Presentation Write-Up 17-Sep.

-2019
Danish Naeem Khan
19160015
Ms. Economics (2.5)

1. Explain the term economic institutions and how it differs from the term
economic systems?
An economic institution is an organization which comprises of different sets of laws,
regulations and social norms that deals with managing the production and distribution
of money, goods and services in an economic system. For example, land registries or
patent offices deals in regulating the property rights in an economic system. An
economic institution is different from an economic system because, an economic
system is the way of organizing the allocation of resources and apportion of goods and
services in an entire economy. Whereas, an economic institution is a body that deals in
regulating the production and circulation of resources in an economy by enforcing
certain set of rules and social customs in a nation.
2. What are the key institutional differences between feudalism and capitalism?
The key institutional differences between feudalism and capitalism are as follows.
Firstly, in capitalism, the property rights of tangible and intangible assets such as land,
houses, stocks and bonds are privately reserved to the owner of the assets. Whereas in
feudalism, the possession of land is given to the serfs or peasants for cultivation, but
the ownership of the land and buildings on it such as mills, ovens, bridges and forests
is held by the feudal lord of that land.
Moreover, in the market mechanism of capitalism, the buyers and sellers socially
interact in the market and determine the prices of goods and services in a much-
decentralized manner where the firm owner seeks for the highest rewards in term of
profit and labor, on the other hand, seek for the highest wages and act in pursuit of their
self-interests. While in feudalism, the serfs are bound to serve their lords as a free labor
either in their houses as servants or work as labor and give all the surplus production of
goods to their lords and the free markets does not exist.
Furthermore, in capitalism, firms have freedom to enter and exit the market, which
maximizes social welfare of both consumers and producers. Dissatisfied customers can
purchase different products, labor can leave their jobs for better wages and investors
can purchase moneymaking ventures. On the other hand, in feudalism, peasants can
work only for their lords regardless if they are willing to work for them or not. They do
not have any freedom to choose their lord willingly and they are bound to work without
any pay.
3. Would you describe today's Pakistan as feudal or capitalist? Why?
To decide whether Pakistan today exists as feudal or capitalist, we need to understand
the current structure and the historical background of the economic system of Pakistan
and see how the economic institutions within this system are working together. To
begin with, feudalism existed in Pakistan even before the partition. There existed a very
small number of people with possession of a huge area of land, however, the transition
of the feudalism to capitalism started even before the end of colonial rule in the
subcontinent. During the British reign, the process of the conversion of feudal lords into
Presentation Write-Up 17-Sep.-2019
Danish Naeem Khan
19160015
Ms. Economics (2.5)

capitalists began and the same continued after the partition of the subcontinent in 1947
(Sharma, 1985).
After partition, Pakistan was inherited with this social base in which capitalism was
nascent in some ways and feudalism still existed as a dominant economic system of
Pakistan. In Pakistan, the feudal are known as Chaudharies, Warraich, Pirs, Khans,
Makhdooms, Arbabs, Mizaris, Khars, Legharis, Nawabzadas, Nawabs, Sardars and
Shahs (Anwar, 2013). Feudal lords used to have big lands, peasants and private jails in
rural areas and spacious houses and luxurious lifestyle in urban areas. Later, the land
reforms took place and the major goals of those reforms were, first, enhance the overall
production of the agricultural goods by dividing the large holdings of land into smaller
ones with a greater number of ownerships. Second, to provide equality of status and
opportunities to the peasants to improve their lives. The land reforms started first in the
era of Ayub Khan as West Pakistan Land Reforms in 1959 which made the ceiling of
ownership at 500 acres of irrigated land and 1000 acres of non-irrigated land or 36.000
produce index units. Land reforms introduced in 1972 reduced the ceiling of ownership
to 150 acres of irrigated land and 300 acres of non-irrigated land or 12.000 plus produce
index units. Land reforms introduced in 1977 further reduced the ceiling of ownership
to 100 acres of irrigated land and 200 acres of non-irrigated land or 8.000 plus produce
index units (Farani, 2005; Butt, 2014). Because of land reforms, people who were
working as peasants under their feudal lord now had land to work independently and
sell their production outputs in the free market for highest possible rates.
As of today, the economic system of Pakistan is transiting more towards capitalism. For
instance, there are more chances to earn money through the industrial sector than via
agriculture produce existing in raw form. People are investing more in industrial sector
and moving towards free markets than investing in agriculture and land purchasing.
Information Technology industry is booming day by day and technology is evolving at
the speed of light, people are getting more and more opportunities to either privately
own their own ventures in free online and traditional markets or work independently as
labor and seek for the highest possible wages which are all institutional characteristics
of capitalist economic system.
To conclude, Pakistan’s economic system is transiting from feudalism to capitalism.
People now have more options to work freely in markets either privately own a new
venture of their own or work as labors according to their self-interests. However,
feudalism still exists in some parts of the economic system of Pakistan but in a very
small proportion. Therefore, we can say that the economic system of Pakistan, as of
now, is at neo-feudal state, which is a hybrid of capitalism, and feudalism where capital
more commonly exists.
Presentation Write-Up 17-Sep.-2019
Danish Naeem Khan
19160015
Ms. Economics (2.5)

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