The State of Bangladesh Economy:
Issues and Concerns
Mohammad O. Farooq, PhD
Associate Professor of Economics and Finance
Upper Iowa University
farooqm@uiu.edu
May 2000
[Abstract: In more than two decades since the independence, the economy of Bangladesh has not seen any meaningful transformation. While there has been sparks of achievements in certain areas or sectors, the overall economy has been fairly stagnant. In recent years, there have been rising concerns about the serious crisis in the economy. In this paper, a brief portrayal and analysis of pertinent issues and concerns are presented. It is also argued that the real impediments to the Bangladesh economy are non-economic in nature. Avoidance of an impending economic crisis as well as achieving the desired economic transformation hinge on addressing those non-economic determinants.]
Introduction
Bangladesh became an independent nation in 1971 with the aspiration of reclaiming its heritage of being the golden Bengal in the past - a vintage that many justifiably believed was held hostage by exploitative ruling elites from outside, such as the British before 1948 or the West Pakistanis before 1971. Although the pursuit of independence was motivated by more than economic reasons, politically we are a sovereign nation at the table of nations of the world. In the last twenty years since its independence our golden rhetoric has not lost its luster, but the long cherished political stability and economic transformation still remain a mirage even though we have no outsiders to shift the blame to anymore.
Our literacy rate has improved, but we have not reached an acceptable level. Our overall economic infrastructure has broadened with major accomplishments such as the Jamuna Bridge, but in many parts old infrastructure is crumbling. We have more private universities and colleges than ever before, but the certificates have lost their credibility. Our tall buildings in many urban commercial and residential areas are becoming taller, but the widening economic dualism in our society is causing the scope of slum dwelling to go out of control. We have now precious police dogs at the disposal of the government, while some powerful, political persons aided by the police force storm into a corporate board's meeting and quite casually raid and take over a bank. There have been many developments in the private sector, while the governor of the central bank of Bangladesh is threatened by a leading industrialist at the governor's own office because the governor wants to create pressure on the big loan defaulters. The result: the governor is removed. There is a profound impact of the NGO movement on the economy of Bangladesh, especially on rural employment, literacy, and other indicators of human development. Parallel to this, we also now have at our hand one of the most serious environmental disasters ever of this century: the arsenic problem.
According to a recent editorial in the New Nation, a small segment of Bangladeshi people has become "super rich," probably stashing billions of dollars outside the country. The editorial also makes the connection that this "super rich" segment has not become so by making any "super" contribution to the country's economy or productivity. Much of these stashed resources outside the country is a result of "super" corruption. [7]
Do we need a balance sheet type analysis to determine the bottom line of our nation's operating performance? Still heavily dependent on foreign aid after twenty eight years of independence, the country got a rude awakening by a World Bank review issued by the country director Frederick Temple. He conveyed to the government of Bangladesh the dismay and discomfort the current situation in Bangladesh is causing to the donors. Representing the donors' view, he drew a very pessimistic picture of the country's overall situation and described the macroeconomic situation of the country as "fragile." This is being considered a sobering report card on Bangladesh, saying economic growth is too slow to defeat poverty and that it is handicapped by political unrest, slackening reform and environmental crisis. [1]
Generally, an economist, respecting his own academic domain as well as others', would confine himself to economic issues related to development. An economist might talk about the sectoral priorities, monetary and fiscal policies, the trade-related issues, Gini-coefficients, capital formation, etc. But quite a few years ago, I have reached the conclusion that our cherished economic transformation is not being restrained or impeded primarily by economic factors. Rather, the real impediments to the Bangladesh economy are non-economic in nature. Avoidance of an impending economic crisis as well as achieving the desired economic transformation hinge on addressing those non-economic determinants, which is the purpose of this paper.
Shifting the focus to non-economic determinants
In 1776 when the father of modern economics, Adam Smith, wrote his Magnum Opus, The Wealth of Nations, he was not focused merely on discovering and understanding the natural principles underlying the economic reality. Rather, one of his primary goals was to seek the emergence of a socio-economic structure in his contemporary context where affluence will prevail over poverty, progress will conquer backwardness, and competitive environment under rule of law will replace anarchy or arbitrary intervention of the government. Parallel to the unprecedented prosperity of the western societies in Europe, the destructive, inhuman, and unbridled economic dimension he observed made him cherish and dream of a new, positive transformation. At different stages of the development of economic thought, the contributions that renowned economists, such as Alfred Marshall, John Maynard Keynes, or Karl Marx, have made were also influenced by their deep concern for their society's welfare and progress. There are a lot of controversies and unresolved issues based on their contributions, and their contributions have not always produced effective results on a sustained basis, yet undeniably in the evolution of economic thought and the growth of the western socio-economic edifice, their contributions were so pivotal and monumental.
