How elite capture, weak institutions, and historical context shaped Pakistan’s nationalization – and why reducing it to personality distorts the debate

From Colonial Capture to Economic Control

Pakistan did not inherit a free market – it inherited a captured economy. Colonial powers had already structured economic control in the hands of a few, ensuring that wealth, opportunity, and influence remained concentrated long after independence.

Colonial powers, while structuring economies to serve their own interests, often empowered a small group of local elites. These elites enjoyed privileged access to land, trade, and political power without competition, while controlling banking, insurance, and industrial sectors. This system benefited colonial masters and these elites, while the masses were left impoverished.

In Pakistan, as mentioned by Dr. Mahbub ul Haq, 22 families emerged as such elites. They were industrial and financial conglomerates that dominated the economy in the 1960s, controlling vital sectors such as textiles, banking, insurance, cement, chemicals, shipping, and industry. Two decades after independence, these 22 families controlled approximately 66% of the industrial sector and 80% of banking and insurance.

This scenario was not a free market; it was concentrated capitalism.

A recent commentary by Razi Dada reduced Pakistan’s nationalization to what appears to be a personal bias of Zulfiqar Ali Bhutto. Such arguments, like ZAB having a jagirdarana mindset, may sound appealing, but they tend to collapse under historical scrutiny

Economic policy is never about personalities; it is about structures.

All countries under colonial imperialism had suffered in similar ways. This imperialism thrived on colonial elites, who were often private landlords or business magnates aligned with colonial power through control of land, trade, early industry, and energy.

By the late 1960s, as colonial imperialism receded, newly formed states had to shift from colonial concentrated capitalism to gain economic sovereignty by dismantling elite dominance for broader public benefit.

India nationalised commercial banks, coal, oil, and insurance sectors. Egypt nationalised the Suez Canal, banks, and heavy industry. Algeria nationalised oil, gas, mining, and banking sectors. Iraq nationalised its oil sector. Tanzania nationalised banks, industries, and large agricultural estates. Ghana nationalised infrastructure and trade. Zambia nationalised copper mines. Chile nationalised copper and the banking sector. Peru nationalised oil, fisheries, and media under a military government.

Thus, across Asia, Africa, and Latin America, nationalisation in the 1960s and 1970s followed a clear pattern.

Newly independent states, facing concentrated wealth, weak regulatory institutions, and the burdensome legacy of colonial extraction through elite capitalism, sought to reclaim control – and Pakistan was no exception.

Zulfiqar Ali Bhutto had two options: either to follow the nationalisation model, as seen above, or to follow the American model. America introduced anti-trust laws against corporate giants like Rockefeller and Ford.

These laws were designed to stop companies from becoming too powerful and killing competition, preventing them from fixing prices, blocking new entrants, controlling supply chains, or influencing politics.

For example, Standard Oil, which controlled 90% of the US oil market, was broken into 34 smaller companies by the government.

Zulfiqar Ali Bhutto, or Pakistan at that time, could not have followed the American model due to weakened institutions, lack of a legal framework for such regulations, absence of political stability, and lack of regulatory authorities.

Hence, post-colonial states with limited institutional depth often opted for direct state intervention – and Pakistan was no exception.

The real question our intellectuals should be asking is not why nationalisation was attempted, but why it failed 2 to deliver.

How did a post-colonial economy, once captured by a handful of elites, simply transition into the grip of a bureaucratic one? And why did this new custodianship, entrusted with public interest, end up where it is today?

Reducing a structural economic crisis to one man’s mindset does not explain history – it avoids it. The same voices that dismiss nationalization here often celebrate models like China’s rise, forgetting that it too began with strong state control before reforming over time. History, when read selectively, misleads more than it informs.

© Pakistan Observer