Strategic Analysis

Strategic Analysis:
A Monthly Journal of the IDSA

Jan-Mar 2002 (Vol. XXVI No. 1)


Pakistan: Impact of Islamic Socialism
Bidanda M. Chengappa * , Senior Research Fellow, IDSA



The paper examines the impact of Islamic socialism as an ideology and as a policy of Pakistan. It discusses the concept, context and content of the ideology and looks at the nature of implementation in the country. The paper analyses how the ‘left’ managed macro-economic affairs and focuses on themes like: rupee devaluation, inflationary trends, export policies and budget deficit. The paper also examines the implementation of Islamic socialism in various sectors namely: agriculture, bureaucracy, education, health and industry. It is essentially an attempt to provide some insights into the revolution attributed to Islamic socialism between 1972-74 and how it shaped the political economy of Pakistan.


Pakistan under President Pervez Musharaff is the sum total of the political, economic and social conditions of the past five decades of the nation-building process. The regimes of Ayub Khan, Zulfikar Ali Bhutto and Zia ul Haq were associated with the Green Revolution, Islamic socialism and Islamisation of Pakistan respectively. While the Green Revolution unleashed the country’s agricultural potential, Islamic socialism succeeded in political mobilisation of the masses and Islamisation increased the role of religion in politics.

Both Zulfikar Ali Bhutto and Maulana Bhashani, the Pakistan People’s Party (PPP) leader and National Awami Party leader, respectively, used the term Islamic socialism in the late 1960s. However, since Bhutto actually implemented the ideology of Islamic socialism it is associated to a greater degree with him than Bhashani. Given the Pakistani people’s level of political consciousness, the prefix Islam proved appropriate. Bhutto’s brand of Islamic socialism was an amalgam of anti-Indianism, socialism and nationalism 1 .

The primary features of Pakistani polity are: religion, praetorianism and the influence of the United States. Therefore, to what extent, did Islamic socialism contribute to the development of democracy, the negation of praetorianism and the US influence on Pakistani polity, is the question.


Islamic Socialism

The Communist Party of Pakistan was founded in 1948 and by its very nature triggered off some interest in comparing Islam and Communism. As ideologies, Islam and Communism are common to the extent that both strive for social revolution and a change of civilisation. Both ideologies believe that while man as an individual is essentially good, problems arise because society determines his conduct. The common objective in both ideologies, revolves around a classless society and an equitable distribution of wealth. Perhaps this prompted an influential Muslim Leaguer, Mian Abdul Bari, to state in Parliament:

“Islamic socialism is as much above Communism and if Communism comes into contact with Islamic socialism, I am sure we may be able to convert it into the Islamic cult.” 2

Following his acrimonious departure from the Ayub regime, Zulfikar Ali Bhutto founded the PPP in December 1967. He initially used the Tashkent issue and subsequently Islamic socialism for the political mobilisation of the masses against President Ayub Khan. Bhutto used the 1966 Tashkent Summit-over the 1965 India-Pakistan War-to deflect the blame on Ayub Khan in whose cabinet he was the foreign minister. The PPP was the first party to acknowledge the claims of distributive justice, which was contrary to the approach of earlier regimes. Instead, the preceding regimes and their policies suggested that such inequities were imperative for growth. Such an attitudinal shift of the government immensely impressed the common man. To that extent, Islamic socialism was tailored to the endemic conditions prevalent then.

It is important to note that, the PPP was the first political party to be formed in Pakistan since the Muslim League amounted to only being a relic from the pre-partioned British India. It was a coherent party with a mass base, which became possible due to Islamic socialism. In a sense, Bhutto used Islamic socialism as a medium to articulate his views which provided ideological coherence and therefore enabled a popular support base.

The country comprised both feudal and tribal societies, besides the religious conservative class along with a miniscule westernised elite segment. These socio-economic characteristics, therefore, required an ideology, which would have mass appeal and yet not offend the conservative class who had their own influence. Accordingly, Islamic socialism promised to minimise socio-economic segmentation and, therefore, attracted a large number of people from various strata. The ideology attempted to represent the aspirations of all classes except the industrialists, bureaucracy and the military. Initially the organised labour, peasants, middle class farmers, the urban and rural middle class and the educated professional urban middle class collectively supported Bhutto’s Islamic socialism. The prefix Islamic was to pre-empt any critcism from the rightist parties.

Bhutto who was referred to as the Quaid-i-Awam (Leader of the People) had some key political associates namely, JA Rahim, Mubashir Hasan, Mumtaz Bhutto, Ghulam Mustafa Khar, Mairaj Mohammad Khan and Mohammad Hayat Sherpao. The PPP idealogues JA Rahim and Mubashir Hasan, along with Bhutto conceived the ideology of Islamic socialism 3 . The two ”leftist” ideologues were not committed to any radical interpretation of Marxism. 4 The birth of the PPP involved the 10 Foundation Documents wherein Bhutto wrote document three about “Why a New Party?” and Mubashir Hassan produced document seven on “Declaration of the Unity of the People”. Rahim drafted the rest of the documents. During the convention, Rahim finalised The Interim Constitution of the Party, which spelt out its four-fold motto:

Islam is our faith;

Democracy is our polity;

Socialism is our economy;

All power to the people. 5

The implementation of Islamic socialism in the Pakistani context implied: land reforms, labour reforms and nationalisation of industries, financial institutions, education and health sectors. In the process, the economy was re-structured because industrial units were under state control. The takeover of financial institutions helped to break the critical link between finance and industrial capital. The nationalisation of large-scale industry resulted in the growth of small-scale industries. Similarly, the government control over education and health had far-reaching social consequences, which could not be rolled back easily. The nationalisation of school education reduced literacy levels as well as higher education enrolments.

There was a difference between the nature of reforms, which were policy-specific and structural in character. While the labour, education and health reforms were policy- specific, the land reforms and nationalisation of industry were structural in nature. The land reforms targeted the landed aristocracy, while the takeover of industries was aimed to break the power of the well-known 22 big business families of Pakistan.

