views are not only right but also inevitable. This was true even when the policy espoused by the State diverged from that of the MLO. For example, the Minister for Water and Power, during whose tenure majority of the RPPs appeared, and who resigned in face of growing criticism, validated his arguments based on appealing to the legitimacy of MLOs as follows:

We were left with no option . . . We held energy conferences on this. We asked World Bank and USAID and other international agencies . We had long discussions. [We told them] that this is our road map. You tell us whether we are not going to make a mistake. . .As was told to me (by sector experts), this (RPP) is known as a stop gap arrangement. ( emphasis added )

In the RPPs case, the role of MLOs (World Bank, USAID) was less direct than with IPPs. The government hired RPPs as its indebtedness to existing IPPs made it difficult for the State to utilize the latter’s existing generation capacity. However, another MLO (i.e. the ADB) played a central role in putting the State organizations back on the IPP path. The main petitioner, who was a member of parliament, took credit for forcing the government to involve ADB in auditing the RPPs policy:

Any policy is formulated after detailed survey and analysis, minutely calculating everything through due diligence. . . it is an ill-conceived policy in my opinion. . .ADB report was in response to pressures from various quarters including my petition and suo-moto action by the SC.

ADB’s audit report ultimately became the Achilles heel of the State’s RPP policy and its legitimating defense. Donor MLOs, including ADB, preferred private participation through IPPs but not RPPs, and the audit report was a scathing critique of the decision to acquire RPPs in large numbers. The State had to defend its case in the SC in the presence of the ADB report and whatever claims the ministry made were refuted by the report. Judges also declared that the report’s overall tone was against the RPPs decision: “Here the total case is that there was no policy. There was no transparency. ADB’s report is a charge sheet against you” (Judge’s observation in the SC).

Despite this, the State could never disassociate itself from the ADB report because of the aura of expertise that the MLOs enjoyed, reiterated by the State itself. Thus, its formal position became one of “owning” it and abiding by it:

It is significant to mention that initially the program envisaged capacity addition of 2250 MW which was later reviewed pursuant to legal, financial, and technical due diligence and program reduced to 1257 MW in light of ADB’s recommendation and conclusions which have been fully approved by the Cabinet. (Ministry of Water and Power, 2009: 1–2).

Thus, this maneuver helped shield the neoliberal ideas and the MLOs located from criticisms about the failure of this policy and its ideological underpinning.

Sensationalizing the local

Another major tactic of the State’s defense strategy was what we called “Sensationalizing the local.” Here, the term “local” refers to the specificities of the context in which the neoliberal policy is to be implemented, in this case a poor, “developing” nation of the Global South with a specific institutional framework. Sensationalizing the local consisted of a set of maneuvers that we label “dramatizing public sufferings” and “minimizing policy failures” described below:

Dramatizing public sufferings

Neoliberal policies required that the State withdraw from the energy sector—gradually but completely (USAID, 1992) and become instead the overseer of market development with an independent entity as regulator. State’s withdrawal was to happen with intermediate stages before the full market mechanism would be operational (USAID, 1992), but without discussing how the transitions would happen. The actual transition was problematic and never this complete, as the State could never sever its traditional and widely perceived role as a provider of cheap electricity: this role remained as part of the social contract even if the State was moving away from it. Thus, any changes in price or disruption in its supply were blamed on the State and its cheap electricity provider role rather than on the private entities, on the regulator, or on the contract signed with them.

The State made strategic use of this role in the courtroom by sensationalizing the local context: its defense strategically positioned different local factors by marginalizing some while emphasizing others, crafting a local context that would serve to justify the State’s actions even if they violated the law.

The marginalized or downplayed factors were the following: the cash strapped position of the country exacerbated by payments to generators; the failure of the public sector to augment the electricity supply from its own generation plants; the sharp increase in electricity demand fueled by consumer financing leading to the acquisition (in installments) of energy-voracious household appliances such as air-conditioners (A/Cs) and finally the high cost of IPPs electricity and the resultant circular debt that was invisible to the nation because it was being added to the foreign national debt of the State. This meant that the electricity consumed was not cheap but on credit, with the difference between the subsidized price and the actual cost incurred by the State was to be paid in the future as taxes and other fiscal obligations imposed on the Pakistani public.

