Economic progression of Bangladesh - from political economy perspective

Rashed Al Mahmud Titumir is Professor of Economics in the Department of Development Studies at Dhaka University. His book  provides an interpretation of the economic progression of the Bangladesh economy since independence to 2018  where the author provides analysis of the post- independence  interplay of political forces in the country and how that has shaped economic outcomes and thereby how they have broadly impacted on the welfare of the people in the country. The book is written in Bengali, therefore I myself have had to make its rendering into English.  As I am not a qualified translator, that may leave room for a certain degree of shortcomings in translating certain technical terminologies from Bengali into English.

From the theoretical perspective the book details the economic progression of Bangladesh from political economy perspective. The author amply demonstrates what James Buchanan termed as 'politics without romance'. Buchanan rejects the idea that participants in the political domain such as public officials (i.e. elected public representatives) and public servants have some altruistic motives such as common good rising above their self-interest. Instead they are guided by their self-interest. Then there are a large number of other interest groups who also want to advance their interests.

The book is divided into four chapters in a periodised format indicating certain structural shifts in political developments and their impacts on the economy between the periods, thus with the state favouring certain interest groups who continue to  remain in place across the periods under study. As such slowly but surely these interest groups have been somewhat changing economic outcomes. But their overall drive to continue their ascendency led to the capture of the state decision making apparatus, in particular, by captains of RMG (ready-made garments) with serious consequences for evolving a more diversified industrial structure and a more dynamic manufacturing base in particular.

The author highlighted how in the process agriculture and services sector also failed not only to achieve their full potential but also got distorted. He clearly identified the factors responsible for the sorry state of the economy though the economy has been talked up not only by successive governments but also by various multilateral institutions.  The major factor, the author identified, is the systemic weaknesses in state institutions. The political culture of clientism and rent seeking largely contributed to the systemic weaknesses in state institutions. This has led to the absence of accountability, transparency and meritocracy.

The first chapter covers the period from 1971 to 1975, the second from 1976-1990, the third from 1991- 2005 and the fourth from 2006-2018.

In chapter 1 the author draws our attention to the failure of the newly independent Bangladesh to realise equality, human dignity and social justice as encapsulated in the liberation war declaration. Also, the state failed to stimulate a growth-oriented economy in the post-independence period. He considers the failure of agriculture and manufacturing sectors to generate investible surplus was at the root of this problem and details factors inhibiting their growth that led to increased dependence on foreign aid. In other words, a dependent growth oriented economy emerged. The author possibly argues his case in line with the theoretical framework provided by Paul Baran, Paul Sweezy, Andre Gundar Frank and Samir Amin. He attributes this to the new state's failure to build institutions for sustainable development.   A group of state-patronised people misusing state power accumulated wealth by looting nationalised state manufacturing enterprises and began the culture of nationalised bank debt defaults. He then opines that to understand all these phenomena and the failure to build an inclusive state structure one must have to look at the political settlement made during this period and its consequent impact on the economic outcomes. He does provide detailed analysis of the political settlement that took place and the consequent economic outcomes.

Chapter 2 outlines the most turbulent political period in the history of Bangladesh marked by a series of military coups and counter-coups and military rule and political assassinations. But in 1990, popular democratic mass movement led to the demise of military-based dictatorship in the country. However, in line with the global trend, Bangladesh slowly moved towards opening up its economy which hitherto was a much closed economy. This went hand in hand with a more market-oriented domestic economy but such reform measures resulted in a very limited degree of success mostly in the fields of human power exports, RMG and pharmaceuticals. Overall, these reform measurers failed to work out a sustainable development environment. The dominance of industrial and financial robber barons continued unabated with state patronage as in the previous period. This period also saw the beginning and expansion of private sector banks and devolution of certain activities to the local government levels such as Zilla and Upzilla councils. The author provides his own perspectives on the factors that influenced the interplay between political and economic forces.

