Although any production function comprises four elements (i.e. land, labour, capital and entrepreneurship), the geneses are land and labour. Capital has become a core element for the production function lately and as an instrument to cheaply exploit land and labour. Land has a deeper connotation than its simplistic denotation as the surface of the earth. Any form of natural resources (land, water, air, mineral, etc) used for the production form the fundamental part of land as far as the modern concept of the production function is concerned. The fertility, importance, availability, human desire and other factors (both tangible and intangible) provide the value weightage for natural resources. As such, one type of resource used in the production or consumed as a product may be more valuable than the others. Also, same kind of natural resources may have different value for their different productive fertilities. Man-made concept, initiative or investment may also add value to particular natural resources. With public investments, for instance, in infrastructures, utilities, and communication, natural resources including land in one location may present more fertility and a stronger relation with other production factors, and thus may become more valuable than the other. This increased value is often a product of public investment and therefore a proper public policy is necessary to do distributional justice and to ensure economic development without compromising the broad societal and environmental objectives. A poor policy environment on the other hand may lead to many forms of natural resources (i.e. air, water, natural wealth, etc.) to be taken as 'for granted' for many production functions severely undervaluing, devaluing or without any valuation. While the fair price for natural resources and its link to real productivity is debated, there is at least a value determined for it and for the public investment made to create such values.
Labour, which includes both trade and sectorial skills, now has become very sophisticated and diversified like hi-tech, smart-tech, soft, and hard skills. The skills and their schemata have also a temporal dimension - once a super hi-tech skill may be considered as hard skills today. Given that hi-tech labour is seen as qualitative element for the production, its holders receive more benefits than those holding the hard skills of labour. Despite it is hard to determine which form of labour has more contribution to the production and thus should receive more benefit, hi-tech labours are always overly paid compared to the hard skills counterpart who suffer and strive under hardship. The cost for labour is dependent on the labour market condition, which is influenced by e.g. labour policy, negotiation with trade unions, liaisons, and fiscal consolidation and other economic policy measures promoted by the external institutions.
Availability of capital depends on a number of factors including a nation's international account recorded in the balance of payments. Problems/deficits in the balance of payments are addressed by economic policy measures like adoption of policies to attract foreign investments or devaluation of national currency to boost exports and thus build up the current reserves. Since the industrial revolution, the increased international economic integration means that a nation's problems in the balance of payments is also concern of the others. This allows the external institutions like Bretton Woods Institutions - the institutions founded to expand the reach of western capitalism in the name of the protection of the global economic order (IMF), financing the post-WWII reconstruction works and lately as lender for development projects for shared prosperity - to intervene in shaping the economic policies of the nation in question, softly named, in the form of policy advice. Given that the IMF (International Monetary Fund) and the World Bank are the lender of last resort for the nation experiencing problems in the balance of payments, its government has little choice but to follow the 'letter of intent' or the demanded 'priority actions' to access loans and grants from these external institutions.
Conditions attached to international loans and grants (e. g. fiscal consolidation, private sector promotion and depth servicing) severely restrict public policy space of the borrowing nation's and its ability to finance infrastructure and social services. For example, the Bank's promotion of the 'Maximising Finance for Development' approach that advocates addressing development challenges with private sector solutions forces the governments of the borrowing countries to allow the use of public resources by the private sector to pursue its objectives (World Bank 2017, 2018). Similarly, the IMF's promotion of labour flexibilisation and the systematic weakening of labour rights have already created a labour market where labour can be accessed cheaply and under flexible employment relations. Easy access to labour and the availability of public resources (including public natural resources) may reduce the capital necessity for production by private sectors and thus support production and economic growth. Such economic growth however severely disturbs a state's capacity to delivering core public services, catering for social objectives, and meeting the human rights obligations. Public resources are now drained to benefit the global economy costing the social, environmental, equity concern and local priorities at the local or national level.
Loss of public and natural resources are common to the developing countries that are trying to boost economic growth. Lack of bargaining power, skills, and poverty mean for them either a sacrifice of public and natural resources or their undervalued use in the economic production for survival. The necessity to improve foreign currency reserve and thus an adjustment in the balance of payments problems means promotion of export-oriented production by making the labour forces cheap and by hugely costing the public and natural resources. In other words, the short-term national financial gains are nothing but a long-term negative consequence for the natural and human resources. This might also help the ruling elites to take advantages but not necessarily for the county and its mass people and of course not for long term. Here, the capitalist concept supported by the international institutions provides this gain to benefit the global economy, while a poor national public policy means that these financial gains benefit the ruling elites costing the mass population in the long run - among others, the loss of public services and high level of inequality are some common outcome.
An example of such export-oriented production is the readymade garment (RMG) that, for a country like Bangladesh, has become the number one industry for foreign currency earning. The RMG production consumes a number of natural recourses (e.g. water, air, minerals) that are either public property given with subsidy or even free as for granted to promote cheap and competitive production. Cheap labour of hard skills supplements. Given that the real gain of a nation comes from a proper use of public and natural resources to ensure a balanced growth in all aspects of life including social, environmental and economic, draining public resources only for economic growth does not show any sustainable long-term promise. A proper public policy in this regard is necessary to prevent the irreversible loss.
Gazi Mahabubul Alam is Professor, Department of Economics, East West University, Dhaka.
Shahadat Hossain is with Spatial Planning, Technische Universität Dortmund, Germany
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