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The Financial Express

BOOK REVIEW

Economic issues in an elaborated frame


Economic issues in an elaborated frame

Economic issues are critical and complex. For the policymakers, it is always challenging to deal with these complex issues, especially in a developing country like Bangladesh, where the informal portion of the economy is significant. Nevertheless, as the country is gradually moving up the development ladder, the necessity of understanding the issues, both in local and global contexts, also widens.  Hasnat Abdul Hye, an eminent writer and former civil servant, tries to present the issues as an elaborate frame. The outcome is a book titled Economic Issues That Matter: Yesterday, Today, Tomorrow, which also 'Includes Corona Economics.'

More than 100 articles and essays, written by the author mostly in the last half-decade and published in The Financial Express, are included in the book. In the introduction the author says: "Irrespective of their origins and provenance, economic issues have direct and indirect impact on our lives. It may make better sense of our economic environment if we have some insight into these issues, even if at an elementary level. Understanding the implications of the various issues may also be helpful in making choices and decisions. To have an idea about the subjects is not necessary to grasp the theories that underpin many of the economic issues. Understanding the technical terms used in economic analysis of the issues is enough to comprehend their composition and implication." To understand the different economic jargons, he adds a set of glossary at the end of the book. He also argues that economic issues that were manifest in the past are still relevant in our lives and may have some relevance in the future as they are mostly rolling in nature.

The author organises the book in six thematic sections so that the readers can find their areas of interest easily. The themes are: policy, macroeconomy, micro-economy, global economy, system economy, and corona economy. The book's most valuable section deals with policy issues, where the writer discusses the basics of policy, policymaking, policy tools, and policy analysis. The writer's long and practical experience on policymaking exercise gives him an added insight to delve deep into the issues. For example, he rightly says: "It would be myopic and impractical to think that economics alone can be the basis for policy analysis and policy making. Ideology, history, the social and cultural framework and a host of other factors are germane to and important for policy and policy making. To a large extent, there is no realistic alternative to the role of the government in achieving social welfare function"(p-24). While discussing the policy tools, Hye elaborates fiscal and monetary policies with examples. He, however, skips the trade policy issues. Nevertheless, the articles on policy issues will give the readers a vivid outline to decode the complex world of policy. For the students, these will also serve as quick references for comprehension.

Hasnat Hye, in the book, gives a significant space for macroeconomic issues in the context of Bangladesh, touching on the gross domestic product (GDP), inflation, budget, banking sector, capital flight, foreign direct investment and some others. Though most of these articles are time-specific, the analyses and arguments are relevant in the long-term. In the article titled 'Moral Hazard in Financial Sector', for example, he argues: "In this age of financialization of economy, banks can make or mar economic growth through wrong decisions or wilful indiscretions. ... Financial crisis may come in different contexts and in different shapes, but the outcome is the same, viz., a serious setback for the economy. NPLs in Bangladesh financial sector is the 'elephant in the room'- an insidious problem brewing for quite some time. It may slide into a tailspin unless tackled appropriately and without loss of time" (P-145). Again, in the article named 'GDP--The Bangladesh Narrative', the author discusses, among others, the flaws in GDP calculation and growth estimate. According to him: "It has been suggested by some quarters that the growth rate projected by BBS is widely inaccurate. Worse still, the projection is suspected to be deliberately inflated....The calculation of growth rate of GDP may be on the higher side if there is wrong assumption about the productivity increase" (P-168-169). Briefly analysing the GDP and growth estimate process, he carefully concludes that there is little ground for an inflated growth rate. At the same time, he also raises the question why the national statistical agency would inflate the growth rate. To him, the answer is: "If it is contended that such an inflated rate is politically motivated, then it has to be pointed out that voters are not swayed by GDP and its growth rate as they are by inflation and unemployment. GDP does not have to be a hand maiden of the power that be for the sake of popularity. It is the outcome of GDP that matters politically, that is how much goods and services are created in the economy and at what prices. GDP growth rate per se is red herring in the context of political economy" (P-170). 

When the writer focuses on microeconomics, it turns into an interesting discussion. The piece titled 'Economics of Slums' is one of those where he precisely and briefly illustrates the economic significance of slums. He argues: "If the costs of slums are not always obvious, their benefits are visible to everyone. Slums keep the service sector of cities humming. From providing domestic help to supplying the hawkers who sell numerous useful items to city dwellers, slums have become indispensable. The urban slums keep the city life ticking twenty four hours a day and almost seven days a week and thirty days of a month. Slums give shelter to people engaged in urban transportation and to low paid employees in offices and factories (think of garment workers). Many medium scale industries outsource their work to slum dwellers reducing their cost of production. There is hardly any slum where many cottage industries don't exist" (P-195). Regarding the article on poverty line measurement, the author solicits the measurement by the developing countries themselves instead of doing it by the World Bank as he finds 'these types of academic exercise' ultimately become 'futile'. Hye argues: "Poverty analysis in the form of updating poverty line and measurement of urban and rural poverty should be left to individual countries which have by now adequate expertise in this area....The poor countries are poor no more in matters of poverty analysis, for which the Bank can take some credit. Why not let them be self-reliant in this respect?"(P 204-205). In another article, he examines the trend of poverty reduction in Bangladesh and says: "The root cause of poverty has to be recognised to make reduction, even eradication [of poverty] possible. Poverty that prevails in Bangladesh is the inevitable outcome of the working of the market economy. The market rewards with profit and higher incomes those who have command over land, capital or possess good academic qualifications and skills. The poor have to be enabled to have access to these assets, including regular income" (P.214). Does it mean the writer seeks a socialistic approach? No. He instead argues: "Poverty being a creation of market economy, there must be solutions that make the poor effective (sustained) participations in the market" (P.215). Thus, the writer is realistic and believes in market-oriented solution. This is like 'decent capitalism' where proponents argued to reform the current structure of capitalism and recreated a different economic system different from the existing financial capitalistic models worldwide.

Hasnat Abdul Hye also employs his analytical skill when he talks on 'system economics', which indicates 'how humankind has arranged for its material provisioning'. However, the author himself does not provide any note on it. Under the theme, he sheds light on the origin of growth, the political economy of development, the future of socialism etc. His observation on French economist Thomas Piketty's work on inequality is quite sharp. Despite praising the voluminous work of Piketty, Capital in the Twenty-First Century, and examining its essence with the works of Karl Marx and Simon Kuznets, Hye concludes: "Piketty's views on convergence and divergence, however, novel, remain in the realm of only possibility, lacking certainty….His only point of originality in the book is pointing out how Kuznets made a great mistake about his theory of diminishing inequality in the course of growth" (P.382).

In the articles on corona economics, the last thematic chapter of the book, Hasnat Hye deals with the impact of the pandemic on the socio-economic lives of people in Bangladesh. He clarifies that there will be little room for recovery without a new set of strategies and restoring the social and economic balance. He does believe: "Let covid-19 be the point of departure from the traditional development strategy of growth and equity that has been followed so far. It is time to rethink the strategy and opt for one that is the need of the time" (P.478). As the country is witnessing the rise of infection and a second wave of the pandemic is almost there, the advice is more relevant.

 

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