Growing our way out of trouble

Economic growth is the path to democracy, which will in turn generate more growth, and all efforts should be concentrated to this end, argues Nazrul Islam

Bangladesh is going through difficult times. The experiment with democracy that the country started anew in 1991 ran aground by the end of 2006. To avoid a deadly confrontation between the AL and BNP-led political forces, the military intervened and put in place an interim government "to put the derailed country back on track," as the army chief has put it several times to describe the situation and explain the mission.

General problem of democracy
The difficulty that Bangladesh is having in practicing democracy is not unique, and is rather common in developing countries. The root of the problem lies in the basic mismatch between the economic base and the political superstructure of capitalism in these countries. What is generally known as "democracy" is actually "bourgeois democracy" that corresponds to a developed capitalist economic base. There are many concrete variations of this democracy as practiced even in developed capitalist countries.

However, it has some common features that include: (i) multiple political parties representing different class and interest groups, (ii) freedom of speech and assembly, (iii) regular change of government through elections, with one person having one vote (adult franchise or political egalitarianism), and (iv) existence of a free press and media to facilitate all of the above. There are, however, limitations to each of these, though that is not the main issue here.

Democracy with the above features did not come into existence suddenly. Instead it developed over several centuries, in tandem with the development of capitalist economy itself, beginning in England, going on to western Europe, and then the US. Even in England, women attained franchise only in 1918, and in the US the women had to struggle to get the same till the 19th amendment to the US constitution was passed in 1920. This simple fact illustrates the long and arduous process through which democracy, as we know it now, came into being. In view of the above, it is not surprising that developing countries, with their relatively undeveloped economies, are struggling with democracy.

Does this mean that developing countries should give up on democracy?

Many of them have indeed achieved economic growth under authoritarian regimes. South Korea, Taiwan, Singapore, and Chile are examples. In more recent years, China and Vietnam are experiencing brisk economic growth under one-party rule. These examples may encourage some to take the authoritarian route to economic growth. Unfortunately, more numerous are examples of authoritarian regimes ending up in economic disaster. Many economists and political scientists have offered theoretical models explaining the predatory behaviour of authoritarian regimes.

While the link between democracy and economic growth is tenuous, the link between economic growth and democracy is quite robust. The experience of the very countries that achieved economic growth under authoritarian rule illustrates this causality.

Authoritarian regimes in South Korea, Taiwan, and Chile have now yielded to democracy. The same has happened in Indonesia and Thailand (with some recent reversal). Democracy is expanding in Singapore, too. As economic growth led to a more developed capitalist economic base, these countries graduated to democracy. In more prosaic terms, when the people are well fed and well read, it is difficult to preside over their lives in undemocratic fashion. Thus, only through economic growth can a developing country overcome the basic mismatch between the economic base and democracy.

Problem of democracy in Bangladesh
In Bangladesh, too, the sure recipe for gaining democracy is economic growth. The question is, how can Bangladesh attain growth and reach the economic stage that makes democracy inevitable? Unfortunately, international experience offers no standard formula. What is observed instead is sometimes called path dependence, implying that individual countries follow trajectories determined by their particular histories and contexts.

From this point of view, it seems clear that the authoritarian route to economic growth is not suitable for Bangladesh, because the movement for independent Bangladesh was also a movement for democracy. In order to establish democracy, the people of Bangladesh overthrew the Ayub regime through a mass upsurge, and Bangladesh's War of Liberation started because the Pakistan regime refused to accept the democratic verdict emerging from the 1970 election.

In the post-independence period, too, Bangladesh people did not accept quasi-military rule for long, and overthrew the Ershad regime through another mass upsurge in 1990. Given this history, the route to economic growth in Bangladesh has to be, clearly, sought through democracy. That is the implication of path-dependence for Bangladesh. However, this also implies that Bangladesh is faced with a "chicken or egg" problem. While economic growth is needed for democracy, democracy itself is needed for economic growth. How can Bangladesh break out of this apparently closed circle?

