Economic instability and Disparity

After coming into power Muhammad Ayub Khan resolved to make Pakistan economically developed.
But he failed to stabilize Pakistan’s economy on sound footings. Wealth began to concentrate in few
hands particularly to 22 families. In 1968 Dr. Mehboob-ul-Haq a chief economist, disclosed that these 22
families controlled 67% of the entire industrial capital, 80% of banking and 97% of insurance capital. This
socio-economic injustice widened the gap between the rich and the poor. The number of educated
jobless people was increasing day-by-day, prices of essential commodities raised to such an extent that
in 1968 there occurred serious shortage of sugar and drinking, water in Karachi. Ayub’s economic
activities did not bring any change and revolution in socio-economic position of common man. Hence
the people frustrated slowly and gradually of his regime. Economics of inequality

Shahid Javed Burki, a former World Bank economist, rightly identified the fundamental disconnect
between the public and the Ayub Junta that celebrated 10 years of being in power by highlighting GDP
growth and other inflated macroeconomic indicators.

The general public, however, cared less of the aggregate statistics as they struggled without much
success against price inflation and spatial income disparities.

Burki points out that the so-called economic growth was rooted in income inequality, which worsened
over time between regions and among people with the growth in the macroeconomy.

The result was evident: half of the industrial wealth accrued to Chinioties in Punjab and the immigrant
Memons, Bohras, and Khojas.

At the same time, General Ayub opened the door to foreign experts who were ignorant of, and alien to,
the political economy of Pakistan.

Yet they came armed with policies that might have worked elsewhere but were ill-suited for Pakistan’s
challenges.

General Ayub’s economic prowess need not be discounted entirely. His penchant for central planning is
evident in the second five-year plan.
The inflow of foreign capital, at twice the rate of that of India, sparked growth in industries that
supported consumer goods.

One must also review what drove the growth and what industrial sectors blossomed as a result. A close
look at what transpired reveals that there was nothing organic about the growth. It was primarily driven
by foreign aid, the same way General Musharraf’s rule was buttressed by American aid after 9/11.

By December 1961, foreign aid was more than twice the size of foreign loans. With the second five-year
plan in 1964, foreign aid was responsible for 40% of the total investment.

And that’s not all. Foreign aid covered 66% of the cost of imports. One must give credit where it’s due,
and it’s mainly foreign aid.

Despite the foreign investment as aid and credit, and the aggressive public works programme pursued
by the regime to generate new jobs, unemployment persisted, and even worsened during the second
five year plan from 5.5 million man-years in 1960-'61 to 5.8 million man-years in 1964-'65 in East
Pakistan.

The regime allocated twice as much for atomic energy than it did for technical training.

What about the rapid industrialisation undertook by the Ayub regime using foreign aid? As soon as the
industries started generating revenue, the regime disposed of them to private investors.

During 1964-65, the loans and advances by the government to the private sector were twice the size of
the direct investments by the industry.

However, profit-making units that should have been set up by the industry in the first place should have
not been handed over to the industrialists as an unearned reward.
Those who defend General Ayub Khan’s reign also hold false memories of peace and harmony. Do such
claims withstand empirical scrutiny?

Raunaq Jahangir, quoted by Burki, demonstrated that violence, especially in Bangladesh (East Pakistan),
increased tremendously during the Ayub era.

If there was peace and tranquility in the '60s, why did the unrest in 1968-69 reach such a feverish pitch?

It was not the economic growth, but the increasing concentration of wealth and power in the hands of a
few that irked the have-nots and fuelled violence.