NationalizationEssay Preview: NationalizationReport this essayThe Second Phase (1971-77), the Bhutto era, saw tumultuous economic changes in the name of social justice. Their repercussions continue to haunt the country even today. Nationalization of 31 key industrial units, 13 banks, over a dozen insurance, ten shipping and two petroleum companies was carried out, many of these belonging to the 22 families. The industrialists and entrepreneurs found the fruits of their labor snatched from them over-night. But, the shattering of their spirit was much more harmful to the nation. Not a single industrial project has been set up by any of these families over the past 28 years. From producers they have turned into distributors, spinners of yarn and processors of sugarcane, at best.
The Bhutto Era of the 1970s
During the second phase of nationalization (1971–77), there was a political transition, with the central government beginning to push for a nationalization campaign.
The Bhutto era began with the establishment of a state monopoly power and the passage of the 1971 Nationalization Act of the National Bank of India. All state controlled sectors of the economy became nationalized with the help of the Bank of India and by the government’s intervention on a nationwide scale. After the Bank of India became established, there were several nationalizations, starting in 1973 and proceeding up to the end of 1982. From 1973 to 1984, over 3 million workers were nationalized in India. These nationalizations included construction, food industry, and automobile business. The biggest of these was the Bihari textile company by which the majority of the bidders were multinational corporations. In 1972, the largest of the bidders was the Indian Rubber Mills, which was owned by a group called New-American Foods, another multinational company that produced the world’s second largest crop of rubber.
Reform of the banking system
Many of the most important and destructive policies of the government of India were implemented during this period. The government’s efforts culminated with the creation of the National Banking Act (NBA), in 1974. It had the effect of raising taxes and, in doing so, had the impact of lowering the price of foreign currency and the currency regime of the entire monetary system for a time. While this was the first serious reform of that period, the NBA was a massive and significant improvement in the financial system.
In addition to the elimination of national banking operations, the NBA allowed the Central Bank of India (CBI) to take over the supervision of the banking system. This was done for an initial period of ten years and eventually ended in 1982.
In 1984, the Economic Mission of the CBI adopted the nationalization policy of the Bhutto Era, and, more recently, initiated the National Indian National Bank (NIEB). Nationalization came only after Congress Party MLAs had seized office in 1984. The NIEB’s nationalization policy was designed to make the country financially sound for a couple of years under the conditions of a national nationalization and, above all, for a nationalization campaign. The NIEB’s nationalization policy was based on the assumption that the country was able to support small industrial enterprises and, under a national central bank, provide them with sufficient money to make capital expenditures for all the sectors of the economy. This was an unrealistic and politically unrealistic goal but, nonetheless, the Nationalization Campaign took place in support of the Bhutto Era and the nationalization drive. The purpose of the nationalization campaign was to strengthen the Bank of Indian Finance and central banks in the country.
The Bhutto Era of 1980 (1978-1983)
The Bhutto Era of 1980-1983 saw the rise of the nationalization campaign. An entire sector was created that became involved in the campaign: commercial banking,
A minor business community, the Chiniotis, filled up the vacuum and shifted industrial activity to Punjab. Karachi kept growing physically, while employment opportunities kept shrinking with the shift of industries to the north. This spawned frustration and violence that, in its turn, has pressured further the Chiniotis of Punjab to take their businesses up north to safer areas. Allocation of land in duty-free areas, provision of infrastructure facilities at public expense and latent official support, worked as the pull factors in this trend.
Nationalization turned bureaucrats and politicians into businessmen and businessmen into politicians.Bhuttos 1973 constitution provided no constitutional security of job to the civil servants. Their postings, transfers, promotions and even summary dismissals lay, for the first time in the countrys history, totally at the pleasure of the prime minister. The en masse dismissal of senior officials by Bhutto on assumption of office Ð-mainly on the recommendations of his party leaders- had effectively politicized senior bureaucrats. Insecurity germinated corruption, its incidence having been till then insignificant.
How nationalization has retarded Pakistans economic growth, points out Shahid, can be illustrated by the simple fact that in 1947 Pakistan had inherited three aging vessels but their number increased to 75 when Bhutto nationalized shipping and placed all these vessels under the National Shipping Corporation. But, in 1992 when Nawaz Sharif allowed the licensing of private shipping, the number of ships with NSC had gone down from 75 to 25 only.