Resilience trap: Bangladesh equilibria and sub-systems

Bangladesh's macroeconomic indicators are not only promising but also relatively stable compared to several lower-middle-income countries. International organisations have forecasted the probability of Bangladesh continuing to be one of the fastest growing economies for decades. The economic progress is not the only criteria that a country should be measured with - a country is a political entity as well. The political development that translates to improved civil rights and living standard are fundamental criteria as well. We should try to understand the existing system, a system that supports an economic development paradigm for specific groups. The trickled-down economic benefits available for the masses do not reflect the boasted economic indicators or the future prospects.

It is an irony that everyone in Bangladesh is preoccupied with politics but not for the sake of politics. What is in practice is not politics - it is a perpetual system that is being nurtured by a collective rent-seeking mindset. Hence the economic development and respective indicators are positive catalyst for relevant actors that can benefit from such a system. Politics is about improving people's lives and economic development is a mean to ensure that function. Bangladesh's economic development does not translate to political development. Adam Smith in his book on Wealth of Nation termed the concept of modern economy political economy, not just economy.

Bangladesh is not the only country with a large population, high economic growth, contentious political environment and a hyper-capitalist business sector. China, Vietnam, Indonesia, The Philippines share similar characteristics as well. This observation acknowledges the uniqueness of each country's political culture, socio-economic norms, geographical conditions and demographic dynamics. Labour issues, environmental concerns, human rights violation and corruption are factors to be managed in these countries. These issues existed and still exist and these countries in past managed such issues and still are managing contentious issues while maintaining their brand as functional economic hubs.

Empirical data and historical observations show that countries that function as high growth economic hubs, the initial economic benefit is enjoyed by domestic first movers and foreign investors. Eventually the system evolves to find a resolution that balances the domestic and geo-political interests, then the economic devolution gradually takes shape. If the system either delays too much or fails to find a manageable resolution both politically and economically, then the country cannot sustain the accelerated growth rate.

Civil society, human rights activists and opposition political parties are critical of the incumbent government for prioritising development over democracy. They also state that Bangladesh's economic growth may continue for several more years with the current level of governance, but without a good governance system the projected accelerated economic growth would not be achievable. Policy experts also state that the current system of governance will become a constraint for development as the country reaches its middle income status.

The present government does seem to prioritise development over democracy by citing examples of Singapore, Malaysia, South Korea etc. An objective analysis of Bangladesh's political history will show that almost all the governments in last 46 years prioritised economic development over political development. Awami League, BNP, Jatiya Party all focused on economic progress without developing a complementary modern governance system. If we analyse how their respective administrations and their governance models fared with development programmes, then the empirical result would be a false plus. Given the pretext that economic condition and social development indicators of Bangladesh were at such a low stage than it did not require proper governance at the initial growth stage. That underlying false impression perpetuates the mindset that "Bangladesh can continue its growth momentum as is without proper governance".

The critics do have reasonable arguments to state that Bangladesh's development might slowdown, however a system approach analysis draws a different conclusion - a real-politik conclusion. Bangladesh's economic growth will continue while its governance will change in a self-sustaining way to support the system.

The Status Quo: The system that has gradually increased inequality is the system that the masses depend on. Bangladesh has become a vibrant economic hub, largely on the premise of a low-wage culture widening the inequality. Destitute people prioritise the availability of their next meal and that percentage of extreme poverty has decreased in Bangladesh. However, we have to acknowledge the cruel fact that even white-collar workers in Bangladesh are trapped in the month-to-month sustainability trap. The middle-income group in our society are passively conforming to the status-quo as they are too busy and can't afford to challenge the system.

Before 1971 there was a saying that 22 family and their businesses controlled the economy of East and West Pakistan. That system does not exist but unfortunately the new system is a combination of several sub-systems and is more ingrained and resilient. The system in Bangladesh is too big and interconnected, hence it is difficult to initiate any reform to the status-quo. This is similar to the situation "too big to fail" with the big banks in the United States after the 2008 Financial Crisis. As they were declared too big and deeply interconnected, their collapse would collapse the overall economy. This scenario is true not only for Bangladesh but also for several other countries with similar self-sustaining systems and growing inequality. Latest Household Income and Expenditure Survey (HIES) by Bangladesh Bureau of Statistics (BBS) supports this scenario. The survey shows that the poorest five per cent held 0.78 per cent of the national income in their possession back in 2010, and in 2016 it was 0.23 per cent. In contrast, the richest five per cent, who held 24.61 per cent of the national income in 2010, in six years increased that to 27.89 per cent.

Confusion and systems approach: Bangladesh posted almost 5.0 per cent-6.0 per cent economic growth in midst of political unrest, weak governance, deficient planning, environmental disasters and rampant corruption. Experts, policy-makers, politicians and development workers have termed this the Bangladesh miracle. An objective analysis would reveal that it is not a miracle, rather the result of the growing domestic consumer market and general economic activity of 163 million people. Bangladesh is going through a phase of jobless growth. The elasticity of employment with the GDP and the elasticity of investment with employment have both gradually decreased over a decade. Even with concrete data our perception seems to be somewhat overly optimistic.

Research and case studies have shown that low income countries aggressively pursuing developmental goals have fallen into a "systemic trap" that sometimes can be mistaken as "Resilience". The system approach analysis explains this scenario as multiple sub-systems that are self-sustaining and they reciprocate hence creating a system of equilibria.

