The debate on nationalisation is a bit out of place now.
ISLAMABAD: In a recent speech, Prime Minister Nawaz Sharif criticised the nationalisation carried out by Zulfikar Ali Bhutto. Farhatullah Babar and Qamar Zaman Kaira have responded to the prime minister’s criticism. Mr Babar said that nationalisation was justified on historical and ideological grounds, whereas Mr Kaira based his reasoning on economic theory and on grounds of necessity, saying that this was done to make Pakistan a welfare state.
In my view, nationalisation at this stage of economic development of Pakistan had both positive and negative effects. The nationalisation of banks and insurance companies had become necessary as it was through these institutions that wealth was seen to be concentrating within a few families. Control of these institutions by these groups was creating monopolies and this was creating a negative impact on the economy by preventing other new investors from setting up businesses. Nationalisation of these entities was, therefore, not only justified from an equity point of view, it was a necessary economic policy measure to enable the government to open up opportunities for newcomers, especially those from the middle income groups.
On the other hand, there seemed no need to nationalise schools and colleges, mainly because the process vastly reduced their quality. The second wave of nationalisation during which small-to medium-size industries like ghee mills, flour mills, rice husking and cotton ginning were nationalised, not only went against the then PPP government’s avowed policy of creating a level playing field for middle class businesses, it led to the creation of a corrupt and inefficient bureaucratic control of middle level business.
Dr Mubashar Hasan’s arguments at that time were that farmers were being denied a fair share in income as middlemen in the shape of factory owners of ghee mills, rice mills and cotton ginning factories were taking undue advantage of the poor holding power. It needs to be understood that in the first place, it wasn’t the factory owners who were exploiting the farmers but the ‘arhatis’, who acted as commodity merchants in the rural areas. To protect the farmers’ economic interests, the government ought to have made arrangements for availability of credit and crop insurance, thereby giving them the necessary economic strength to resist exploitation at the hands of these merchants. The PPP’s failure to understand this led to a misallocation of resources and the creation of a new exploiting class in the shape of the bureaucracy that was given the task of running the nationalised factories.
The debate on nationalisation is a bit out of place now. The need is for a debate on the role the government needs to play in order not only to encourage private sector growth but also to ensure that this growth is in line with the economic priorities of the country and that free market excesses are curbed by appropriate legislation.
Imtiaz Ahmed
Published in The Express Tribune, December 11th, 2013.
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