Abstract
This chapter starts with a brief outline of Bangladesh’s political developments since independence. It is followed by an overview of the economic progress of the country in terms of growth and structural change. The final section of the chapter provides a brief comparison of the economic performances of Bangladesh and Vietnam to put the discussion in an international development perspective.
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Notes
- 1.
In his majestic account of the development of democracy, Stanford political scientist Francis Fukuyama argued that a flourishing liberal democracy needed to be built on three basic pillars: a capable state (meaning an effective and fair administration); rule of law; and government accountability (Fukuyama 2014). In Bangladesh today, as in many other developing countries, the quality of bureaucracy is weak. Although the country inherited a fairly honest and efficient bureaucracy and a neutral judiciary, its quality was gradually compromised with intense politicization by successive governments. In addition, in the postindependence period, both the bureaucracy and the judiciary suffered deterioration in educational quality and professional standards. This deterioration is reflected in the pervasive corruption that exists in much of the society today. With respect to the other dimensions of liberalism—that is, rule of law and government accountability—the country does not have as much of a strong tradition as India does. Both before and after independence, Bangladesh experienced successive regimes of authoritarianism which ruthlessly flouted these basic tenets of liberalism.
- 2.
In his magnum opus, Economy and Society, German sociologist Max Weber defined patrimonialism to describe a ruler who regarded the country as “part of the ruler’s personal household and private property” and ran the administration along “purely personal connections, favors and privileges” (Weber 1978 (original publication, 1922)). Like many other third-world countries, Bangladesh today is a far cry from a liberal democracy—and it increasingly resembles patrimonial regimes of Weber.
- 3.
For example, Brady and Spence (2010), which was part of the World Bank Growth Commission Report, noted in their preface that much of the market-oriented reform in the 1980s was conducted under the guidance of the World Bank and the International Monetary Fund. However, the outsourcing of major economic policies has not changed much ever since.
- 4.
In 1990, Bangladesh introduced a system of neutral caretaker government to ensure free and fair elections without any political influence of the incumbent government. Initially established as a consensus among political parties, this system was formalized, in 1996, through a constitutional amendment. Under the caretaker system, the country was ruled by a nonpolitical government for an interim period of 90 days during the transition from one political government to another.
- 5.
The erosion in the quality of democracy is corroborated by recent assessments from various international think tanks. First, Germany’s Bertlesmann Foundation, in its 2018 “Transformation Index”, ranked 58 countries out of 129 developing countries as autocracies. Bangladesh, along with Lebanon, Mozambique, Nicaragua, and Uganda, was labelled under “new autocracies” (Bertelsmann Stiftung 2018). Second, Freedom House publishes an annual report, Freedom in the World, on the degree of democratic freedoms in nations; it provides an assessment of the current state of civil and political rights on a scale from 1 (most free) to 7 (least free). Freedom House ranked Bangladesh as “partly free”, with a declining trend in aggregate freedom (Freedom House 2018). Third, the Economist’s Economic Intelligence Unit ranks counties on the basis of five categories: electoral process and pluralism, civil liberties, the functioning of government, political participation, and political culture. Based on this ranking, it divides countries into four broad categories: full democracy, flawed democracy, hybrid regime, and authoritarian regime. Bangladesh democracy was rated as a “hybrid regime”, which ranks between a “flawed democracy” and an “authoritarian state”. Its rank slipped 8 notches in 2018 from that in 2017. The position of India also slipped. It fell 10 places in the rankings from 32 to 42 (Economic Intelligence Unit 2018). Finally, press freedom is a sentinel in a democracy as well as an indicator of whether the democracy is healthy. According to the latest ordering of countries in press freedom, Bangladesh ranked 146 out 180 countries considered, which was below all countries in South Asia (Reporters Without Borders 2018).
- 6.
It is well known that democratic institutions must be reinforced by strong informal norms and values. Democracies function at their best when such unwritten rules of the game, known and respected by all players, ensure a minimum code of civility and cooperation.
- 7.
According to a study by the United Nations Development Programme (UNDP) (2015), the costs of such street protests in Bangladesh in the 1990s were staggering, estimated between 3 and 4 percent of GDP. However, the frequency and virulence of these hartals have shown little signs of abating over the years.
- 8.
A case in point is the public university. There is a close link between student politics, rent-seeking, and political violence in public universities. As noted by Suykens and Kutting (2018), there is a fierce competition on campus to prove one’s bona fide as a party activist of the government, which needs the support of students to maintain its hold on power. Student leaders use interparty violence to show their commitment to the party and use intraparty violence to secure control of a faction. Such control—which signals capacities for violence and assertiveness—provides access to various opportunities: construction/procurement contracts within the university; a position in the student organization, which is often the stepping stone to an elected office or to the state bureaucracy—most specifically the police. These positions can be the gateway to middle-class lifestyles in Bangladesh.
- 9.
Politicization refers to substitution of political criteria for merit-based criteria in the selection, retention, promotion, rewards, and disciplining of members of the civil service.
- 10.
