Violence takes its toll on the service sector

The Nobel laureate economist Arthur Lewis was the first to point out that in the early stages of development, the agriculture sector employs more labour than it requires. Many of them actually do not add anything to the total production of this sector. Yet they are employed there as they don't have any other thing to do. This provides an opportunity to employ these surplus labours elsewhere in the economy without reducing total agricultural production.
According to Lewis, since the surplus labour can be withdrawn from the agricultural sector without any loss of output, the opportunity cost of such relocation from society's point of view is zero. However, the private cost of such relocation is not zero. Nobody wants to be relocated, neither professionally nor geographically, for nothing. How much one would need to leave the agricultural sector to take a job, say in manufacturing sector, depends on the institutional factors. Lewis pointed out that the surplus labour can be employed in the manufacturing sector by providing them with the institutionally determined wage.
But with employment of more and more labours in the manufacturing sector withdrawing them from the agricultural sector, total surplus labour in the latter will be exhausted. The opportunity cost of withdrawal of any labour from the agricultural sector will not be zero anymore. This is the juncture at which any relocation of labour from the agricultural sector would require increase of their wage. The pace of this increase would depend on the pace of growth of manufacturing employment. Depending on this pace, the wage in the agricultural sector will become equal to the wage in the manufacturing sector at one stage. The advent of the equality between agricultural and manufacturing sectors is popularly known as 'Lewsian turning point' in development economics.
Has Bangladesh economy arrived at or already crossed over the Lewsian turning point? The available information indicates that the gap between manufacturing and agricultural wage has been narrowing down in Bangladesh if not fully disappeared yet. According the available nationally representative wage survey, which was conducted during 2009-10 by the Bangladesh Bureau of Statistics (BBS), there is no significant difference between agricultural and manufacturing wages (table 1).
The Lewsian turning point refers to a certain level of maturity of economic development of a country. Bangladesh economy and society have changed notably in the recent years. Monga is almost a forgotten word. Incidence of hunger has lessened to a large extent compared to 1970s and 80s. A consumption-oriented generation has emerged in the urban area, who is probably the second generation migrants, leading to expansion of domestic market and creating scope for business. Agricultural wage proximate the industrial wage, which along with the above phenomenon implies the advent of Lewisan turning point in Bangladesh economy.
Many economists held a particular view for a long time, which is known as 'iron law of development'. This says industrialisation is the only route to rapid development and the bottom billion would have to long for their turn as it takes for a country to experience rapid industrialisation.  In case of Bangladesh, industrialisation has increased but not so significantly. Its contribution to total GDP (gross domestic product) is still less than 30 per cent. It is very puzzling and can be little difficult for many to fathom how Bangladesh economy arrived or even crossed over Lewsian turning point without any ostensible significant industrialisation.
A research conducted by the World Bank couple of years ago, which was published as a book titled 'The Service Revolution in South Asia' (EjazGhani, 2010) showed that development did not have to follow the iron law. An economy can arrived at the Lewsian turning point through an alternative route, which is the service sector. According to this research, Bangladesh as well as other South Asian countries is following it. While manufacturing sector will continue to remain important, future growth trajectory of Bangladesh will significantly depend on the service sector.
The service sector accounts for about 53 per cent of the total GDP in Bangladesh. The preliminary findings of economic census 2013, conducted by the Bangladesh Bureau of Statistics, show that the service sector is growing faster than the manufacturing sector. The observed economic resilience of Bangladesh economy can be attributed to the vibrant service sector of the country.
The ongoing political crisis and escalated violence seriously affect the service sector, and income groups like the transport and service workers, salespersons, and petty traders are affected the most. In many cases, service sector is dominated by informality. Most of the people working in this sector are economically challenged and belong to the bottom echelon of income distribution. In the absence of any significant industrialisation, it is the service sector that has so far provided the development impetus in Bangladesh and enabled the economy to accomplish a certain level of developmental maturity. This sector has already been shattered by the ongoing violence. If the current level of violence continues, the economy will face irrecoverable damage.
Last year around this time, I had a conversation with the vendor in my neighbourhood who sells 'shiterpitha' (winter snacks) while doing some business with him. It was dusk and he was taking time to serve my order. The person was little exhausted but seemed very happy. It emerged from that conversation that on average he sold about 300 pithas with a profit margin of Tk. 2.0 per piece, meaning his daily profit was TK. 600. I went to him couple of days ago and tried to have a conversation. He seemed very dejected and not really interested in any conversation. Due to my insistence, he shared his frustration and anger with me at one stage. Due to the current volatile situation, his sale this year has declined significantly. His income has reduced to half compared to last year. The added agony for him is the fear of being physically injured and/or his small shop being burnt any time. These sufferings of this vendor say it clear and loud how the service sector is being affected by the ongoing violence, and how it will take its toll on our whole economy.  
Abul Basher, PhD is Researcher at Bangladesh Institute of Development Studies (BIDS), former economist, World Bank, and former faculty, Willamette University, USA. [email protected]