In contrast, other local factors were emphasized, especially those related to the impact of load shedding on broad socio-economic conditions of the country. These included the suffering of the public; street agitations and civil unrest; and loss to the national economy. The State used its historic social contract of providing affordable electricity to justify exorbitant deals it had struck with the private organizations to ease the “suffering of the people” and the unrest that came from no electricity. Petitioners also highlighted public suffering:

[i]t is important to note that the effects of load-shedding [i.e., cutting power supply to customers, typically when demand is larger than supply—Ed.] have spread far beyond the economy, as it tears into the social fabric and the daily routine of 20 million Pakistani households – unrelentingly – each and every day and night. (Asif, 2011: 2)

The State confirmed the public suffering, and because of this emergency, it had to take extraordinary measures including buying electricity at any cost and by any means necessary even violating the laws of the land. Thus, exaggeration (e.g. public misery) and minimization (e.g. State’s role in fostering increasing use of voracious electricity consuming goods such as air conditioners) allowed the State to construct a defense where opting for RPPs was a reasonable way to alleviate public misery. This fulfilled electoral commitments of providing affordable and available electricity to the masses, which was only affordable because it was on credit: the deficit became foreign debt with mounting interest. The former Minister for Power confirmed this in a written submission to the SC:

Energy shortage is a problem which has been facing the country (sic) for some time. Since it affects the life of every citizen, it was also an election issue. It is well known that even the run-up to the election in February 2008, the country faced load-shedding on a massive scale, resulting in anger and frustration amongst the general public. (Ashraf, 2011: 2)

Minimizing policy failures

The rationale in court for the RPP policy remained a contested issue throughout and stakeholders had diverging interpretation of whether there was any thoughtful policy process behind the decision to justify RPP acquisition. When judges insisted that the State counsel should present the policy document on RPPs before the court, the counsel presented the minutes of the government’s cabinet where decisions on acquiring RPPs were made. This annoyed the judges who took this act as the government’s attempt to undermine the significance of this matter:

This we are screaming from day one and nobody was ready to listen, that there is no (RPPs) policy. Even today your RPPs [which have started operation] are not giving you electricity. . . What is the benefit of this emergency [short-term] solution . . . you cannot shed your responsibility like this.

The counsels to the government and to the former Minister insisted the minutes of the meetings and the decisions taken therein by definition constituted policy. Government’s position in RPPs policy was in stark contrast to its earlier strategic decisions in the electricity sector through which private participation appeared in the form of IPPs. These decisions were based on clearly laid out policies, elaborated with the goal of increasing private participation in the sector (e.g. Ministry of Water and Power, 1994, 2002). However, for RPPs case, the government counsel insisted that this was a stop-gap arrangement and under such scenarios the government only needed to discuss and decide the matter within the cabinet, becoming policy under Rules of Business so the RPPs approval [by the Cabinet] is nothing but a policy for the RPPs.

Scapegoating the State

We term the final tactic of the State’s defense as “Scapegoating the State.” In this context, our reference to “State” aligns with Weber’s definition: a dominant entity that asserts legitimate sovereignty over a specific geographical area, encompassing its resources and inhabitants (Weber, 1919). What we highlight here is the capacity of this entity not just to wield authority, but to also shoulder responsibility. We emphasize the vast potential of this entity to absorb unattributed damages, both material and symbolic. This was done through two forms of maneuvers that we label “accepting blame and derisking,” and “inevitability of failure.”