Whether Islamic socialism and pure Islam would be mutually contradictory or not was a highly debatable question. The PPP included two Maulvis, Muhammad Saeed and Qudratullah to ensure the Islamic credentials of the party 6 . They were used to convince skeptics about the absence of any clash of ideologies between Islam and socialism. In 1969, the conservative clergy had issued a fatwah or religious decree, which proclaimed socialism was un-Islamic and that Bhutto was a kafir or non-believer for the propagation of such an ideology 7 . Probably this explains why the term Islamic socialism was not used in the PPP’s foundation documents or the election manifesto.

Bhutto found support for his socialist ideology from the views of the poet Mohammad Iqbal and Quaid-i-Azam, Mohammad Ali Jinnah on the subject. He defended his position with these views and added:

“Islam is our faith, and it is the basis for Pakistan. Pakistan cannot last without the supremacy of Islam. A socialist government does not rival that supremacy. On the contrary, socialism will make the whole population the custodian of Islamic values.” 8

Moreover, Bhutto was of the opinion that if Muslim countries like Algeria, Egypt, Iraq and Syria had successfully reached stability through Islamic socialism, then similarly, Pakistan too could prosper through this ideology 9 . He was a shrewd politician and tailored his speeches to the audiences and the area they belonged to. For instance, he said the common man’s standard of living had to be improved and the abuse of power by the landed aristocracy should be stymied, in Sind. To industrial workers in Karachi he highlighted Islamic socialism. He spoke of a socialist revolution in the NWFP. In order to appeal to the Islamic sentiments of the people he referred to Musawaat-i-Muhammadi (Equality of Islam) rather than Islamic socialism 10 . Bhutto defined socialism as “ . . . the highest expression of democracy and its logical fulfillment . . . and progressively realised without violent changes. 11 He further said,

“The range of socialism is as wide as conceivable . . . The socialism applicable to Pakistan would be in conformity with its ideology and remain democratic in nature. If there can be a Scandinavian form of socialism, why cannot there be a Pakistani form suitable to our genius?” 12

Pakistan was pervaded with political controversy owing to the ‘Bangladeshisation’ of the country and thereafter the adoption of Islamic socialism as an ideology in the 1970s. Zulfikar Ali Bhutto and his creation-the PPP-were the major players in these controversies. To that extent, the PPP was the only secular party, which articulated its ideology and thereby added new dimensions to the political discourse in the country. Pakistan has, ever since its creation, undergone an ideological dilemma whether to be an Islamic republic where the Sharia will be implicitly followed or a secular state which respects all religions and favours none. This was so because Mohammad Ali Jinnah, in pre-partition British India, had mobilised support for the Muslim League party on the basis of Islam to carve out a new nation state, but thereafter religion ceased to have the same significant role in politics. Subsequently, with the ‘second’ partition of Pakistan in 1971, the intelligentsia in the country questioned the ideological basis for the creation of Pakistan. It at least emphasised the ideological vacuum in the country. Gradually, the political leadership adopted policies to appease the religio-political parties for a while and the state evolved a mild Muslim identity.

At this juncture, the Jamaat-i-Islami attempted to project its fundamentalist ideology which did not have the same appeal as Islamic socialism for the people of Pakistan. The military leadership with its westernised outlook preferred an equally westernised Bhutto and Islamic socialism to the Jama’at’s Maulana Maudoodi and Islamic fundamentalism. Islamic socialism was associated briefly with the first phase of ‘state’ capitalism from 1972 to 1974 and amounted to a passing phenomenon in Pakistani politics. The 1974 PPP Government’s declaration of Ahmediyas being a non-Muslim minority heralded the end of Islamic socialism 13 and the onset of a new phase without ideology. The PPP’s pursuit of Islamic socialism, though only for a brief interlude, made an impact on the political economy of Pakistan.

The nationalisation programme was divided into two distinct phases. The first phase was characterised by distributional concerns till 1974 and undertaken as part of a deliberated exercise. The second phase was post -1974, after the left wing’s marginalisation, when the government adopted an arbitrary approach to nationalisation. Those who headed these units used public intervention of the economy to indulge in corruption.

The PPP drifted from Islamic socialism in its second phase (1974-77) and accomodated the interests of religio-political parties. It declared the Ahmediyas non-Muslims among other concessions to them. This burial of ideology is attributed to the international development of the 1973 oil price hike which strengthened Saudi Arabia as a political and economic power besides other Arab states 14 . Given Pakistan’s growing ties with the Arab world, Islam obtained greater attention in the country and hence the PPP’s ideological shift away from Islamic socialism. For the PPP, it amounted to a tactical victory over the demands of the religio-political parties and left them without any serious issue to agitate over.


Macro-Economic Management

That the PPP Government mismanaged macro-economic affairs can be highlighted by the fact that the debt burden started to make its impact from the mid-1970s onwards. Pakistan was unable to make disbursements towards its annual repayments and the era of debt rescheduling started for the first time in 1974 15 . These indicators including debt-GNP ratio and debt-servicing-foreign-exchange ratio registered a hike during this period. 16 Though the government exercised exclusive control over economic policy and developed a sort of socialist ‘command’ economy model, in a sense of the term, it depended on external finance for its large scale manufacturing sector-related investments.


Rupee Devaluation

After much deliberation in May 1972, the PPP Government took a difficult decision to devalue the rupee by 58 per cent in relation to the US dollar. The Pakistani rupee which was hitherto Rs 4.75 to the US $ was raised to Rs 11. For Pakistan it was an economic shock which previous regimes were not prepared to administer. While Bhutto faced criticism for going ahead with devaluation, his predecessor Ayub Khan was accused of inaction. The US reportedly arm-twisted Pakistan through the IMF by withholding aid, to make it take this drastic measure.

The big industrialists were affected because their large loans in foreign exchange would now have to be re-paid in inflated sums of rupees. Bhutto defended the decision by stating “ . . .our political and social fabric would explode unless certain basic reforms were undertaken”. 17 The government’s objective of devaluation was to bring about equilibrium in the balance of payments through export promotion and curtailing import flows, according to the State Bank of Pakistan Governor, Ghulam Ishaq Khan. 18

Qamar ul Islam who headed the Planning Commission clearly cautioned Bhutto and said that it would increase defence expenditure beyond acceptable international limits, hike the net debt burden, trigger inflationary trends and lead to additional wage demands. There was a possibility of comparison with the Indian exchange rate of Rs 7.27 to the US dollar. 19


Budget Deficits

The PPP government indulged in its share of discretionary spending which reflected in budget deficits. The eight per cent budget deficit during 1972-77 was higher than the four to five per cent in the 1960s and the two to three per cent in the 1950s. 20 The Government’s revenue account deficit totalled Rs 10 billion or almost two per cent of the GDP during 1972-73 to 1976-77. 21 The absence of public saving for several years resulted in revenue deficits. Essentially, revenue deficits implied that the Government met the current expenditure, particularly salaries of government employees, from borrowings.

