Bhutto basically submitted to pressure from the religious establishment. Three points are relevant here: the specific context in 1974 and more broadly the 1970s, understanding the reasons for vehemence of the campaign run by the ulama, and finally seeing the bigger picture on the decline of Islamic modernism.
Although Bhutto had achieved a remarkable breakthrough in the elections of 1970 in West Pakistan, by 1974 the Bhutto government was coming under strain and had lost some of its political credit. Dissension within the government, was compounded by economic difficulties. In August 1973 there were massive floods. In October 1973 there was a four fold increase in petroleum prices. University teachers went on a countrywide strike in 1974 and there were shortage of flour and cooking oil.
There is also the wider context especially in the aftermath of the loss of the eastern wing, which prompted Pakistan seeking closer ties with the Islamic world. First, there was an economic dimension. Prior to Bangladesh achieving independence, 50 per cent of West Pakistan's exports were to East Pakistan. Now Pakistan had to seek new markets and restructure its trade and one market that Pakistan sought to develop was West Asia. By 1981, 30 per cent of Pakistan's exports and imports were with the Organisation of Islamic Conference states. There was also a security dimension. Closer diplomatic ties with the Arab world facilitated inflow of Libyan and Saudi money which was crucial for the nuclear programme. But such support did not come unalloyed. As Ali Usman Qasmi indicates in the interview in post 2, Saudi Arabia began to put pressure on Pakistan to declare Ahmadis a non-Muslim minority. There was the issue of self-esteem. The loss of the eastern wing damaged national pride. Turning to the Arab world represented at least in part, and effort to restore national self-esteem. The world spotlight turned to Pakistan when the Islamic summit in 1974 was held in Lahore. A euphoric crowd in Lahore turned up to hear Colonel Qaddafi claim that Pakistan was the 'citadel of Islam in Asia'. Finally, the loss of the eastern wing meant that Pakistan lost most of its religious minorities. Whilst the secession of Bangladesh damaged the idea of the two nation theory, ironically by making Pakistan less plural, it bolstered Islamic parties and made it much easier to orientate Pakistan towards West Asia.
On second point - the strength of the campaign of the religious establishment that ultimately pressured the Bhutto government into caving in - we must of course acknowledge that religious groups had long called for the declaration of Ahmadis as non-Muslims, and this extends back to the colonial period, when the Majlis-i Ahrar-i Islam were the forefront of the anti-Ahmadi movement. Anti-Ahmadi sentiments were therefore deeply rooted and for many a crucial theological issue. But beyond this, we must also consider the wholly original point made by Muhammad Qasim Zaman that the religious establishment’s “misgivings” about Islamic modernism and the modernists, who also formed the government elite. As Zaman states, this is partly because the Ahmadis themselves have been associated “with modernist positions, notably a derisive attitude toward the `ulama and the Islamists, an insistence on adapting Islam to changing conditions, and doubts about the state’s implementation of Islamic law.” More than this, as Zaman argues, for the intensity of the religious groups in pressuring the government to act, was because of what they perceived to be the actual lack of commitment of modernists to moor the state to Islam. For the religious establishment the presence of Ahmadis in positions of authority within the state and failure to excommunicate the Ahmadis from the Islamic fold demonstrated that the modernists were not seriously committed to Islam.
This leads thirdly, to the final point, around the decline of Islamic modernism. Within Pakistan it seems clear that Islamic modernism has become increasingly beleaguered- this is in fact the core part of Zaman’s argument in his book. Modernists had been committed to bringing to life the ‘spirit’ of Islam, to emphasising ethical values, which in their eyes had been deadened by the religious establishment who had encased Islam in outer ritualism. The modernists had emphasised the ‘ecumenical’ nature of Islam that transcended sectarian divisions. Such a perspective was already coming under stress in the Ayub years when modernism had reached its zenith. It was in 1968, that Fazlur Rahman was forced to resign as director of the Institute of Islamic Research. The lack of intellectual firepower to counteract the arguments of the religious establishment had left modernists vulnerable to pressure from the religious right. And this too is part of the story of the events that unfolded in 1974.