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Ne Win Military Rule - A Nationalized Economy

Ne WinDespite the emphasis on pragmatism and flexibility expressed in The System of Correlation of Man and His Environment, the military established a state-controlled economic system that resembled in many ways thoe of Eastern Europe. This course seems to have been initiated in February 1963 after the resignation of Brigadier Aung GyA, a key figure in the coup, from the Revolutionary Council. Aung Gyi had advocated a mixed public-private sector economy. Thereafter, the influence of Brigadier Tin Pe and U Ba Nyein (a civilian), both doctrinaire socialists, was predominant. There followed a wave of nationalizations, beginning with the British-owned Imperial Chemical Industries in August 1962 and the Burma Oil Company in January 1963. Banks, both domestic and foreign, were nationalized in February 1963; that same month the Enterprise Nationalization Law decreed that all large-scale industrial enterprises would come under state control by June 1, 1963. In fact, nationalization of large enterprises, including foreign-owned ones, continued through 1964 and 1965.

In September 1963 the People's Store Corporation was set up to take responsibility for retail distribution of imported and domestic goods. The Defense Services Institute, a military-run enterprise involved in a number of activities ranging from shipping and hotels to the sale of ngapi (fish paste, a staple of the Burmese diet), was made a state enterprise in October. Overall, some 15,000 enterprises were taken over by the government between 1963 and 1972. The government also invested more than K1 billion in an ambitious industrialization program during this period.

On May 17, 1964, the Demonetization Law was promulgated. This declared that K50 and KIO0 notes were no longer legal tender. The law required persons to turn them in to the authorities (to receive a maximum refund of K500 in smaller notes), and there were heavy penalties for noncompliance. In August a special tax was imposed on bank accounts of a certain amount (the equivalent of US$882 at that time) and above. These laws had the effect of undermining the dominant economic position of Indian and Paldstani traders and retailers. Responding to government pressures, some 97,000 out of a total of 109,000 Indians and 12,000 out of 26,000 Pakistanis had left the country by July 1965.

Despite the growing resemblance of the management of the economy to that of communist countries, the government made no real attempt to collectivize agriculture. The Union of Burma Agricultural Marketing Board, similar to the Agricultural Marketing Board established by the U Nu government, was placed in control of purchasing paddy from the farmers and exporting it overseas. The government moved to abolish tenancy. In 1963 laws were passed both prohibiting the seizure of land or animals following the nonpayment of debts and the setting of levels of rent, to be paid either in cash or in kind. In April 1965 the government turned to what General Ne Win called "unfinished business which mocks our declaration that we will not .. permit the exploitation of man by man." The Tenancy Act was amended, to abolish rents on farmland.

A number of sympathetic observers pointed out that the military's economic policy during the first decade of its rule was designed to promote equity and put an end to foreign (including both Western multinational and resident Indian) exploitation of the country, rather than economic growth. Stagnation of the state-controlled economy, however, resulted in practically everyone's getting smaller - though perhaps more equal - slices of the pie. Per capita income in constant prices rose modestly between FY 1962 and FY 1972, but it was still below prewar levels. Although paddy production grew from 6.7 million to 8 million tons within the same period, this barely kept pace with population growth.

Rice exports declined precipitously. Their value in FY 1965 was the equivalent of US$134.5 million, falling to US$52.7 million in FY 1972. Because of the government's emphasis on rapid industrialization, public investment in agriculture declined. Lack of consumer goods and price-fixing by the Agricultural Marketing Board gave the farmer little incentive to produce more; his best rice was often hidden from government buyers and sold for a good price on the black market. The quality of rice exported by the board thus declined, resulting in fewer overseas buyers and less foreign exchange. In the cities, shortages of goods in the People's Stores, the shelves of which were often bare, and high inflation eroded the standard of living. Consumer goods were often available only on the high-priced black market. An American observer in the early 1970s discovered that in the Zegyo Market in Mandalay, a half-empty bottle of "Horlicks," a British powdered health drink, sold for the official equivalent of US$12, and aspirin was available neither there nor in Rangoon's People's Stores. The capital, once known for its brightness and gaiety, began to take on the woebegone aura of a Soviet provincial city transported to the tropics, though lively crowds still frequented the Shwedagon Pagoda and its precincts.

The government initiated a major reversal in policy at the First Congress of the BSPP, held in June-July 1971, when it approved the document "Long-Term and Short-Term Economic Policies of the Burma Socialist Programme Party." This represented a less doctrinaire approach to planning, calling for the abandonment of Soviet-style rapid industrialization and giving top priority to the agricultural, consumer goods, and mining sectors, in that order. The mistakes of the past and the plight of the consumer were acknowledged, and the role of material incentives in development was stressed over ideological mobilization. The congress recommended the acceptance of limited economic assistance from abroad, without compromising Burma's neutralist foreign policy stance. It also approved the Twenty-Year Plan (fiscal year [FY] 1974-93), projecting growth targets of 5.9 percent gross domestic product (GDP) per year through to FY 1993, when Burma would have developed into a "socialist industrialized state."

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Page last modified: 08-10-2011 12:16:44 ZULU