While various considerations contributed to the fiscal imbalance, an important aspect of it all was the disproportionate defence expenditure. The size of the armed forces which was 3,65,000 men-at-arms in united Pakistan in 1969, had increased to over 500,000 by 1975. 22 The decision to increase defence spending was attributed to a potential Indian military threat. This argument was however irrational as the US tilt towards Pakistan proved to be an adequate deterrent to check such Indian military intentions. Moreover, considering that the dismemberment of Pakistan was already accomplished vis-a-vis Bangladesh, such a threat was not likely to manifest itself in the near future. The dominant view was, the high defence expenditure was only a means to ensure that the military’s morale was maintained in the wake of the 1971 defeat against India.


Inflationary Pressures

The problem of price inflation proved to be a serious issue for the Bhutto Government. The domestic economic policies resulted in inflationary trends due to the rapid expansion of money supply and the slow growth of the commodity producing sectors. 23 The growing fiscal deficit was one of the factors behind the inflation but this was a legacy inherited from the previous regime. The Government’s budget deficits had to be financed and therefore, there was a need to create money. The increase in non-developmental public expenditure like defence led to an increase in the budgetary deficit. The rupee devalution raised domestic agricultural prices and also added to the inflationary trends.

The shocks of the international oil price hike in 1973-74 affected the prices of oil imports which rose from US $60 million in 1972-73 to US $225 million in 1973-74. Similarly, fertilizer import prices increased from US $40 million to US $150 million for the same period. It resulted in a 30 per cent inflation 24 and neutralised the gains from devaluation, exports and a positive balance of trade, post-1972-73. The oil shock resulted in international recession and affected several economies on a much wider scale across the globe. For Pakistan, the oil price hike affected the prices of all other imports. In a sense, the inflation was an imported phenomenon for Pakistan. In social terms the inflation diluted the benefits of higher wages and thereby affected the salaried classes who were PPP supporters.


Export Policy

The ‘New’ Pakistan, in the post-1971 period was able to absorb the loss of its eastern wing without much of a problem on the export front because it found new markets in Europe, East Asia and the US. The major export earner from the eastern wing was jute which had gradually become an economic burden of late on the western wing. The export boom was shortlived due to the quadrupling of oil prices in 1974 which in turn affected oil, fertilizer imports and worsened the balance of payments position. Further set-backs suffered by the Bhutto Government were on account of natural calamities like floods, pests and an earthquake which resulted in poor crops. Hence, the two critical crops-cotton and rice-which were major export items adversely affected export figures for the period.

To make a significant break from the past, the PPP regime abolished the bonus voucher scheme to promote exports which in fact created multiple exchange rates and became class-oriented 25 in nature. The bonus voucher scheme proved to be discriminatory and favoured the rich and not the poor. For instance, the rich could buy bonus vouchers to import foreign cars at Rs 4.76 per US dollar and petroleum products at Rs 9.52 per dollar. Whereas tea which was a poor man’s drink, was imported at Rs 14.28 to a US dollar. 26 Nevertheless, this policy change was in tune with the principles of Islamic socialism.

The PPP regime enjoyed good export growth for the first two years which thereafter saw a decline. The problem with exports was that the Bhutto Government lacked an appreciation of the role of exports in national development. Perhaps this explains why there was an inadequate emphasis on exports which is evident from the inconsistent decision-making. Therefore, economic incentives and disincentives for exports existed simultaneously. 27



Pakistan has traditionally been an agrarian economy but its feudal characteristics hampered the efficient growth of agriculture. The PPP was determined to correct this important sector of the economy. The Government’s agricultural policies in benefited the tenant, the small farmer and the big landowner. To a certain extent, however, the big landowner was the only agricultural segment affected by the land reforms.

The agriculture sector proved to be a major element for economic growth during the Bhutto years. The agricultural output increased due to higher support prices for crops but the main beneficiaries of this price policy were the Punjab landlords. For instance, during 1965-70, average wheat production was 5.6 million tonnes and it rose to 8.5 million by 1975-76. In the same period, rice production increased from 1.7 million tonnes to 2.6 million tonnes. Similarly, cotton and sugarcane output also registered an increase during the Bhutto period. 28

The Government can especially be credited with having increased the wheat output and thereby avoiding a wheat crisis in the early 1970s. Whether the increase in total wheat production could be attributed to higher support prices or improved irrigation facilities is difficult to state. However, the yield per acre still remained much below the level of advanced countries. The point is that Bhutto devoted time and energy to accomplish this objective. 29

Perhaps, there is merit in the argument that the Bhutto Government adopted economic policies aimed at developing agriculture at the cost of industry. Apparently, the PPP regime which instituted generous credit schemes for agriculture from the newly nationalised banks and other state agencies probably did so with the forthcoming elections in mind. So much so, the Government’s economic policies were related to its political objectives. This, however, does not detract from the fact that Bhutto’s agricultural policies attempted to balance the inherent advantage that large farmers had over their smaller counterparts for decades. He was genuinely keen on the uplift of the peasantry. At the same time, he was opposed to industrialists because they had concentrated power among themselves with their interlocking interests in industry and banking.

The PPP’s economic policies were aimed at rejuvenation of the rural economy and therefore the financial allocations for agriculture were hiked considerably during 1971-72. A modest allocation of Rs 212 million was raised to Rs 1, 336 million during 1976-77. Likewise, institutional credit was enhanced from Rs 180 million to Rs 1,800 million over the same period. Another indicator is the use of fertilizer over the same five year period which increased from 308,000 tonnes to 650,000 tonnes. Also, the same number of tubewells increased from 88,000 to 145,000 during the Bhutto period. Another critical import for the agricultural sector, was tractors. In 1968 the import of tractors stood at 16, 583 which had doubled under the PPP by 1975. 30

The argument that tractors aided only the middle and large farmers and affected small farmers and landless labour has some weight. According to an estimate, one tractor dislocated as many as five labourers. It may be noted that mechanisation or ‘tractorisation’ of agriculture also resulted in small town urbanisation with repair workshops and retail sales outlets for spares being established in agricultural towns. 31


Land Reforms

Bhutto lowered the maximum limit on individual ownership of land from 500 acres to 150 acres and from 1000 acres to 300 irrigated acres. He also initiated several changes in the landlord-tenant relationship to restrain eviction and proscribed free labour by the landed classes. On account of adverse public opinion to his land reforms not being effective, he further reduced the holdings from 300 acres to 240 acres.

