Pakistan s economic system: a stage of transition

Transcription

1 MPRA Munich Persnal RePEc Archive Pakistan s ecnmic system: a stage f transitin Naved Hamid and Rashid Amjad 1971 Online at MPRA Paper N , psted 11. June :13 UTC

2 Pakistan's Ecnmic System A Stage f Transitin Intrductin In the first ever General Electins held in December 1970 the Pakistan Peple's Party emerged as the largest plitical party in West Pakistan. On 20th December, 1971 the Chairman f the Party tk ver as President f Pakistan. Althugh the cuntry is still under Martial Law demcratic rule is t be intrduced in the very near future. Certain preliminary ecnmic refrms in the Industrial and Agricultural sectrs are t be intrduced under the cver f Martial Law. Natinal and Prvincial Assemblies. Other refrms will fllw the cnvening f the The purpse f this article is t examine the different pssible paths the Pakistan Peple's Party may fllw in the implementatin f its scialist prgram. Fr this purpse we intend t examine bth the ecnmic and plitical frces perating in the cuntry. In the first part f the article we will shw that the Peple's Party's ecnmic prgramme is a very radical ne. It prpses fr the gvern ment t take away pwer frm the capitalist and the landlrds and t initiate a prcess f cnstructing scialism. T illustrate this we have extensively quted frm the Party's manifest. We have als briefly described the main characteristics f the ecnmy in which this manifest has t be implimented. In the secnd part we have analysed the causes f the success f the party, the nature f its mass supprt, rganisatinal structure and its limi tatins. Tgether the first tw parts prvide us the framewrk in which the crucial questin as t what the Party is likely t d can be answered. This we d in the last part where we have utlined the pssible ways pen t the Party and have discussed the cnsequences ing these plicies. and limitatins f fllw

3 48 PAKISTAN ECONOMIC AND SOCIAL REVIEW PART I Basic Characteristics f the Pakistan Ecnmy Pakistan is a typical underdevelped cuntry where except fr a few peple the vast majrity lives in misery and pverty. The agricultural sectr, which nw cntributes abut 50% f the GNP and emplys 80% f the ppulatin, hwever, have been made is dminated by a feudalist structure.* Sme inrads, in it because f the prcess f mechanizatin. This has led t the emergence, in certain areas f a class f capitalist farmers. The prcess f mechanizatin has als led t an increase in landless labur which nw numbers abut 20% f the ppulatin.f In the industrial sectr a plicy f rbber barn industrializatin was fllwed wthich has resulted in an extreme situatin where n the ne hand 66 per cent f the industrial assets and 85% f the Banking and Insurance assets are wned by nly 22 families1, while n the ther, ver the last 10 years the per capita incme f the peasantry and the industrial wrkers has gne dwn.2 The semi clnial nature f the sciety can be seen frm the fact that, first the cuntry is heavily dependant n freign aid and lans which ver the years ttal a sum f dllrs 6,033 millin.3 Secnd, the kind f industrializatin which has taken place in the cuntry has been such that n basic industries have been allwed t be set up and the cnsumer gd industries which have been set up are based almst entirely n imprted raw materials. Third, cnsiderable amunt f private freign investment has flwed int the cuntry. capital emplyed by all firms incrprated In 1962 thirty tw per cent f the ttal in Pakistan was wned by freigners. In percentage terms this declined t 17.5% in It, hwever, still remains a substantial amunt f Rs. 2,749 millin.4 This shws that * An idea f the semi feudal nature f agriculture in West Pakistan can be had frm the fact that 6,060 f its big landlrds pssessed families, while mre than half f the land was cultivated by mre land than its 3.3 millin peasant tenants at will wh had n legal right whatsever t the land. (A Reprt f Land Refrms Cmmissin fr West Pakistan, Lahre Jan pp ). t Mst likely cnservative side. Using, ppulatin an estimate f tw millin landless labur families wuld be n the a figure f 5 members per family wuld lead t a ttal in the landless labur grup f abut 10 millin (Aresvik, O, "Reflectins the Sci-Ecnmsc Objectives f the Frth Five Year Plan-Agricnlture Strategy", Agriculture Department, Gvernment f Pakistan, Nvember 1968 (Mime). n

