This has been a shatteringly bleak week for Pakistan, but not one that condemns it to being a failed state. The return of Benazir Bhutto, overshadowed by the bomb that killed 140, is a step forward. But although she has been championed in Europe and the US, she is a long way from being the solution to her country’s savage problems.

Pakistan dominates Britain’s foreign worries, officials say, and they are right. It is not just that terrorism is on the increase – as well as the capacity of extremists, in this age of eight-hour direct flights and the internet, to cause mischief in the Pakistani community in Britain. But with 165 million people, Pakistan is six times more populous than Iraq or Afghanistan, and has nuclear weapons.

But it is worth starting with reasons for optimism, because they are too easy to forget in alarmist sketches of Pakistan being the “Taleban with nukes”. The country is far better material for becoming a modern state than, say, an Arab autocracy. The military, the Civil Service, the courts – the pieces in place at Partition 60 years ago – do work and are getting better. And it gave itself a written Constitution in 1973, although it has been suspended during military rule.

It is to the credit of that framework that the Supreme Court, which has clashed with Pervez Musharraf, is now hearing petitions against his re-election as President while he remains head of the army. True, many expect a fudge – a split panel or one verdict for him and one against. “Everything is political, except a road accident,” said one lawyer when asked whether the verdicts, expected next week, could be free of politics.

But it is encouraging that President Musharraf’s attempt to sack the Chief Justice in the spring brought bigger protests than his suppression of the Red Mosque extremists in Islamabad. Fundamentalist parties have barely reached double figures in polls. The heart of the country is moderate.

You could add to the list of reasons for optimism: economic growth of more than 6 per cent (although some stems from US aid); the swelling middle class (although many hover an hour’s flight away in the Gulf); the investment by expatriates; the falling birthrate. The raucous health of the media is another; President Musharraf has permitted two dozen private television channels to launch, even though many of them denounce him.

Despite last week’s carnage, it is remarkable how little violence there is in a country so divided and so poor. There have been bombs on many days near the Afghan border, but the big cities, easy targets, are largely spared.

But there optimism runs out. Terrorism is spreading from the always lawless tribal areas to the settled Swat valley. Pakistan’s income per head is two thirds of India’s, and its infant mortality rate double. Half of its people can’t read; it has failed to educate a generation, and risks doing the same with the next – 37 per cent of Pakistanis are younger than 14.

And people have no one to turn to but the old, imperfect leaders. Fatima Bhutto, Benazir’s niece, and a viscerally angry critic of her, says: “We are told there are only four” – Benazir Bhutto, head of the left-wing Pakistan People’s Party, Nawaz Sharif, leader of the conservative Pakistan Muslim League, President Musharraf and the MQM party, which runs Karachi.

Benazir Bhutto is the most likely to be the next prime minister after next January’s elections, and the reason for the West’s enthusiasm for her is clear: she is secular, liberal, educated, female. But doubt has been cast this week on her judgment. Even to fans, the recklessness of choosing, for her return after eight years away, a procession crawling for 14 miles through a crowd of a million, smacks of vanity. Her decision to hold her first press conference in English was received poorly at home. Her accusation that three government officials had plotted the bomb attack seemed hotheaded.

Her party retains its feudal character; the huge crowds that greeted her were brought to Karachi by the machinery of patronage as well as love for her. Local party workers were rewarded for bussing in supporters; even the pro-Bhutto graffiti were paid for. But the amateurism that the Pakistan People’s Party otherwise shows, a kind of exuberant fatalism, is worrying if it returns to government. The day after the bombing, there was only a semblance of security at her house, directed at foreigners, with known faces and women waved through.

Nor is it easy to overlook the record of the two governments she led. Ms Bhutto dismisses corruption allegations as politically motivated, but the Supreme Court next week may quash the amnesty that President Musharraf has granted her. In the slums of Lyari in Karachi this week, one party worker was indulgent about complaints that she had done little for the poor: “She had too little time.” But Nasreen Jalil, Karachi’s deputy mayor, a one-time opponent and now uneasy ally, argued that President Musharraf has been “better for women than Benazir”, stopping rape being treated as adultery and guaranteeing women parliamentary seats.

Mr Sharif is the only one who could beat Ms Bhutto at the polls, but as Prime Minister he took the country towards Islamism and might do so again. In any case, he is stuck in Saudi Arabia, where President Musharraf deported him last month when he tried to return home. The President seems in no rush to let him back, despite Western desire for the elections to be properly contested. A fudge is possible, allowing Mr Sharif back just before the elections so he has no chance to put up candidates.

The MQM is the only party that is secular, urban and middle-class. But it has run Karachi as its fiefdom in a cloud of corruption allegations; it is no model for the future.

And President Musharraf? He has helped Pakistan’s stability, and his instincts are liberal; he is a “dictator-lite”, as Fatima Bhutto put it. But he has preferred a military solution to problems better dealt with politically, and at this point even bad politicians seem better than more military rule.

Pakistan has been resilient in righting itself after each crisis, but now the crises are coming without respite. The institutions, the elites, the military cannot hold it all together for ever without progress on education, poverty and terrorism.

The best hope is that the next prime minister, probably Ms Bhutto, with Pervez Musharraf as President, makes some inroads into solving these problems; that the economy grows; and that the middle class shakes off its disdain for politics and produces better candidates to lead a modern country. But if Pakistan cannot get to grips with its problems within another generation, then it could finally fulfil the alarmist predictions of being the largest failed state in the world.

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