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Are comparisons valid?

October 06, 2010


A MOST unhelpful occurrence in Pakistan’s history was the visit in the 1950s of Korean officials to study our economic policies. Western experts then ranked Pakistan higher than South Korea. Soon after the visit, Korea started developing astronomically while Pakistan gradually floundered. Thus, the visit created the illusion that Korea outpaced us by copying our recipes which we failed to utilise ourselves, and its memory still causes an immense sense of unfulfilled national destiny.

Popular myth maintains that we could easily have been like Korea if only we had better leadership and/or better ethics, especially unity, honesty and hard work. Actually, our slower progress is rooted in a broad array of structural factors which include, besides politics and ethics, anthropology, history, geography, chemistry and economics. Understanding this complexity will help us analyse our future development potential.

Let’s start with anthropology and history. Pakistan has been consumed by ethnic tensions since independence, unlike Korea. However, ethnic diversity and a shorter national history rather than weaker ethics are the cause. The two Koreas had been a homogeneous territory for more than 500 years with the Korean ethnic group constituting 90 per cent of the population. Pakistan has been in existence for just 60 plus years and is ethnically heterogeneous.

Longstanding, homogeneous societies handle inequality better as inequality produces jealousy but also hope among have-nots as they see similar people benefiting. Wealth also spreads widely and more quickly through cultural mechanisms such as marriages, gifts, personal loans, etc. Consequently, while both experienced inequalities post-independence, this was minor in South Korea but led to constant ethnic turmoil and even dismemberment in Pakistan.

Moreover, our colonial history was different. Japan undertook major industrialisation and land reforms in Korea, while the British de-industrialised India and strengthened feudalism. Imagine how smooth Pakistan’s progress would have been if at independence there were no landlords or ethnic tensions but higher industrialisation.

Geography and chemistry further expanded South Korea’s advantages after it became a separate state. Compared with our off-on American relationship, it enjoyed consistently stronger chemistry with America as the threat of communism was more serious in East Asia. Both faced a hostile neighbour after independence due to partitioning. However, we had to beef up defences mostly from our own pocket, leaving little for development investment, while the US reduced Korea’s defence burden by maintaining troops there.

South Korea also got much more economic aid, technology and access to American markets. Once Japanese companies started hunting for cheaper production sites from 1960s onwards, South Korea made sense given physical proximity and colonial linkages — advantages Pakistan could not match even if it had better national ethics, leadership and policies.

The last difference relates to economic policies. Korea adopted a consistent strategy of working closely with the private sector to help it towards more advanced industries. Pakistan’s economic policy changed several times — from market-led to state-led to IMF-led strategy. Until 1971, we followed a market-led strategy. The state did work closely with the private sector in facilitating industrialisation, but remained stuck with light industry without the technology from America and Japan that Korea got.

Zulfiqar Ali Bhutto adopted a state-led strategy with a focus on heavy industry and ethnic equality given earlier failures along these dimensions. Roles reversed as now it was Pakistan copying Korea’s policies. As in Korea earlier, banks were nationalised to harness savings for industrialisation and a state steel mill set up. In Korea, nationalisation was limited and industrialisation drew on a capable bureaucracy.

In Pakistan, nationalisation was overdone and the private sector and bureaucracy weakened in pursuit of ethnic equality precisely when they were needed to meet the first objective. While this reflects faulty policy, it also reflects the additional policy considerations faced by an ethnically heterogeneous country dismembered due to ethnic tensions.

South Korea set up advanced industries with superior American and Japanese technology while Pakistan only got Soviet technology for its steel mill. Finally, since the 1980s, we have followed an IMF-led strategy which undermines national development and which Korea never followed.

Korea’s astronomical development within one generation was the result of more favourable developments stretching back to the pre-colonial period. Thus, a wide array of factors must converge, over decades and centuries, before a country (at least one without oil) can develop. Security, good governance, human capital, finances and technology are all imperatives. Some of the following must also be present: favourable location, chemistry with great powers, large diaspora, natural resources, high savings rate, homogeneity and national history.

It is the differences of these factors that explain why Pakistan lags behind South Korea and other East Asian countries.

Fortunately, these factors are starting to line up for Pakistan. The centre of the global economy is moving to our neighbourhood in China and India; Pakistan is among the most important developing countries for America. If governance improves, other factors may become more likely: eliminating militants and mafia; improving relations with India; developing a skilled labour force; expanding the tax base; reducing corruption, waste and defence costs and avoiding IMF dictation. Pakistan’s long-term future could be better than its past.

The writer is a research associate at the University of California, Berkeley.