ZAB's Nationalization of 1972 and the Pakistan Before That

[Bouncer]

Ironic, since without Ayub, there won't be any ZAB.

ZAB was the original and most patronized of all sepoy's golden children. He was given such a free reign over the whole decade of 70's, that he ascended to the level of a civilian martial law administrator and became a true authoritarian dictator.

He alone called all the shots and took monumental decisions like Nationalization all by himself. He pocketed any and all aid money that came into Pakistan all under the auspices and blessings of the military.

Well put. We often make the mistake of analysing these rules in isolation. ZAB's emergence, his popularity was a direct consequence of actions taken by Ayub Khan. Bangladesh did not suddenly pop up one fine morning. It was a decade of Ayub's rule that slow cooked it.

Staying on topic though, I agree that ZAB's ill advised populist move to nationalize our industrial base pushed us back by decades.

 

[El Sidd]

Pakistan started from scratch. A blank piece of paper. Neither she had infrastructure nor the finances and faced unprecedented odds in her infancy. The situation could not have been worse as right after her inception, she was at war for Kashmir and lost the guidance of founding fathers, Jinnah died in 1948 and Liaquat martyred in 1951.

By the tail end of the 50s, the political friction within the industrialists and feudal ranks allowed for opportunistic rise of Ayub Khan who reaped the rewards in some economic respite in the 1960s which has become mythical. His efforts to leverage the disparity between the eastern and western wing of the country resulted in political problems which soon became militaristic by the end of the decade.

The last nail in Ayubs legacy was his selection of Yehya as successor. There seems to be ethnic motivation in his selection. Yahya proved incompetent in dealing with industrialists, feudals, clergy and populist. The misery was compounded as war broke out in 1971 with India over the eastern unit.

Pakistan after the 1971 war was in shambles. The chaos provided for the feudal class to trump the industrialists helped by the clergy. Bhutto would later pay the ultimate price as his policies against industrialists empowered the military beyond Ayubs wildest imagination. By the end of the 70s, Pakistan would once again have a military dictator and faced formallt with the prospect of the approaching Soviets.

How is Mujeeb ur Rahman Shami a Punjabi? His name literally means he is from Sham, Syria.

 

[HAIDER]

Recently I butted head with several PDF senior guys in a thread. In that thread, I asserted that if today's Pakistan even exists, it was because of the Ayub Khan era of 1958-1969. My argument was that the Pakistan of pre 1958, especially between 1951-1958 was in a dangerous downward spiral but Ayub not only stabilized the political environment but his contributions to the economy were huge. I believe Pakistan would have a different path forward--a very prosperous one had ZAB not nationalized major industries. Yes, there is the fabled '22 families controlling most wealth' blah blah but where was the wealth before that? Some member here even accused me of from a military background and I had to counter them--I am not.

If you want to know my background, then, without disclosing too much: It is Urdu speaking background, born and raised in Karachi. Both parents and their elders came from India after 1947 and both came with money and expertise to start textile businesses as did dozens of other relatives--yes, there were literally dozens of textile mills of various sizes in Karachi, started by my immigrant grandparents' generation. They were not feudal like most of the Pakistan was. Industries were established by them and workers were hired irrespective of their ethnic background. I will also add that mother's side of relative had established at least seven industrial units in Karachi.

All that changed with Bhutto's ill-advised nationalization of 1972. Here, a Punjabi Mujeeb ur Rehman Shami is giving credit to the generation of my immigrant grandparents, and also saying don't compare Pakistan with Bangladesh; I think he's hinting Pakistan has much more potential.

Needless to say, Mujeeb is endorsing the economic vitality in Pakistan due to the Ayub Khan era. This video is not only an affirmation of the role played by the Urdu speakers from India in Pakistan but also Mujeeb's advice to Pakistanis to stay positive! Mujeeb is at a very old age and he wants to speak the truth and be remembered for his words. I hope he, and journalists like him live long!

