Political Economy History of Pakistan Part-4

Part-4

Economic Growth since Independence

Political power in Pakistan has been concentrated in the hands of the bureaucratic-military elite who were the British raj's successors. They operated with a parliamentary facade of politicians and ministers drawn primarily from landlord interests in the 1950s, but there was no genuine general election in Pakistan before 1970, and the government has been a military dictatorship since 1958. The main beneficiaries of independence have been (a) the bureaucracy and military, who have enjoyed lavish perquisites and increased in number significantly, (b) the new class of industrial capitalists, (c) professional people, whose numbers have increased rapidly, and (d) landlords in West Pakistan.
Pakistan's ruling military-bureaucratic elite is, on the whole, quite conservative. Their education is predominantly Western, their organizational framework is British, and their working language is English. Their houses, mess halls, cantonments, and way of life are all British colonial. Despite being at the pinnacle of Pakistani society in terms of power, prestige, and income, they continue to regard themselves as ‘middle class,' subconsciously classifying themselves as if they were still British subjects.
The country's leadership has remained secular, and there is no official religious hierarchy, but orthodox ulama (theologians) have been able to halt certain types of modernization. Women's regress is the most visible manifestation of this. Many women wear veils, and the majority of them are confined to their homes, unable to go to the movies or enter a mosque, have limited access to education, are married at puberty to men chosen by their families, and remain domestic drudges.
In contrast to India’s ‘socialist pattern,' the official Pakistani doctrine has been one of functional inequality, in which inequality is viewed as a positive virtue. Thus, income tax has been kept low, businesses have been given free rein to form monopolistic groups, public enterprises have been established for functional rather than ideological reasons, there have been no nationalization, no village uplift programs, and trade union leaders have been imprisoned. East Pakistan has been overlooked to focus resources in the West. When land reform was implemented in West Pakistan, the ceiling of the holding was set at 500 acres rather than the 50 acres that is generally the upper limit in India. Land reform in East Pakistan resulted from the political coincidence that zamindars were Hindus rather than from any social pressures. In East Pakistan, the only ‘social' program of any size was the Works Program, which was largely imposed by foreign pressure.
Pakistan's growth rate has most likely outpaced that of India since independence. From 1948 to 1969, the national product increased at a rate of 3 to 8% per year. West Pakistan's agricultural output grew much faster than the rest of India, but this may have been offset by slower growth in East Bengal. In any case, the post-war growth rate disparity between East and West Pakistan has been striking. East Pakistan grew at a rate of 2-6 percent per year from 1948 to 1969, while West Pakistan grew at a rate of 4-5 percent per year. In both areas, the population has increased by 2-5 percent per year. In the West, per capita income has increased by 2% per year, but not in the East. East Pakistan's aggregate growth rate has been higher since independence than before, but its per capita growth rate has remained the same as it was during the colonial period.
In India, the growth rate was higher in the 1950s than in the 1960s, but in Pakistan, the opposite is true. The GNP growth rate in the 1950s was only 2-6 percent, whereas it was around 5-6 percent in the 1960s. There were several reasons for the 1950s' slow growth. Partition had a far greater impact on Pakistan's economy than on India's. Refugees made up 10% of the population, as opposed to 2% in India. They made up 20% of the population in West Pakistan. Some of these changes were beneficial in the long run. Immigrants are more entrepreneurial and energetic than native-born people. The exodus of Hindus in East Pakistan accelerated zamindari reform, and the fact that the entire commercial and industrial structure had to be rebuilt from the ground up created more opportunities for enterprising people than in India. There were fewer old hands in the civil service and less of the dead hand of tradition. However, Pakistan's absolute income level is lower than India's, though the difference is not large. On the other hand, Pakistan had a very unusual economic structure at the time of independence, with virtually no industry or commerce. As a result, one could argue that in the Pakistani case, the 'advantages of backwardness' (as a result of catching up with and copying the rest of the world) outweighed the disadvantages (as a result of greater difficulties in resource mobilization).
Pakistan's foreign aid has been greater in proportion to India's. Almost all of the benefits of foreign aid have gone to West Pakistan, which has performed admirably by international standards.
