That's the good news. It conflicts with opinions in the establishment media in some western countries, as well as with some in the Barack Obama administration. David Kilcullen, a top adviser to General David Petraeus, said in March 2009 that state collapse could occur within six months. This was and remains highly improbable.

Now, the bad news: the clouds over the future of Pakistan's state and society are getting darker. The speed of social decline has accelerated, surprising even many who have long warned that religious extremism is devouring the country.

The path to Islamabad

Here is how it happened. The United States invasion of Afghanistan devastated the Taliban. Many fighters were products of madrasas in Pakistan, and their trauma was in part shared by their erstwhile benefactors in Pakistan's military and intelligence. The army, recognising that this force would remain important for maintaining Pakistani influence in Afghanistan - and to keep the low-intensity war in Kashmir going - secretly welcomed them onto Pakistani soil. The process of rebuilding and rearming was quick, especially as after initial success the US campaign in Afghanistan went awry. The then president Pervez Musharraf's strategy of playing both sides against each other worked for a time. But Washington's demands to dump the Taliban became more insistent, and the Taliban also grew angry at this double-game. As the army's goals and tactics lost coherence, the Taliban advanced.

In 2007, the movement of Pakistani Taliban - Tehrik-e-Taliban Pakistan (TTP) - formally announced its existence. The movement's blitzkrieg of merciless beheadings of soldiers and suicide-bombings drove out the army from much of the frontier province. By early 2009, it held about 10% of Pakistan's territory.

Even then, few Pakistanis saw the Taliban as the enemy. There were even many apologists for the Taliban, for example among opinion-forming local TV anchors that whitewashed their atrocities and and insisted that they shouldn't be resisted by force. Others supported them as fighters against US imperial might. The government, beset by ideological confusion and with no effective propaganda response, had no cogent response to the claim that Pakistan was made for Islam and that the Taliban were Islamic fighters.

An immense price was paid for the government's prevarication. A cowardly state allowed fanatics to devastate hitherto peaceful Swat, once an idyllic tourist-friendly valley. Citizens were deprived of their fundamental rights. Women were lashed in public, hundreds of girls' schools were blown up, non-Muslims had to pay a special tax (jizya), and every form of art and music was forbidden. Policemen deserted en masse, and institutions of the state crumbled. The Taliban, thrilled by their success, violated the Nizam-e-Adl regulation in April 2009 only days after it was negotiated. They quickly moved to capture more territory in the adjacent area of Buner - barely 120 kilometres from Islamabad. The movement's spokesman, Muslim Khan, boasted that the capital would be captured soon. The army and government still dithered, while the public remained largely opposed to the use of military force.

At this point, a miracle of sorts happened. Sufi Mohammed, the illiterate and aging leader of the Swat sharia movement, lost his good sense to excessive exuberance. While addressing a huge victory rally in early May, he declared that democracy and Islam were incompatible; rejected Pakistan's Islamic constitution and courts; and accused Pakistan's fanatically right-wing Islamic parties of mild heresy. Mohammed's comments - even for a Pakistani public enamoured by the call to sharia - were a bit too much. The army, now with public support for the first time since the birth of the insurgency, finally mustered the will to fight.

The Taliban's game

Today, that fight is on. A major displacement of population, estimated at 3 million, is in process. This tragedy could have been avoided if the army hadn't nurtured extremists earlier. For the moment, the Taliban are retreating - and even being assailed by local tribesmen in parts of the Upper Dir district. But it will be a long haul to eliminate them from the complex mountainous terrain of Swat and Malakand. To wrest North and South Waziristan from their grasp will cost even more. Army actions in the tribal areas, and retaliatory suicide-bombings by the Taliban in the cities, are likely to extend into the foreseeable future.

Meanwhile, the cancerous offshoots of extremist ideology continue to spread. Another TTP has established itself - Tehrik-e-Taliban Punjab. That could mean major conflict eventually shifting from Pakistan's tribal peripheries to the heartland: southern Punjab. Indeed, the Punjabi Taliban are busy increasing their operations, including an attack on the police and intelligence headquarters in Lahore on 27 May.