4 HAMID AND AMJAD PAKISTAN'S ECONOMIC SYSTEM 4$ Pakistan has been kept as a market fr the manufactures f the advanced industrialised cuntries and an utlet fr their surplus capital. The ther tw imprtant frces which frm the backbne f the system are the military and the bureaucracy. Ever since the military tk ver the gvernment in 1958 it has becme an increasingly imprtant beneficiary f the system. Nt nly has there been a cnsiderable increase in military expenditure (ttaling 60% f the budget) but als the military has expanded int ther fields. A large industrial cmplex is being directly run by the military. Als sme senir military fficers have been given large hldings f land and imprtant jbs in varius public and private rganizatins. The Bureacuracy, which is a legacy f ur clnial past, derives its main pwer frm the vested interests. It has been able t exercise tre mendus ecnmic pwer because f its cntrl ver the distributin f ecnmic resurces. This has had tw effects. Firstly, crruptin is ram pant amngst gvernment servants and they have amassed cnsiderable wealth. Secndly^ they have either becme partners in business with the industrialists r are getting high salaried jbs n retirement in the private sectr. We can, therefre, cnclude that the basic characteristic f the ecnmy is semi-feudal and semi-clnial. The feudalists and the cmpradr mnply capitalists cntrl the system thrugh the military and the bureacracy. PEOPLE'S PARTY PROGRAMME* The Party's manifest states "The ultimate bjectives f the Party plicy is the attainment f a classless sciety which is pssible nly thrugh scialism in ur times''5 (Emphasis added.) The Party stands fr the eliminatin f the feudal system and will take cncrete steps in accrdance with the established principles f scialism t prtect and advance the interests f the peasantry'6 1. NATIONALIZATION OF INDUSTRIES7 : In the Public sectr will be all basic and key industries. The principal nes are :? 1. Irn and steel 2. Nn ferrus metals This has been taken entirely frm the Peple's Party Manifest t shw what is its ecnmic prgramme.

5 50 PAKISTAN ECONOMIC AND SOCIAL REVIEW 3. Heavy engineering 4. Machine tls 5. Chemicals 6. Ship building 7. Mtr car assembly and manufacture. 8. Equipment fr electrical pwer prductin, distributin and use. 9. Electrnics 10. Prductin f arms, and ammunitin and armaments fr defence. 11. Cement 12. Paper. T these will be added the new industries which must be established t enable the autnmus grwth f the natinal ecnmy. Fr example, it will be necessary t manufacture agricultural machinery and equipment in Pakistan, and the cmmnly used hand tls. All majr industries will be natinalised. (Emphasis added.) This will mean taking ver int the public sectr textile and jute mills ver a certain prductin capacity. In private wnership these have been surces f excessive prfits, inefficient prductin, wastage f resurces and unhinder ed explitatin f wrkers. In the public sectr will be nt nly the large scale prductin f electrical pwer but als all ther surces f energy supply namely, nuclear material, gas, il and cal. All explitatin f mineral wealth, bth mining and re-prcessing, will be in the public sectr. The public sectr will cmpletely cntain the fllwing majr means f public transprts, namely, railways, shipping and airways. It will als take ver public rad transprt, whether f passengers r gds, when it is necessary t run it n a large scale. A special cncern will be the cnveyance f wrkers and emplyees between their hmes and their places f wrk. Large-scale exprt trading, such as f jute and cttn, will be cnducted by state crpratins." 2. FINANCIAL MEASURES8 : "The pssessin f mney institutins in the hands f private parties is the surce f explitatin which uses natinal wealth and private depsits t create mney fr the financing f mnply capitalists. All big indus tries have been set up entirely n bank lans, which means, n the mney

6 HAMID AND AMJAD : PAKISTAN'S ECONOMIC SYSTEM 51 f depsitrs. Such lans can be said t have been the misapprpriatin f public mney by the bankers. T this srt f abuse which is inherent in any system where banks are in private hands, there has been added the cntrl f banks in cartels belnging t industrialist families. Unless the State takes hld f all the banks by making them natinal prperty, it will nt be able t check inflatin. The State's financial plicy is at present a prisner f the bankers. All banks natinalised". (Emphasis added.) Agrarian Refrms 9 and insurance cmpanies will be frthwith "The breaking up f the large estates t destry the pwer f the feudal landwners is a natinal necessity that will have t be carried thrugh by practical measures, f which a ceiling is nly a part. (Emphasis added.) The size f the agricultural estate will be limited by the ceiling, the nrm being the wner ship f a maximum f 50 t 150 acres f irrigated land, the maximum varying frm tract t tract and being determined n the basis f quality f sil, present prductivity and the availability f irrigatin facilities. Fr what the estate wner surrenders ver and abve the prescribed ceiling he will be cmpensated in the frm f a terminable life annuity, with a maximum duratin f twenty-five years heritable and negtiable within this perid. But the best way is t replace the system f agricultural prductin in islated units by the creatin f scial cperative farms. The estate wner, after he has surrendered his excess hlding, will be eligible, like any ther farmer, t jin the scial cperative farm f his area. There are many peasants wh pssess land less than the subsistence unit and must therefre be regarded as a class frm whm be justifiably demanded. Cnclusin land revenue cannt It is bvius frm the abve that the Party's ecnmic prgramme is nt nly cncerned with ecnmic refrms but aims at bringing abut basic changes in the existing system. It aims at destrying the pwer f the capitalists and the feudalists in the cuntry and initiating a prcess f building scialism. This is t be achieved thrugh far reaching natinalisatins in industry and finance n the ne hand and drastic land refrms in agriculture n the ther.