Pakistan Zindabad!

that was the time when Marxist movement on peak and also labor movements were at peak. but it was a wrong decision for the nation's future.

 

[maithil]

People at large did not enjoy the fruits of decade of development even in West Pakistan. Even during his own rule, his policies resulted in huge protests. This nationalization policy was wildly popular at the time.

 

[Meengla]

this point doesnt stand. most of the development in asian countries was done by a few families (samsung, hyundai, suzuki, honda, toyota, daewoo, mitusbishi, tata, birla, ambani etc).

Agreed!! I was thinking those business tycoons as well as the so-called 'Robber Barons' in America who, while 'exploited' the workers and concentrated wealth, but also created wealth. Ultimately, the industrialization helped America and other countries as you mentioned. That would have been the case with Pakistan too if Bhutto had not done the Nationalization.

it was bhutto all the way. the military turned against him later. he had virtually complete control of the country post 1971.

Bhutto was the last truly independent civilian leader of Pakistan.

he chaos provided for the feudal class to trump the industrialists helped by the clergy. Bhutto would later pay the ultimate price as his policies against industrialists empowered the military beyond Ayubs wildest imagination

Good point. To add to that, from my personal experience, though I was very young then, textile mills of very close relatives shut down due to workers' strikes. Large mills which literally employed hundreds if not thousands, in Karachi experienced breakdowns in the 1970s. They were mothballed!! Sealed. We kids used to go there for fun but couldn't anymore. Some close family members, who built great wealth using the money they brought from India during the Partition, still haven't recovered from those days. My own family's textile mill managed to survive and still bears my dad's writing in a concrete block when the foundation was being laid, saying '1951'.

 

[SQ8]

There are elements of truth in what you are saying. My main point has been, to be pro Ayub, is that if you compare what was before him--the era between 1951-1958 and the kind of 'leadership' was present, then Ayub was a huge improvement. One has to go back to the Pakistan of 1947 to realize where Pakistan was and the kind of threat it faced then and the feudal society it was.
Those who judge Ayub harshly don't take into factor what was before him and what followed him. American aid was given to others later but they squandered while Ayub did a lot for Pakistan.

But Ayub's gains were squandered by ZAB's nationalization. The video I quoted supports my assertion.

BTW, EVERYTHING in Pakistan has an ethnic angle! I, an Urdu speaker, praising a Pathan Ayub Khan, and my opinion of Ayub is supported, albeit indirectly, by a Punjabi have significance in a country where people are too prone to look through the prism of ethnic origin.

But that era of musical chairs was instability created by the demise of both the father of the nation and the defacto successor in Liaqat Ali Khan. Those musical chairs would have eventually run themselves clear and had Ayub not intervened Iskandar Mirza would have been forced to hold elections again.
Ayub did bring temporary stability to what was an uncertain time but permanently damaged the foundations and growth of Pakistani institutions.

There is always an ethnic angle because even even Ayub Khan used it against Fatima Jinnah during elections when Altaf Gauhar trucked loads of Pathans into Karachi solely for the reason of influencing the electorate there.

this point doesnt stand. most of the development in asian countries was done by a few families (samsung, hyundai, suzuki, honda, toyota, daewoo, mitusbishi, tata, birla, ambani etc).

the only reason this was an issue was because communism and socialism were on the rise, and it was in fashion to criticize and hate the rich. our so called intellectuals and all the newspapers used to have high praises for socialism, while shitting on the businessmen and industrialists. the labor will always be paid lower wages than the management staff, and the management staff will never be as rich as the owner. simple as that.

Wrong!

while the leftists ideals were abound during that time -
The key difference between these models lies in the relationship between the state, economy, and the entities themselves. The Korean and Japanese models are characterized by a positive symbiotic relationship between the government and these business entities. Both sides cooperated to encourage innovation, competition, and international expansion, which subsequently led to overall economic growth.

However, in the Pakistani model, the “22 families” accumulated wealth and economic power due to favoritism and protection from competition by Ayub himself. This relationship didn’t incentivize innovation or expansion, as the families benefited from maintaining the status quo rather than pursuing risky growth strategies.

