Strangely, my baptism in the ill effects of nationalization started in Larkana, Zulfikar Ali Bhutto’s home constituency. After training in the academy, I was assigned to interior Sindh to be exposed to district administration. The Bhutto government had earlier nationalized the banks and heavy industry, and cotton ginning factories and rice husking units were recently added to the list.
Khalid Kharal, Deputy Commissioner Larkana, was a hardworking administrator whose doors would always remain open. It was late evening in the stuffy August weather. The Deputy Commissioner was narrating the interesting stories of local political intrigues to his protege. The attendant brought in an old hari (farmer) who complained about the demand for bribery from the manager of the local rice husking unit. The energetic Deputy Commissioner lost no time. He settled the matter after visiting the factory in the next half an hour.
On his return, the Deputy Commissioner shared that though the factory manager was at fault, he would still retain his job because elections were near and he was the son of an influential politician. Disappointed by this information, I was eager to know the rationale behind the government’s decision to assume control of minuscule industrial units. Khalid Kharal was frank and forthright. He said the decision was part of Z.A. Bhutto’s politics. Nationalization was a means to extend political patronage to the party’s supporters.
It shocked me. Till last year, I was a student of Economics and Politics at the Government College in Lahore. My academic training viewed control of the means of production differently. This issue was at the heart of the conflict between capitalism and socialism. The policies of the U.S. were historically shaped by Jeffersonian politics and the philosophy of Henry David Thoreau, who famously said, “That government is best which governs the least.” Communism, on the other hand, believed in giving ownership of industry to the state to save it from the clutches of greedy capitalists who misappropriated the labor surplus.
Karl Marx’s philosophy became popular after the successful October Revolution in the Soviet Union. The Depression of 1929 introduced Keynesian Economics and the government’s involvement in economic management. After the Second World War, the common man brought the Labor Party of Britain into power, leading to industry nationalization. Control of the economy by the state thus became legitimate even in the capitalist system. At the same time, newly independent colonies wanted rapid economic development. The success of the Soviet example influenced the leaders to adopt five-year plans and state control of primary industries.
Pakistan, after independence, also realized that the private sector did not have the resources and entrepreneurial capacity to invest in industries with long gestation periods. In 1950-51, state investment in the industry started with the formation of the Pakistan Industrial Development Corporation (PIDC) and continued in the following years. To augment investment in hydel resources, the Pakistan Water and Power Development Authority (WAPDA) was established at the beginning of 1958. Ayub Khan’s government, after the imposition of Martial Law, encouraged the private sector but continued investment through the PIDC platform.
The writer is a book author, columnist, and retired civil servant.
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