The year 2024 saw three Nobel laureates--Daron Acemoglu, Simon Johnson and James Robinson--receiving the Nobel Prize in Economic Sciences for their valuable research regarding the role of institutions in shaping economic prosperity. This seminal work underlined how political and economic institutions not only substantially influence inequality in the creation of wealth in nations but focused on inclusive institutions that give birth to prosperity and extractive institutions that result in stagnation and oppression. The relevance of these insights for Bangladesh, a country with a complex political and economic history in her development process, cannot be overemphasised. Here we analyse what the core ideas are in their research and how these can be applied to Bangladesh's institutional reform and development in a sustainable manner.
IMPACT OF INSTITUTIONS ON PROSPERITY: A crucial ingredient in the work of Acemoglu, Johnson, and Robinson is this: prosperity of an economy depends on the quality of its institutions--the political, legal, and economic structures of the society. Evidence indeed shows that inclusive institutions provide opportunities for equal participation, protection of property rights, and proper implementation of the rule of law as a means of achieving growth. Extractive institutions, however, achieve power and wealth centralised in a few elite hands at the expense of growth and equality.
Among the countries of the South Asian region, Bangladesh, despite impressive economic development in the past few decades, has massive challenges in various institutional frameworks. The country is still plagued by systemic corruption, poor governance, and lack of transparency, which, in themselves, stand as a significant problem to all prospects of long-term prosperity. Political and administrative systems in Bangladesh are too often oriented to favour the elite while leaving the larger section of the population under political and civil disfranchisement. Here, the lesson from the Nobel laureates' research is particularly apt: for any notions of sustained economic growth in Bangladesh, the country needs to transition toward more inclusive institutions that would empower all citizens, ensuring that opportunity for economic advancement remains fairly available.
COLONIAL LEGACIES AND EXTRACTIVE INSTITUTIONS: A vital aspect of Acemoglu and Robinson's work is the evaluation of colonial legacies and how they configured the institutions of nations. They show that during colonisation, European powers established extractive institutions in areas with rich resources but with little intention of building long-term infrastructure for inclusive governance. On the other hand, more inclusive institutions were given to those areas that European settlers viewed as a viable option for long-term settlement.
The case of Bangladesh is little different from most former colonies, where the institutional structures still bear the hallmarks of colonial extraction and control. Governance systems in the country, though in a phase of evolution, still carry the imprint of policies formulated towards centralising power. This extractive approach that political elites continue their hold on, at the expense of the larger population, has hindered inclusive growth in Bangladesh.
INSTITUTIONAL REFORMS: A WAY OUT FOR BANGLADESH: In fact, the work by these Nobel laureates provides a roadmap on the ways Bangladesh can move forward, investing in institutional reform. Further, if Bangladesh is to realise all the potentials for economic takeoff, there is also the need to accord due priority to making institutions more inclusive in important sectors such as education, health, and the judiciary. This calls for strengthening the rule of law, reducing corruption, and inducing more participation in the political process.
Perhaps the most significant is judicial reform. In Bangladesh, the judiciary today is plagued by inefficiency, delays, and accusations of graft. Ensuring transparency and efficiency within the judiciary will ensure that business and individuals are confident to invest in this country's economy-- a feeling that the contract will be respected and any dispute in court will be dealt with on a just basis. Similarly, the reform of public institutions to ensure that appointments and promotions are based on merit will contribute towards a competent civil service able to act as catalysts to the national development agenda.
POLITICAL INSTABILITY AND THE EXTRACTIVE INSTITUTION: The path-breaking work of Acemoglu, Johnson, and Robinson points to the underlying dangers of extractive institutions in leading to political instability. Available literature would suggest that when power and resources are in the hands of only a few, this not only serves a small elite group but also perpetuates structural inequalities. The political instability in Bangladesh has come in waves of unrest and controversial elections, with elements of authoritarian overreach. This speaks of symptoms of extractive institutions that fail to distribute power equitably or uphold transparency and accountability. This is self-reinforcing: where political and economic power is concentrated among the few, corruption, disfranchisement, and inequality ensue. Reform of the institutional machinery is badly needed to break this self-vicious cycle. One positive step under the Interim Government of Nobel Laureate Dr. Muhammad Yunus is the constitution of six commissions that are to reform the constitution, the electoral system, the judiciary, police, Anti-Corruption Commission, and public administration. More Commissions also need to be set up in areas of education and health-- highly critical sectors for long-term national development and stability.
