Why do Military Regimes in Pakistan Show Impressive Economic Growth Rates?

Introduction

Before Man Mohan Singh’s far-sighted economic reformation put India on a high growth trajectory during the 1990s, economists used to taunt India for growing at the Hindu rate of growth of 2.5% for several decades after independence. Pakistan can also share this taunt with a caveat; we have followed two different rates of growth-military rate of growth of more than 6 % and a civilian rate of growth of less than tha4%.

A cursory glance at the 70 years growth profile of Pakistan would reveal that relatively high GDP growth rates were achieved mainly during the three military regimes; all the low growth years occurred during the civilian rule. For example, low growth rates of the 1950s, early 1970s, and 1990s were coincidental with the democratic eras while high growth rates were achieved during the 1960s, late 1970s and then in 200os- when the country was under military dictatorships.

Was it a sheer coincidence of fortuitous circumstances, or there is some inherent logic of its own? The answer to this question depends upon the perspective you are using. However, to me, there were two main reasons for this phenomenon.

  1. Firstly, the single-minded attention of the military dictators to economic development to compensate the people for depriving them of political freedom and thus provide legitimacy to their rule.

Let me explain

The first military dictator of Pakistan, General Ayyub came into power during an exceptionally favourable global economic environment, known as the golden period of the Washington Consensus. In the wake of escalating Cold War, the USA needed strong-arm military men to rule in geopolitically important allies to further American interests. They were willing to provide advisory services, financial resources, and access to her markets for the purchase of machinery and export of manufactured goods to all those who were willing to join their camp.

Because of Pakistan’s extremely important geopolitical position, it was wooed desperately by the Americans to join its camp against the USSR. How much role USA played in his eventually overthrowing a civilian government in Pakistan, is anybody’s guess. According to KK Aziz, it was widely thought that the coup was endorsed by the US to win the support of the pro-West military in the Cold War while Lawrence Ziring asserts that general elections in the country were a few months away and it was perceived that the newly elected government would alter its policy of Cold War involvement.

Once in power, General Ayyub was well rewarded for his services. Not only did the US provide ample aid to Pakistan during Ayyub’s era, but there were also about 8,000 American experts working in different fields in the country. Hence the remarkable rate of economic growth witnessed during his era.

The second dictator, General Zia was also an American choice. Americans had been active in the soft belly of the USSR, namely Afghanistan to provoke its occupation of Afghanistan. The Soviet Union fell into the trap laid for the bear and invaded Afghanistan. Pakistan became a front-line state for the furtherance of American interests in the region in particular and at the global level in general. With it came the usual perks-military aid, foreign assistance, advisory services, and support for military ruthlessness.

Similarly, the third military ruler of Pakistan, General Musharraf was lucky like his two illustrious predecessors, Ayyub and Zia. 9/11 happened a year later, and suddenly he became the leader of a front-line state in the war against global terrorism, the non-NATO ally Pakistan. Not only sanctions were relaxed and loans were restructured on long-term soft terms, but Pakistan was flooded with military and financial assistance in return for her services in the global war against terrorism. This fiscal reprieve, combined with plenty of spare capacity, provided the basis for Pakistan’s burst of growth.

With almost zero debt repayments, foreign exchange reserves stabilised and started increasing with the arrival of foreign military aid. 9/11 tragedy brought another financial bonanza for Pakistan, which saw massive doses of foreign workers’ remittances, mostly through legal channels. Reserves started building up accompanied by exchange rate stabilisation. Foreign direct investment started flowing in, boosted by privatisations.

No doubt, Pakistan achieved a remarkable rate of economic growth during these periods Pakistan remained under military dictatorship. However, we should take these stellar achievements with a pinch of salt.

  1. Firstly, it is a historical fact that the pace of development is always very rapid in the initial stages of economic development as there are a lot of infrastructures to build, which invariably increases your figures. Look at the massive growth performance of China, which owes it to the huge investment made by them in infrastructural development.

On the other hand, the bad performance of the civilian regimes throughout has been more to do with the mess left by these military regimes when they exited. At the end of each high-growth period of the military regimes, the respective incoming civilian governments invariably inherited serious deficiencies in the basic economic structure of the country-uneven growth clusters, inadequate infrastructure, low human development, undiversified export bag, etc. Coupled with a bloated defense expenditure but drastically reduced foreign assistance, the economy suffered the worst economic crises in the form of fiscal and balance of payments pressures which induced a subsequent slowdown.

Another important factor in the bad performance of the civilian regimes has been their bad luck. They not only had to face an adverse external environment but nature also dealt a raw hand with them. For example, during the first ten years after independence, it was the civilians ruling the country. However, anyone who has a rudimentary knowledge of the economic history of Pakistan knows the dismal initial conditions with which Pakistan started its journey.

Pakistan inherited a predominantly agrarian economy dominated by big landowners with an extremely poor level of rudimentary infrastructure, technological penetration, or application of modern techniques of agricultural farming. The same was the case with its industrial sector, which inherited 34 industrial units of insignificant importance. Its service structure was in total disarray. Mass scale exodus of administrative talent, financial capital, and entrepreneurship, historically underrepresented in British India due to imperatives of colonial development and strategic compulsions of the occupying power, meant there were very few people who could run the government offices, social services, financial institutions, and commercial enterprises.

The arrival of more than one million traumatized refugees who were without any assets but full of expectations from a country that was still reeling from the pangs of birth added to the miseries of the state which was almost financially bankrupt and administratively decimated en masse emigration of their key personnel. Hindus and Sikhs.

In the 1970s, PPP inherited a dismembered Pakistan, a demoralized and traumatised nation, and a declining economy that had to face the worst floods as well as the worst financial crises from outside.

Benazir Bhutto took reins of the country in 1988 when the inflow of foreign aid which had sustained a military ruler for 11 years dried. She again came into power in 1992 in the wake of great financial crises and had to leave the government in 1995.

The same misfortune was waiting for them in their fourth tenure. Zardari government came to power in 2008 when the global economies experienced the worst economic recession since the great depression of the 30s. The demand for Pakistani goods declined and investment flows dried up, thus starving Pakistani industries. Another bolt from the blue was the massive floods resulting in colossal damage to the crops and water standing in lower Sindh for months. Lastly, the loans which were rolled over for a decade during the Musharraf regime, the newly elected government was forced to pay these loans at a time when the economy had nosed down because of the global oil and financial crises of 2007/8.

Thus, notwithstanding the stellar performances shown by the military regimes in terms of economic development, one must be cautious in comparing their achievements with those of the civilian regimes.

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Shahid Hussain Raja

Shahid Hussain Raja

Retired Federal Secretary, Government of Pakistan/Author/Independent Consultant- Public Policy & Governance Reforms