Bhutto’s Nationalization & Its Impact on Pakistan’s Economy | History & Analysis

0:00 have them oneself. It my question is whatever BH was doing everything it had in it had political motivations it has a patronage rent seeking and a collaboration with a class of people to gain his legitimacy. So how how do you evaluate or analyze this whole scenario? I think that's you're rightly pointing this out. But I mean this is um I mean a good way to understand all the all the things you've said are characteristic of Pakistan's civil service or bureaucracy even today and so rent seeking you know most of our stateowned enterprise even today political patronage rent seeking behavior we say these things about our bureaucracy even today I mean this is

0:46 not something which is peculiar to the Bhau era or something which is um which is characteristic only of the Bhau era. But perhaps of other eras in Pakistan when one looks at Pakistan civil service or like uh like uh its bureaucracy or services like for instance the Pakistan administrative service which has been the lynch pin of the bureaucracy while called the district management group. Um all of them thrive on political patronage. Um our our bureaucracy generally has been very strongly politicized. Um and then of course uh there is that idea of uh rent seeking very strong lobby groups and because BHU was nationalizing industries and you rightly pointed this out and Pakistan was moving towards like a socialist

1:32 economy it was very natural for not just these private sector firms were n which were nationalized by the state but also other uh uh government uh stateowned enterprises or government's own institutions which were very strongly unionized during that era. So, so the idea was ultim event eventually was and if BTO wanted to sort of implement the Stalinist kind of or USSR style socialism, it would have eventually meant that these labor unions that we today so despise and you know um something that you call labor militancy. These kind of organizations were leading or these were the organizations at the helm of affairs in the industrial sector in other socialist economies of the world. That experiment did not take take

2:19 place in Pakistan. In Pakistan, we were at the phase where the state was controlling these industries, not labor unions. But the eventual idea could have been if these labor unions became eventually became so strong that they could have eventually taken over if not all perhaps some of these industries. But I agree with you that most of these industrial enterprises basically showed the same picture or were exactly what Pakistan's uh state-owned enterprises or Pakistan's institutions control and run by the government today are because these are all characteristics of a colonial bureaucracy and we were not just a colonial bureaucracy we were a rotten colonial bureaucracy and that same colonial bureaucracy had then started taking over these enterpris is

3:06 so they took the exact same system that they had in the public sector, they took it to these nationalized industries. So essentially the nationalized industries mirrored the kind of bureaucratic polity that existed within the uh within the uh organizations or institutions uh run and controlled by the state. So so it was exactly the same thing. I mean you do not need to do like a fresh or a separate analysis for uh the nationalized industries. They were just like a like uh the standard bureaucracy that Pakistan had which was like I at the cost of repeating myself characterized by the things you just mentioned red tapism nepotism um uh overstaffing uh rent seeeking behavior

3:52 uh very strong politicization of these institutions and all of these had like adverse effects on the efficiency and productivity of uh these industries which is why industrial production declined and they had adverse effects on uh economic growth. Yes. If we we understand uh from the standpoint of political economy let's assume that BH done what what you know he wanted to done and he had sufficient time to implement his vision like he got uh four five good years six years to implement his vision and he he did everything to appease that class that those stratas of the society which he thought that were marginalized back in the time of Yub's era and he he started you know

4:37 politicizing or building his own economic narrative around that class of workers of laborers of of the unions and everything then if we see the results of 1977's election so BH's resort to uh uh the political violence to the political centralism and and the use of bureaucracy and and use of the state state resources to rig the election then why his own class, the very class he was looking after or he was trying to make their lives better, did not sort of say I I don't want to say did not vote for him but not voted enough to to steer his ship out of the troubling water. That's true. I mean I mean Vakasab

5:24 something that needs to be understood is that nationalization of industries in itself would not have eliminated poverty. I mean the idea was to to do something that could sort of redistribute resources within econ within the economy and uh ensure I mean if tomorrow Pakistan nationalizes all its industries including the textile sector but doesn't do anything to sort of really ensure that the samraat of that are go to the the poor people the poor person would be would still be uh marginalized in the economy I I mean I don't see if I do like an analysis of the BHO era I don't see something other than political slogans which was really done to affect the marginaliz