This protectionism and concentration of wealth created a significant wealth disparity and stunted the economic growth of Pakistan, as it didn’t foster a competitive market or encourage entrepreneurial innovation. Furthermore, the 22 families model often led to inefficient industries, as there was no competitive pressure to improve or innovate.

In contrast, the Japanese and South Korean models focused on creating globally competitive companies that constantly innovated and improved, thus driving economic growth. The governments also ensured that these companies contributed to society by providing employment and contributing to the national economy.

 

[PakFactor]

But that era of musical chairs was instability created by the demise of both the father of the nation and the defacto successor in Liaqat Ali Khan. Those musical chairs would have eventually run themselves clear and had Ayub not intervened Iskandar Mirza would have been forced to hold elections again.
Ayub did bring temporary stability to what was an uncertain time but permanently damaged the foundations and growth of Pakistani institutions.

There is always an ethnic angle because even even Ayub Khan used it against Fatima Jinnah during elections when Altaf Gauhar trucked loads of Pathans into Karachi solely for the reason of influencing the electorate there.


Wrong!

while the leftists ideals were abound during that time -
The key difference between these models lies in the relationship between the state, economy, and the entities themselves. The Korean and Japanese models are characterized by a positive symbiotic relationship between the government and these business entities. Both sides cooperated to encourage innovation, competition, and international expansion, which subsequently led to overall economic growth.

However, in the Pakistani model, the “22 families” accumulated wealth and economic power due to favoritism and protection from competition by Ayub himself. This relationship didn’t incentivize innovation or expansion, as the families benefited from maintaining the status quo rather than pursuing risky growth strategies.

This protectionism and concentration of wealth created a significant wealth disparity and stunted the economic growth of Pakistan, as it didn’t foster a competitive market or encourage entrepreneurial innovation. Furthermore, the 22 families model often led to inefficient industries, as there was no competitive pressure to improve or innovate.

In contrast, the Japanese and South Korean models focused on creating globally competitive companies that constantly innovated and improved, thus driving economic growth. The governments also ensured that these companies contributed to society by providing employment and contributing to the national economy.

I love reading your posts; you say what I want to say, but in a moron calm downed tone.

Another thing I would point out regarding those 22 families is that collectively they own 70% of the country's total industrial assets, 70% of insurance, and 80% of its banking. As you mentioned, they can limit entrants to the market due to their vast size and political and military relations.

The other issue concerns the cornering of agricultural production; 22,000 landlords and waderas control 65%-70% of arable land. Tied into politics and military, the Pakistan Muslim League, from its inception, comprised of landowning feudal lords. They took credit from the government and subsidies to bankroll their operation. When losses occurred, they were forgiven, while the small farmers and medium ones with 500 acres took the loss. The large landowning families set policies in place and created infrastructure around their land, leaving the rest disadvantaged.

Overall, in all segments of the Pakistani economy that mattered, no healthy competition was allowed for innovation and growth. Hence, you are left with stagnant growth in population due to a lack of investment in education and technical schooling. The difference between South Korea and Japan is they put the money into education and technical schooling, and the latter made up for those who couldn't gain access to higher education due to lack of grades, etc. Still, their mobility within society wasn't capped as technical schools filled the gaps.

In the States, prominent industrialist families like the Vanderbilts, Rockefellers, Carnegie, Ford, Morgans, etc., investing in education, the library, the health sector, and transport, to name a few. The pre and post-Gilded Age in America is worth studying on what to and what not to do.

 

[Meengla]

The key difference between these models lies in the relationship between the state, economy, and the entities themselves. The Korean and Japanese models are characterized by a positive symbiotic relationship between the government and these business entities. Both sides cooperated to encourage innovation, competition, and international expansion, which subsequently led to overall economic growth.

And you think the Robber-Barons of America and the Tata-Birla of India had the 'positive symbiotic relationship', even if one were to accept your argument about the Korean and Japanese models? I hear even the Koreans were learning from Ayub's economy.

