Comparing Economic Progress of Pakistan with South Korea – Part 1

Abstract

Comparing the 70-year development experience of Pakistan with that of any of the Asian Tigers, particularly South Korea, is an exercise in futility; the speed and content of the economic development of a country depends upon several constants and variables such as

  1. Initial conditions at the start of its economic development
  2. Economic policies adopted to accelerate its economic progression
  3. Unknown Factors & Global Environment available.                                                                                                                                                

Using the historical data, the author maintains that all these four Asian Tigers enjoyed certain advantages in the above mentioned three areas which Pakistan did not.

This 2-paret article attempts to highlight the comparative advantage those countries had over Pakistan when they started their development process and made all the difference.

Introduction

It has become very fashionable among a large number of Pakistani intellectuals to compare the economic progress made by Pakistan during the last 7 decades of its existence as an independent nation-state with that of South Korea, Hong Kong, Taiwan, etc., and wonder why did Pakistan fail to become one of the so-called Asian Tigers. Some even go to the extent of citing the rapid rise of post- World War 2 Japan and Germany as proof that Pakistan could have done far better if it had taken a different course or if Ayyub style of the developmental model had been adopted throughout. It is nothing but ignorance and sheer naivete.

Comparing Pakistan of 1947 with post-WW2 Germany and Japan is ab initio absurd; both these countries were world powers in the 1940s. World War 2 only dismantled their war machine and destroyed their few cities which were economically or commercially not extremely vital for their economic regeneration. No doubt thoroughly defeated, they were strong enough in terms of infrastructure, institutional setup and trained workforce to withstand the economic ruination caused by the war.  The massive dose of foreign aid under the Marshall Plan helped them in bouncing back with a vengeance. Provision of security umbrella by the superpower of the day absolved them from the need to maintain a large standing army which came as good stead to overcome their capital deficiency. No question of equating Pakistan of 1947 with post-WW-2 Japan or Germany.

Similarly, great caution should be exercised while comparing the 70-year development experience of Pakistan with that of any of the Asian Tigers, particularly South Korea. We must keep in mind that the speed and content of the economic development of a country depends upon several constants and variables out of which three are the most crucial namely

  • Initial conditions at the start of its economic development
  • Economic policies adopted to kick-start and accelerate its economic progression
  • Unknown Factors & Global Environment available.                                                                                                                                                

All four countries namely Taiwan province of China, South Korea, Hongkong, and Singapore enjoyed certain advantages in the above mentioned three areas which Pakistan did not. Let us take the case of South Korea.

Initial Conditions of South Korea

Koreans being of the same racial stock, Japan treated Korea as its province and developed it accordingly. Applying the lessons learned during the Meiji Revolution, Japanese civil servants who dominated the Korean state structure after its occupation, planned Korean development on the Japanese Model.  After destroying its landed aristocracy, they built a strong state and packed it with more than 50,000 Japanese civil servants. This new strongly centralized state structure extracted resources needed by Japan for its imperial designs but also developed its human resource,  provided a congenial environment for savings & investment and gave it a direction on how to go forward.

Even more importantly, the Japanese transformed the entire Korean socio-political landscape and cultural norms within a short span of three decades by carrying out redistributive land reforms, nurturing a dynamic commercial middle class, adopting Western laws, and creating a strong police/security force which ensured rule of law. This sociopolitical re-engineering resulted in releasing the human and financial resources, the emergence of a technically competent middle class and a strong state structure that could extract resources through coercion.

Korean agriculture benefited immensely from Japanese technical expertise in farming, and heavy investment which permitted Korea to become the granary of the Japanese Empire. Korean rice production increased by 2% per annum from 1910–1940. The export-oriented nature of Korean agriculture led to major increases in productivity and efficiency of Korean food production but also created a class of commercial exporters who played a crucial role later.

Side by side the agricultural revolution in Korea, an industrial revolution, although initially discouraged to protect Japanese manufacturing, started taking place. Because of the rising labour costs in Japan, the Japanese companies already flush with capital, started investing in low-cost Korea. It had also other motives.

  • Firstly, to dampen the Korean nationalist fervour by co-opting its businessmen and buying local elite’s loyalties. These alliances of convenience ensured Korean integration into the overall Japanese imperial designs. In fact, all the top 50 conglomerates (Chaebols) of South Korea’s business class which are now global brands, had their roots in the Japanese colonial era,
  • Secondly, it ensured the easy availability of semi-processed inputs for Japanese firms at low prices. Such a division of labour ensured an increasingly capable and efficient war economy which later helped Japan to fight world war 2.