In the first phase, the PPP used land reforms to curtail the power of the landed aristocracy. The total resumed land was less than one per cent of the total area of 36.4 million acres in Punjab and less than three per cent of the total area of 11.4 in Sind 32 . In overall terms, only one per cent of the landless tenants and small owners benefited from the 1972 land reforms. So much so, the land reforms of the Bhutto regime were not as successful as the 1959 regime.

Perhaps land reforms were the most politicised part of the reform regime and are linked to the PPP’s conflictual relationship with the National Awami Party which was predominant in the North West Frontier Province (NWFP). According to one estimate, 33 per cent of the total number of landless tenants in the province were granted land. In the process 12 per cent of the agricultural land was re-distributed in the NWFP. 33 As a result, the PPP obtained strong support in the province.

Table: PPP’s Nationalisation Programme: The Road Map

January 1972: Public takeover of 31 large firms in 10 basic industries: iron and steel, basic metals, heavy engineering, motor vehicle assembly and manufacture, tractor assembly and manufacture, heavy and basic chemicals, petrochemicals, cement and public utilities.

March 1972: Land reforms

March 1972: Management and control of 32 life insurance companies

May 1972: Banking reforms; State Bank of Pakistan extends controls over scheduled banks, re-orienting credit policy towards small farmers and small industrial entrepreneurs

May 1972: Devaluation of rupee by 131 per cent

June 1972: Comprehensive labour reforms

Source: Akbar Zaidi, S. Issues and Studies in Pakistan’s Economy, 1999, Oxford University Press, Karachi, p. 99.


Manufacturing Industry

The manufacturing sector which comprises the large, medium and the small scale sectors, as also the informal sector and the agro-industrial units contributed almost one-fifth of the gross domestic product. In a 1969-70 survey the total fixed assets of 3,289 industrial units were valued at Rs 3, 807 million. These units employed 4,000 people and produced goods worth Rs 9,138 million. 34

The PPP regime appears to have evoked severe misgivings over the nationalisation of industry and how it retarded industrial growth in Pakistan. Apparently, this impression is erroneous and exaggerated because the state’s takeover was compartmentalised to the capital and intermediate goods sectors only. 35 In effect, this implied that 20 per cent of the value added to the large-scale manufacturing sector (LSM) was brought under state ownership. Whereas the private industrial sector largely comprising consumer goods manufacturing units was not nationalised by the state.


Large-Scale Manufacturing Sector

Bhutto wanted to neutralise the power of the powerful industrialists like the Saigols, Fancies, Adamjees, Valikas, also known as the 22 super rich families of Pakistan. This inspired him to embark on his nationalisation of the LSM sector. Interestingly, the decline of private investment in the LSM began even before the PPP regime was voted into office. To that extent, nationalisation was not the sole cause for the private sector decline in industrial investments. It is also important to understand that except for the textile sector, private LSM units were not being run professionally. These units suffered from capacity under-utilisation, tax evasion, outstanding loans, zero cash liquidity and disorganised documentation. Given this background, the PPP’s decision to nationalise industrial units appears to be appropriate.

There were two aspects to the fallout of the government’s decision to nationalise: a flight of capital and entrepreneurs to Africa and Middle East countries; besides, further private investments into industry were not forthcoming. The other related issue pertains to the labour reforms which resulted in labour militancy and indiscipline. In turn, this inhibited further investments in the LSM sector which were deflected to the small-scale industries (SSI) sector.

The trouble with nationalisation was an increase in public sector investment projects like fertilizer and cement plants which had a long lead time. These projects became operative only in the Zia period. It proved disadvantageous to the Bhutto regime because there were no quick pay-offs in political terms. As a result, the successor regime of General Ziaul Haq derived mileage from these heavy industrial projects.


Small Scale Industries

The Bhutto period witnessed the rise and further rise of the SSI sector owing to government policies of nationalisation. So much so, this sector underwent a 122 per cent increase between 1972 and 1974. The significance of the SSI sector is that it provides an index of industrial growth in the country.

The fear of nationalisation resulted in a flight of investments from the LSM sector towards the SSI sector. Also, labour laws towards the SSI sector were not as stringently applicable as the LSM sector and thereby proved to be advantageous due to lower over head costs. 36 Moreover, a new import policy allowing industrial plants priced lower than Rs 20,000 to be freely importable against cash also fuelled the SSI growth. 37 Similarly, the Cottage Industries Act of 1972 encouraged textile units to enter the SSI and informal sector.

The rupee devaluation and termination of the multiple exchange rate connected to the bonus voucher scheme subsidised the LSM imports through an officially distorted foreign exchange system which was unavailable to the SSI sector. This implied that earlier the SSI was at a disadvantage against the LSM sector because the former had to pay free market rates for foreign exchange unlike the latter. So, the SSI sector could not compete against the LSM sector in the manufacture of consumer goods and engineering industry items. However, the rupee devaluation corrected this problem and enabled the SSI sector to compete with the LSM sector and thereby contributed to growth.


Agro-Industrial Units

In 1973, the nationalisation of cotton and rice export trade alongwith edible oil units was not a deliberate policy decision but an ad hoc one owing to the heavy floods which resulted in price hikes. The government response to the problem was to set up a cotton export corporation with exclusive export rights for the state. The edible oil problem arose due to hoarding by unscrupulous traders.

The Government decision to nationalise 4,000 flour mills, rice-husking and cotton-ginning units in July 1976 proved to be a highly controversial one. 38 The problem with this move was that it came soon after the Government made an official announcement that there would be no further steps towards nationalisation of industry. To that extent, the Government had reneged on its promise in the eyes of the common man.