Accepting blame and derisking (shielding private corporations from responsibility)

In court, State entities blamed each other for the RPP policy failure but whenever a private organization was involved, the State organization would own the blame and claim responsibility for illegal actions arguing that any irregularities in RPP contracts/projects were the fault of the State. This protected the legitimacy of private organizations: a private company would argue that an irregularity/corrupt practice took place because of the State’s own doings and declaring that it had nothing to do with these irregularities even though it stood to reap significant financial gains from them. Then, the concerned State organization would claim responsibility for these irregularities, arguing that improprieties were the State’s sole doing, with the private organization thereby being exonerated by a confession of guilt by the State.

RPP cases during court proceedings provide empirical support for these capitulating acts by State actors, performed in open coordination with the private organizations. For instance, the first two RPPs hired in 2006 performed poorly, as indicated by the ADB report and audits performed by the regulator. And yet the concerned SOE would write glowing appreciation letters for these RPPs insisting that the country benefited from them. The concerned private company who owned multiple RPPs, later presented this SOE letter as evidence in the court that it was holding its end of the deal. In that letter was stated, “The aforesaid rental plant . . . played a key role in supplying power to the national grid, when the country was in dire need of it” (PPR, 2010: 4).

Further, the State also supported RPPs claims and came to their rescue when the court raised questions about some dubious advance payments made to RPPs. For example, a joint venture between a Pakistani and US firms received 14% advance payment on two different projects but against the same RPP equipment. Further, that company had also negotiated a higher tariff price in the later project, a violation picked up by the regulator. Yet in the courtroom, the concerned State-owned organization with whom these RPPs had made these contracts, declared that the contract on the first of these RPP projects had been terminated through mutual agreement between the two parties. A copy of termination notification was also later submitted to the court.

In this manner, the State asserted that a single set of machinery was involved, which was subsequently transferred to the second project due to the termination of the initial project. This claim spared the concerned RPP firm from potential embarrassment and subsequent criminal investigations stemming from the perplexing situation of claiming advance payments for machinery that, against the laws of physics, was purportedly being utilized in two distinct projects situated in separate geographical locations.

The decision to terminate the original contract seems to have been made retroactively, likely prompted by the revelation of this irregularity in court. This was necessitated by the State organization’s inability to account for why the RPP company had received dual advance payments for the same equipment. Consequently, the State’s actions were positioned as a preventative measure, aiming to forestall the SC from imposing penalties on the RPP. Instead, the Court merely instructed the company to reimburse the advance payment pertaining to these two projects. Effectively, the State shielded these private organizations from the punitive penalties that legal firms advocating against the RPPs believed would have been levied by the SC.

Inevitability of failures

A favorite move by the State in its justification was to present a wrongdoing in the RPP policy and/or its implementation as inevitable, and the State’s action to deal with such unavoidable matters as not only appropriate but also indispensable. For instance, RPP contracts allowed incentives of 7% to ensure speedy completion. Post contract, this amount increased to 14% when the government failed to open a letter of credit for its payment obligations (a contractual obligation) owing to the global financial crisis of 2008.

This undermined the value of sovereign guarantees already provided by the government, because it was now offering two additional incentives to the private organizations for the State’s failure to timely open a letter of credit (i.e. 7% additional advance payment, and sovereign guarantees for its capacity/energy charges payments to the private organization). ADB criticized all this by stating, “The provision of a (Sovereign) guarantee combined with a high upfront down payment tends to down grade the value of Sovereign Guarantee and could negatively impact its value as a risk mitigation measure in future contract” (Asian Development Bank, 2010: 16).

These measures effectively shifted the balance of risk in favor of the seller (i.e. RPPs), leaving little leverage for the buyer (i.e. the State) in case the seller failed to meet its contractual obligations. The government put all the blame for the increase in advance payment on the 2008 global financial crisis and the resultant fall in the credit rating of Pakistan. It further cautioned the court from taking any actions against the RPPs on this account as the firms would litigate:

Cancellation or the termination of the RSC (Rental Service Contract) is not in the interest of public policy as it would lead to multiple contractual disputes leading to arbitration outside Pakistan. (Ministry of Water and Power, 2011: 14).