And what makes you think that Pakistan's industries wouldn't be 'globally connected'? Even in these depths of the lows, Pakistani industries do export some. Imagine had 1972 Nationalization not happened. Mujeeb Shami's message is about that--a message of positivity.

And I absolutely don't buy this '22 families' myth. If anything, the income disparity in India was/is greater but the country is going ahead. So would have Pakistan. There is more than a grain of truth in the 'Capitalist' model of Ronald Reagan.

Had Ayub not intervened in 1958 then Pakistan's civilian setup might have--just might have-- a chance to be established. But that's a big question mark considering the chaos of between 1951-58 and the 'Khotey Sikkey' (worned out coins) comments made by Mr. Jinnah about his legacy politicians. They were feudal as was a large part of the Pakistan Muslim League leadership!!

 

[SQ8]

And you think the Robber-Barons of America and the Tata-Birla of India had the 'positive symbiotic relationship', even if one were to accept your argument about the Korean and Japanese models? I hear even the Koreans were learning from Ayub's economy.

And what makes you think that Pakistan's industries wouldn't be 'globally connected'? Even in these depths of the lows, Pakistani industries do export some. Imagine had 1972 Nationalization not happened. Mujeeb Shami's message is about that--a message of positivity.

And I absolutely don't buy this '22 families' myth. If anything, the income disparity in India was/is greater but the country is going ahead. So would have Pakistan. There is more than a grain of truth in the 'Capitalist' model of Ronald Reagan.

Had Ayub not intervened in 1958 then Pakistan's civilian setup might have--just might have-- a chance to be established. But that's a big question mark considering the chaos of between 1951-58 and the 'Khotey Sikkey' (worned out coins) comments made by Mr. Jinnah about his legacy politicians. They were feudal as was a large part of the Pakistan Muslim League leadership!!

Regardless of their initial relationship - because the state institutions are strengthened they can impose some controls - take the recent Microsoft Activision deal under block by the FTC. That system doesn’t exist in Pakistan because the institutions were scuttled by dictatorship after civilian ineptitude and then dictatorship again.

Whether you buy the 22 families or not is irrelevant - respected economists, historians and the majority see them as living proof of those failed policies.

As for why they wont be connected - other than Agha Hasan Abdi and perhaps the Dawoods, these families are only focused on safe wealth generation for only themselves and extremely risk averse. They would never have innovated - and even today don’t. Its the startups in Pakistan who think 100 yards ahead but since the institutional support doesn’t exists for them - unlike India they die out or migrate.

The Tatas and Birlas have had much more innovation in them than the seths of Pakistan despite having less opportunity available to them initially as you yourself point out.

Simply because nepotism always prevails where institutions fail and mediocre sharks can keep control while leaving potentially brilliant ideas behind. The same is even true for defense related industries in Pakistan where nepotism and buddies have let great ideas and resources die out because a certain General or AVM had a buddy who they want to curry favor even if their buddy has his sights on profit rather than innovation. And since Ayub’s faltering of institutions killed off any chance of something like a GAO where here Boeing can protest about some Lockheed did or even a small fish like General Atomics initially can get its contracts validated; Pakistan is stuck with crap - from a cesspool that feeds a cesspool.

 

[Azadkashmir]

I love reading your posts; you say what I want to say, but in a moron calm downed tone.

Another thing I would point out regarding those 22 families is that collectively they own 70% of the country's total industrial assets, 70% of insurance, and 80% of its banking. As you mentioned, they can limit entrants to the market due to their vast size and political and military relations.

The other issue concerns the cornering of agricultural production; 22,000 landlords and waderas control 65%-70% of arable land. Tied into politics and military, the Pakistan Muslim League, from its inception, comprised of landowning feudal lords. They took credit from the government and subsidies to bankroll their operation. When losses occurred, they were forgiven, while the small farmers and medium ones with 500 acres took the loss. The large landowning families set policies in place and created infrastructure around their land, leaving the rest disadvantaged.

