COVID-19 Lessons for Pakistan from American Industrial Revolution
COVID-19 is no new spectator to the global economy that has witnessed benign predecessors to the likes of Spanish Flu of 1918, which single-handedly swept two-thirds of Europe and over 675,000 Americans. Triggered during the First World War, this Spanish Flu, which originated in Spain and later spread across the whole planet, is thought to have intruded the United States and Europe by the returning soldiers packed in small ships and peddle-boats where chances of contact were dramatically high. These soldiers had survived for months of battle in congested trenches, which were muddy, cold and dirty – a notable condition for the spread of disease. What ensued was a similar [to today’s] nationwide shuttering of businesses, an immediate ban on public gatherings and prevalence of larges-cale economic uncertainty. In this article, we try to seek lessons for Pakistan from the rise of American Industry before 1918, during the Roaring 1920s and immediately following the Great Depression of 1930s.
The early Spanish Missions, who landed in Alta California, in 1769, laid the foundation of community spirit as necessary in achieving self-sufficient and reliable supplies of food, shelter and clothing for the people. Just three decades later, Samuel Slater pioneered the first textile mill in Rhode Island that were capable of spinning cotton into yarn. Later, individual homes were delegated different steps of the production for the first time that brought about efficiency in processing. Although, much credit is owed to Slater’s first cotton ginning and textile mills, what truly kick-started the American Industrial Revolution was the centralization of large-scale work that historians refer to as, Factory System. Billionaires representing the Boston Associate drove the Slater movement forward in resource-rich states like California, purchasing heavy machineries for their new factories run by female laborers who were available in cheap supply. Simultaneously, the state governments prioritized credit expansion to facilitate these wealthy entrepreneurs and provided them transportation to move raw materials. As demand soared, a ‘Market Revolution’ triggered with never-before-felt heightened importance for an efficient transportation system. People needed to move for jobs and the goods to factories – the rapid industrialization had led to the creation of a national river transportation network in 1840.
As entrepreneurship multiplied and steam-powered engines became chief power source for factories, the idea of cutting metal into two identical objects [interchangeable parts] surfaced and immediately commercialized, resulting in mass production of products like sewing machines. The US market continued to balloon as first canals, bridges and railways got constructed and similar to the time of Spanish missions human resource became a principle asset in building the infrastructures. During this period, introduction of railroads played the most pivotal role in redefining the social and economic contours of the American economy. The Brooklyn Bridge, the stunning sights of steam locomotives moving across the country and then later transcontinental rail network, as a result, further consolidated the economic prowess of United States in the world.
As first steamboats, telegraph and clocks saw the light of day, budding wealthy businessmen hopped onto the bandwagon of scientists and inventors that instantaneously fast-tracked nationwide proliferation of industries. People with ideas became talk of the town and new types of product started bursting out of factories. As 50 years of America’s industrial revolution culminated, this chain of rapid industrialization unleashed the most remembered era of 1900s, when Henry Ford designed the first automobile in 1908. The days of horse-carriages once used by wealthy farmers to curtail harvesting periods were over because now horseless buggies became the new normal. By 1918, the cheap credit and easy installment plans offered by banks and departmental stores to the people paved way for rapid rise of bourgeoisie who could now afford to buy previously expensive products. Manufacturers adopted the 1895 radio to launch a series of aggressive advertisement campaigns that fueled consumer demand and significantly increased market competition for newer and low-priced products.
Shortly before the influenza outbreak hit American coastal shores in 1918, American economy had just recovered from two successive recessions, which were much worse than one during the pandemic [1918-1920]. Henry Ford’s 1913 invention of automobile assembly lines was the prime reason behind these incredible reversals as they markedly reduced production time from 12 hours to 2hours and 30 minutes. This one marvelous event empowered the U.S. to meet the high demand for military weapons during war and to earn billions in revenue. The extra reserves kept the economy afloat when the pandemic hit and enabled it to continue growing quietly at 0.87 percent . The Government of America was now better prepared than the rest of the world to face any medical emergency.
Right after the first pandemic case submerged in Fort Riley, on March 11, 1918, President Wilson announced mandatory observance of Non-Pharmaceutical Interventions (NPIs) or essentially social distancing measures that worked miraculously in keeping death rates at minimum. Cities of New York and St. Louis took the lowest hits unlike in today’s COVID-19 crisis. State governments adopted postal services to begin door-to-door holistic circulation of pamphlets carrying these new NPI rules and assigned government workers the arduous task of cautioning the public because there was no television until 1927. This exemplary readiness and cohesiveness on part of states proved key out of the virus cycle. Just like the Tiger Force of PM Imran Khan, New York City had Boy Scouts handing red cards to citizens violating the rules of NPIs spotted either spitting, shaking hands or not wearing masks. Meanwhile, doctors quietly trial-tested vaccines in the night and economists ruthlessly debated out their theories of turn around.