Murphy, Shleifer, and Vishny provided a theoretical treatment of the pernicious impact of rent-seeking on resource allocation and distribution. They argued that in countries with permissive legal systems and poor laws that permit easy corruption, high level of rent-seeking could be self-sustaining. This, in turn, could lead to a diversion of talents from productive innovation activities to rent-seeking and a reduction of growth (Murphy et al. 1993). Krueger (1974) wrote a seminal paper on rent-seeking in the context of development, and presented estimates of losses from rent-seeking in Turkey and India.
- 11.
Year 2004 refers to FY2003-2004.
- 12.
As the World Bank’s Commission on Growth and Development (2008) noted, the high-performing East Asian economies—such as Japan, Korea, Hong Kong, Singapore, Taiwan, Malaysia, Thailand, and China—all grew at a rate of 7 percent and above for three decades before reaching their current stage of development.
- 13.
It has been suggested that income is an unsatisfactory measure of individual welfare. Given the fact that income is often subject to transitory fluctuations, it provides a rationale for using observed consumption expenditures rather than income to estimate inequality. According to the permanent income hypothesis, differences in consumption expenditures over time and between agents reflect differences in permanent disposable household income rather than transitory shocks to income. It is typically true that the distribution of consumption expenditures is less unequal than that of current income (Aitkinson and Bourguignon 2001).
- 14.
The World Bank’s Commission on Growth and Development (2008) associated inclusive growth with equity, equality of opportunity, and protection in market and employment transition. This is an elaborate definition that includes both the outcome and the means to achieve it.
- 15.
In his review of the East Asian economic miracle economies, Quibria (2002) argued that macroeconomic stability was a necessary though not sufficient condition for sustained high investment and rapid growth. Until the 1980s, India had the macroeconomic stability of a “graveyard”, yet in the absence of other complementary government policies and appropriate institutions, it could not achieve the kind of growth and poverty reduction that the East Asian miracle economies did.
- 16.
The loan portfolios of even some of the better-managed state-owned banks have also deteriorated rapidly. According to a recent report, the bad loans of Janata Bank reached about 22 percent in June 2018 (The Daily Star 2018).
- 17.
For example, a recent report of the World Bank on its Bangladesh investment confirms this mixed picture. It stated that “IEG (Independent Evaluation Group) has evaluated 16 operations that exited the portfolio during FY11-13; of these, the Padma bridge project was not rated (but with clearly an unsatisfactory experience). For the other 15 operations four were rated below the midpoint—all Moderately Unsatisfactory—and 11 above the midpoint including two Highly Satisfactory, three Satisfactory, and six Moderately Satisfactory. This means that 73.3 percent of the evaluated portfolio by numbers were Moderately Satisfactory and above—roughly the same as for the SAR region and the Bank’s world-wide portfolio” (World Bank 2016).
- 18.
The most notable among these studies include Clark (1940), Kuznets (1966), and Chenery and Syrquin (1975). They attempted to establish some stylized facts of development—that is, the patterns of development followed by most countries. A recent work of this genre, which includes a set of studies, is McMillan et al. (2017).
- 19.
Bangladesh, which largely follows the international standard industrial classification (ISIC), divides its economic activities into three major categories: Agriculture consists of crops, livestock, forestry, and fishing; industry includes manufacturing, mining, utilities, construction, electricity, water, and gas; services correspond to wholesale and retail trade (including hotels and restaurants), transport, government, financial, and professional; and personal services such as education, health care, and real estate services.
- 20.
Zhang et al. (2014) further argued that the Bangladesh economy had already reached the Lewis turning point, named after Nobel Prize-winner Sir Arthur Lewis. This refers to a development model advanced by Arthur Lewis, who highlighted the dual nature of a developing economy. The first component of the duality relates to its underdeveloped agricultural sector, which engages a major part of the labor force at subsistence wage; the second component of the duality relates to the modern market-oriented sector, which produces industrial goods at competitive wage. The growth of the economy is led by the modern sector with the support of the surplus supplies of labor drawn from agriculture. Finally, a point is reached when no more labor can be drawn from the agricultural sector at subsistence wage—and wages begin to rise. This is known as the Lewis turning point (Lewis 1954).
- 21.
See Sattar and Ahmed (2012) for the challenges Bangladesh faces in diversifying its export basket, which is highly concentrated.
- 22.
According to the Global Climate Risk index 2018, the list of top ten countries that were most affected by the impacts of weather-related loss events between 1997 and 2017 included both Bangladesh (ranked 6th) and Vietnam (ranked 8th) (German Watch 2018).
- 23.
The narrative on reform in Vietnam draws heavily from Pavcnik and McCaig (2017).
- 24.
Also known as COMECON, it was an economic organization that existed from 1949 to 1991 under the leadership of the Soviet Union. It comprised the countries of the Eastern Bloc along with a number of communist states elsewhere in the world. The primary impetus behind the establishment of COMECON was to foster greater economic cooperation between Russia and the weaker states of Central Europe, which were cut off from their traditional markets and suppliers in the rest of Europe.
- 25.
The Herfindahl–Hirschman index is calculated by taking the square of export shares of all export categories in the market. The value of the index lies between 0 and 1.
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Quibria, M.G. (2019). Political Developments and Economic Progress. In: Bangladesh's Road to Long-term Economic Prosperity. Palgrave Pivot, Cham. https://doi.org/10.1007/978-3-030-11587-6_2
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