6:10 marginalization of of of the classes you talk about there's nothing that was really done towards that I mean maybe some uh like I said that there some large scale development projects were being implemented but as uh the literature says those development projects take a while to sort of really redistri contribute resources within an economy and I mean unless sorry just one second question does not fall into perfectly to your domain right but we have grown up listening to one sentence that Pakistan leader he was hanged and by a dictator right so so the situations we are

6:56 talking about the situations you are mentioning the people with whom he had his hope that these people would you know protect him or or would come out of street to the streets and and save him or provide him that cover to be not hanged by the dictator. So I think that means he would he was not that much popular maybe the what we hear or what we've been told by by the books or or the writers. I think BH had lost considerable ground by 1977's elections. um also because of a very strong opposition called the Pakistan National Alliance PNA uh gaining a lot of strength which was an alliance of eight party uh gaining strength against Bau and so so PNA had gained immense ground

7:41 before the 1977's election and if the elections were not rigged as most people would call it Bhau might have lost also um but this is not to say that BH in 1977 had lost all popularity or he was not a popular leader it's very hard to you know make this sort of a definitive claim about BH. He was popular and um he had uh great control over you know um I would call them political institutions within an economy which he had used to his u to his favor very very effectively. He also did a lot of like I said a lot of things which were popular. So for instance um you know uh Put's role within the Muslim world was really

8:27 hailed by people within Pakistan given you know the uh the political economy of Islam or political relevance of Islam within Pakistan. So well that that that too seems I mean the more I'm reading about Pakistan or Pakistan's history so so actually I'm getting this sense that there is no one era which we read or which we can truly understand without uh you know understanding the geopolitical uh sort of approvals and and the global or the regional dynamics noting Pakistan's uh political regime. Exactly. and and and and and so yeah, I mean uh uh Pakistan from its very early days was strongly embedded within an

9:12 international polity and um call it geopolitics or call Pakistan call it Pakistan's uh geo uh political or geostrategic location or call it whatever you want to call it but I mean different people could talk about different things why Pakistan has been relevant uh within the global politics in different eras but the reality is that it has been and um it has brought kind of mixed effects to Pakistan. It has if you look at foreign aid and we discussed foreign aid when we discussed Aub's era in a lot of detail. If you discuss foreign aid uh one would see that Pakistan has immensely benefited from its geostrategic uh location or its uh relevance in global politics. But

9:59 then if you see you know these uh political instability in Pakistan one also sees that you know Pakistan or perhaps um you know the situation that developed after war on terror. One then starts to uh reconsider uh the thought that Pakistan has benefited from its geostrategic location or its relevance within global politics. But but yes Pakistan I mean the if you look at the 1970s Vakasaba one thing that one might want to consider was that BH's era was at the peak of cold war but Pakistan was not really needed by the US at that time and this is something that needs to be understood. Uh so so I think the United States had accomplished major

10:47 um uh major w I mean had made a lot of gains during the 1960s during the yub era was uh when Pakistan was really badly needed by the US. So I think by the 1970s Pakistan was not perhaps Pakistan still needed the the cold war was continuing. Pakistan was still needed by the US but perhaps not as much as Pakistan was needed in the 50s and the 60s. So I think um and that u uh and that also sort of led Bhau to sort of really uh become closer to to China which was also as I keep saying his his preconceived notion before he became prime minister. So, so I think um I think the global politics was changing that also leaned him towards the the

11:34 Muslim world and China both of them and and and so he used both of these to great effect uh in his domestic politics. He used uh Islam u through his closeness with the Muslim world organized the first uh Muslim conference in Pakistan and and then the other thing that he used to good effect was was China. Consider something to come up with a country like China that has nothing to do with Islam. Their local religion is completely different. They look completely different. They speak a different language. Pakistan effectively has or Pakistani people have absolutely no similarity with the Chinese. But he sold that idea so well