Apparently, the State actors and private organizations collaborated to forge this argument. During the court proceedings the two sides, in open view and frequently, were seen discussing issues and judicial strategies and when the judges were away on breaks the State and RPP actors would gather to review and revise their submissions. Occasionally, a State lawyer would counsel the RPP presenter on some detail that the latter had to provide in support of his claims: “Stick to this!—stick to this!” he would say while indicating to a certain clause in the open folder in his other hand.

We observed and documented a frontstage and a backstage performance played out in front of the SC audience. When the judges were present, the two sides would maintain their distance. However, once the judges disappeared the backstage performance would start: “You have been too strict on this,” the State counsel would complain to an RPP lawyer who had been critical on the State’s handling of the RPP project. “Really—how is that?” the RPP lawyer would play innocent. The State lawyer would then tell him the points/instances where he thought the RPP lawyer was tough. The next day the RPP lawyer would appear in the court just before the judges would enter. He would happily wave the file in his hand toward the State counsels and loudly tell them: “I have removed all the contentious matters . . . by God (original emphasis) . . . All the contentions removed (sare jhagre muka dite nei.).”

On one such occasion, when the State and RPPs lawyers managed to defend successfully against the petitioners’ objections through a coordinated effort, a lawyer from the opposing bench was visibly annoyed. This lawyer was well acquainted to the first author. As people were moving out of the courtroom during the break, he made an effort to come closer to this author and whispered in his ear: “The watchdog is siding with the thieves” (Kutti choron se meli hoi he).

Discussion and conclusion

Above, we presented the main strategy including its constituting tactics and maneuvers deployed by a State in the Global South to defend a neoliberal policy when challenged by spectacular failures (nation-wide power outages and a national corruption scandal). Literatures on ABD, derisking, and MLOs to our knowledge have not conceptualized the strategy through which a State defends a neoliberal policy that has hit crisis mode. We have attempted to do so, and this is the paper’s main contribution.

Through this conceptualization effort, our findings reveal another important role for the State in the Global South beyond the ones of being an enabler and enforcer of neoliberalism as per the extant ABD literature. It also plays the role of an exonerator, especially when neoliberal policies fail as they often do. We highlight this role as a fruitful subject of theoretical inquiry, and an object of empirical reflection in the literatures on ABD and derisking discussing neoliberalism in the Global South, because there is ample evidence that this role (“exonerator”) has been and is central when countries implement neoliberal policies and these fail.

Our findings also enrich the critical conversations on MLOs, either in the specialist literature focused on it (e.g. Kentikelenis and Babb, 2019, 2021; Murphy, 2008) or as discussed in the ABD and derisking research streams (e.g. Gabor, 2021; Harvey, 2005). MLOs are said to play a key role in orchestrating neoliberal policies, because they provide not only material (e.g. financial assistance) but also symbolic capital to the State. They supply rationales that help build a narrative to introduce and implement neoliberal policies that eventually come to be seen as not only “inevitable” but also the right thing to do. From this perspective, symbolic capital is conferred by MLOs to the State in the Global South, but we observe it running in the other direction as well. As mentioned, the State is the “site par excellence of the concentration and exercise of symbolic power” (Bourdieu et al., 1994: 9) so it can also transfer symbolic capital to MLOs and our research documents such a transfer. The Pakistani State was defending its RPP policy by borrowing or transferring in symbolic capital from the MLO of concern (in our case the ABD) by saying on numerous occasions that it was following its advice because it was the best in class, reinforcing its aura of expertise.

Such an admission that helped further build symbolic capital stock of an MLO (e.g. ADB) depleted the State’s own symbolic capital. To show the ADB as world-class experts on development, the Pakistani State was downgrading its own expertise: not world-class but second rate, and any analysis carried out by various organizations of the State lost currency. The ADB’s audit done on RPPs became the most sacred text during the whole RPP saga in the SC as we have documented in our case study. Other reports (e.g. from ministers, SOEs, and the regulators) were not given credence by the SC. Thus, all the parties ended up citing from the ADB report and the SC final judgment on the matter heavily borrowed from it. Incidentally, the ADB had hired a multinational consulting company to conduct this audit and the main author of this report was a former employee of the main SOE now working for the consulting company.