However, the Government had its logic to the move and argued that these units were integral to the agriculture sector and were not therefore part of the industrial sector. The nationalisation of agro-industrial units was perceived to be a political and not an ideological decision. The left wing had already made their exit from the Government and therefore the ideology element had undergone a dilution. The objective was to achieve vertical integration of the agriculture sector wherein growers became traders and were involved in marketing, processing and distribution. 39


Civil Service Reforms

The Bhutto Government had inherited a regulatory bureaucracy with strong imperialist and capitalist orientations. 40 The bureaucracy concentrated a lot of power in its hands owing to the absence of democracy and extended military rule in the country. The civil service/servant rule was appropriately termed naukarshahi. The bureaucracy was trained to regulate capital formation, industrial production and distribution of essential commodities rather than facilitate these critical activities so necessary for economic progress of the people. The PPP Government which had an articulated policy position on the role of the state initially believed that this kind of a bureaucracy was highly unsuitable to its rule.

The bureaucractic power was such that it did not allow the politicians any latitude to assert themselves. Moreover, the positions of power that the bureaucrats held easily enabled them to frustrate the implementation of policies at various levels by the Government. The PPP regime was certainly not comfortable with such a state of affairs and had no option but to neutralise the power of the bureaucracy.

The complete bureaucracy from top to bottom comprised one million people which included 320 officers from the elite Civil Service of Pakistan (CSP). The CSP officers entered Government through a competitive examination and were a close knit group of individuals. One of the reasons for their excessive power was that people’s representational institutions had not yet evolved in the country. The unfortunate aspect was that such power also made several CSP officers and their counterparts from other services indulge in corruption. The Bhutto Government abolished the CSP and instituted a new administrative service structure.

A classic case in point was the Planning Commission, which was headed by a senior bureaucrat and functioned as an autonomous body to advise the Government on economic affairs. The PPP Government made the Planning Commission a part of the Ministry of Finance. The Government believed that the apolitical nature of the Planning Commission had to be abandoned in order to further the policies of Islamic socialism. 41

The leadership’s view was that a Planning Commission minus politicisation would just remain a bureaucratic bastion and enable the bureaucrats to stymie the Government’s social and economic programmes. The Government dismissed Mr Qamar ul Islam, the head of the Planning Commission and inducted several young socialists fresh from academia to help Mubashir Hassan evolve a new economic blue-print for Pakistan.

The Bhutto Government’s civil service reforms revolved around compulsory retirement of 1,300 bureaucrats and technocrats who were known for corruption. The other revolutionary concept was the lateral entry scheme into the civil services where the principle of eligibilitarianism could be applied. In the process, the Government was able to tap the rich experience of professionals from various spheres. The generalist bureaucrat was dispensed with and the specialist era was taking shape. While all this sounded good in theory, in reality the lateral entry scheme later degenerated into induction of the PPP party loyalists into the administrative system.

Qamar ul Islam, the President of the CSP Association, advised the PPP regime against such drastic administrative reforms. His view was that a politically independent bureaucracy was a prerequisite to implement a new economic order. 42 However, the Government rejected his suggestions on the matter. Bhutto’s personal conflict with some civil service officers and his preference “to rule by whim rather than through institutions” also conditioned his rationale for these reforms.



The Government’s health schemes to improve medical facilities for citizens met with mixed results. The health sector had much to be desired as the doctor-patient ratio was low in the country. In 1970, there were only 13,000 medical graduates. 43 The Government, therefore, set up new colleges in Faizalabad, Rawalpindi and Larkana to churn out more and more medical graduates. As a result, these new colleges along with the existing ones trained an additional 6,000 doctors between 1972-77. This should have increased the total number of doctors to 20,000 in the country. However, in 1977 there were only 11,000 doctors which was 2,000 less than in 1970. 44

The reason for this decline in numbers was because there was a massive migration of doctors from Pakistan to the United States and the Middle East countries. While these doctors left the country for better career and income prospects, it should also be noted that the domestic demand for them could only increase with an expansion in medical facilities within the country. The Government was responsive to the problem and in early 1973 directed the Ministry of Health to officially stop the exodus.

This failure implies the Government’s inability to contain the problem of doctor migration. Pakistan’s medical schools have been a major source of “brain drain” to the Western industrialised democracies because the curriculum was tailored to suit the needs of a foreign society as it was oriented to expensive curative treatment rather than preventive treatment. Moreover, the emphasis is on diseases which afflict people whose basic nutrition is not a problem and are therefore prey to ailments like cardiac diseases which are alien to the poorer socio-economic segments in Pakistan. 45

The only positive development from the entire exercise was the availability of a better medical infrastructure. The Government had instituted a number of new teaching hospitals which resulted in an increase in the number of new hospital beds. There was an increase of 4,000 hospital beds. The Bhutto regime increased the spending on health from Rs 190 million in 1971-72 to Rs 1, 200 million in 1976-77 but was unable to correct some serious systemic problems. 46

This implied that the hospitals had a higher in-patient capability. All the same the original problem of a decline in the doctor-patient ratio as well as the nurse-patient ratio persisted. The middle classes were directly affected by the Government’s inability to provide them with proper government health care facilities.

The other Government initiative in the health care sector also affected the middle classes directly. In May 1973, the Health Minister embarked on an imaginative scheme of ‘generic medicines’ wherein the concept of brand or trade names for drugs would not be there. The drugs would then be sold only under their chemical names. The objective was to reduce those drug prices which could be sold much cheaper to the common man because there were no payments for patent rights. The scheme proved to be a success for several common medicines which were sold at 60 per cent below the original prices in the first six months.

The problem was that the retail chemists who had sold drugs with “brand” names obtained wider profit margins whereas under the new scheme their margins were comparatively narrow. The pharmaceutical sellers protested to the Government which refused to take note of their complaint. The retailers then attempted to discredit the reform and managed to sow seeds of doubt about the quality of the ‘generic medicine’ in the minds of their clientele. The reason they were able to succeed was simply because of the strong retail chemists’ bonds with the people. Due to the shortage of doctors, the chemists not only dispensed medicine but also performed in a limited role the diagnosing of symptoms of their clientele’s ailments. Eventually, the Government was compelled to lift the ban on several ”brand name life-saving medicines”.