Even behind the great British empire, where sun did not use to set, there was some kind of dream or aspiration. During the same year when the famous book of Adam Smith was published, the American Revolution took place. Also behind this revolution was a dream and an aspiration of the pilgrims to be free from the "royal" British rule and to found a new, more desirable society. How and how much of that dream has been materialized or whether the American experience has been an unmixed blessing for everyone, or whether it was acceptable and imitable by the rest of the world may be a moot point. But the thought of the great modern economists and the dazzling material success and progress of the sole surviving and dominant western civilization - or so it is sometimes claimed - on the development thought and programs of poor, backward, and stagnant countries, such as Bangladesh, is undeniable.
Those who control the wheels of power in countries such as Bangladesh, those who are ever-busy in gambling the destiny and future of the people, those who claim that only in their political pocket lies the elixir of national salvation, those who keep formulating every few years voluminous and glossy development plans, those who hold positions with the lofty platforms of higher education, one way or another, are deeply indebted to the ideas, philosophy, and experience of the modern west. Indeed, many of the modern thoughts in the field of economic development that have influenced us are also among the contributions of the west.
Within the last few decades, right in front of our eyes, several Asian countries, such as South Korea, Taiwan, Hong Kong, Malaysia, and Singapore, experienced significant development. Why doesn't it happen in the case of Bangladesh? Why is it then that the same thoughts, approaches, programs and strategies, using which the west achieved the pinnacle of material success (which they proclaim and we unreservedly concur), our avowed imitation of the same does not produce the same result? Is it really a mystery at all? [4] The purpose of this paper is not to elevate the superiority of the western thought and the effectiveness of their approaches to the level of a universal standard or criteria. However, since our thoughts, approaches and programs are deeply and fundamentally influenced by those, we can't separate ourselves from the influence and contribution of the west.
The organized political crime and game
Promoth Chowdhury said, "Disease is contagious, health is not." The condition of Bangladesh as a nation and the condition of its economy in particular, in the context of the global influence and supremacy of the west, are clear illustrations of that proverb. It is redundant even to state how serious, deep and fundamental the nature of our economic problems is. What is then the answer to the question as to not only that we are not succeeding in achieving our economic emancipation, but rather our problems are steadily deepening and deteriorating? We don't lack economists who are well known, experienced, experts and educated from the world's leading universities. Is it that they don't understand the problems or they are unable to solve these problems? Are those who are engaged in formulating and implementing economic research and development programs incompetent? Or is it of paramount importance to recognize that economic development does not depend as much on economic thought or the ability/competence of the economists as we tend to believe?
I, as an economist and as a human being, can't help but continue to ponder about these relevant issues. With a great deal of sensitivity and pain, I am observing year after year how our conditions are deteriorating. Whoever I talk to, I sense mostly profound frustration and despair. Parallel to the suffering and deprivation of a good portion of the population, a smaller segment continues to amass wealth. The middle class is typically entrapped in the roller coaster of hopes and despairs: Where do they have the leisure to substantively deal with the problems of the nation or of the general population! The intellectuals are hissing and roaring from the safety-shell of their theories and intellection, earning fame by writing voluminous and elegant treatises, yet there is no positive change in our condition or overall trend. Our politicians from the opposition are constantly hammering us with the diagnosis that the real and primary cause of our problem is that they are not in power to shape or reshape the fate of the country. However, the political game of musical chairs is without any positive effect. Parallel to all these secular trends, we also see prayer sessions for the national development and emancipation, Ursh, Ijtima and even "Islamic politics" have chords plugged into power outlets of some special middle-eastern countries. All these forces, regardless of their ideological orientation, are claiming that they are sacrificing themselves for the sake of their beloved country and people. Yet, our moral decadence, economic ruination, political instability, and social tension are steadily and apparently unstoppably on the rise. Are we then truly a "Basket Case"?
As an economist teaching as well as engaging in research is part of earning our livelihood. But what we teach and often what we search and research do not seem to have much relevance to the real problems. Yet, whatever I can analyze myself, and what I can gather from others' analyses, I personally have a firm conviction, which only deepens with time, that a complete and genuine transformation of our nation and its economy is possible and it's an imperative.