Overall, in all segments of the Pakistani economy that mattered, no healthy competition was allowed for innovation and growth. Hence, you are left with stagnant growth in population due to a lack of investment in education and technical schooling. The difference between South Korea and Japan is they put the money into education and technical schooling, and the latter made up for those who couldn't gain access to higher education due to lack of grades, etc. Still, their mobility within society wasn't capped as technical schools filled the gaps.

In the States, prominent industrialist families like the Vanderbilts, Rockefellers, Carnegie, Ford, Morgans, etc., investing in education, the library, the health sector, and transport, to name a few. The pre and post-Gilded Age in America is worth studying on what to and what not to do.

the american families invested in what is called business philanthropy which increased their grip or wealth.

pakistanis can boycott these industrialist and buy from the fairer ones or the ones give back.

 

[PakFactor]

And you think the Robber-Barons of America and the Tata-Birla of India had the 'positive symbiotic relationship', even if one were to accept your argument about the Korean and Japanese models? I hear even the Koreans were learning from Ayub's economy.

And what makes you think that Pakistan's industries wouldn't be 'globally connected'? Even in these depths of the lows, Pakistani industries do export some. Imagine had 1972 Nationalization not happened. Mujeeb Shami's message is about that--a message of positivity.

And I absolutely don't buy this '22 families' myth. If anything, the income disparity in India was/is greater but the country is going ahead. So would have Pakistan. There is more than a grain of truth in the 'Capitalist' model of Ronald Reagan.

Had Ayub not intervened in 1958 then Pakistan's civilian setup might have--just might have-- a chance to be established. But that's a big question mark considering the chaos of between 1951-58 and the 'Khotey Sikkey' (worned out coins) comments made by Mr. Jinnah about his legacy politicians. They were feudal as was a large part of the Pakistan Muslim League leadership!!

@Meengla @SQ8
To answer your first point about Robber-Barons, yes, there was a positive relationship because there was enough flexibility within the system to create laws to dismantle monopolies while maintaining the relationship. Standard Oil was broken up due to the Sherman Anti-Trust Act but from the orders of the U.S. Supreme Court in 1911. What does that tell you? It tells you that each branch of government had checks and balances in place. India developed their laws against monopolies under the Restrictive Trade Practices Act of 1969, the Competition Act of 2002, and what those 22 families did (see the image below). Again even in India, there was a balance that was maintained.

Now remember one thing those families we referenced were already in the import/export business before Ayub handed over state assets to them.

 

[Meengla]

The Tatas and Birlas have had much more innovation in them than the seths of Pakistan despite having less opportunity available to them initially as you yourself point out.

Simply because nepotism always prevails where institutions fail and mediocre sharks can keep control while leaving potentially brilliant ideas behind. The same is even true for defense related industries in Pakistan where nepotism and buddies have let great ideas and resources die out because a certain General or AVM had a buddy who they want to curry favor even if their buddy has his sights on profit rather than innovation. And since Ayub’s faltering of institutions killed off any chance of something like a GAO where here Boeing can protest about some Lockheed did or even a small fish like General Atomics initially can get its contracts validated; Pakistan is stuck with crap - from a cesspool that feeds a cesspool.

I think the industrial immigrants to Pakistan were cut from the same cloth as the Tatas and Birlas: Mercantile and innovative to make some serious money. And they proved themselves in the new fledgling country of Pakistan--and mind you, India was already much better placed than Pakistan in 1947.

Nepotism exists in Indian defense industry as well--actually, maybe far worse than in Pakistan because the pie is quite large in India. Indian parliamentary system is full of corrupt people but where India is way ahead is continuity of policies--something like that is hinted by Mr. Shami in the OP video. Something like that is needed in Pakistan now--and at this point, I don't care if it is PTI or Noon League or a govt of technocrats or even an open Martial Law: Continuity of policies for at least ten years and I believe the upcoming setup is for that.