The fallout of the entire episode was that reputed multinational pharmaceutical companies shut shop in Pakistan and by default left the field wide open for local manufacturers to take over. The ramifications of this problem manifest even today which is evident from the fact that drugs are expensive in Pakistan. The inability of the indigenous pharmaceutical industry to bridge the demand-supply gap has led to a high level of smuggling of pharmaceuticals into the country.

The Government’s attempt to make medicines available to the common man at cheaper prices through the imaginative concept of “generic medicines”, was a fiasco only because of the level of illiteracy. It was a revolutionary move to ensure the people’s welfare, which the retail chemists’ lobby thwarted successfully by spreading rumours about the quality of medicines, to which the clientele succumbed.



When the PPP regime took over the reins of power, the education sector was in disarray owing to complete mismanagement. The low literacy levels were a clear indication of such a state of affairs. The PPP was aware of the problems and therefore, a new policy was formulated and announced in less than three months after the Party was voted into office.

This was possible because various pressure groups like teachers associations , university students, middle classes and the urban poor, had lobbied. The teachers influenced the Government to nationalise educational institutions; the university students were for greater participation in management; the middle classes were unhappy with the quality of education provided in both state-owned and private teaching institutions; the economically weaker sections wanted larger outlays for primary and functional education. Thus the Government embarked on reforms in the education sector which had far-reaching implications beyond the Bhutto period.

The Government nationalised private schools and colleges and only a dozen institutions were not taken over. These institutions were run by foreign Christian missionaries and the nationalisation policy covered only the schools and colleges owned by Pakistani nationals. The Government machinery moved fast to takeover control and by September 1972, and 175 private colleges came under the provincial education departments. 47 The private schools were nationalised over a two-year period from October 1972 to September 1974.

Some facets of the education policy proved to be faulty. The private sector presence was more at the college than at the school level. Yet, the decision to nationalise these urban private schools was not given enough thought but taken in the interest of a comprehensive policy to cover all institutions.

For instance, neither the West Pakistan College Teachers Association nor the Pakistan Teachers Union, a school teachers body, sought the nationalisation of urban private schools. 48 This segment of schools came into existence because the Government was unable to offer the education that the urban middle class sought. These schools could be categorised as being better than those of the Department of Education but of the same standard as the foreign missionary ones. There was no profit motive behind these schools, which essentially amounted to community institutions with strong parent-teacher fraternities. These schools employed, second breadwinners’ who were women from middle class homes. These schools neither formed associations nor made demands for nationalisation.

Once these schools were nationalised the teachers could not develop a rapport with the bureaucracy which managed their institutions. This phase of nationalisation was completed by October 1974 and a large number of these school teachers resigned from their jobs. As a result, the standard of education declined after the schools came under officialdom and the urban middle classes were restricted by legislation to create new schools.

While the nationalisation of education may have had its share of failures, the positive aspects cannot be ignored completely. It had some success in meeting the requirement of the urban poor. The policy highlighted free but not compulsory education for children till 13 years of age. Such free education was useful to those poor families who could not afford even the government school fees.

Probably the nationalisation of education had more negative than positive implications for Pakistan. The only positive aspect was that female education at the primary level improved considerably. During the PPP regime the college and university enrolment figures registered a decline. The private sector had a stronger presence in higher education which the Government was unable to substitute owing to financial constraints. The nationalisation of educational institutions not meeting us objective was evident from the fact that the successor regime reversed this policy. In 1979, the private sector was permitted to start new schools and several teaching institutions were also de-nationalised. The fiasco in basic education continues to have an impact on growth. 49

The difference in approach to basic education in urban and rural areas was not sufficiently considered at the nationalisation policy stage. Besides the Government machinery was overstretched in its endeavour to cope with the administration of the educational sector. In such a scenario, compulsory primary, middle and high school level education would have become the social order of the day. The economically weaker sections of society would then encourage their children to avail the free education available in these state-run schools. But the failure of educational reforms left a big gap in the socio-economic infrastructure which the successor regime exploited to its advantage. The successor regime in accordance with its Islamisation policies, established madrassas all over the country. Therefore, these madrassas gained popularity with the poor families who sent their children there for education, in the absence of state-run educational institutions.To what extent it is possible to attribute the proliferation of madrassas to the failure of the government to provide proper basic education during the PPP regime, is debatable.


Political Impact

The PPP became popular with the masses due to its ideology of Islamic socialism and in the process proved successful in the political mobilisation of the citizenry. Bhutto was able to communicate with the masses and used the medium of Islamic socialism which revolved around economics and slogans like roti, kapra, makan, mangta hai har insan (every person seeks food, clothing and shelter). Till Bhutto arrived on the political scene, the landed aristocracy had monopolised the business of politics but none of them was able to develop the kind of equation with the common man that he had been able to achieve. This is because these elitist leaders spoke a language that did not touch a chord in the hearts of the peasants, landless labourers, urban poor, small farmers and salaried classes. The fact that the PPP candidate Khursheed Hassan Meer, a former Pakistan Air Force non-commissioned officer 50 won against the high profile Asghar Khan, a former Chief of Pakistan Air Force, from Rawalpindi, a cantonment city with a large retired military population, illustrates the point clearly.

The political implications which resulted from the pursuit of Islamic socialism was the onset of Nizam-i-Mustafa or Muhammad’s social system. The Jamat-i-Islami which believed that socialism, democracy and secularism, were an anathema to Islamic rule had strongly opposed the PPP’s Islamic socialism. The Jama’at proclaimed that socialism and Islam could not coexist in Pakistan. The Jama’at’s founder-leader Maulana Maududi criticised Islamic socialism because it was not just a negation of capitalism but amounted to a completely different political philosophy which would spawn a new system. He was of the opinion that Islamic socialism implied a combination of the philosophies of Islam and socialism. So the choice was between Marx and Mohammad along with his companions. 51 After the Jama’at’s initial opposition to Islamic socialism, the common ground between the two ideologies came to the fore. The theme of the welfare of the oppressed classes, proved to overlap between the two otherwise diverse ideologies. To that extent, the PPP ideology of Islamic socialism pointed the Jama’at in the ideological direction of Nizam-i-Mustafa, which eventually Bhutto’s successor Zia ul Haq attempted to implement in Pakistan.