In the next chapter the author begins with an optimistic note. He saw the 1990 popular uprising as a harbinger or a new dawn of opening up new possibilities for Bangladesh including a compact reached for the transfer of political power. He saw in this new promising political settlement also reflected in the economic front. He also saw progress was made in quantitative terms both in social and economic fronts. While the reach of the state was expanding, the corresponding institutional development was lacking. The result was the state remained captured by the vested interest groups. The period under discussion was also marked by growing rural-urban migration, expansion of microcredit and inflows of overseas remittances impacting on rural areas. The services sector including ICT (Information and communications technology) started to expand. Overall the private sector was taking the lead in economic activity. The period also witnessed expansion of female education, employment and growing awareness of social issues affecting women.

But continuing environmental degradation counterweighed progress made in the agriculture sector along with the continuing fragmentation of cultivable land and the lack of technical progress.  Expansion of education was not matched by improved quality in education. Health care remained grossly inadequate and beyond the reach of the vast majority of people.  While road transport integrated the north with the rest of the country, the overall transport system - both railways and road transport - remained inadequate relative to the need.

Meanwhile, a section of the middle class became desperate to amass wealth. They started to use the state levers to do so by forcibly appropriating forests, rivers and welands as well as railway lands - all state-owned properties. This has resulted in the syndication of sectional interests across the country. The acquisition of state-owned wealth by private individuals further demonstrated the structural weaknesses in state institutions.  Therefore, the political settlement reached in this period led to the increased concentration of power in vested interest groups but with somewhat an expanded base.

The last chapter takes us to where we are now.  One remarkable feature of the period under consideration was once again the army who stepped into power for two years (2006-2008) and was followed by an elected government. The next election was held in 2014 when most members were elected unopposed. But on the economic front the country started to record continuing growth. This growth was achieved despite stagnant private investment and declining national savings. Also the levels of domestic and foreign debt were rising as were income inequality and unemployment.

The author points out to scaled-up social and state-sponsored   violence which were directed against women and children in the most acute form in particular. Allegations of human rights violations, kidnapping, extra-judicial killings, repression and a culture of lawlessness were made. These are clearly symptoms of the breakdown of the accepted social norms and behaviour. Such an environment does not engender a well-functioning economic order.

The Bangladesh economy also faced increased levels of bank debt defaults requiring continuous recapitalisation of the banks at the expense of tax payers' money while tax frauds by the rich continued. As a result, consumption-based regressive tax became the mainstay of revenue collection. A series of scams rendered the stock markets practically ineffective means to raise capital thus leaving the banking sector to provide capital.

He further argues that the drummed-up economic growth figures as reflected in GDP figures are to be treated with extreme caution. He provides a very comprehensive list of statistical flaws in GDP estimates provided by the Bangladesh Bureau of Statistics (BBS). The author also  argues that an overly RMG exports and overseas remittances-based economy inherently remains a fragile economy despite the government talking up the economy.

The book provides us a reasonable perspective on disjointed political developments since independence and their impact on the economy. The author successfully demonstrates that exclusions and inclusions are a consequence of political process where money not only talks but also acts to safeguard vested interests. He further provides an in-depth analysis of how a small well-organised group can gain power and how the tentacles of  that power compounds over time and gets much more powerful in capturing all the levers of state machine and gets harder to get rid of.

At a broader level the book has brought to the level of articulation, but not to the point of resolution or synthesis, the issues surrounding the current political crisis facing the country and its consequences on the economy. The book also does not deal with the role of the bureaucratic state apparatus in the overall scheme of the things the book dealt with.

The book carries on the long tradition of academic discourse in political economy. So far this is the first book that I have come across that deals with the political economy of Bangladesh - but from a particular theoretical perspective.  The book remains a reference point for further debate on the issues surrounding political developments over time and their impact on the economic outcomes in Bangladesh. The book could be a useful reading to stimulate discussions in both undergraduate and post-graduate levels on the political economy of the country at universities in Bangladesh. The book also remains an important reading for all those who are interested in a critical evaluation of the interplay between political and economic forces in the country since independence.

Muhammad Mahmood is an independent economic and political analyst.

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