Mises Daily Articles
Pakistan and the Problem of Military Aid
“Trade, not aid” said the current prime minister of Pakistan Nawaz Sharif. It was six years after its 1947 independence from India that Pakistan experienced a near-famine due to two failed crop seasons from lack of monsoon rains. Meanwhile, Pakistan didn’t have enough hard currency to buy wheat on the international market. The US State Department considered Pakistan on the brink of starvation, so President Eisenhower gained approval from Congress to send one million tons of wheat (known as the Wheat Aid Act), thus beginning Pakistan’s tragic addiction to US foreign aid.
According to former Pakistani ambassador to the US Husain Haqqani, Eisenhower’s advisors had spoken of their agenda for “bringing strategically situated Pakistan into the free world’s defense system” and “building a Pakistani army and eventually locating American airfields there.” Pakistan had always turned to America for expensive weapons and economic aid, especially due to frequent tension with its much larger neighbor, India. In exchange for weaponry, the US government would make Pakistan a key ally in its “Northern Tier of Defense” (which also included an alliance with Iran, Iraq, and Turkey) to fight against the Soviet threat. The US entered into numerous negotiations in order to finally install bases in Pakistan. On May 19, 1954, Pakistan and the US signed a Mutual Defense Assistance Agreement, which led to US military “assistance” for Pakistan. At the time, the leftist and Islamist all opposed it on the grounds that militarization would trump development, but in Pakistan today, the military now remains the central player in all affairs, receiving huge subsidies while it maintains an iron grip on the private sector. “What it doesn’t own it controls,” says Ayesha Siddiqa.
A Military Corporate State
Pakistan’s economic golden age occurred during the 1960s when its export sector outcompeted that of Thailand, Malaysia, and Indonesia combined. It was a model amongst its Asian neighbors for its export-led growth strategy. During this time it was under military rule, and economic growth enabled the government to create a large bureaucracy. The bureaucracy in turn set about manufacturing a new ideology for Pakistan in which one glorifies the military-economic complex.
Even by international standards, Pakistan’s military is not exactly insignificant, and it is perhaps most notorious for being the first nuclear-armed military controlled by Muslims. Domestically, it dwarfs almost all other institutions and the armed forces control some of the largest enterprises in the nation while maintaining monopolies in numerous industries.
The military controls 11.58 million acres, or 12 percent of total state land. Six million acres have been distributed amongst military officials since 1960. The projects the military is involved in include: bakeries, gas stations, beauty parlors, cement and textile factories, cereals, shoe factories, catering and decoration, tool and die making, they control one third of heavy manufacturing, fertilizer, education, universities, , finance, insurance, medical centers, and several media outlets. In spite of this, cronyist politics has led to a weak economy and political upheaval. The country enjoys vast natural resources; including vast land, natural gas reserves, petroleum, extensive coal, iron ore, copper, salt, limestone, and gold, many of them hitherto undiscovered. It also boasts one of the largest irrigation systems in the world.
According to a few surveys from the Environmental Investigation Agency, Pakistan has the second largest salt mine, second largest coal reservoirs, fifth largest gold mine, and seventh largest copper mine. The country is the eleventh largest wheat producer, twelfth largest rice producer and the seventh country to have nuclear power. The Thar coal field is said to contain 175 billion tons of good quality lignite. The country sits lower then Iran, and due to its lower altitude it has an abundance of shale oil underground, estimates from the Energy Information Administration estimate shale gas reserves of 105 trillion cubic feet (TCF) and more than nine billion barrels of oil. That is more shale oil than Canada, which is currently experiencing a gas boom. And yet, the average Pakistani sees little benefit from these natural advantages, all of which are instead controlled for the benefit and pleasure of Pakistan’s military-industrial complex.
Today, many “private” companies are not listed on the stock exchange because, according to Siddiqa, a principal function of these businesses is to serve as a private piggy bank for the privileged military hierarchy. She goes on to describe an interesting term that she titles “milbus” (short for military-business), which is "military capital used for the personal benefit of the military fraternity, especially the officer cadre, which is not recorded as part of the defense budget."
Unfortunately for many average Pakistanis, a military economy is just another type of crony capitalism. As a result, Pakistan is no longer the model it was in the 1960s. The legacy of foreign aid in Pakistan’s economy is now all too clear. Awash in foreign aid from the United States for decades, Pakistan now nevertheless finds itself having to look to the very countries that once used Pakistan as a model, to find a way out of its military-industrial malaise.