Political institutions might have been snuffed out by Ayub but there are countries, including even South Korea and Singapore, where authoritarianism allowed continuity of policies, resulting in once basket case economies to grow. Ayub's industrialization, if allowed, would have the same effect on Pakistan.

 

[Meengla]

To answer your first point about Robber-Barons, yes, there was a positive relationship because there was enough flexibility within the system to create laws to dismantle monopolies while maintaining the relationship. Standard Oil was broken up due to the Sherman Anti-Trust Act, but the orders from the U.S. Supreme Court in 1911. What does that tell you? It tells you that each branch of government had checks and balances in place. India developed their laws against monopolies and what those 22 families did (see the image below) under the Restrictive Trade Practices Act of 1969 and the Competition Act of 2002. Again even in India, there was a balance that was maintained.

Even if one were to accept the 'positive symbiotic relationship' argument, but against your argument, many arguments could be made that the Pakistan of 1958 simply didn't have the caliber of politicians to do the job, and that Pakistan was a feudal country with a large majority of illiterate population and that Pakistan had already fought a bloody prolonged war in its very first couple of years against a much more powerful neighbor.
There was no body available to 'bell the cat' in 1958 and so realistically speaking, in Pakistan's precarious situation, someone did the best he could to raise Pakistan from far worse outcomes. There can be countless fiscal papers to show that Pakistan was becoming an industrial country from, perhaps, even a pre-agrarian country and that too within a span of a mere decade.
The resources available to Pakistan in 1947 were far less than India had. The external threats to Pakistan were far more than India, USA, Korea, Japan, or Singapore had. And Pakistan's politicians were 'Khotey Sikkey' in Mr. Jinnah's own words. So, objectively speaking, Ayub did a wonderful job in his circumstances and to this day his legacy lives in many ways.

 

[Jango]

Something like that is needed in Pakistan now--and at this point, I don't care if it is PTI or Noon League or a govt of technocrats or even an open Martial Law: Continuity of policies for at least ten years and I believe the upcoming setup is for that.

Musharraf also gave continuity of policy, what good did that do for us?

Technocratic setups are also beholden to someone, in our case, it's the army. 3 years later the COAS changes, and boom goes continuity. The solution you propose is also person specific.

Example in point, ever since Asim sahab came, our foreign policy has taken a 180 degree turn. It doesn't get mentioned in media and otherwise because it isn't spicy enough, but Bajwa and Asim are poles apart on foreign policy.

Whenever you impose inorganic solutions, things will go haywire.

That is why you need institutions to function, not people.

You are right that we need vcontinuity, but that should be of policies or institutions or frameworks, not people in the manner you propose.

 

[Meengla]

Musharraf also gave continuity of policy, what good did that do for us?

Did far better than Amir ul Mominoon Nawaz Sharif who had run Pakistan's economy to the ground. Between Oct. 1999 and Sept. 2001, before any American 'aid' arrived after 9/11, Musharraf had already started to reverse the decline of Pakistan's economy.

Technocratic setups are also beholden to someone, in our case, it's the army. 3 years later the COAS changes, and boom goes continuity. The solution you propose is also person specific.

Example in point, ever since Asim sahab came, our foreign policy has taken a 180 degree turn. It doesn't get mentioned in media and otherwise because it isn't spicy enough, but Bajwa and Asim are poles apart on foreign policy.

I don't think there is much of a difference in foreign policy between Bajwa and Asim Muneer. The pillars of Pakistan's foreign policy are to never alienate China, keep trade with the West going, and don't displease, in fact, milk the rich Arabs. What am I missing? Imran-Bajwa tussle was about some extension or for power politics.

But, agreed, long term, the solutions I propose for the next ten years are not good. I propose short term: Raise Pakistan from the ground and that's not possible if the 'politics' of the last 15+ months continues. Three is zero chance even if free and fair elections are allowed and Imran wins, there will be 'stablity'. The combined Opposition also has a large vote bank and Noonies are Khoonies!
Drastic situations require equally drastic measures.