Industrialization alone will not lead to prosperity
By Dr Mahnaz Fatima
THE issue is not whether to industrialize or not as is the slant given by some quarters to an otherwise simple question. The question is whether industry per se is the only sure fire solution to our economic woes or is industry a pet solution being fitted to our economic plight in the hope of working miraculous solutions even before diagnosing the complex nature of the ailment.
So, is industry believed to be a panacea only on the basis of observation of some symptoms whose specific cure may or may not lie in ‘forced’ industrialization from the outset or whose remedy may require industry to interact with other variables to produce the awaited results? The matter assumes serious proportions especially when the Prime Minister links prosperity with industrialization in a simplistic bivariate relationship as he did after laying foundation stones of three cement plants and one paper mill near Chakwal on April 3. This talk of prosperity was a major departure from the earlier emphasis of the PM on the debunked trickle-down approach.
One is curious to know how the emphasis changed almost overnight to prosperity when thus far only a trickle was being promised to the people. While it is pleasant to see the slogan changed from a trickle and poverty alleviation to prosperity in PM’s speech, its translation into practice remains a major challenge as it is unclear how prosperity will be attained only through industrialization that has emerged as a key plank of Pakistan’s near-term economic policy.
That the third world industrialized without becoming prosperous is well documented in the economic history of the developing world. That Pakistan industrialized too without getting anywhere near being prosperous is known to us from our economic history. So, to believe that yet another round of ‘forced’ industrialization will lead to prosperity begs the question: prosperity for whom? Will it be prosperity for the many or prosperity for a few that has always been easy to attain in our country and that requires not much hard-headed thinking or deliberations?
The dilemma in Pakistan is prosperity for the many and their prosperity is not possible to realize unless they are included in the economic process. The capital-intense processes required in the industry are labour-saving and labour-displacing. With rapid growth in the labour force, industrial growth will not lead to absorption of the rapidly growing labour force as capital-intense industry, irrespective of its rate of growth, cannot generate employment enough to absorb the high labour force growth.
So, the country may have more industry but it will not necessarily have more jobs. The growing industry will, therefore, not be able to include enough. How will the ones excluded then become prosperous if the economic process relies primarily on industry that will tend to exclude more than include. The benefits too will not trickle down but will circulate only amongst the beneficiaries of the industrialization process that will not be an encompassing group.
The response to the above is usually searched in education. While the benefits of education are countless, this variable too does not work in isolation as has been amply demonstrated now in the Labour Force Survey 2003-04. The ratio of educated unemployed has gone up from 55.1 per cent in 2001-02 to 59.2 per cent in 2003-04 indicating “there are no linkages between education and trade and industry and the jobs created” and in these two years jobs “were mostly (created) for the unskilled labour for personal and domestic services”.
This shows that education needs to interact with other variables of the economic development process if employment is to be created and inclusion sought. It also shows prosperity for some and poverty for others that creates demand for domestic help.
Is this the kind of prosperity that the PM alluded to in his above-referred speech? That is, prosperity for some whose glitter will eclipse the poverty of others so much so that not only will the poor remain excluded and marginalized but the issue of poverty, deprivation, and inequitous distribution might also stand displaced on the agenda. Should this happen, those-who-matter might conclude with ease that the economic woes have ceased to exist and the country has turned the corner into prosperity. So, is prosperity to be claimed only on paper or in reality? If in reality, will ‘forced’ industrialization enable it?
‘Forced’ industrialization is to set up industry either on the basis of an inaccurately projected demand that may not be realized leading to over-capacity or on the basis of demand that is not sustainable, for example, setting up cement plants on the basis of some expected infrastructure projects following which the demand might taper off if not generated in other sectors such as construction that in turn depends upon country’s economic vitality amongst other factors or in areas where internal strengths are lacking that will not enable industry to be competitive.
In the above cases, industry is not likely to generate employment at rates that can be called inclusive. Even if none of the above holds and recurring demand does exist for the upcoming industry that will also be competitive, will the outreach be large enough to encompass the country’s population that is deprived with little or no purchasing power? Industry can sell only to those who can buy and if the buyers are limited, industrial growth will remain restricted. Demand for industry is derived from consumer demand which is depressed in a country with large segments of underprivileged and impoverished people.
For as long as the demand side remains depressed, the wheel of the industry will not be able to turn with full force as industry cannot function in a vacuum. The ardent believers in the wonders of industrialization ought to then think in terms of creating fodder on which industry may crank and thrive. Unless there is demand enough for industrial goods, industry will not realize potential and will not be able to do the kind of service the industrialization enthusiasts think it can in isolation.
So, if industry is loved, then, create a demand for its products. To create demand, people must have money in their pockets with which they can buy the goods produced by industry. How do we stuff notes in the pockets of people? By including and engaging them in the economic process. How do we engage them when jobs are inadequate or none? By engaging them where they are concentrated. They are concentrated in rural areas where they serve for pittance, if at all. The issue goes back to land-to-the-tiller where if the people are engaged will first produce for family.
Next, they will generate cash surpluses and move on to mixed farming and then commercial farming. In tandem will turn the wheel of the industry. For, as soon as they begin to collect notes in pockets, they will demand basic industrial goods and more from industry. And, industry will begin to develop sustainably and “naturally.”
It is this process of “natural” industrialization that needs to be kick-started without which the link between prosperity and industrialization, ala the PM, will remain weak as the intervening and related variables will remain unaddressed.
So, those who want industrialization to work wonders must think backwards to find the missing links in the development network.
Industrialization is not sustainable and not effective unless “natural.” For industrialization to be natural and efficacious, the effort must be synchronized with agricultural development through land reforms. The people will then march ahead in sync with benefits for all. For, prosperity for a few and trickle for the many is a weak proposition on technical, professional, and moral grounds and, therefore, a non-starter!