The path charted by the Nobel laureates underlines that strategies and mechanisms for inclusive institutions have to be tangible and transparent. These institutions visibly work toward ensuring the fair distribution of power and resources, which is basic to fostering long-term political and economic stability.
LESSONS FOR BANGLADESH'S FUTURE: One important insight of the Nobel laureates is that a change in institutions often occurs when a ruling elite fears revolution. When the elites feel they no longer have the option to placate a deprived population with promises, they may be compelled toward democratisation to ensure social stability. This insight has now become hugely applicable to Bangladesh in the course of history, as mass protests and political uprisings challenged the status quo.
There have been strong grassroots movements in Bangladesh over the last couple of years for greater transparency, rule of law, and political accountability. These popular demands for reform partly express the frustration of people who had grown accustomed to and intolerant of the insensitivity of the political leadership over the years. If these demands are not urgently addressed, social unrest may spiral out of control, with the concomitant result of a serious loss of public confidence. Institutional reforms must be taken up with a great deal of urgency by the leadership of Bangladesh as changes need to be proactive, not reactive, if democracy is to evolve and stabilise.
The Commissions set up by the interim government are an opportunity for structural transformation. The future of Bangladesh, as a successful, accountable democracy upholding the spirit of justice and inclusiveness, would be shaped based on the suggested reforms by the Commissions.
ECONOMIC REFORMS FOR SUSTAINABLE GROWTH: Work by Acemoglu et al. has, therefore, underlined an imperative for economic policies that are inclusive, thus creating prosperity for all. Given this premise of their work, Bangladesh's current findings as to its adoption would mean a re-evaluation of the economy in terms of considerations for fairness, inclusiveness, and sustainability in the long run. Economic reform in that way would include support for SMEs, expansion of education, and technological innovation-- all important factors which drive broad-based growth.
Entrepreneurship and innovation can help Bangladesh build a more dynamic economy. If entrepreneurship is encouraged through incentives, access to reasonably priced capital, and training in entrepreneurship, then barriers will be reduced and more of the population will be able to be active contributors to and beneficiaries of growth. In addition, investments in education and health will equip the labour force with the skills and health to be competitive in a changing global economy.
DR. YUNUS'S "THREE ZEROS" MODEL: The economic reforms put forward by Acemoglu, Johnson, and Robinson very much resonate with the "Three Zeros" model advanced by Dr. Muhammad Yunus: zero poverty, zero unemployment, and zero net carbon emissions. Bangladesh may build on the success of the Grameen Bank model by expanding other inclusive financial services to empower marginal populations with services such as microloans and savings programmes. Especially for rural areas, it is relatively easy to integrate digital banking and mobile payments to expand financial inclusion. What could augment this move toward poverty reduction, while at the same time stimulating innovation, is a harmonised approach where government, NGOs, and private sectors facilitate the establishment of social enterprises to address job generation and social goals concurrently.
SOCIAL ENTREPRENEURSHIP TO ADDRESS UNEMPLOYMENT: Zero unemployment will be achieved only by encouraging a culture of social entrepreneurship. The philosophy of Dr. Yunus to put the interest of the society over that of profit can ensure job creation. Bangladesh can achieve sustainable employment by supporting SMEs, particularly in high-growth sectors like technology, agriculture, and renewable energy. Further, collaborations with international organisations for skill development will create access to newer markets and thereby enhance economic vibrancy.
TACKLING CLIMATE CHANGE THROUGH ZERO NET CARBON EMISSION: Climate change is one of the big threats to Bangladesh. Substantial investment in renewable energy generation, such as solar and wind, along with energy efficiency, should be encouraged. Public-private partnerships with international cooperation will be important in mobilising resources.
While developing these strategic reforms, Bangladesh can become a global example of how economic development and job creation can go together toward a sustainable development of improvement with environmental protection.
A CALL FOR INSTITUTIONAL REFORM: Insightful speeches from Nobel laureates Acemoglu, Johnson, and Robinson on the institutional aspect add extra impetus to the urgency and necessity of such reforms in Bangladesh. Current efforts, led by Dr. Yunus with his interim government, have created a historic opportunity to address systemic corruption, political instability, and economic inequality.
While strengthening democratic governance and promoting social entrepreneurship and tackling climate challenge through the "Three Zeros" framework, Bangladesh can demonstrate what inclusive growth and responsible governance can do to transform society.
Dr. Serajul I. Bhuiyan is a professor and former Chair of the Department of Journalism and Mass Communications at Savannah State University, Savannah, Georgia, USA.
© 2024 - All Rights with The Financial Express