Consequently, Korean industrial growth averaged 10% per annum from 1910 for the next three decades with the result that by 1940, nearly 40% of all commodities produced in Korea originated from the industrial sector in Korea.

As a result of agricultural and industrial revolutions, the Korean economy grew more than 3% per anum for three consecutive decades up until Korean independence, nearly 35% of which consisted of manufacturing and mining sectors. The number of students who had grown from 10,000 in 1910 to 1.7 million in 1945 would form the backbone of the state bureaucracy and the future industrial policy. After independence, Korea just followed the model left by the Japanese with ruthless efficiency.

Initial Conditions of Pakistan

On the other hand, the British colonization of India vastly differed from the Japanese colonization of Korea. Unlike Japan which considered Korea as an ethno-cultural and geographic extension of Japan and developed it accordingly, the British treated the Sub-continent as a colony for resource extraction, to serve as a market for British goods and provide human resources for the Indian Royal Army for further colonisation. As such, the British made no concerted effort to direct social and economic change in India the way the Japanese had done in Korea; .they only tinkered with the system they inherited from the Mughals on a need basis, created infrastructure for resource extraction and introduced modern political ideas on an incremental basis.

They did not destroy the landed aristocracy of India, rather made alliances with the existing local landowning, feudal elite, utilizing their political clout combined with the clout of the British Indian army to control India. The British were not interested in forming an effective, centralized and authoritarian state nor they had any plans or impetus to industrialize India. The British companies did not outsource production to India on any significant scale or incur any social and political changes that would have made India and Pakistan more amenable to industrialization after Independence.

Unfortunately, areas that comprised Pakistan were at the periphery of the British Indian Empire and could not reap the benefits of colonial development. Consequently, when Pakistan came into existence as a result of the dissolution of the British Indian Empire in 1047, it was a typical under-developed country. which inherited a weak state lacking the necessary wherewithal to even carry out its normal regulatory functions not to speak of initiating an ambitious programme of socio-economic development at a massive scale. (Out of a total of 1,157 Indian officers, only ninety-five officers opted for Pakistan). 

It was a subsistence agricultural rural economy, with an extremely poor level of rudimentary infrastructure, technological penetration or application of modern techniques of agricultural farming. After the migration to India of the Sikh farmers, Pakistan’s agricultural sector was facing an acute shortage of skilled labour force and resourceful landlords. The same was the case with its industrial sector and inherited only 34 industrial units of insignificant importance. without any jute mill; any textile mill worth the name. Mass scale exodus of administrative talent, financial capital, and entrepreneurship, 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

To make matters worse, soon after independence, communal rioting started which resulted in the death of 250,000 people and an influx of 12 million refugees. As the state was grappling with these crises, Pakistan got engaged with hostilities on its both borders. While hostilities with Afghanistan were at the most an irritant, it was much more serious with India. It started with a battle over canal water in Punjab, it went to Kashmir where the war started with India which withheld the release of the money which came to Pakistan’s share. Seriously under-resourced military force which it badly needed to ensure its external defence and internal security. All 16 ordnance factories were in India, which refused to hand any over. The military supplies which India agreed to hand over sometimes did not arrive, or when they did, they were often old, worn, damaged and obsolete.

After severing ties with India, Pakistan lost the major market for its two major commodities namely cotton and jute. On the other hand, commodities such as coal and sugar were in short supply in Pakistan as they had traditionally come from areas now part of India. And much of Punjab’s electricity was imported from Indian power stations.

The trade war between the two countries reached a crisis in September 1949 when Britain devalued the pound. India followed Britain’s lead, but Pakistan did not, so India severed trade relations with Pakistan. New trading relationships were formed, and the construction of cotton and jute mills in Pakistan was quickly undertaken.

Keeping in view the above differential in the initial conditions between Pakistan and South Korea at the time of the start of their respective processes of economic growth, it is not fair to blame Pakistan for faring badly; it was an unequal fight

(Taken from author’s book Political Economy of Pakistan; 1947-2020/ A Short History available at 

https://www.amazon.com/dp/B0844ZMKNW#reader_B0844ZMKNW
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