We have to be disappointed when we take the account of our accomplishments in nearly two-and-a-half decades as an independent nation. Earlier we sought independence from the British so that we can build our own lives - a process that would prevent them from sacrificing their future at the altar of self-centered injustice, oppression, and exploitation of others. Failing to materialize that dream through Pakistan, we have sought and fought to open the door of new possibilities. We cherished and achieved freedom and independence with a new dream, full of conviction and aspiration. But this seems to be the outcome: as if we originally sought and got Pakistan for the reason that if injustice, oppression, and exploitation are the fate of our nation, why do we need the British? Aren't they good enough to perform that? Why do our people need to get kicked by the boots of the British solders, while the boots of our own soldiers are as shiny and firm to deliver a good kick? Similarly, whatever was the underlying aspiration or spirit behind seeking freedom from the military junta and the vested economic powers of Pakistan, the reality turned out to be: Why would the foreign dictators and military juntas will rule over us? Don't we have military juntas among ourselves? The people have always been deprived, exploited, and oppressed. But why does that have to happen in the hands of the West Pakistanis? What are we ourselves for? Are we less adept in singing political lullabies? Are we less competent in the art of loading our own bags of fortunes while beguiling the nation with the hope and assurance of economic development? Are we really backward in the competition of juggling the future of our own nation and people?
I do have a conviction, and as I have stated, it is deepening with time that a genuine transformation of our nation and economy will bring the cherished progress and prosperity. The basis for this conviction is this plain, simple fact that so far, at least in this century, there has not been any genuine and substantive effort whatsoever toward building a viable, sustained, and prosperous future of our nation. Yes, there was immense loss of life and property in 1971. It is also true that probably no other country has suffered as much and as frequently from colossal natural disasters. Yet, what we could have achieved in terms of political, economic, social and educational goals, we don't have much to show and no outsider to blame. Unemployment, underemployment, inflation, trade-cum-budget deficit, foreign debt, dependence on international aid, and educational backwardness, are problems that are becoming more serious with the growth of population and the passage of time. When a good portion of our population is malnourished, other basic needs, such as clothing, housing, health care, and education, still continue to be luxury.
It is not that our economists, planners, and policy-makers don't understand the technical or applied aspects of these problems. I am also not trying to say that all of their analyses are proper and relevant. I have as much respect for them as I have sympathy for them. But in my estimation, if we have to determine the fundamental preconditions to solving our problems, then those preconditions are not primarily technical or economic in nature. That is the reason this paper is not embroidered with the elegant jargons of economics; it is also not loaded with eye-opening statistics or head-turning theories. Professional economists might not feel like descending at this level. They might even allege that such an approach is either over-simplification of some really complex problems or simply demeaning the economists' otherwise lofty and powerful arsenal of theories and tools. However, it is undeniable that paying no respect to either the contributions of our capable economists or to the wishes of our nation, the economy is charging down the descent like a wild horse.
We are all familiar with organized crime. It might be helpful to understand our political institutions that we have experienced so far as nothing short of "organized political crime." The main participants in the political arena - those who are ruling and those who are in the opposition - demonstrably have all the characteristics of what is typically known as organized crime. Here the arena is political and the major political parties have shown and continue to show the same behavioral pattern as has been or are generally experienced in cases of organized crimes. Such organized political crimes have rendered our politics dysfunctional. And, dysfunctional economy or economic development is only the natural outcome of such dysfunctional politics.
The relevant non-economic determinants
If we have to build a viable and prosperous future of our nation and its economy, the first step is to develop a conviction that it is not an impossible idea or project, if we can and are determined to provide the necessary ingredients and to build the right kind of environment. This conviction can't be merely a political slogan or rhetoric.
Secondly, the main purpose behind referring to Adam Smith and other leading economists, the American revolution, the appreciable success of some Asian economies, and various economic thought and approaches earlier in this paper is that in each of these cases it has been axiomatically assumed that those responsible for materializing the dream and implementing the plans and programs would have some minimal moral and ethical standard. If that moral or ethical standard is lacking, the competitive pressure or the public opinion will address that. That simply is not true in the case of Bangladesh. The phenomenon of dysfunctional politics and economy, especially due to "organized political crime", is not limited to Bangladesh alone.
