Coming out of six per cent GDP trap

The growth of gross domestic product (GDP) has been hovering around six per cent for a long time. Now the critical question that has caught the policymakers' attention is how to overcome the six per cent growth inertia. What kind of instruments and policies do we need to accelerate growth above six per cent hurdle? This growth debate may engage people with different perspectives.
It is commonly held that we need ingenious and robust macroeconomic policies to accelerate and sustain growth above six per cent. This traditional point of view is one of the main obstacles that are diverting our attention from something which we need to address first before formulating and implementing macroeconomic policies. Acceleration of GDP no longer depends on macroeconomic policies alone, especially in our country. Political reform is a precondition for economic reform.
The story of GDP is critically rooted in political reform in the country. Let us focus on some issues that we need to address badly to produce a strong growth momentum.
The relation between the stock of human capital and the growth of GDP is well-known. The effective utilisation of  human capital will determine the long-run growth ceiling of a country. Is our human capital being utilised effectively? Corruption is a critical factor in hindering effective utilisation of human capital.
Economic theories say that price mechanism will ensure the optimum utilisation of resources - resources yielding higher return will command higher market price and will be used optimally. Though there are serious objections about this argument, casting aside all the complications, we may try to determine whether the same is observed in our country.
In our country, a peculiar culture has developed - the victory of mediocrity. Mediocre resources yielding lower return command higher market price in our country, and superior resources yielding higher return command lower market price! Our culture is very much conducive to lemons (lower quality) and very much hostile to productive resources and machines. This is due to corruption in all stages. Corruption makes it possible to replace productive machines by lower quality ones. For this, we are counting huge cost in terms of loss of GDP. Our GDP will easily cross six per cent hurdle if we minimise corruption to ensure that our best human capital is utilised most effectively. For this, we don't need macroeconomic policies but a strong stand against corruption.  
If somebody says that the six per cent trap is due to lack of robust macroeconomic policies, then he or she should take it into consideration that policies alone will not change the reality but the implementation of those policies will do. But political, social and corporate corruption frustrate proper implementation of policies.
We need people with commitment towards honesty and equality of treatment; we need a government that is not backed by goons and does not indulge in sordid practices; we need good teachers who will encourage students to learn; we need honest employers who will employ those who will yield higher return, not lower return; we need strong law and order system devoted to justice and security for all and so on.
Merely advocating for strong macroeconomic policies to accelerate growth is tantamount to diverting our attention from some key issues that are needed to be fixed so that policies can bring the desired result.
Political reform means that reform must start with the elimination of malpractices of government. But this will not be possible if the government uses malpractices as instruments to play the game of retaliation in the political field.
The story of GDP in our country is no longer a domain that solely belongs to economists. All policies and recommendations will ultimately become redundant if we don't raise our voice for a strong political reform that will remove all the inertia and obstacles on the path of accelerating economic growth. Theories are of no use if conditions are not conducive for their application. If such is the case, then mediocrity will dominate over excellence; price mechanism will fail to ensure effective utilisation of best resources; and policies will fail to achieve whatever they are designed for. We will then wonder how to overcome six per cent hurdle.
The writer is Faculty Member, the School of Business, North South University.
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