12:21 to the Pakistani people in the 70s and that was the effect of Zulfakar Ali BH and his politics. I mean he was a great auditor. One would not should not take that away from him. He was a great auditor, a great politician. He would he can he could charm the crowd and so he Max Weber's charismatic leader charismatic leader. He was and all populists are Max Weber's charismatic leader. So he used his charisma to such great effect especially when it came to building legitimacy for the Chinese within Pakistan that so so I mean to answer your question I mean it's it's important to understand that BH was doing the kind of things which were popular and so while BH would have lost a lot of ground by 1977 he did not lose

13:08 all ground and so so so it was difficult and and what was PNA strength by the way PNA was an alliance of eight parties but most of those parties were um were uh Islamic parties and you have to understand that it was led by something somebody called Murana Muti Memu the great uh scholar Islamic scholar and leader from the Kar Pakuna region father of uh Murana Fazur Raman and an extremely respected religious cleric from KP a downto-earth man from the middle class who rose to become the chief minister of KP P also leader of the uh Jay Islam then um a leader of the PNA what was PNA's comparative advantage over BH or

13:56 their unique selling point their USP their unique selling point was just Islam and they were branding BH at that time as somebody who was anti-Islam or perhaps like a modern leader who drank spoke spoke English wore very expensive suits was educated in the west but I read somewhere uh in a book of history I can't recall the name that when Pauh did the second amendment to to appease the religious right and in order to gain their favor so so a lot of people you know the the very famous clerics of that time you know they they spoke to BH in private or or spoke to the other people that this is the man you know which we saw in dream that that would accomplish a miss unleft mission

14:44 and he's the you know blessed one and the chosen one and it it is the god's will that he has chosen Bhau and he he was you know given such comments or remarks directly and indirectly just to make him feel that that he has done something special and what we are talking about that later on the very same class kind of the very same people or the very same uh class was revoling against I mean that's exactly the point I'm making it's perhaps not the very same class I mean something that needs to be understood was that BH was hailed as the leader of the Islamic world. As I said during the OIC summit, he did he was doing great things as far as Islam is concerned. Also, he brought um the on board uh during the 1973 constitutions.

15:31 I mean uh he he he created he gave like an Islamic color to the 19673 constitution that um uh really pleased uh uh Pakistan's religious right as you call it. But but I think um I think I think um he eventually fell out with with the religious right. But also I mean uh that's exactly the point I'm trying to make that BH's Islamic gestures or his leaning towards Islam or his occasional leaning towards Islam as I would call it also kind of created a divide between um you know the uh Pakistan's religious right or Pakistan's uh Islamic scholars or perhaps within Pakistan. So I think at uh the PNA I would carefully term this was the the

16:18 political Islam that was against Pau but the real Islamic scholars or were kind of divided over who BH was or whether he could be branded as the champion of Islam within Pakistan or a political leader or or perhaps the blessed one as you call it. So I so I think I think one thing that BH successfully did was that he used Islam to such a fact that he created a divide within the religious right. There were some people who were kind of ambivalent about BH who thought that BH had done done some good for Islam and so did not oppose him. But then there was this these political parties which were Islamic political parties something that I call political Islam who eventually um organized themselves into into the Pakistan

17:04 national alliance the PNA and then started opposing Bhau. So so I think Bhau gained from Islam and something that Islamic socialism the 1973 constitution the OIC and so on and so forth. So some of these Islamic gestures helped him at least gain favor of some of these uh uh Islamic groups if not all of them and and of course some of some others at the same time were alienated who eventually formed the Pakistan National Alliance against him and gained immense amount of strength uh after 1975. Yeah. Well uh thank you very much and uh there is a one little question I would like to ask uh if you have uh more time like to Oh sure yes yes yes please please go ahead. uh there is a one more important dimension which I would like to make

17:50 that uh the center province uh bargaining of or the aspect of this project because some scholars argue that this process of nationalization was actually a centralizing project because your two provinces Baloistan and KPK had no real industrial base. So they were actually left over out of this whole uh you know economic policy. And in Punjab obviously SU is uh expanded jobs allocations were made in Sind particularly the Karachi or the urban areas urban

