Once again in the economic history of Pakistan is development going to be equated with industrialization, capital investment, and technology.

Emphasis is on rapid industrial growth through fiscal incentives and rapid agricultural growth through corporate farming.

The emphases are, however, fraught with contradictions in the light of which it cannot be definitively concluded whether the emphases on speedy growth in the two key economic sectors will be development of the sectors per se and/or the economy and/or the people as a whole.

The kind of industrial strategic thrust being envisaged now is not too different from the one that had been experienced in the first decade of 'development' in the 1960s when the country did industrialize in a sheltered environment but the upshot in that very decade could not be called as development of either the industry itself or the people.

The people were expected to wait for their trickle of benefits as the approach followed then was based on the inverted-U hypothesis according to which inequalities would first increase and then decrease. The inverted-U approach also distributes in favour of the owner of assets initially as the assumption is that they have a higher propensity to save.

Consequently Pakistan's famous twenty-two families of the 1960s emerged as revealed by Dr Mahbub ul Haq. The 'development' of these 22 families did indicate the direction in which the fruits of growth got channelized primarily during the first decade of development.

Would the economy have traversed the second leg of the inverted-U of decreasing inequalities and better distribution had the process of the 1960s remained uninterrupted? Many are inclined to answer in the affirmative without really appreciating even anecdotal evidence that was available to the contrary.

Some semblance of job creation and professional management ought to have surfaced towards the end of the decade. The fact that the professionally qualified agitated for jobs, the concept of professional management remained alien, and many units posted contrived losses pointed towards the fact that the fruits of growth were nowhere close to equitable sharing by the time the decade of the 1960s came to a close. In the absence of the above, more industrialization would have contributed to more dualism and not less.

Even as for industrial development, the industry set up in the 1960s was more light or medium than heavy industry. So, it is difficult to claim that the country even industrialized in the true sense during that decade remembered as one of 'development.'

And, while many might contend that it was Zulfiqar Ali Bhutto's (ZAB) nationalization in the 1970s that threw a spanner in the works, more medium and heavy industry was set up or conceived during ZAB's tenure when the country not only industrialized in a big way but also acquired high technology.

The industry was organized on sectoral lines and concept of professional management introduced. It was made mandatory for industrial units to hire professional engineers and MBAs.

The workers were not expected to be slave-driven either and their rights were secured. The failure of the nationalized industry, gauged by its losses, during the 1970s is the failure of those who came at the helm to run this newly organized industry. The failure was more an implementation failure than a conceptual failure.

None can dispute the organization of industrial units on lines in the 1970s that we now call modern. However, while structure and staff were ensured by the then government, the industry lacked style and skills. Also absent conspicuously was policy direction.

Policy inertia resulted at the organizational level from an inability to fathom this quantum change that left the managers dazed and confounded with not only rapid internal transformation but also by the volatility of the external environment that became increasingly turbulent for even the developed parts of the world during the 1970s.

As the industry managers failed to handle this period of flux that emanated from both internal and external sources, the overall performance of the industry was viewed as miserable.

While the naïve, gullible, or predisposed minds attribute it outright to the decision of 'nationalization,' a closer look is required to assign responsibility and ascertain the sources and causes thereof.

These sources if found in the private sector will render it dysfunctional too. And, when these causes were addressed in the 1980s, public sector's performance did turn around.

Further, it is turned around public sector that becomes acceptable for private acquisition. And, if turnaround is possible in the public sector, the issue is one of the quality of management and not of the sector in which the unit exists. Similarly, the issue was one of the management of public sector units in the 1970s. The failure was operational in the implementation phase and should be viewed as such.

As stated earlier, most of the public sector units were turned around by the 1980s after the then government sent out a strong message that public sector operations should be self-sustaining and would not be bailed out by the government.

So, by the 1980s, the country was industrialized enough with light, medium, and heavy industry. But, was the country developed in the socio-economic sense? It was not. Industrialization and development are, therefore, not synonymous.

Was the industry creating jobs enough to absorb the labour force growth? It was not. The industrial growth rate was outpaced by labour force growth. Why could industrial growth not keep pace? Because the industry could not grow fast enough.

In fact, there was over capacity and under utilization of capital and technology. Even the industry was not developed enough despite industrialization. So, even industry development and industrialization are not synonymous which is indeed paradoxical and even counterintuitive.

Against the above backdrop too must we view the current thrust towards industrialization as synonymous with development. Once again, emphasis is on fiscal inducements to set up industry.

As in the 1960s and in the 1970s, the assumption again is that supply will create its own demand. Supply neither created its own demand in the decades gone by nor is it likely to do so now when the general public has not become any 'richer' and when even the trade environment is liberalizing. So, amongst the determinants of investment cited by the policy elite, the one most conspicuous by its absence is consumer demand.

This factor of consumer demand is either ignored or, as also in the past, is assumed to grow at a rate at which the project looks feasible on paper and is thus able to mobilize the requisite financial resources it needs to get cracking.

The project may thus get approved and going but it may not crank in a sustainable manner if actual consumer demand is lacklustre and significantly different on the ground from that projected on paper for expediency or due to lack of ability to anticipate future environment in which the project would operate.

While there is impetuosity on the part of the investor, the government is faced with the issue of short-time horizons within which they must show some results or leave some tracks behind to be remembered from by coming generations.

The issue of consumer demand gets ignored in the process and the country might then have more industry whose development would be an issue for the posterity to grapple with. And, the upshot would again be 'forced' industrialization and not 'natural' industrialization that alone can lead to industrial and socio-economic development.

Natural industrialization requires agricultural development to add to purchasing power in the country whose benefits would then flow back up to industry and the two would then grow in sync in a virtuous cycle of growth and development.

As the development of agricultural sector was emphasized upon to develop consumer demand, it is 'corporate farming' that the government decided to embark upon instead. Corporate farming is capital and technology intensive and is not just labour-saving but is also labour-displacing.

This would mean inadequate job growth or even more jobless vagrants in the countryside who might even migrate to urban centres inflating their population burden without really getting absorbed in the formal economy as the formal urban industrial economy requires consumer demand that is not likely to grow significantly with unemployment in the countryside.

Someone might suggest that this is urbanization and development. But, the above kind of urbanization is not synonymous with development either as this is urban population growth burden on urban resources not growing commensurately with population growth that the urban nodes also fail to absorb.

So, a question worth addressing is as to how the emphasis on rapid industrialization will lead to development in the absence of consumer demand not likely to grow significantly in the aftermath of corporate farming.

The government needs to rethink the assumption that it is headed towards integrated development through the above twin approach when actually its two prongs tend to move away from the goal of inclusive development instead of converging to it which is what a truly integrated approach should be aiming at.

Opinion

Editorial

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