Bhutto Regime and Nationalization

Introduction

In this paper I will discuss:

Ð'* Why Z.A. Bhutto thought nationalization necessary for the development of Pakistan.

Ð'* What steps he took and how he went about doing it.

Ð'* What effects the nationalization had on the economy as well as its social and political impacts.

Ð'* And finally, why the nationalization failed to produce the desired result Mr. Bhutto had in mind.

What is Nationalization

In order to fully understand the content of this paper, it would prove helpful to first have a clear concept of what exactly nationalization is.

Nationalization is the act of taking assets into state ownership. Usually it refers to private assets being nationalized, but sometimes it may be assets owned by other levels of government, such as municipalities. Similarly, the opposite of nationalization is usually privatization.

Or in other, simpler words, the process of bringing an asset into public ownership is called nationalization. Public ownership is government ownership of any asset, industry, or corporation at any level, national, regional or local (municipal).

A key issue in nationalization is whether the private owner is properly compensated for the value of the institution. The most controversial nationalizations are those where no compensation is paid or an amount unreasonably below the likely market rate (expropriation). Much nationalization through expropriation has come after revolutions, especially communist ones.

In some instances, nationalization occurs as the government seizes the corporate property of a criminal. An example is Renault, which was seized by the French government from its owners because they had collaborated with Nazi Germany.

Some services, such as defense, cannot be provided by the private sector directly - only a government system of taxation can finance them. Thus here it is important this kind of services be under public ownership.

There are many other arguments in favor of nationalization. Another basic argument in favor of nationalization is that Public ownership can protect consumer interests in sectors where competition is low, where choices are important but made infrequently, and/or where consumers do not have the expertise to make good decisions (such as in health care).

A profitable nationalized industry contributes with its profits directly to the common wealth of the whole country, rather than to the wealth of a subset of its population.

On the other hand nationalization also has its negative effects. Government ownership may lead to waste (inefficiency) if it proves unable to motivate management and personnel through appropriate incentives, including appropriate pay and threat of redundancy.

Public ownership in an industry which could be competitive in private hands may stifle innovation if proper incentives are not provided by the government. Consumer choice may be reduced and there may be no alternative sources of goods or services that better meet consumer preferences.

Decision-making in the public sector may be prone to interference from politicians for political or populist reasons. The industry may be over-staffed in order to reduce unemployment; it may be forced to conduct transactions or actions in certain areas in order to win local votes; it may be forced to manipulate its prices in order to control inflation. Of course, some of these measures may be considered positive rather than negative, but if they are not taken properly, in the long run they are likely to be an inefficient way to meet the desired goals.

About Z.A. Bhutto, the times, and his regime

Zulfiqar Ali Bhutto was born on January 5, 1928. He was the only son of Sir Shah Nawaz Bhutto. Zulfiqar Ali Bhutto completed his early education from Bombay's Cathedral High School. In 1947, he joined the University of Southern California, and later the University of California at Berkeley in June 1949. After completing his degree with honors in Political Science at Berkeley in June 1950, he was admitted to Oxford.

In 1958, he joined President Iskander Mirza's Cabinet as Commerce Minister. He was the youngest Minister in Ayub Khans Cabinet. In 1963, he took over the post of Foreign Minister from Muhammad Ali Bogra.

Zulfiqar Ali Bhutto launched Pakistan Peoples Party after leaving Ayub's Cabinet. In the general elections held in December 1970, P. P. P. won a large majority in West Pakistan but failed to reach an agreement with Sheikh Mujib-ur-Rahman, the majority winner from East Pakistan. Following the 1971 War and the separation of East Pakistan, Yahya Khan resigned and Bhutto took over as President and Chief Martial Law Administrator on December 20, 1971.

After he had left Ayub Khan and had formed a party of his own, he came forward with a programmme of economic and social reform and laid down the guiding principles of his policy: Islam, Socialism and Democracy. A promise of economic uplift was epitomized in the slogan of Roti, Kapra, and Makan (lit: food, clothing and shelter). The manifesto contained the pledge to nationalize basic industries. It is important to note here that his policy included Socialism. That was why he thought nationalization essential for the betterment of the country. There's more about this later on in the paper.

A majority of the people of Pakistan resided in the rural areas in countless villages and they were mostly landless peasants, workers, or tenants. They had lived for generations in extreme poverty and had endured the oppression of the landlords. The inability to change the conditions of their lives had bred deep apathy and they lived as if they were the victims of nature's seemingly unchanging laws. By championing the cause of the poor and the underprivileged and by his assertion of the sovereign rights of the people, Bhutto responded both to economic need and the urge for political participation. He instilled hope in the people's hearts. There were, on the other hand, a growing number of young educated people qualified for a wide range of professions, but unable to find careers or avenues of employment. They were resentful of the decadent economic system and of a social setup which denied to them a rightful in society. They found in Bhutto's radical programme a new hope.

Bhutto had earned a reputation as a young nationalist with flair of appeal for the youth. He had the natural ability to captivate whole crowds