So far all who have sought political power or simply grabbed it have repeatedly and consistently proved that they have betrayed their trust and deplorably wasted the confidence, support (and in some cases, unreserved love) from the people. This is what happened during the first four years of Awami-Bakshal regime. It might not be correct to say that socialism or socialist policies were responsible for the misery of our nation and the economy. The real causes are rampant corruption, nepotism, and a third-class partisan attitude and conduct exacerbated by unbridled but organized infrastructure of greed and expropriation, all of which have gradually shaped the infrastructure of "organized political crime."
What the nation was presented with in 1975 through the change of power, militarization of political process and the so-called "nationalist-democratic" politics was another farce involving opportunism, corruption and abuse of power. In this case similar to the fact that past nationalization neither brought prosperity nor did any fundamental harm, the denationalization policy and programs did not bring any fundamental change for people either. It was merely taking the shamelessness, lack of self-respect, and insensitivity toward the suffering of people to a new height. The change of government in 1980 was merely an ugly repetition of the past.
Sense of responsibility and accountability, sensitivity toward people's sorrow and happiness, self-respect, truthfulness and fairness, trustworthiness, the loyalty not to sell out national interest - how to restore these basic values that are essential for any national economic development can't be found within the domain of economics. That is because these are fundamental preconditions to any economy or program. Until we can address these preconditions or until we as a nation resolve these matters through conscious, conscientious, candid and constructive dialog, even the combined acumen and prowess of all the Nobel-prize winning economists, I am afraid, would not be of any use. That is why trustworthiness and accountability at the level of personal and national interest are such fundamental preconditions that there has hardly been any discussion about it in the premier theories or treatises on economics.
Although many specific non-economic factors can be identified, I believe that the nation needs to focus on two broad non-economic factors: (1) establishment of rule of law (where no one is above the law and law is implemented uniformly and without prejudice); and (2) minimal ethical standard for the government and for any participants in the political arena. How to address these to non-economic factors is a challenge beyond the scope of this paper, and generally far beyond the traditional domain of economists. However, I would like to draw attention to one of my unpublished draft concept paper, "Political Transformation in Bangladesh: The Demand Side and the Supply Side of Healthy Politics." [3]
Until we address these fundamental preconditions, there is no prescription or solution to the serious malady of our deteriorating economic conditions. Among the modern economists who have addressed these issues is Gunnar Myrdal, the Nobel-prize winning Swedish economist. Ironically, his magnum opus was Asian Drama, of which we are a dramatic part. However, he did not have as much success in prescribing any solution or giving any guidance for overcoming these problems as compared to the success he had in identifying and analyzing the problems. [6]
Conclusion
The problems of the Bangladesh economy have less to do with any particular ideology. Even though socialist countries have not fared anywhere close to what the market-oriented western countries have achieved, several socialist countries have done significantly better than what we have done. That is why I believe that even if socialism were sincerely followed, our situation would have been better than what it is now. Similarly, capitalist ideology would have done us good as it has done many others, if for the sake of our national development, appropriate policies and strategies were adopted with sincerity, dedication and consistency.
We are all more or less familiar with the scope and depth of our economic problems. The technical or applied aspects of dealing with economic problems and solutions as reflected in our various economic plans are not all that bad. Yet the conviction and aspiration of building our better and viable future, minimum ethical standard, and consistency between what we profess to be our ideology and what our practice is are some of the fundamental preconditions of our national and economic transformation. In absence of these fundamental conditions, no society, including the western ones, have been able to materialize their dreams, and we are not going to be any exception. Without these conditions met, no policy, plan or strategy would be of any avail; no party or organization would be able to deliver us from this vicious cycle; no ideology, dogma or theory would enable us to achieve prosperity and development.
However, the human history is full of examples where people have been successfully involved in the process of creative destruction. It is possible to have that happen in Bangladesh as well. But that is not an importable service. The demand and supply side of healthy politics [3], as critical non-economic variables, need to be properly understood and pursued to make that happen.
Whatever I have stated here, I have done so without any reservation or without beating around any bush. For the sake of our nation, people, and our own true interest and the interest of our future generations, what is needed is open, constructive, creative, and synergistic discussion among all of us. The intellectual arrogance and rhetoric as well as confrontational-cum-destructive attitude and conduct need to be replaced with mutual understanding and cooperation as a nation. If we all come forward with positive, constructive and cooperative attitude and ideas and at the same time if we reshape our lives on the basis of minimal ethical standard, then I do believe that we have no lack of ability, creativity or any other attribute that others have.
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