This seems to be a well-researched work by the author on a subject that has received very little independent scholarly attention. While it singles out Z.A. Bhutto's nationalization in the 1970s as the biggest culprit, it also includes a good description of how industrialization was stymied in Pakistan by successive governments while feudal rulers continued to take their toll on any middle class growth essential for civil society and democracy. The author argues that the Bhutto era nationalization has left such "deep scars on the psyche" of Pakistani industrialists that, to this day, these industrialists are not willing to make long-term investments in big industrial projects with long gestation periods. The military governments have, in fact, been more pro-industrialization because the military elite benefits from the manufacturing sector as much much as it does from real estate and agriculture sectors.
|Top 11 Groups of Companies Account For 35% of Karachi Stock Exchange Market Cap|
Comparisons with India:
Whenever we discuss Pakistan, comparisons with India are inevitable because we have such a long shared history and both countries became independent at the same time. Looking at the Indian experience, the Indian Congress governments were not particularly friendly to industries as depicted well in the Bollywood movie "Guru" based on the life of Dhirubhai Ambani. The semi-literate Ambani built a multi-billion dollar empire called Reliance Industries in India. However, Congress and Nehru were really hostile to the feudal system and brought it down almost immediately after independence in 1947 through
real and extensive land reform that reduced individual and family land
holdings to a few acres each. In spite of his deeply held socialist beliefs, Nehru was a pragmatic leader and believed in industrialization. He recognized that India needed a strong higher education system to support industrialization. The renowned IIT system was, therefore, started in 1951 by Prime Minister Jawaharlal Nehru and Education Minister Maulana Abul Kalam Azad with the first IIT in Kharagpur inaugurated by Maulana Azad on Aug 18, 1951. Maulana Azad was also the person who brought Birla and Nehru together after Liaquat Ali Khan as Finance Minister in 1938 started investigating Birla for his cash contributions to the Congress party. Recognizing the contributions of Birla and Tata to Congress in the struggle for India's independence, Nehru gave special treatment to both of the industrialists and asked them to help in India's industrialization.
Actions by Nehru and Congress in India were in sharp contrast to the policies pursued in Pakistan. There was no strategic thinking or vision to start anything like the IIT system in India or to reach out to the industrialists who chose to come to Pakistan. Instead, these policies allowed thousands of acres of land in the hands of a few Pakistani feudal families such as the Jatois and the military elite while Pakistan's leader ZA Bhutto presided over the destruction of the nascent industrial sector that had just started to take off under President Ayub in the 1960s. Like Tata & Birla, some of the Pakistani industrialists such as the Habibs and the Haroons helped in Pakistan's independence movement and, immediately after independence, Habib Bank had bailed out Pakistan Government with a huge loan in its early days to cover its budget deficit. However, Bhutto showed no recognition of their help during his nationalization campaign in the 1970s. All of Bhutto's favors were reserved for his feudal colleagues who assumed leadership positions in his administration. These are the conditions under which Pakistan could not move from feudal to industrial society and the middle class could not grow to sufficient strength to demand real democracy based on rule of law.
Privatization in Pakistan:
Nationalization had finally been recognized as a failure in Pakistan when Benazir Bhutto became prime minister in the early 1990s. During the two terms each of Benazir and Sharif, each embarked on rolling back ZA Bhutto-era nationalization by privatizing hundreds of industrial units. However, the privatization efforts by both have now been documented by author Shahid-ur-Rahman to be marred by massive corruption involving a giveaway of multi-million rupee units for the token prices of a few rupees. The sales of these units did not make even a small dent in the national debt.
Pakistan Under Gen Musharraf:
Since "Who Owns Pakistan" was published in 1999, the last eight years under Gen Musharraf have seen the return to annual economic growth of 6-8% with significant new domestic and foreign investment in industries, particularly telecommunications, financial services and infrastructure development. Pakistan's GDP has more than doubled. The number of telephones has soared to 50 million from a mere 600,000 six years ago. The privatization of banks has led to a huge increase in the production and sales of cars, motorcycles and, perhaps most important, TV sets. From a strictly economic standpoint, military rule in Pakistan appears to have been a lesser evil. But, regardless of what one might think about the merits of military rule, Pakistan has seen significant growth under General Musharraf and his hand-picked Prime Minister Mr. Shaukat Aziz. By all accounts, the ranks of the middle class have been swelling in Pakistan during Gen Musharraf's rule. According to Tara Vishwanath, the World Bank's lead economist for South Asia, about 5% of Pakistanis have moved from the poor to the middle class in three years from 2001-2004, the most recent figures available. As expected, the prospering middle class has demanded more than just economic benefits. The middle class is now demanding democratic reform that bodes well for Pakistan in the long run. However, this class is still small relative to the population in Pakistan. It just needs to be cognizant that impatience on its part can roll back the gains made in the last eight years.
The Higher Education Commission under Dr. Ata-ur-Rahman Khan has seen a tremendous increase in HEC budgets with the opening of dozens of new universities and large number of scholarships to study abroad. My hope is that, if the economic, education and industrial growth continues at the current pace for another decade, we can expect a much larger, more powerful middle class to emerge that will successfully challenge the feudal and military rule in the not-too-distant future in Pakistan. We might even see real land reform at some point to free the unwashed masses in rural and tribal Pakistan. Feudal system might even fizzle out by itself as the vast landholdings get distributed among the feudal offsprings over the next couple of generations.
The Indian Exception:
Among the less-developed nations in Asia and Africa such as India and Pakistan, India remains a unique example of a country that has only partially industrialized but it remains largely democratic in spite of the majority of its people not being served well by its successive governments. There seems to be only one plausible explanation for the Indian exception as a democracy: India's sheer size and diversity make it very difficult for any military to govern it but I think the early and effective land reform in India has been one of the key factors in its ability to free the average people who chose to sustain democratic institutions over other alternatives. With the recent emergence of a powerful middle class in India, India's democracy has been further strengthened.
Pakistan remains decades behind India in establishing democratic institutions by failing to limit the power of the feudal lords,the military generals and the clerics.
The recent economic growth has helped propel the middle class as evidenced by the growth of the media and the powerful resistance to military rule by the civil society including the lawyers, the media and various NGOs. However, the Pakistani middle class is still relatively small to bring about a fundamental change. It needs to grow at the current pace for at least another decade. The challenge for India is to enable sharing of its new-found wealth and opportunities with the rural folks who have not yet participated in India’s progress.