7 52 PAKISTAN ECONOMIC AND SOCIAL REVIEW PART II The Reasn fr the Peple's Party's Success in West Pakistan Prbably fr sme time t cme it will be a matter f dispute amngst plitical scientists as t whether the charismatic leadership f Mr. Z.A. Bhutt r the appeal f the party's prgram was the main cause f its success. Hwever, there is n dubt that bth played a very imprtant part in this victry. Withut the charisma f Mr. Z.A. Bhutt the message f scialism wuld nt have been able t spread s widely amngst the masses in s shrt a time. On the ther hand withut the mass appeal f the Peple's Party prgram its success culd never have been s verwhelming. It is imprtant t keep this in mind and ne must nt ver emphasise the rle f charismatic leadership. If this had been the nly factr it shuld have been equally effective in all areas. Hwever, we find that the success f the Peple's Party is mstly restricted t the relatively advanced areas f West Pakistan. This indicates that nly in thse areas where the peple culd understand the party's prgram and think it feasible did the party receive massive supprt. While n the ther hand in the backward areas where the feudalist hld is still very strng and the peple culd nt cmprehend the feasibility f the prgram the party did nt achieve such success. This means that cnsiderable expectatins have been arused amngst the peple and thse wh vted fr the Peple's expect it t fulfil its prmises. Party Reactin amngst the Capitalists Althugh the rightist press and plitical parties have cnsistently main tained that the Peple's Party has n intentins f fulfilling its prmises yet apparently they did nt believe in their wn prpganda. An idea f this can be had frm the actins f the landlrds and the capitalists immediately after the electin results. The landlrds have tried t sell r transfer land and als have ejected the tenants fr the fear that they wuld lse it in the land refrms. Similarly the stck market which is an index f the capitalists expectatins declined sharply. It was nly slightly revived at the time f military actin in East Pakistan in. March 1971 when hpes were revived that the pwer wuld nt be transferred t the peple's representatives (See figures).

8 53 GENERAL INDEX OF SHARE-PRICES (Based n /959-60*/) SHARE PRICES INDEX OF COTTON TEXTILES (Based n *100) HO c d 100 IN* k??? k * cj q.? Q ^ ^ ^ GENERAL INDEX OF SHARE SHARE PRICES INDEX OF (Surce : Mnthly Statistical Bulletin Nvember '72 CS.O. Karachi) Diagrams by Abdul Raf.

9 HAMXD AND AMJAD : PAKISTAN'S ECONOMIC SYSTEM J J Impact n the Peple The electin campaign in 1970 and the victry f the Peple's Party has had a tremendus impact n the thinking f the peple. Fr the first time in the rural areas the peple participated in mass plitical activity against their age ld ppressrs. Their victry made them aware that the landlrd and his supprters culd be defeated. This has pened entirely new pssibilities fr the ppressed peasantry and landless labur. The result is that besides the increased expectatins there is als a new spirit f self cnfidence amngst them and this will be f great cnsequence fr the future especially if their expectatins are nt fulfilled. Althugh the visible impact in the rural areas has been far greater, because f the previus backwardness, there has als been an imprtant change in urban areas especially amngst the wrking class. Until nw the wrkers had been invlved nly in "Trade Unin" activities. Fr the first time in 1970 wrkers began t participate increasingly in plitical activities, and the year was marked with a mammth 'May Day' prcessin and numerus meetings fr purely plitical purpses. This change reached a climax with a tw day takever f all the large factries in Lyallpur, in March 1971, fr plitical demands n the call f the Peple's Party. There has been a great increase in their plitical awareness and recently whenever the wrkers have prtested they have dne s nt by strikes and walkuts but by taking ver the factry and running it n their wn. All this indicates that the present gvernment is nw faced with a plitically cnscius and active ppulatin, wh will be much mre difficult t satisfy than they were in the past. Limitatins f the Party and its implicatins The basic limitatin f the party is the lack f well disciplined rganiza tin and the class cntent f its leadership. The reasns fr the frmer is nt nly that the party has been in existence fr just fur years, but mre imprtant that nt enugh attentin has been paid t building up its rganizatin n prper lines. At the same time because f its success all srts f pprtunist elements have jined it and nw exercise cnsiderable influence in it. This has serius implicatins regarding the future plicies. The? pprtunist elements wh have jined the party fr persnal mtives- will try t sidetrack the basic refrms and will advcate a. plicy f gradualism

