The State, Industry and Commerce – I
History records the after effects of takeover of the assets of the British East India Company by the British Government in the name of the Crown subsequent to the 1857 War of Independence as a sordid example of the excesses of private enterprise being replaced by the inadequacies of bureaucracy’s lack of enterprise. Economics aside, it took almost a century for the foundations of the British Indian Empire to crumble, the residual of Imperial rule still afflicts South Asia, most particularly in ethnic and religious tension that sweeps the region. Our bureaucracy, no match for its British antecedents, particularly in honesty and sincerity of purpose, adds to its Atlas-like Administrative burden by ham-handed attempts to guide the economy of the nation, concentrating everything in the public sector, at the cost of private enterprise. Under the garb of a misguided sense of socialism that became the fashion of politics of the world in an era of slogan-mongering politicking in the 50s and 60s, more particularly the new emerging nations of the Third World, the State became a major (and dominating) participant in industry and commerce in Pakistan rather than acting to simply regulate the process in a laid-back manner, a sure recipe for disaster manifest in the despondency and hunger afflicting the masses of one of the Superpowers of today, the Soviet Union and its former proteges and client-nations of Eastern Europe. People who talk about the Marxist-Leninist type of socialism should be made to stand in queue in the bread lines of the USSR and the former COMECON countries.
The State has no business being in business, it must never try to control market forces unless the economic imbalances threaten to ruin and beggar the population at the lower end of the scale. Adam Smith, rather than Marx or Lenin, is the new found god of the socialists, former die-hard communists are finding the virtues of a free enterprise system laudable. Gorbachev has been leading the pack with his “Perestroika” war cry. Even in Third World countries, the three Ds, Denationalisation, Disinvestment and Deregulation are the catchwords of economic progress, closely following another D, Disenchantment with the socialistic model, the human cost being the proliferation of hunger, misery and utter privation of the masses. The world has learnt a terrible lesson from these false prophets who revelled in State intervention, yet only some of these leaders were essentially sincere people. For the most part, they were (and are) corrupt, morally depraved egoists who live and die for themselves rather than for the ideals they espouse. To separate fact from the fiction that their rhetoric has represented, one has only to see how brazenly they looted the public till, in the name (and with the unknowing support) of the gullible masses.
Pakistan should have seen the end of socialism experiment by the fall of Bhutto regime in 1977 but it had not reckoned with the power and greed of bureaucracy. State control of heavy/ medium industries and specialized commerce (edible oil, wheat, sugar, crude oil, naphtha, etc) which was perfunctorily in the hands of politicians from 1972 to 1977 went totally under the aegis of Government civil servants, helped along by a gullible lot of uniformed men running the Martial Law that replaced the PPP Government. Regretfully, by the time democracy of sorts was restored in 1985, an unparalleled loot of the nationalised industries and State’s commercial enterprises was in effect, public enterprises became bankrupt, kept running by infusion of massive public funds except in stray cases where their own momentum carried them along.