There is a cost to borrow symbolic capital from MLOs as it requires the State in the Global South to present them as the leading experts on development. This depletes a State’s own symbolic capital while augmenting that of the MLOs in a transfer from the State in the Global South to MLOs. This we believe is an important theoretical insight to the critical conversations on ABD which mostly talks about the material elements of capital accumulation and may have overlooked the possibility of symbolic capital flowing out from States situated in the Global South to MLOs.

Reflecting further on the symbolic work done by a State in the Global South, leads us to provide greater texture to the concept of derisking (Gabor, 2021) as is the case when the State designs a neoliberal policy that reduces the intrinsic risks of an economic activity with the goal of shepherding in private investment (Christophers, 2023). Our study brings to surface that the State not only derisks private investments but it also derisks a neoliberal policy by assuming the responsibility of failure so that its symbolic capital and the wider neoliberal project of which it is a part remains protected. We call this “symbolic derisking.” This has been underexplored so far in the derisking literature that has enumerated investment specific risks that the State absorbs on behalf of private investment (see Table 6 below for the project derisking done in IPPs and RPPs), but not the reputational risks it absorbs on behalf of the neoliberal project and its policies.

Table 6.

Project derisking of IPPs and RPPs (based on RPP contracts found in court documents, and Ministry of Water and Power, 1994, 2002).

Risk	Explanation	Allocation of risk-IPPs	Allocation of risk-RPPs
Grid failure	The purchaser is unable to evacuate the power	Purchaser (SOE)	Purchaser (SOE)
Pricing risk	Change in fuel price or delayed payment by the purchaser	Purchaser (SOE)	Purchaser (SOE)
Interest rate	Possibility of variation in market rate of interest payment on debt	Purchaser (SOE)—through indexation	Seller (Private company)
Debt repayment	Insufficiency of cash to repay debt or interest.	Purchaser (SOE)—through capacity payments	Seller (Private company)
Exchange rate risk	Possibility of local currency depreciation	Purchaser (SOE)—Through indexation.	Purchaser (SOE)—The main RPP contract was in USD
Inflation risk	Impact of local inflation on sellers (IPPs) cost	Purchaser (SOE)—through indexation.	Seller (Private company)
Change in law	Impact of change in law upon seller	Purchaser (SOE)	Purchaser (SOE)
Change in tax rate	Possibility of change in income tax and other taxes	Purchaser (SOE)	Purchaser (SOE)
Demand risk	Risk that nationwide demand of electricity changes	Purchaser (SOE)	Purchaser (SOE) through rental payments
Purchaser’s default risk	Purchaser’s (SOE) inability to pay cost of electricity	Government of Pakistan through sovereign guarantee.	Government of Pakistan through sovereign guarantee.

We documented the presence of symbolic derisking when the RPP policy failed, and the State took up the reputational losses. It went out of its way to scapegoat itself, sacrificing its own reputation to preserve the symbolic capital of the neoliberal policy. The message it sent out was that it was not the policy to be blamed, but the incompetent State who could not implement it. No cause of failure was allowed to lead to the private organizations or to MLOs, as a direct result of State counsels’ collaborative strategies with the counsels representing privately owned RPPs.

Thanks to these efforts, the neoliberal project in Pakistan’s power generation industry successfully avoided erosion of its symbolic capital and the MLO spearheading it retained its privileged status despite the failures. Not difficult to explain then that the IPP power generation model continued in the State’s 2015 power policy (please see Table 2 above for a timeline of the main transitions in the electricity sector of Pakistan)—3 years after the RPPs were disbanded through the SC judgment.

Our findings suggest the State is not only the chief enabler and enforcer of neoliberalism but also arguably its chief exonerator in its mission to avoid de-legitimizing the neoliberal project and its consequences. Can it become its chief prosecutor? Prospects for humanity and the planet may well hinge on how we answer that question, hic et nunc .