10 56 PAKISTAN ECONOMIC AND SOCIAL REVIEW s as t safeguard their wn interests. Similar advice will be frthcming frm the existing bureaucracy, which the party will prbably rely n because f the weaknesses in its wn rganizatin. PART III* Befre we utline the pssible paths pen t the Peple's Party we wuld like t make clear sme f the difficulties invlved in trying t bring abut scialism withut first undertaking fundamental changes in the ecnmic system. The first and mst imprtant difficulty has been very clearly expressed by Oskar Lange wh 4 pints ut that An ecnmic system based n private enterprise and private prperty f the means f prductin can wrk nly as lng as the security f private prperty and f incme derived frm prperty and frm enterprise is maintained. The very existence f a gvernment bent n intrducing scialism is a cnstant threat t this security. There fre, the ecnmy cannt functin under a scialist gvernment unless the gvernment is scialist in name nly. If the scialist gvernment scialises the heavy industry tday and declares that the textile industry is ging t be scialized after five years, we can be quite certain that the textile industry will be ruined befre it will be scialized. exprpriatin have n inducement t make the necessary Fr the wners threatened with investments and imprvements and t manage them efficiently. And n gvernment super visin r administrative measures can cpe effectively with the passive resis tance and sabtage f the wners and managers. A scialist gvernment really intent upn scialism has t decide t carry ut its scialisatin prgram at ne strke, r t give it up altgether. The very cming int pwer f such a gvernment must cause a financial panic and ecnmic cllapse. Therefre, the scialist gvernment must either guarantee the immunity f private prperty and private enterprise in rder t enable the capitalist ecnmy t functin nrmaly in ding which it gives up its scialist aims, r it must g thrugh reslutely with its sciali satin prgram at maximum speed. Any hesitatin, any vacillatin and in decisin wuld prvke the inevitable ecnmic catastrphe. nt an ecnmic plicy fr the timid."10 Scialism is In this part we have relied cnsiderably n the article "Peaceful Transitin t Scialism?" by the Editrs, Mnthly Review, January 1971.

11 HAMID AND AMJAD : PAKISTAN'S ECONOMIC SYSTEM 5 7 Secndly, as the scialist gvernment cmes t pwer it inherits the state apparatus f the past. This state apparatus is there t serve the interests f the capitalist and feudal classes. The members f the bureaucracy have links with the vested interests. The legal system, the plice in fact the entire gvernment structure is there t lk after the interests f the privileged classes. If the scialist gvernment tries t wrk within this structure and uses this apparatus t bring abut its refrms it will find that the refrms will be sabtaged at every step and unnecessary difficulties created in every way. Therefre, a scialist gvernment cming t pwer must immediately destry the surce f pwer f the existing privileged classes and this bviusly can nly be dne by natinalising the big industries and redistributin f land. Only when this surce f pwer has been effectively dne away with the scialist gvernment can be saved frm sabtage by the state apparatus which it inherits. We must, therefre, cnclude that shrt term changes are neither feasible nr pssible fr the scialist gvernment t bring abut until it is fully reslv ed t cmpletely change the basic sci-ecnmic structure. And that the gvernment wuld face cnsiderable difficulty in making shrt term refrms withut changing the system. Alternative Plicies The new gvernment has taken ffice n a prgramme which is a standing threat t the existing ecnmic system and t the vested interests. The gvernment therefre has tw simple chices. Either it shuld act n its prgramme in such a way as t try t gain effective cntrl ver the ecnmy and lay the basis f scialism r t retreat frm its prgramme and adpt plicies cmpatible with interests f the feudalists, capitalists and imperialists. As regard t the first alternative it wuld mean implementing fully the parties prgramme f intrducing radical land refrms in the agriculture sectr and far reaching natinalizatin in the industrial sectr. The vested interests, hwever, will nt give up their pwer withut a struggle and here the party will find that its tw majr shrt cmings i.e. lack f party rganizatin and the class cntent f its leadership acting as an imprtant barrier in its effrts t implement these refrms. N successful land refrm can be implemented thrugh the present bureaucratic structure with the feudal interest dminating the party leader