Interestingly, the PPP’s popular mandate needs to be viewed from the prevalence of a martial law regime in the country. The PPP implemented the various reforms under a martial law regime and therefore, did not have to face any political opposition. Once the 1973 Constitution was established and the martial law lifted, the opposition to the reforms started to take shape. 52


Economic Impact

The PPP Government’s economic performance has to be examined in the context of the ‘New’ Pakistan that it inherited from the Ayub and Yahya regimes in December 1971. With the partition of its eastern wing, Pakistan had undergone a political, social and economic transformation and the economy was in poor shape, accompanied as it was by the global recession and oil price hike. While considerable criticism clouds Bhutto’s economic policies which were synonymous with ‘state’ capitalism, it needs to be noted that Pakistani industrialists were reluctant to invest in their own country and therefore, the Government was compelled to do so. The industrialists inhibition to invest was evident towards the last phase of the dictatorial regime. The Government had to ensure economic resurgence and could not ignore investment, which manifested through the public sector enterprises.

The PPP could not afford to make the nationalisation programme a failure, as its own credibility would suffer. The mismanagement of the public sector enterprises (PSEs) occurred in the post-Bhutto period. To that extent, extensive public sector investment in industry enabled excellent economic growth in the Zia period. The argument that the PSEs were a failure, does not wash because had it been so, then the successor regime would have reversed these policies. Instead, the successor regime benefited immensely from the PSE projects which Bhutto had commissioned during his leadership. For instance, these projects pertained to fertilizer or cement plants, which required long lead times to reach the production stage. As a result, the Bhutto regime’s efforts in economic development helped Zia to continue in power.

The Bhutto period witnessed widespread improvement of agriculture, the most vital sector of the economy. The credit, subsidy and price policies, all aided the growth of agriculture, particularly the small and the medium farmers. The ‘tractorisation’ also contributed to the development of the sector. Similarly, the banking sector, which was earlier confined to the urban areas, underwent a revolution and shifted from class banking to mass banking, with an extended reach into rural areas. On the negative side, the nationalisation of agro-industrial units, proved to be a disaster both on the economic and political fronts. It was a shortsighted move and only eroded the credibility of the PPP regime besides antagonising its own constituencies.


Concluding Observations

Whether Islamic socialism strengthened Pakistan or not is an important issue. In this context, it would be relevant to state that Islamic socialism in ideological terms, symbolised secularism rather than religious fundamentalism. Whenever a Muslim state emphasised the role of religion in politics, it only resulted in sectarianism, which is synonymous with divisive forces that weaken the state. On the contrary, the ideology of Islamic socialism certainly succeeded in its objective and strengthened the political economy. Bhutto laid the foundations for prosperity both in agriculture and industry sectors. It was another matter that the Bhutto regime suffered set-backs due to serious natural calamities which clearly affected the economic growth. The successor regime inherited a strong economy which also enabled it to hold on to power for a little over a decade. To that extent, the Zia regime’s longevity could-among other considerations-be attributed in no small measure to the PPP’s economic agenda implemented under the guise of Islamic socialism.

The first phase of the PPP regime which involved three years of Islamic socialism during 1972-74 had an irreversible imprint on Pakistan. While some of these were positive, the others were negative. Bhutto used his ideology to supplement the nature of the political discourse with economics which no other national leader had done till then. He essentially attempted socio-economic development of a nation which was predominantly feudal, partially tribal and only peripherally urban in character. Perhaps, it was an innovative initiative to evolve a kind of welfare state in a loose sense of the term.

The PPP Government managed the economy without a framework of planning and several decisions were based on ideological considerations. This led to ineffective macroeconomic management characterised by budget deficits, inflation and arbitrary spending. It had long-term implications and added one more chapter to the two and half decades of economic mismanagement.

While the predecessor regime’s economic policies emphasised industrialisation as a development strategy, the Bhutto Government reversed such a skewed policy and re-focussed on agriculture but not to the exclusion of industrial development. The nationalisation of industry was on the anvil in the Ayub regime and to that extent the Bhutto regime’s policies were a logical progression of its predecessor’s policies. Nationalisation was unavoidable as the private sector did not invest in the ‘core’ sector or basic industries.

Another commonality between the Bhutto and the Ayub regimes was the decision to implement land reforms.The PPP Government’s land reforms were a politically motivated decision and made no meaningful impact. Interestingly, the PPP regime did not apply the land reforms to the lands owned by army officers.

Bhutto believed that his ideology proved useful to attain power in the first phase, but once this objective was achieved, authoritarian policies would be relevant to consolidate his position. However, only he solitarily held this view and not the PPP ideologues who had by then exited from the party. This approach discredited the PPP’s credentials and was one of the reasons for its fall from power.

The bureaucracy which hitherto was the sole formulator of policy, no longer enjoyed a monopolistic policy. Following the civil service reforms, the independence of the bureaucracy was diluted in a big way. The politicians were now policy formulators and the bureaucrats were confined to policy implementation. This helped as the politicians were much more accessible to the common man than the bureaucrats.

In conclusion, it could be argued that the implementation of Islamic socialism relegated political Islam to the background for the three years it was in vogue. Bhutto used Islamic socialism to change the terms of political discourse for the first time in the country. Economics took precedence over politics. Apart from this, Bhutto’s politics involved the masses to a greater degree than the previous regimes in Pakistan. This wider political consciousness was definitely detrimental to the practice of praetorianism. Also the US clearly disapproved economic policies like nationalisation and PSEs because these policies ignored foreign consultants’ views and thereby reduced the US influence in Pakistani polity.

In Pakistan, the late Zulfikar Ali Bhutto and Islamic socialism are identified with each other. The impact on the people was positive as the country largely accepted the PPP’s nationalisation and reform programmes. That the late Bhutto’s daughter Benazir Bhutto was voted to power in 1988 in the post-Zia period, only proves the point. However, since the early 1980s, socialism as an ideology started to fade away internationally. Pakistan also subscribed to this political trend and Benazir Bhutto as Prime Minister initiated the process of privatisation of public sector enterprises in the country. Subsequently, Nawaz Sharif as Prime Minister continued the process. Eventually, President Pervez Musharaff inherited this political economy which had Zulfikar Ali Bhutto’s ideological stamp of Islamic socialism.



