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Finance and economics: looking back

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After a few centuries of hindsight, it is evident that the Mughal ruler, Jehangir, did not know the damage he was inflicting on the subcontinent when he warmly received his ambassador, Sir Thomas Roe, from the court of King James I. was supposed to be a trade delegation ended up being the rulers of undivided India. The British, by the turn of 1615, when Shah Alam II ruled Delhi, had begun to establish factories and low-level employees of the East India Company (EIC) were appointed as tax collectors. Indian labor had begun to be exported to other British colonies.

Delhi’s rulers were oblivious to the dynamics of the commercial economy and thus fell prey to the machinations of the British. They did not seem to have realized that economic domination would make them susceptible to losing political power. An officer of the East India Company is said to have remarked: “the little court is disappearing; trade languishes; capital withers away; the people are impoverished…the Englishman thrives and acts like a sponge drawing wealth from the banks of the Ganges and squeezing them to the banks of the Thames”.

Shashi Tharoor, in one of his books, mentions that every year more than £18 million was sent to Britain from India. He quoted Count De Chatelet, the French Ambassador to the Royal Court in London, who said: “There are few kings in Europe richer than the directors of the East India Company. It would not be wrong to say that the Industrial Revolution in Britain was built on the stake of South Asian resources. Under cover of trade, the parent tax Aurangzeb collected, estimated at £100 million, was tactfully hidden in London. The economic capitulation had begun…

Between the years 1857 to 1900, Parsis and Hindus dominated local trading conditions. Jamshedji Tata was able to set up iron and steel production in 1912. Through nationalization, the shipbuilding industry of the Muslim Keralites was completely destroyed. The end of the Second World War marked the beginning of the decline of the British Empire. Minorities, especially Muslims, were the most exploited.

The Muslims of India had become aware of their pitiful conditions and their status in terms of economic well-being. This deep rift of exploitation, both political and economic, led Mr. Jinnah to propose the creation of a separate Muslim homeland. It was difficult to achieve, but the “resolution” helped. Mr. Jinnah and his associates diligently pursued the idea of ​​a Muslim homeland. Thanks to his indomitable spirit and unparalleled leadership, we were able to obtain Pakistan: a land of our own. Boasting unique, distinct and different leadership qualities, he recognized the need to empower Muslims in the subcontinent, both politically and economically. It captured the imagination of Muslims at all levels, enabling it to carve out a nation-state for itself in 1947.

When it was formed, Pakistan was financially and economically unprepared. Allocation of assets and liabilities between Pakistan and India has been entrusted to the partition council, which has indulged in complete trivialities as to how office pencils, rubbers, gem clips etc. ., should be shared. Distribution by the Reserve Bank of India (RBI) was equally messy. Cash on hand at RBI was Rs.400 crore – the common currency remained in vogue until September 1948 – of this amount Pakistan’s share was calculated at a dismal low of Rs.75 crore. India made an initial payment of 25 crore rupees as working capital, before August 1947; the remaining 55 crores became hostage to the cunning politics of the equally cunning Sardar Patel, who made it known that the balance was repatriable only after outstanding political disputes were settled. Gandhi fasted against this decision in protest. His fasting, real or prank, had no fruitful consequences for Pakistan, as the money never came. This amount remains unpaid as receivables from India to date.

After independence, Pakistan, more than India, had to learn the tricks of economic and financial management. Due to Nehru’s penchant for the socialist economic model, India immediately embarked on a planned economy; Pakistan gave in and succumbed to the demands of a capitalist economy. The feudal structure of Pakistan was the main motivating factor to move in this direction. While India abolished the jagirdari system (a feudal form of land tenure, dating back to the 13th century) in 1951, Pakistan settled for the feudal structure, which sadly continues to haunt our democracy today.

India is in an advantageous position as it has inherited a large number of industries and production units. In true Soviet economics style, the Indians had successive five-year plans which were extremely successful, resulting in a cumulative growth of 11% in the economy. Towards the start of the Sino-Indian War, this number improved to a growth of 21%. To our collective dismay, all of this happened in India as our five-year plans floundered due to relentless political upheaval. The political instability has strongly shaken the economic enterprises. Our growth rates were in the single digits.

As part of SEATO (the Southeast Asian Treaty Organization) and CENTO (Central Treaty Organization), we have received generous assistance under the Marshall Plan. This supported our economy, but the aid acted like opium, leading Pakistan to become a permanent borrower in international markets. This continues to be a cause of embarrassment to our nation even today. We have lost respect in the community of nations. However, for a few years during the Ayubian period, the dark era of the Zia years and the enlightened years of President Musharraf’s moderation, we saw substantial growth, which exceeded 7% of GDP per year.

During the 1960s, Pakistan had become a model economic state for other newly independent countries in Asia and Africa. Private enterprise has reached new heights, providing employment opportunities. The industrial base developed rapidly. However, the capitalist model on which Pakistan operated obviously created a concentration of wealth and the country saw the emergence of its infamous 22 family lines. Socialist political forces made them look like exploiters; thanks to the charismatic Zulfiqar Ali Bhutto, this mass appeal has united.

Following the rise to power of ZA Bhutto, the golden period of development and growth of the sixties collapsed. During Bhutto’s reign, all critical industries in the economy were nationalized, which inflicted great damage. The private sector remained in hibernation for a very long time and only emerged from its loneliness towards the beginning of the 1990s.

In the area of ​​financial intermediation, Pakistan boasted of having a robust banking sector, with specialized financial institutions. However, politicians subsequently looted all the institutions and today most are part of the corporate graveyard. Unlike the current culture of Pakistani politicians, Jinnah was the rock of Gibraltar, with no susceptibility to the temptations of power, pelf or the acquisition of wealth. India was fortunate to have Nehru and other politicians to guide her through her nascent phase of development; we lost the generation of freedom fighters and founding fathers early on to Mother Nature.

Having great foresight, Quaid knew the importance of economics, banking, and finance. In his speech at the inauguration of the State Bank of Pakistan on July 1, 1948, he said: “I will watch with interest the work of your Research Organization in the evolution of banking practices consistent with Islamic ideas of social and economic life. The economic system of the West has created almost insoluble problems for mankind and for many of us it seems that only a miracle can save it from disaster… the adoption of economic theory and practice western ways will not help us achieve our goal of creating a happy and contented people. We must work out our destiny in our own way and present to the world an economic system based on the true Islamic concept of equality of manhood and social justice.

While over the past 75 years we could have done better, many opportunities have been lost due to political instability. However, we have created a name for ourselves. Given the advantage of good leadership, the country is bound to fight back with better economic numbers. Those who, God willing, celebrate the 100th anniversary of the independence of this country, should raise their chins in the air. This scribe is confident in the abilities of current and future generations of Pakistan to lead the country north.

-The author is a senior banker in Pakistan