The Rebel Road…

I know you’ve come to kill me. Shoot, coward, you’re only going to kill a man. – Ernesto Che Guevara

Industrial concentration in Pakistan.

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There is no dispute that Pakistan became one of the fastest industrialising states in the world by the 1960s, but the manner in which this industrialisation took place was somewhat skewed. The military regime, which came to power after the tumultuous era of pseudo-democracy of the early to mid-1950s, gave over control of most of the industrial capital, within Pakistan, to a handful of families. This created the condition of the concentration of industrial capital. Shahid-ur-Rehman in his book Who owns Pakistan?, states, “majority of 22 families of the 1970s Pakistan started as traders and exporters and only 17 of 100 people at the top in industry interviewed by Gustav Papanek in 1960 reported to have experience in industry prior to 1947. The first and second five year plans also noted that it was people in trading who had surplus capital and, therefore, they should diversify into manufacturing and industry. The Korean boom of the early 1950s helped these traders in reaping fortunes and entering manufacturing.”

The impact of this policy has been multi-faceted and Pakistan continues to suffer the effects of the mismanagement by military regimes. In my opinion, a number of significant and immediate effects can be identified.

Artificial creation of income and wealth disparity between the people of Pakistan.

The unequal industrial capital distribution between East Pakistan and West Pakistan.

The rise of the capitalist-bureaucratic alliance.

The creation of monopolies, and

Dependence on foreign aid.

Pakistan at the time of its creation was a rather poor country. Indeed, in its formative years Pakistan did not even have resources to carry out effective administration. The first and perhaps the most important form of wealth generation came in the early 1950s with the Korean crisis. During these years many countries stocked up on supplies, including cotton, and Pakistan was in the position to supply such products at higher than usual prices. The sheer amount of money introduced into the economy was staggering for a country that was as yet trying to stand on its feet. Peter R. Blood, in his book, Pakistan: A case study, states, “The outbreak of the Korean war (1950-53) and the consequent price rises in jute, leather, cotton, and wool as a result of wartime needs, saved the economy of Pakistan. New trading relationships were formed, and the construction of cotton and jute mills in Pakistan was quickly undertaken.”

The end of the Korean crisis brought about an end to this money generation and Pakistan was forced to introduce import regulations to bolster its industrial growth. The situation, however, takes on a completely new dimension as Ayub Khan hands over control of all industrial and financial capital (87 percent) to the favoured ‘twenty-two’ families, as Mehbub-ul-Haq put it in his speech.

This created a position in which a completely new stratum of society, which as the author states had no connection or history with industry longer than 10 years in the past, found itself at the forefront of what was hailed as the salvation of Pakistan. Studies show that this method of propagating industry did not have the effect intended, i.e. the famous myth of the “trickle down effect”; rather figures show that income disparity, poverty and life standards worsened as a result. Real wages between 1957 and 1967 fell by approximately 25 percent. The situation for the rural peasant had gotten so bad that it is estimated that by 1971-72, 82 percent of the rural population did not afford 2,100 calories per day per family member. Further estimates show that during 1960 to 1978 almost 0.8 million tenants became landless wage labourers.

The second important result was the creation of a greater cleavage between East Pakistan and West Pakistan. This was because rapid industrialisation was taking place within the western half, whereas the eastern half was always treated as the step-sibling (according to state policy). Another significant reason is that out of 44 houses the study was conducted upon, only 16 even owned assets within East Pakistan and of these 16, only three were exclusive to the area. It is clearly evident from statistics alone that no real effort was made by state or private investors to develop East Pakistan. Mohammad Niaz Asadullah, in his paper titled Educational disparity in East Pakistan and West Pakistan, 1947–71: was East Pakistan discriminated against? states, “The western wing, which had a larger urban population (33 percent), was the primary beneficiary of such industrialisation. The East Pakistan economy was largely agrarian and 95 percent of the population resided in the rural areas. Consequently, it was left out of the development process and experienced little gain in per capita income.”

The third significant aspect is the rise of the capitalist-bureaucratic alliance. The bureaucracy amassed great power in the years leading up to the military coup. This resulted in more policy-based decisions being taken by this sector. When capitalists were artificially given more power, the first thing they did in order to achieve monopoly was to make themselves immune from any future state and bureaucratic interference. Furthermore, the One Unit scheme was another ploy on the part of capitalists to gain future monopoly in all markets across Pakistan. This monopoly creation status was soon accomplished (four houses controlling 27.7 percent of the cotton industry, 33.7 percent of the sugar industry, 46.3 percent of the cement industry, 57.1 percent of the jute industry, etc.) by making the bureaucracy an active ally; another nail in the coffin for ‘social welfare’ in Pakistan.

The matter was further exacerbated by the manner in which wealth generated from these industries was not put to productive use. Again, as mentioned before, the trickle down theory failed to slake the thirst of the working classes. The bourgeois elite, however, saw gains from the Korean war years as well as the recent industrialisation as their private wealth, to be squandered at their whim. Since Pakistan was already carrying out its industrialisation with heavy reliance on foreign debt, the squandering of these finances compounded the problem of debt servicing. “According to official figures, gross foreign aid inflows increased from $373 million in 1950-55 to $2,701 million in 1965-70.” Rudolf Hilferding, in his book, Finance Capital: A study of the latest phase of capitalist development, says,

“The progress of industrial concentration has been accompanied by an increasing coalescence between bank and industrial capital. This makes it imperative to undertake a study of the processes of concentration and the direction of their development, and particularly their culmination in cartels and trusts. The hopes for the `regulation of production’, and hence for the continuance of the capitalist system, to which the growth of monopolies has given rise, and to which some people attribute great significance in connection with the problem of the trade cycle, require an analysis of crises and their causes.”

Debt servicing as a percentage of foreign exchange earnings rose from 4.2 percent in 1960-61 to 34.5 percent in 1971-72. It is quite evident, therefore, that although great achievements were made in the sheer magnitude of industrialisation in Pakistan, the manner in which it was carried out doomed it from the very beginning. This is by no means a solitary instance. Similar instances of this policy have been seen earlier; indeed the very failure of this policy is its defining feature.


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