The economic turnaround did happen and came about in the era known as the Roaring 20s in American history. During this period of 1920s, the industries registered 42 percent expansion a record that still stands. War and Henry Ford had pushed American economy into fifth gear with factories now able to produce mechanical parts, clothing apparels and weapons. The government injected US$1 billion on development of affordable housing, new roads, power grids, telephone lines, traffic signals, restaurants, beverage factories, cinemas, film industry and hotels. The Real GNP growth was growing at 4.2 per year in America and sales were up and manufacturers were happy. Rapid industrialization phase was at its prime stage with well-structured intra-state trade networks and blossoming consumer markets – American stood on the mantel of the world with GDP of US$690 billion [twice that of today’s Pakistan].
The returning soldiers of war carried secrets of German superiority and pilots wanting to show off their flying skills to the rejoicing Americans helped build the airlines industry. Henry Ford again rebounded and this time with Ford’s Model T cars and began manufacturing cheap cars for working-class families. This exploded employment levels in other related industries like rubber, tourism, steel, oil, construction – all boomed. The expansive credit systems earlier established during the 50-year industrial revolution was now more actively serving this middle-class. Innovations and new technology were rapidly shaping consumer preference and America dominated international trade and businesses.
California, with its numerous oil depots and gigantic mines was flourishing too. The roaring construction of highways and railroad networks made it easier for investors to reach these hotspots and within short time, the boom created millions of jobs as a result. Pakistan, in quick comparison, also has vast reserves carrying over 10 billion tons of precious metals and minerals that can be converted into chemicals and other value added export products. The pandemic had just ceased and with renewed interest in its mineral reserves, the Californian Government established a Mineral Leasing Act that rapidly promoted mining in federally owned lands that today the world knows as Silicon Valley. This important policy set time in motion for California to become today’s sixth largest economy by size of US$3.2 trillion in GDP. Interestingly, while California was experiencing a mining revolution, in other states, industries that were performing well included construction, chemicals, machinery, electrical appliances and automobiles. These are the exact same industries (including mining) where Pakistan has top potential to attract investment and earn foreign exchange.
While, North East was busy mechanizing processes and replacing old parts to raise productivity of labor and capital, the West expanded on mining and agriculture. Simultaneously, when more and more consumers began demanding electronic appliances like TVs, Radio, refrigerators, etc., the resulting mass production led to establishment of independent power producers (IPPs) and electricity boom came about. However, the growing and unmonitored size of businesses, housing construction, rapid public-private ventures and largescale manufacturing had reached its toll and exacerbated demand for consumer credit to such an unescapable level that it enforced the stock market to crash in 1930. The uncontrollable consumerism and reinvestments, economy dipped from 6 percent to -13.2 percent. A record that still stands and is known as the Great Depression in history books and this is where it gets more interesting for Pakistan during COVID-19 period.
When millions of Americans found themselves unemployed, the 32nd President of the United States, Franklin Roosevelt, rallied to rescue the hungry and homeless on top priority just like done by current Prime Minister of Pakistan, Imran Khan. He launched a US$3 billion Federal Emergency Relief Act to directly compensate the jobless. Of course, the monetary value of this relief fund was perhaps, 20 times more than the US$1.2 promulgated by Pakistani Government, and even though it lasted for two-years, what is more important is government’s creative employment generation programs. The Civilian Conservation Corps (CCC) was one of the first that paid unmarried and unemployed men in mid 20s to participate in nationwide building of bridges and reservoirs. The Civil Works Administration (CWA), soon followed and generated 2.5 million jobs in just one month. As part of the CWA, participating workers were paid to construct community-engaging amenities like swimming pools, football fields, and parks and even to repair schools, hospitals, etc. The keen government even hired several thousand writers and artists to write articles and advertisements – jobs were matched with skills and talents.
The largest relief program during the Great Depression of 30s was Works Progress Administration (WPA) that employed almost 9 million citizens and used the same model of the CWA to divert the temporarily unemployed labor force into constructive economic activities. Later when Federal Theater Project was launched, actors and artists were boarded to beautify the country and to educate the illiterate in rural areas by means of traveling libraries. People needed cash desperately and with these initiatives the economy slowly retracted to record 7.6 percent growth at the end 4 years’ time period.
COVID-19, just like the Spanish Flu and the Great Depression has caused an economic debacle in Pakistan and forced the government to choose between saving lives and livelihoods but we must draw a page from American history. Pakistan is very fortunate to have the largest irrigation system in the world and a sea rich in fish species. We have arable lands, breath-taking landscapes for tourism and a hotpot central location for investment and easy trade with central Asia, Gulf and Africa. It does not need to depend on international aid at all. The current government and central bank have jointly done remarkably well to contain the spread of virus and supported employers, SMEs and daily-wagers quite generously. The pandemic of today has come at a time of digital revolution with greater urgency than ever to depend on Artificial Intelligence. Countries with 3D-printing machines are manufacturing ventilators and ones with advanced healthcare systems are getting increasingly closer to a Corona Vaccine, in record time. These countries are advancing aggressively just like the time of Roaring 20s, when innovations were prioritized. For industries in Pakistan to survive through this war the government must focus on developing R&D, capacity building, IT sector and upgrade infrastructure. With sixty percent population being young, civil engagement models of the 1930s can prove to be a highly effective, so why not use it. The Government now has the case of the American Industrial Revolution and success stories of post-pandemic time including that of Roaring 20s and the Great Depression. It must learn from them.
President Employers’ Federation of Pakistan