The Financial Express

Hoping for a prosperous Bangladesh

| Updated: October 23, 2017 01:44:21

Lankabangla and Fianancial Express Lankabangla and Fianancial Express
Hoping for a prosperous Bangladesh

As I was being driven by I looked through the car window and saw an evidently traumatised boy of indeterminate age (due to malnutrition perhaps) entering the confines of iron spiked  barricaded (terkata ghera) space in the middle of the road and fearfully eating some leftovers from a nearby dustbin. His fear was palpable as if someone would snatch away the "dog's food" he was relishing.



In newspapers and television programmes we   read and hear how Bangladesh has  become a model of development for many developing countries. World Bank, IMF, Pricewaterhouse Cooper have applauded our growth and have predicted that Bangladesh would be one of the countries to be watched. PwC reports that Bangladesh will be among the top three fastest growing economies by moving up to the 28th spot among the world's most powerful economies by 2030.The economic output of Bangladesh could grow from $628 billion in 2016 to $1.3 trillion in 2030, says  PricewaterhouseCoopers (PwC). The report ranked 32 countries by their projected global gross domestic product (GDP) by purchasing power parity (PPP). PPP estimates of GDP adjust for price level differences across countries, providing a better measure of the volume of goods and services produced by an economy as compared to GDP at current market exchange rates, which is a measure of value. Bangladesh ranked 31st among the world's 32 largest economies in 2016, that together account for around 85 per cent of global GDP. Findings by the PWC, one of the world's largest professional-services firms, show that China, India and the US would be at the top of the table.



In a speech to the Metropolitan Chamber of Commerce in February last year a senior Bangladeshi bureaucrat brought out the strength of the Bangladesh economy. According to him, Bangladesh is a stable state with pluralistic democracy with politically conscious people and the economy running on a stable path. Bangladesh is least volatile among regional powers, receding poverty level (25 per cent in 2015) and increasing per capita income $1314 (2015). Apart from the strength of Bangladesh economy, he  had correctly identified the challenges that Bangladesh economy would face in the future by climate change, terrorism and violent extremism, limitations in adopting to rapid economic changes as well as evolving international norms, ethics and practices.



While all these may come to pass and Bangladesh may have an impressive GDP, it would be difficult to achieve any of such goals without institutional reforms. Geoffrey Sachs while reviewing the book by Daron Acemoglu and James Robinson-Why Nations Fail-wrote, "Their causal logic runs something like this: economic development depends on new inventions (such as the steam engine, which helped kick-start the Industrial Revolution), and inventions need to be researched, developed, and widely distributed. Those activities happen only when inventors can expect to reap the economic benefits of their work. The profit motive also drives division, as companies compete to spread the benefit of an invention to a wider population. The biggest obstacle to this process is vested interests, such as despotic rulers, who fear that a prosperous middle class could undermine their power, or owners of existing technologies, who want to stay in business. Often, these two groups belong to the same clique".



Economists generally agree that political centralisation is one of the main drivers of economic growth. China is a shining example of rapid economic growth. (Here is a comparison between China and India. The Chinese economy advanced 6.9 per cent year-on-year in the second quarter of 2017, the same pace as in the previous period while markets expected a 6.8 per cent expansion. Growth remained at its strongest level since the third quarter of 2015, as industrial output and retail sales picked up while fixed-asset investment remained strong. For 2017, the Chinese government expects the economy to grow by around 6.5 per cent, slightly below last year's 26-year low of 6.7 per cent. The Indian economy advanced 6.1 per cent year-on-year in the first quarter of 2017, slowing sharply from a 7.0 per cent expansion in the previous period.  It is the lowest growth rate since the last quarter of 2014, due to a slowdown in consumer spending and a drop in investment, following the demonetisation programme started in November of 2016 that removed 86 per cent of India's currency in circulation. GDP annual growth rate in India averaged 6.12 per cent from 1951 until 2017, reaching an all-time high of 11.40 per cent in the first quarter of 2010 and a record low of 5.20 per cent in the fourth quarter of 1979.)



If our target is to increase GDP then it is possible to achieve the target mentioned earlier. But if the authorities aim for fair distribution of increased wealth then political centralization, which in the final analysis breeds corruption of the elites, democracy appears to be more attractive option.  Many have mistaken Chinese rise due to the authoritarian character of the regime discarding the fact that "China did not take off because it was authoritarian. Rather, it took off because the liberal political reforms of the 1980s made the country less authoritarian. One of the first acts by the reformist leaders was to signal an improving environment for private property… The reformist leaders also began to embark on meaningful political changes. As scholar Minxin Pei has noted, every single important political reform-such as the mandatory retirement of government officials, the strengthening of the National People's Congress, legal reforms, experiments in rural self-government and loosening control of civil society groups-was instituted in the 1980s. The Chinese media became freer in the early reform era. The timing here is critical. This "directional liberalism" of China's politics either preceded or accompanied China's economic growth."  (Does democracy help or hurt economic growth?  CPE blog posted on June 30, 2008 by Anna Nadgrodkiewicz, Director Multiregional Programme at Wshington-based Centre for International Private Enterprise).



It is incontrovertible that infusion of foreign investment is absolutely necessary for the growth of an economy. Historically bulk of foreign investment is done by the developed countries in other developed countries mainly because of similar regulatory frameworks and beliefs and democratic ideals. Besides, similar skills they share with one another make it easier for them to trade in high-end products. It has been happening despite Raul Prebisch's scepticism about accretion of national wealth through foreign investment that often has high social cost.



The developing world is now confused whether in view of global meltdown Adam Smith's theory of minimalist role by the government can lead a country "to the highest degree of opulence from lowest degree of barbarism" is not now outdated. 



Advocates of capitalism ignored that perfect marriage between demand and supply is a theoretical concept, particularly in places where few firms forming syndicates control the supply and price  of commodities. In economies like ours often captains of industry and commerce dictate state economic policies either as pressure groups on the political authority or on their election as members of parliament. With the withering away of idealistic politics and the advent of commerce-based politics and expensive elections politicians in both the developed and developing worlds have increasingly become dependent on donations from industrialists to finance their elections. Donations being hardly given for altruistic reasons, the donors expect returns on their "investment". Such concentric relationship invariably leads to inequity and social stratification in terms of wealth and power.



One, nevertheless, hopes that in the case of Bangladesh the spirit of liberation war and people's abiding faith in democratic ideals would lead the country to prosperity as promised by our leaders.



The writer is a former Ambassador and Secretary


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