Pakistan's overall natural resource endowment is likely to be lower than India's, but agriculture is not as volatile. Half of West Pakistan's agricultural land was irrigated at the time of independence, and East Pakistan's problem is floods rather than droughts, though floods are not usually as devastating as Indian droughts. Pakistan's military spending is slightly higher than India's.
Of course, Pakistan's aggregate growth was relatively rapid in the 1960s, but there is no real evidence that inequality aided the growth process. Saving from private income, in particular, is rather low and has actually declined since 1964. Furthermore, it has become clear that the policy of 'postponing' social issues, even if well-intentioned, is counterproductive. Proponents of 'functional inequality' frequently argue that social justice issues can be addressed more effectively at a 'later stage' of development when the economy is more prosperous. This argument, however, ignores the fact that the economy's capital stock and productive capacity are geared to meeting a specific pattern of demand in specific locations, and the possibilities of usefully redistributing assets at a later stage actually diminish over time. Thus, capital invested in luxury housing, large dams in West Pakistan.
The new industrial class in Pakistan was largely comprised of a small group of refugee families who had previously been traders in India and had recognized the new industrial profit opportunities. The landlord class, which dominated politics in the first decade of independence, played virtually no role in industrial development.
Because of the enormous power of government controls, and because the industry was still small and controlled by minority groups, the relationship between the bureaucracy and business has been one of patron and client. In British times, the administration had always felt superior to business but now realized how much business relied on it for markets and profits. This relationship also satiated bureaucrats' egos while filling the pockets of the more corrupt among them. It preserved their social standing because restrictions on the import of luxury goods prevented businessmen from flaunting their wealth excessively. The bureaucracy had a vested interest in controls, even though many bureaucrats are aware of the economic inefficiency and corruption that they foster. Under intense international pressure, they have modified the system to include some elements of the price mechanism, but they appear unlikely to abandon the basic idea of allocating resources through bureaucratic rationing. The situation is similar to that of the USSR, where Liberman-style reforms to strengthen the role of the price mechanism are opposed because they would weaken bureaucratic power. The bureaucracy claims that by assisting businesses, economic growth has been boosted. They could have had a little faster growth, a little more equity, and more customer loyalty if they had helped it less.
The most positive development for the majority of citizens since independence has been an increase in life expectancy. West Pakistan was the winner in terms of living standards, but there was no improvement in the east. After independence, income inequality has risen in Pakistan, as evidenced by the growing trend of common consumer goods. The number of food grains available per person increased from 14-9 ounces per day in 1949 to 15-3 ounces per day in 1968. This is a smaller increase than that seen in India, where daily consumption increased from 13-9 ounces in 1951 to 15-4 ounces in 1969. On the other hand, West Pakistan had lost its regular export market in India in the early 1950s, and consumption was higher than usual as a result.
The statistical estimates of income distribution remain extremely shaky. The government's Central Statistical Office published figures for 1966-1967 that shows the top 20% of the population with 31% of household income in East Pakistan and around 34% in West Pakistan. These figures understate the income of the upper classes, as few countries have this level of equality. A more detailed study for the years 1963-4 reveals that the top 20% received 45 percent of the income. Income tax in Pakistan is significantly lower than in India, and direct taxes account for only 2% of national output. Total public sector spending on social services such as health, education, housing, water, and sewerage is only about 3% of GDP, with the majority of the benefits going to the upper-income groups. Only one-third of education spending goes to primary school, while the majority of health spending goes to urban areas; nearly all public housing projects and housing subsidies are for middle- and upper-income groups and nearly all spending on amenities is for urban areas. In previous plans, schemes for university development were usually met, but primary school construction was far below target, programs to build medical schools were met but rural health centers were neglected, targets for civil service housing were met but rural sanitation was neglected.

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