What exactly do the Pakistani Taliban want? They share with their Afghan counterparts the goal of fighting the United States. But still more important is the wish to replace secular and traditional law and customs in Pakistan's tribal areas with their version of the sharia. The logic of this aim (shared with religious political parties such as Jamaat-e-Islami) is a total transformation of society. It entails the elimination of music, art, entertainment, and all manifestations of modernity and westernism. The accessory goals include destroying the Shi'a - whom the Sunni Taliban regard as heretics - and expelling the few surviving native Christians, Sikhs, and Hindus from the frontier province. While extremist leaders such as Baitullah Mehsud and Maulana Fazlullah derive support from excluded social groups, they don't demand employment, land-reform, better healthcare, or more social services. This isn't a liberation movement by a long shot, although some marginalised Pakistani leftists embrace this delusion.

It is impossible for tribal insurgents to overrun Islamabad and Pakistan's main cities, which are protected by thousands of heavily armed military and paramilitary troops. But rogue elements within the military and intelligence agencies have instigated or organised suicide-attacks against their own colleagues. Now, dazed by the brutality of these attacks, the officer-corps appears at last to be moving away from its earlier sympathy and support for extremism. This makes a seizure of the nuclear arsenal improbable. But Pakistan's "urban Taliban", rather than illiterate tribal fighters, do pose a nuclear risk. There are indeed more than a few scientists and engineers in the nuclear establishment with extreme religious views.

While they aspire to state power, the Taliban have been able to achieve considerable success without it. Through terror tactics and suicide-bombings they have made fear ubiquitous. Women are being forced into burqas, and anxious private employers and government departments have advised their male employees in Peshawar and other cities to wear shalwar-kameez rather than trousers. Co-educational schools across Pakistan are increasingly fearful of attacks; some are converting to girls-only or boys-only schools. Video-shops are going out of business, and native musicians and dancers have fled or changed their profession. A sterile Saudi-style Wahhabism is beginning to impact upon Pakistan's once-vibrant culture and society.

It could be far worse. If, for example, General Ashfaq Kayani were overthrown in a coup by radical Islamist officers who seize control of the country's nuclear weapons, making intervention by outside forces impossible; and if jihad for liberating Kashmir is subsequently declared as Pakistan's highest priority and earlier policies for crossing the "line of control" (LoC) are revived; if Shi'a are expelled to Iran, and Hindus forced into India; if ethnic and religious minorities in the northern areas flee Pashtun invaders; if anti-Taliban forces such as the ethnic Muttahida Qaumi Movement (MQM) and the Baluch (Baloch) nationalists are decisively crushed by Islamists; and if sharia is declared across the country. All this still seems improbable - as long as the army stays together.

The way forward

What can the United States, which is still the world's pre-eminent power, do to turn the situation around? Amazingly little.

In spite of being on US life-support, Pakistan is probably the most anti-American country in the world. It has a long litany of grievances. Some are pan-Islamic, but others derive from its bitter experiences of being a US ally in the 1980s. Pakistan, once at the cutting-edge of the US-organised jihad against the Soviet Union, was dumped once the war was over and left to deal with numerous toxic consequences.

The festering resentments in Pakistan produced a paranoid mindset that blames Washington for all of Pakistan's ills - old and new. A meeting of young people that I addressed in Islamabad recently included many who thought that the Taliban are composed of US agents paid to create instability so that Pakistan's nuclear weapons could be seized by Washington. Other such absurd conspiracy theories also enjoy huge currency.

Nevertheless, the United States isn't powerless. The chances of engaging with Pakistan positively have improved under the Barack Obama administration. Any real progress toward a Palestinian state and dealing with Muslims globally would have enormous resonance in Pakistan. The US president's speech in Cairo on 4 June 2009, announcing a "new beginning" with the Muslim world, is a promising step in this regard.

Pakistan's financial support must not be cut, or economic collapse (and certain Taliban victory) would follow in a matter of months. The government and army must be kept afloat until Pakistan is fully ready to take on extremism by itself (although better financial monitoring is needed). The United States also should initiate a conference that brings Iran, India, and China together. Each of these countries must recognise that extremism represents a regional as well as global danger, and they must formulate an action-plan aimed at squeezing the extremists.