Balance Sheets were doctored by imaginative accounting practices, an euphemism for sleight of hand. Overheads increased to the detriment of financial stability, over-staffing resulting in recurring expenditures that ate into the profitability of eminently profitable ventures (in private hands). In their wildest imagination, late J.A. Rahim and Dr Mubashir Hasan, PPP’s party theoreticians who orchestrated the nationalisation sweep, could not have perceived the devastation of the economy that was wrought. In defence of late Z.A. Bhutto, he gave the working class a voice that had been imperiously trampled upon by capitalism without a human face, stifling their potential, their capability for hard work exploited by a heartless bunch of robber barons who had a condescending, scornful attitude at the plight of their employees, driving them into individual economic desperation. Bhutto translated this mass voice of protest and aspiration into a political asset that gave a democratic (of sorts) leadership. Zulfikar Ali Bhutto was an unusual blend, a landed aristocrat who became a champion of the poor, an utter autocrat who identified himself with the downtrodden, he set in motion forces that only he had the political capacity to control. After his death only the daughter has shown the same talent of crowd manipulation but not the same sagacity. Yet in one fundamental aspect, both these outstanding charismatic leaders of the masses failed, they did not have the imagination or the means of translating their promises into deeds, their economic leadership was bankrupt because their brand of socialism was tampered by the greed of unscrupulous individuals, in the case of Ms Benazir her inability to face upto it or cope with it. To Ms Benazir’s credit, she did an about turn on the stated PPP manifesto regarding the party’s plank on nationalisation, infuriating the socialist ideologues who were her late father’s colleagues, Dr. Mubashar Hasan, Shaikh Rashid, etc. The business community, apprehensive of Ms Benazir’s ascent to power, became comfortable with her pragmatic economic policies, essentially an extension of that of her predecessor, Junejo. Helped by satisfactory handling by good economic managers, the Benazir Government performed in a better than average manner during 1989. With the narrow failure of the no-confidence motion against her in the National Assembly, she became a prisoner of sorts of the greed of some of her party men (and various camp followers), her husband added to the impression of rampant corruption by ill-advised chequer-board moves across a broad expanse of the business world. Ms Benazir was essentially brought down by the corruption image, she did not manage to quite set in motion before her fall, despite her rhetoric, those fundamental changes that would have taken the State out of the nation’s industry and commerce, thus leading to economic emancipation.
The list of denationalisation targets is long but the Prime Minister would be well-advised to start the process without further delay to deter erosion of his credibility among the business community. Given that he has the background of a private industrialist, as a committed free enterprise person any hint of hesitation at the behest of bureaucracy will be fatal. Dr. Mahbubul Haq is again in the media, evoking the greatest pessimism in us of “business as usual” unless this Chameleon Extraordinary changes his tack to a genuine free enterprise system.
Nawaz Sharif has loosened the State’s control by obviating prior permission before allocation of future industrial ventures (sanctioning being a bureaucratic plum). The impetus towards move into rural areas is most welcome but instead of indiscriminate mushrooming all over the place, zones within the rural heartland must be well-defined as industrial parks, even formed and managed by private enterprise. The Government has taken tentative steps by making Telegraph and Telephone (T&T) Department and National Highway Board into Corporations. As communications provides access to flourishing of new and old commercial ventures, this first stage is welcome, how privatisation will be implemented into practice will be the harbinger of economic upturn. If the plan is confined to lip-service symbolic moves without genuine invitation to the private sector not only to invest but to manage their investment as a private enterprise, then we are doomed before we even begin. Making the T&T into a Corporation could be done phase-wise, i.e. all the trunk lines should be kept in the first phase as a public enterprise while making the internal exchanges of selected cities and towns completely autonomous. One of the major problems of the telecommunications sector is billing, one can rest assured that the private sector will be most efficient in making sure that every penny is accounted for (and collected). Development in sectors allocated to a private enterprise should be the headache of the concerned entrepreneurs who can go for funds from Development Finance Institutions, investment and commercial banks thereby lessening this financial burden on the public exchequer.
All municipal utilities should be privatised, beginning with the supply of electricity. Whereas trunk transmission grids can be in the public sector, the distribution of electricity to domestic and commercial consumers should be given over to private enterprise who can pay the public sector in bulk for the electricity that they receive, obtaining in turn their revenues from the consumers. One can rest assured that the rampant stealing of electricity will come to a stop, thereby (1) increasing revenues while (2) reducing load. The same analogy is good for water supply, sewerage facilities and garbage collection. The government can control the excesses of the private sector in unilaterally raising of prices by a formula that restricts the concerned utility price against a marker indicating the cost of bulk sale by government itself.
All the Corporations and their constituent units under the State Engineering Corporation (SEC) need to be denationalised or privatised forthwith, as also the factories under the National Fertiliser Corporation (NFC), whether they are profit-earning or loss making. The Ministry of Production should be renamed as the Ministry of Disinvestment, in less than a year all its production facilities (barring none) should be in the hands of the private sector. Letting market forces free rein over the destiny of existing production facilities may mean loss of jobs in the short-term, this is the price one must pay for economic amelioration in the long-term, in turn this will mean the creation of new jobs.
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