18:35 empowered ethnic conflicts. Was it how how it impacted uh the relationship between the center and the provinces? I mean uh Vakasab I would I would um I would confess that I this is an area of um BH's politics that I've not explored in a lot of detail but it provides me um uh sort of a reason to to look into it. Um great question. I mean I mean it's at at at the very outset it um it seems that there was I mean this I don't think that this was a thing leaving out Balojasthan or KP for that matter. I don't think what it it it was a planned move and uh it was a or a discriminatory

19:22 policy by the state. Of course uh industries wherever they existed would have been nationalized and most of the industrial base was in Punjab some in Sind as as as you rightly point out. So, so, so yes, something that could have been done was to sort of could have been to sort of expand the industrial base to other provinces or the state could have expanded easier for states since it everything was controlled by the state. So state could have used that centraliz centralized power to to red actually redistribute the power. Do you distribute the power or take that industrial activity to if I mean

20:08 industries were used as a device to provide employment only which the Pakistani state always does or bureaucratic control always does or populist leaders always do is to provide jobs without any sort of due consideration to how that will affect industrial profits. And so and this is how the Pakistan steel mills or other state-owned enterprises have become overstaffed now because every government comes in they promise people jobs. Government's job is not to provide jobs. The government's job is to create a conducive environment in which the private sector can generate jobs. But because the industries were being nationalized they were providing jobs. If that was the whole idea then jobs could have been provided to people in KP or Balojasthan if the industrial activity was taken to those provinces.

20:54 But because those provinces did not have an industrial base before Bhau came into power, industries were only nationalized wherever they existed. And so and so that could have created these kind of you know uh interpro provincial uh differences when it came to uh the economic effects of u bhau's nationalization. But this is something that I would I would like to sort of read into and something that we could uh potentially discuss in the future. But but one thing that I would like to say is that maybe I understood your question wrong but but uh regardless of whether the industry where the industries existed the entire nationalization was a centralization idea. I mean industries were centralized and and one thing

21:40 Wakasab that needs to be understood is that Pakistan was not a very strong federalism before 1973 and even after 1973 Pakistan was still I mean on paper we we graduated towards a stronger federalist state and when I say federalist state I hope that the students understand that federalism essentially means stronger constituent units and Pakistan's constituent units at that time were only provinces because we had not started talking about local governments which happened much later after the 18th amendment. So so we were we only talking about provinces but provincial governments were not strong. We were more like a unitary government before 1973 and with a very very strong center. So

22:25 the so there was an inherent centralization within the system because provinces were not strong. I mean we did have provincial assemblies and provincial high court secretariat which is the executive. These things might have existed before 1973 but with very very little powers because Pakistan was more like a unitary state. So there was already even perhaps before the nationalization project Pakistan centralization was very strong

23:11 in Pakistan and so nationalization I agree with you added to that centralization but I don't think that in terms of the distribution of power between the center of course you compare the provinces with each other and as we discussed there could have been differences on the basis of where the industries originally existed and the government failed to sort of expand the industrial activity to other provinces. But I don't think that nationalization would have disturbed the equilibrium between the center and the provinces because there was already a very strong centralization and that centralization increased. Yes. But the provinces were already weak and I I don't think that that affected the provinces in any adverse way because they uh I mean I

23:57 mean you don't even remember something that's very interesting about Bhau and this would be my last comment. Has anyone ever thought I mean Mustavakar is the only governor of Punjab that people often talk about but if you analyze the Bhau era nobody ever hears any name of any chief minister. Nobody talks about them. Who was the chief minister of Punjab during Bhau era? Provinces were not very strong. Bhau was such a dominating leader that there is no mention of any other leaders during the Bhau era. So nobody talks about the people who led the provinces because provinces were not much talked about constituent units because they were not strong and they did not have the kind of salience in the national politics as they do today especially after the 18th amendment. That's a