The contributions of Professors Rakesh Gupta, Chairman, Centre for Political Studies, Centre for Study of Social Systems, JNU and Kalim Bahadur, formerly of South Asian Studies Division, SIS, JNU have been valuable and are acknowledged accordingly.



Note *:   Bidanda M. Chengappa, Senior Research Fellow obtained his PhD from the Department of Political Science, Bangalore University. He has done a Masters programme in defence and strategic studies from Madras University. He has reported extensively on defence industry and techno-military issues. He worked for the Indian Express, New Delhi. He specialises in Pakistan studies and has written on foreign policy issues, economics and politics. Back.

Note 1:   Kalim Bahadur, Jama’at-i-Islami of Pakistan, 1977, Chetna Publications, New Delhi, p. 121. Back.

Note 2:   Arif Hussain, Pakistan its Ideology and Foreign Policy, 1966, Frank Cass Ltd, London, pp. 90-91 Back.

Note 3:   Details about Bhutto’s inclination for socialist ideology from his student days in the US and the thinkers who influenced him, which included Jawaharlal Nehru, are available in Stanley Wolpert, Zulfi Bhutto of Pakistan. 1993. Oxford University Press. Delhi, p. 35. Back.

Note 4:   Mubashir Hasan, The Mirage of Power: An Inquiry Into the Bhutto Years 1971-1977. 2000. Oxford University Press, Karachi, p. 2000. Back.

Note 5:   Rafi Raza, Zulfikar Ali Bhutto and Pakistan, 1967-77, 1997, Oxford University Press, Karachi, p. 6. Back.

Note 6:   Salman Taseer, Bhutto : A Political Biography. 1979. Ithaca Press, London. p. 91. Back.

Note 7:   Rafi Raza, no. 5, p. 33. Back.

Note 8:   Dilip Mukherjee, Zulfikar Ali Bhutto : Quest for Power. 1972. Vikas Publishing House, New Delhi, p. 179 Back.

Note 9:   Rafi Raza, no. 5, pp. 24-27. Back.

Note 10:   Ibid., pp. 27-28. Back.

Note 11:   Ibid. Back.

Note 12:   Ibid. Back.

Note 13:   Ibid. Back.

Note 14:   Omar Noman, The Political Economy of Pakistan : 1947-85. 1988, Routledge & Keegan Paul, London. p. 109. Back.

Note 14a:   Hasan, no. 4, p. 256. Back.

Note 15:   Omar Noman, Economic and Social Progress in Asia: Why Pakistan Did Not Become a Tiger. 1997. Oxford University Press, Karachi. p 147. Back.

Note 16:   Ibid. Back.

Note 17:   Raza, no. 5, p 282. Back.

Note 18:   Hasan, no. 4, p 98. Back.

Note 19:   Ibid., p. 96. Back.

Note 20:   Pervez Hassan, Pakistan’s Economy at the Crossroads. 1998. Oxford University Press, Karachi. pp. 196-7 Back.

Note 21:   Ibid. Back.

Note 22:   Ibid. Back.

Note 23:   Noman, no. 14, p. 88. Back.

Note 24:   Ibid. Back.

Note 25:   For details on the bonus voucher scheme see Akbar Zaidi, Issues in Pakistan’s Economy. 1999. Oxford University Press, Karachi. pp 172-3. Back.

Note 26:   Hasan, no. 4, p. 91. Back.

Note 27:   Ibid. Back.

Note 28:   Raza, no. 5, p 280. Back.

Note 29:   Hasan, no 4, p 50. Back.

Note 30:   Zaidi, no. 25, p. 66. Back.

Note 31:   Ibid., pp. 66-67. Back.

Note 32:   Noman, no. 14, p. 94. Back.

Note 33:   Ibid. Back.

Note 34:   Hasan, no. 4, p. 67. Back.

Note 35:   Noman, no. 14, p. 76. Back.

Note 36:   Adherence to the new labour laws as applicable to large scale manufacturing sector implied additional costs for the employers. Back.

Note 37:   The genesys of the small scale industrial (SSI) sector is linked to the Green Revolution when there was a demand for agricultural machinery like tractors, tubewell engines/pumps and tractor-driven threshers. Subsequently, the Bhutto period enabled the SSI sector to exit the exclusive confines of agriculture- related machineries and into broader engineering industries through its policies of currency devaluation and abolition of the bonus voucher scheme. Thereafter the SSI sector was dominant in carpets, garments, surgical instruments and sports goods, which were all export units. Back.

Note 38:   Shahid Javed Burki, Pakistan Under Bhutto 1971-77, 1980, Macmillan, London. p. 160. Back.

Note 39:   Hassan, no. 20, p. 209. Back.

Note 40:   Over two decades, the bureaucracy also developed an American slant with the upswing in the US-Pakistan relationship. In the process these bureaucrats related better to foreign advisers from capitalist countries rather than their own people from various walks of life. Therefore, these civil service officers never trained themselves to figure out indigenous solutions to national problems, but preferred foreign options. To illustrate the point, in the case of a serious sugar or oil production shortage they would not bother to take the difficult rout to a long-term solution like a programme to increase indigenous production but instead resort to imports according to Mubashir Hasan, no. 4, p. 65. Back.

Note 41:   Ibid. Back.

Note 42:   Noman states, “ However, the administrative structure which replaced the previous one was marred by nepotism, inefficiency and corruption. This was unfortunate since the expansion of the public sector and the efficient implementation of the regime’s policies required an effective and organised civil service.” no. 14, p. 63. Back.

Note 43:   Burki, no. 38. Back.

Note 44:   Ibid. Back.

Note 45:   Zaidi, no. 25, p. 353. Back.

Note 46:   Hassan, no. 20, p. 226. Back.

Note 47:   Burki, no. 38, p. 124. Back.

Note 48:   Ibid., p. 129. Back.

Note 49:   Hassan, no. 20, p. 229. Back.

Note 50:   Sherbaz Khan Mazari, Journey to Disillusionment, 1999, Oxford University Press, Karachi, p. 171. Back.

Note 51:   Hussain, no. 2, p. 186. Back.

Note 52:   Mohammad Waseem, Politics and the State in Pakistan, 1994, National Institute of Historical and Cultural Research. Islamabad, p. 298. Back.