12 5? PAKISTAN ECONOMIC AND SOCIAL REVIEW ship in the rural areas. In the industrial sectr the ld wners and managers "will fight against any attempt n the part f the gvernment t impse plicies n them which they cnsider cntrary t their interests. If the gvernment tries t cunter this "by taking ver the industries and relies n the bureaucracy r the "burgeis" managerial class it will hardly make any real difference in the industrial sectr. The nly way the gvernment can be successful in implementing its manifest is by putting itself at the head f a great mass mvement against feudalism, mnply capitalism and imperalism. Only under the impetus f such a mass mvement, embracing the majrity f the ppulatin, will it be able t carry ut a bld prgramme f scialisatin. This in cncrete terms wuld mean the setting up and strengthening the present rganiza tinal structure f the party t grass rt levels. With the leadership at all levels in hands f the explited peple and refrm being carried ut thrugh peasant cmmittees and cperative farming being rganized by them. In the industrial sectr it can be dne nly with wrkers participatin and cntrl f the natinalized industries and the replacing f the market mechanism by a centrally planned ecnmy. The secnd alternative fr the party wuld be t "retreat" frm its prgramme. By this we d nt mean anything as as simple frmal abandn ment in whle r in part. What we d mean is that the prgramme is interpreted and implemented in such a way as t make the feudualists and capitalists (bth dmestic and freign) t believe that the basic framewrk wuld nt be destryed. The party culd carry ut refrms such as natinalizatin f the insignificant heavy industrial sectr and agrarian refrms n the line f Ayub Khan's regime. The prgramme f retreat can cnsist f three parts :? (i) Pressing frward with refrms t acceptable the vested interests (2) pstpning structural changes unacceptable t the vested interests. (3) Starting a shrt run prgramme t rehabilitate the ecnmy supprted by large amunts f freign aid. Fr example what the gvernment can d is t bring abut minimum amunt f natinalizatin and land refrms keeping the verall system intact and putting frward the reasn that given the extreme nature f the present ecnmic and plitical crises it must mve slwly. The success f such measures depends, hwever, n hw successful

13 HAMID AND AMJAD! PAKISTAN'S ECONOMIC SYSTEM 59 the gvernment is in satisfying the peple n the ne hand and f cnvinc ing the vested interests n the ther, that it will ensure its basic existence. If the vested interests still fail t cperate with the gvernment in making limited ecnmic refrms then it wuld be frced int a taking definite psitin. Either it wuld have t make an alliance with the vested interests and give up its prgramme f scialism altgether, r it wuld be frced t mve Cnclusin in the ther directin cmpletely scialising the ecnmy. Thus we can see that the gvernment has tw ptins pen t it. In can either bring abut limited ecnmic refrms, with the cperatin f the vested interests r it can undertake fundamental and far reaching changes in the ecnmic system and begin the cnstructin f scialism. Hwever, it must be kept in mind that the prblems f the masses are very acute. While, at the mment, the Peple's Party gvernment enjys almst the cmplete supprt f the peple yet they will nt be prepared t accept the cntinuatin f the status qu fr very lng. The very frces which the Peple's Party has generated amngst the masses leaves it with very little rm fr maneuvre. Ecnmics Department Punjab University. NAVED HAMID RASHID AMJAD REFERENCES 1. Dawn, Karachi, 25th April Hamid N., "A Critical Appraisal f Frei&t Aid Strategy'9, Punjab University Ecnmist, December, 1970 p Pakistan "Ecnmic Survey, , p Chaudhry S.A., Private Freign Investment in Pakistan, Pakistan Develpment Review, Spring 1970, p Electin Manifest f the Pakistan Karachi, p. 13. Feple's Party 1970 Visin Publicatins Ltd., 6. Ibid. p Ibid. p Ibid. p Ibid. p Lange O., On the Plicy f Transitin, Mnthly Review, January 1971 pp