Can the state do business?

We are often told that doing business is not the job of the state. This “mantra” is constantly repeated by pro-free market economists and other experts who consider state interference in a country’s economic affairs an “unpardonable sin” that must be prevented at all costs.

They assert that such intervention has always proven disastrous, plunging the country into terrible financial and economic crises. Therefore, they usually advise all nations not to interfere in the complex issues of production and distribution, demand and supply, and the planning and implementation of economic policies.

Economist Adam Smith advised us to leave such things at the mercy of market forces. The economist John Maynard Keynes adopted a somewhat permissive stance, asking states to allow capitalists to draw off the surplus value created by the working class—allowing them to use it for their own personal well-being and enriching their families—but distribute the losses when this system is inherently corrupt. The fires are collapsing, sending shock waves through the stock exchanges and financial capitals.

Keynes believed that at this point, intervention becomes mandatory. In simple words, this intervention means that the capitalists, who never share the fruits of prosperity with the workers, must receive financial help from the taxes that have been snatched from the pockets of the common people. The state should launch meaningless capital-intensive projects just to maintain the economy, which has largely benefited only people with deep pockets. State institutions must make frantic efforts to stimulate the economy and nationalize the losses caused by the peculiar policies of money makers and stock market speculators.

The Chicago Business School, which denies even the “shadow” of the state when it comes to the state’s economy, urges governments to be generous when the system is close to collapse. The school that defends the dominance of market forces wants the state to support the “greedy” exploiters when their disastrous policies drive the entire society towards financial and economic collapse.

For these economists, there is only a state to bid for entrepreneurs who, according to them, should have access to essential life supply lines such as health, education, and transportation. For them, the greatest moral responsibility of the capitalist is to maximize his profits. While Keynes appears to be in favor of giving breathing room to the working class, the Chicago Business School and neo-liberals are vehemently opposed to even such relaxation.

This mentality has prevailed in many countries including Pakistan. Ronald Reagan and Margaret Thatcher were the great heroes of this cruel modern-day ideology that has caused chaos in the lives of millions, perhaps billions of people. It has caused deindustrialization in many parts of the world, along with putting millions of workers out of work. This ideology has forced policy makers to leave even water supply, sanitation, and education at the mercy of market forces. As a result, only those who can buy these goods can get them.

This idea promotes that the state is inherently inefficient and incapable of managing economic affairs. Such assertions contradict reality as countries that had centrally planned economies have shown miracles, lifting millions of people out of poverty, improving their living standards, eliminating literacy and raising life expectancy. For example, the Soviet Union lost more than 27 million people during the Second World War, witnessed destruction on an epic scale and suffered huge financial losses, but even then, it was able to get back on its feet in 11 years with the help of a planned scheme. economy, and emerged as the second largest industrialized country in 1956.

North Korea was devastated during the 1951-1953 Korean War. The United States carried out a heavy bombardment of the country, turning it to ashes. The CIA estimated that it would take the country at least a hundred years to get back on its feet, but the Korean socialist government embarked on an ambitious plan to rebuild the country, achieving industrialization within a decade.

Cuba has been under several sanctions for more than five decades now. Several attempts were made to overthrow the socialist government there. Despite all this, it was the first country to prevent mother-to-newborn transmission of HIV, and it is also the most educated country in Latin America. It is also among the few countries in the world with one of the lowest infant mortality rates. All this was possible due to the economy, which was largely state-run.

After the 1949 revolution, China also made huge strides in various walks of life, despite the brutal sanctions imposed by the West, civil war, and famine. The country achieved a five percent growth rate from 1949 to 1979, raising life expectancy from about 35 to 65 along with greatly improving literacy.

It is worth noting that the communist state was able to achieve this with the help of a planned economy, and even today, among the 75 major Chinese companies, a quarter of them are state-owned. State utility companies also played an important role in the modernization of China by introducing an efficient mechanism that helped industrialize the country.

The story was not only of socialist countries, but even of the third world, countries that adopted a planned economy to better serve their citizens. For example, Iraq, with a largely state-controlled economy – nearly 70 percent – has the second largest number of graduates in the Arab world. Libya, which also has a state-controlled economy, has achieved one of the highest per capita incomes in Africa.

In Pakistan, most of the state-run entities were profitable until the early 1980s, and many provided health, education and other facilities to their employees. Noam Chomsky and many pro-people intellectuals believe that when states want to privatize public entities, they are deliberately pushing them toward bankruptcy to justify their privatization. This is exactly what happened in Pakistan where a deliberate effort was made not to increase the production of Pakistan Steel Mills (PSM) which would have turned it into a more profitable company, along with creating more jobs. The profitable routes of Pakistan International Airlines (PIA) were sold to foreign companies as some PIA executives were offered highly paid positions, perks and perks.

Almost every government in Pakistan claims that it does not have sufficient resources to run state institutions efficiently, but every government comes with rescue packages for stock exchanges, tax cuts for powerful industries, energy subsidies for influential industrial groups, and a policy of appeasement for independent energy producers. The huge losses these policies incur to the national treasury are never counted.

Last year, in the middle of the Covid-19 pandemic, it announced a 1,200 billion rupee rescue package for businesses; Part of it was used by ordinary people. Instead of appointing more nurses and medical staff to public hospitals, the government introduced health insurance cards, which benefited private hospitals.

The government preferred to distribute scholarship packages to students which would have greatly benefited private educational institutions, rather than improving facilities in state-run educational institutions. Precious resources have also been wasted on the Unified National Curriculum (SNC) – a project that will only serve to appease the dark forces of society. Many institutions are also created in the name of spirituality to accommodate religious right.

Over the years, huge amounts have been pumped into seminaries. All of this is happening at a time when universities are eager for funding. So, the state has money, resources, infrastructure and capabilities, and the only obstacle is private interests that do not want the state to do business.

The writer is a freelance journalist.


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