Sunday June 23, 2024

Economic half-truths

By Abdul Sattar
December 11, 2023

After pushing Pakistan’s economy towards partial deindustrialisation, the pundits of the neo-liberal world have come up again with a new anti-people agenda.

These ‘experts’ now want the government to sell the remaining state-run entities that, according to them, have been incurring unimaginable losses. They are skilled at manipulating facts and love to speak half-truths. 

Most of them do not want to discuss the rise of capitalism and the ruthless exploitation that helped this monstrous system make strides in different walks of life.

Containers have been held up at Karachis port as the country grapples with a desperate foreign exchange crisis. — AFP/File
Containers have been held up at Karachi's port as the country grapples with a desperate foreign exchange crisis. — AFP/File

Academics, former ministers and financial experts also seem determined to prove that the ideology of the free market is the only way forward. For them, it is a panacea that must be employed to cure the ills of Pakistan’s economic system. They believe that if we are left at the mercy of the market, everything will get better. For them, this is the only solution to address skyrocketing inflation, rising poverty, rampant corruption, abysmal human development index and massive unemployment.

But they fail to enumerate the benefits of this anti-people system that was introduced in the country during the 1980s under General Zia. Tall claims were made by politicians that Pakistan would be converted into a new Singapore or South Korea by following the recipe of the free market economy, but the adherents of this ideology are tight-lipped over the truth about these claims.

Despite implementing a number of reforms, the country is yet to witness the fruit of the much-vaunted industrialization that the disciples of Adam Smith had promised more than 35 years ago.

The Pakistani economy might not have been as impressive as that of some advanced capitalist countries during the 1960s, 1970s and 1980s, but it had a modicum of industrialization with the state pumping billions of rupees towards economic growth.

It was the state that offered generous loans to industrialist families helping them build industrial and financial concerns. In many cases the public sector created industries, doling them out to entrepreneurs later to run it. A low interest rate and a number of other concessions were instrumental in encouraging the business class to take keen interest in the economic development of the country.

Had there been not enough support on the part of the state, the economic growth that the country achieved during the 1960s and 1970s would not have been possible.

Since most of these financial pundits and free market warriors do not want to discuss politics, they tend to ignore the impacts of politics on economic development of states. Had there been no cold war, there would not have been any Marshall Plan to rebuild the devastated economies of western Europe, Japan, South Korea and other countries that were in the ambit of capitalist America.

Worshippers of the free market economy in our country tend to ignore the benefits that we achieved by siding with the West during the cold war.

When they talk about the impressive economic growth during the time of Ayub Khan, they almost always praise smart entrepreneurs without acknowledging the generous Western financial assistance that was showered on Pakistan for showing a lukewarm response towards the 1948 Arab-Israeli war, for adopting criminal silence over the Anglo-French aggression against Egypt in 1956, and for throwing clandestine support behind the West during the conflict in the Korean Peninsula in 1951-53.

Perhaps it was because of this that we were gifted $0.77 million in economic assistance in 1948. During the next two years, there was no conflict, so we remained without any assistance. The Korean War that erupted in 1951 brightened our chances of securing Western assistance. We got $2.89 million, $74.25 million and $748.29 million in 1951, 1952 and 1953 respectively in economic assistance.

Development aid was also directed to us and we received $73.55 million in 1952 and $286.23 million in 1953 in economic assistance from USAID.

With the cessations of hostilities in the Korean Peninsula in 1953, our chances of financial assistance from the West also diminished. Pakistan received $156.95 million in economic assistance and $152.24 million dollar in assistance through USAID in 1954.

In 1955 with rising tensions in the Middle East, our economic assistance also witnessed a boost, and we received $733.15 million in economic assistance and $477.18 million in assistance through USAID. We also received $266 million in military assistance. This was the first time that the US understood our security challenges and offered military aid for the first time.

With the eruption of a war in the Middle East in 1956, our star started shining once again and the country received a whopping $1056.67 million in economic assistance, $700.89 million in assistance through USAID and an astronomical amount of $1,086.5 million in military assistance. The conflict in the Middle East proved that we could be a trusted ally of the West and that London, Washington and Paris could pin their hopes on us.

We also joined Western military alliances in the 1950s and became a part of the SouthEast Asia Treaty Organization (Seato) in 1954, which lasted until 1977, and the Central Treaty Organization (Cento) in 1955, which lasted until 1979.

These military alliances greatly helped Pakistan militarily and financially. This is something which many tend to ignore while talking about the miracles of economic growth during the first three decades after 1947.

We were extended generous Western financial and military assistance during all those years. In 1957, we received $1,079.65 in economic assistance, $619.9 million in economic assistance through USAID and $437.59 million in military assistance.

The amount that we received in the three categories in 1958 was $2090.94 million. To understand what Pakistan received in economic assistance, assistance through USAID and military assistance, we need to analyse the era of General Ayub Khan which witnessed a phenomenal surge not only in economic activity but also in foreign financial help, with the country receiving $1,367.93 in economic assistance, $985.25 in assistance through USAID and $366.81 in military assistance in 1959.

Between 1960 and 1969, Pakistan received $15,305.43 million in economic assistance while we were showered with $9,434.56 million in assistance through USAID.

Now compare this with what we got during 1970-1977, especially during the time of Bhutto who is accused of ruining the Pakistani economy.

During these years the country witnessed an inflow of economic assistance worth $4,810.36 only while development assistance through USAID was a meagre $2342.97 million during these years. This is not even one-third of what we got during the tenure of dictator Ayub Khan.

The writer is a freelance journalist who can be reached at: