Paternalistic Regulatory Economy

Today we are faced with difficult problem that if we want to know the truth we don’t need to study European history. We need to study European history in order to understand the basis for this knowledge and to attack or dispute with it. European social science is a product of Europeans trying to understand their own experience so if we want to understand European social sciences then we have to understand the past experience otherwise all of it will be meaningless. Actually we don’t in need of doing all this and can through all of these theories and start looking at problems and their causes in case of Pakistan and try to solve it on our own without any reference to theories based on European history. But unfortunately we cannot do this because all of our elite have been brainwashed in the West so now in order to explain them what to do we have to show them true picture.

Before the takeover of markets there was paternalistic and regulatory economy named by Karl Polanyi. Before the emergence of capitalism there were self-sufficient communities. Villagers produced their own food and there was very little need of trading goods. In such societies trade happened only in luxuries but not in necessities. People did not want to be buyer of food from others because in this case their survival was vulnerable. In fact in India, after the British takeover, there were many famines in which lots of people starve to death because economies were switched from self-sufficient economies to those matched to Adam Smith’s theory that one should produce good in which one has comparative advantage. So, it was told to Indians that they are self-sufficient in production of cotton so they should only produce cotton can buy food from the receipts of cotton sale. But due to vulnerability of prices of cotton and low yield of cotton due to harmful weather people could not able to buy food and died of hunger. Self-sufficiency is good thing in this sense but according to economists it is totally wrong and comparative advantage is advantageous for everyone.

Similarly, at the time when mercantilism was propounded trade was only in luxury items. Mercantilism advocates that we should maximize the gold from sale of goods but at the same time don’t buy from others. As long as the trade was in luxury item it makes sense to increase the exports to buy gold and decrease imports to avoid loss of gold. This theory was rejected when comparative advantage came in. If trade is not only luxury items but also in essential goods then mercantilism does not make sense. If anyone wants to buy food and is in need of it then gold is of value to him. So, to understand the theory we must understand its historical context.