On broad strokes, there are four sub-systems with exogenous and endogenous dynamics that create the system of equilibria for Bangladesh.

i. Political party-based economic sub-system: The political parties in Bangladesh historically empowered and continue to empower their supporters through government contracts, business opportunities, appointments and direct monetary assistance. For example, at the rural level public-service activity linked with local tender, construction permits, social welfare and its service delivery are all delegated through this sub-system. The same economic and power distribution mechanism is maintained throughout the country. This sub-system reciprocates with the other sub-system on the condition of higher political approval.

ii. Syndicated business sub-system: The private business entities (small, medium and large) look forward to favourable outcome through reciprocal arrangements with respective administrations. The second and third generations of business leadership in Bangladesh are bringing experience and education from the West and adapting to the system in place. Big business conglomerates maintain the sectoral syndicated support system to maximise their profit. Moreover, specific business groups maintain strategic relationship with foreign investors (countries) to maintain their long-term business interests. Politically-linked business entities face regulatory issues and unwarranted difficulties with change of administration. In recent years the business entities have adapted to integrate in this sub-system model and also support the other sub-systems in the process.

iii. Government and bureaucratic sub-system: The administration, government employee pool, semi-government agencies and government contractors all actively or passively adapted to the practice of supporting the political system. The weak governance system provides both the bureaucracy and the policy-makers room to be flexible with blame-game. Both bureaucracy and policy-makers endorse short-term and long-term goals for their sub-system's benefit and sustainability.

iv. Foreign investors and countries: Great powers will do whatever it takes to maintain their interests. Economic and political interests are prioritised and specific investors and regional countries use their influence in our decision-making process. This sub-system, although exogenous, has gradually developed significant endogenous resources and economic leverages within Bangladesh.

We have to understand the real-politik scenario and cannot let our emotion and ethics cloud our analysis. These sub-systems consider the 163 million people as a 163-million economic entity. These sub-systems focus on maintaining the status-quo and their self-serving interests. The second and third generation leadership of these sub-systems recognises the infrastructural weaknesses, lack of skilled human resources and deficiency in planning. They are planning monitoring and evaluation programmes, conducting capacity development trainings and bringing in external experts to remove the systemic weaknesses. The result of such development within each sub-system is the gradual build-up of resilience and subsequently some benefit will trickle down to the masses.

The Innovation: The folk theory of democracy endorses the collective judgement of informed and engaged citizens. However, reality is quite different, the voting population are like worker bees. They are informed and engaged but too busy with their day-to-day lives coping with illness, traffic, unemployment, relationship issues etc. to be politically effective. We have to be innovative to cope with this unconditional convergence and multiple self-sustaining equilibria. The system and the people are in an imbalanced reciprocal arrangement. The mass population cannot afford to challenge the status-quo and the system in place; as any disruption to the system inherently effects the livelihood of the masses. Considering the above circumstances, we should think strategically to obtain result through this system.

We should emphasise a resilience policy on agriculture and farming sector. Information Technology (IT), Ready Made Garments (RMG) and remittance sources receive extensive focus in terms of planning, risk management, innovation etc. The same amount of attention and priority should be given to agriculture and farming sector as they contribute significantly to Bangladesh's national income. Agricultural innovation and backward linkages for farming economy reduce poverty and address the rural unemployment issue. Almost 87 per cent of rural population are somewhat linked to farming. Agricultural assistance and development programmes for farms gradually became a positive catalyst for non-farm economy. A World Bank study shows that for Bangladesh farm income and non-farm income are positively correlated. Additionally we must explore the ecological impact on the long-term sustainability of the system and the country. Natural disasters like flood and drought significantly affect a country like Bangladesh at micro and macro levels.

A recent study by the Centre for Policy Dialogue (CPD) estimated that the loss from recent floods stood at Tk 150 billion. Due to loss of crops from floods the rice procurement could not meet its expected goal. To maintain food security and price stability the country has to pay Tk 55 billion on rice import this year. It was previously Tk 22 billion. This additional import will increase the budget deficit as the budget is already stretched due to loss of Tk 20 billion from the postponement of the VAT act from this year's reviewed budget. The overall budget deficit this year is already projected at Tk 1.12 trillion and with the late plantation of Aman crop there is a probability of more expense to be accrued from rice imports shrinking the fiscal space more. This correlation of ecological strain and economic stress should be explored for Bangladesh's resilience planning.

Safa Motesharreia systems scientist with some of her colleagues have used computer models to get insights into the mechanism linked to social and global sustainability and collapse. They found two mechanisms of significance: economic stratification and ecological strain. The economic stratification of Bangladesh has been emphasised considerably in our political narrative. However, the ecological strain has not been emphasised. Bangladesh can relate to the above research as the 2017 flood ended up effecting our fiscal stability and might decrease our GDP growth rate. There is a real-politik need to prioritise assessing the ecological strain and its remedies.

For Bangladesh to achieve the middle income status the World Bank research suggests that poverty reduction rate, shared prosperity, sustainable rural growth and resilience in food security are important factors. These are facts to plan the long-term resilience of the country, even if status-quo is difficult to change. Without gradual build-up of resilience, the system might collapse. Hence let us work through the system to steadily move to the middle-income status.

The writer is an Archer Fellow, Lee Kuan Yew Scholar.

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