Actually Bangladesh emerged with great potential to break the circle and follow the democratic route to economic growth. This potential lay not only in the struggle for democracy that led to the emergence of Bangladesh, it also lay in the fact that the country emerged with a towering and undisputed leader like Sheikh Mujibur Rahman. However, even Bangabandhu had to struggle with the tricky relationship between democracy and economic growth. He devoted an inordinate amount of energy to the observance of such parliamentary niceties, as holding another election in 1973 when, in the war-ravaged country, so many other problems demanded his attention. Yet, just a year later, he felt compelled by the evolving situation to replace the multi-party democracy with a one-party rule, which he described as the "democracy of the exploited."

Unfortunately, right-wing conspirators brought catastrophe to the nation through the August 1975 coup, killing Bangabandhu and almost his entire family, and unfolding a process that decapitated almost the entire civilian leadership of Bangladesh's Liberation War, including its main organiser, Tajuddin Ahmed, the first prime minister of independent Bangladesh.

Ironically, the August 1975 coup also initiated a tragic process that led to the decapitation of almost the entire Liberation War leadership of the Bangladesh army. With both the civilian and military leadership of Bangladesh independence decapitated, it is no wonder that the country eventually got derailed. There is, therefore, a clear historical irony in the fact that more than three decades after the August 1975 coup, the Bangladesh army has now come forward "to put the derailed country back on track."

The events of the last three months have, however, shown that the task of putting the country back on track is not easy. Carrying off the suspects of blatant corruption to jail was the easy part; convicting them is harder. The apparently bungled attempt to implement the so-called "minus-two" formula seems to have back-fired. Prof. Yunus has retreated from politics even before seriously treading water, closing one political option. The dual power centre of the current regime makes it harder to understand what the latest thinking is. Meanwhile, prices are increasing and, according to various reports, the level of economic activity has slowed down. It seems that some in the government, and its backers, are disappointed that their desire to provide a permanent and perfect solution to the problem of democracy in Bangladesh is likely to remain elusive even when the current regime ends.

In view of the basic mismatch between economy and democracy in developing countries, such disappointment may not be warranted. Examples of perfect democracy in the developing world are very rare. Bangladesh's neighbour India is the most famous example. The glorious tradition of India's independence movement, the survival of its leadership (except Mahatma Gandhi), and the depth of human capital, etc have enabled India to follow the democratic path, though many argue that democracy has cost India in terms of economic growth. However, democracy has helped India to hold together, and is not preventing India from enjoying growth acceleration when necessary global opportunities have presented themselves at its doorsteps. Nevertheless, even the Indian democracy remains far from perfect.

Therefore, a permanent and perfect solution to Bangladesh's problem with democracy is not to be. What may be aspired for is a temporary fix, so that the country can again get going with economic growth, which alone can ultimately provide the permanent solution to the problem.

Temporary fix
Despite the political difficulties, Bangladesh achieved some economic progress over the last decades. Much of it was conduced by global factors. Thus, the Multi-Fiber Arrangement (MFA) conduced to the development of the garments industry in Bangladesh. Similarly, global demand for cheap labour has enabled Bangladesh to benefit from the increasing remittance flow. These two factors alone have led to a multiplier process, as a result of which Bangladesh experienced macro-economic stability, modest growth, and some reduction in poverty.

Bangladesh has had achievements of internal origin too, in the form of innovation and expansion of micro-credit (a singular contribution by Prof. Yunus), and expansion of agricultural output. Through foreign loans and domestic efforts, Bangladesh has also achieved some reduction in fertility and expansion of female schooling. According to many observers, a combination of all these positive changes has made Bangladesh ready for take-off.

It is unfortunate that the prospective take-off got choked by corruption, particularly during the last few years, when neophyte political masters seemed willing to kill the goose in order to get the golden eggs sooner. "Petty" corruption is tolerated in many societies, particularly where the public salary structure is out of line with the cost of living. In such situations, (petty) corruption is often describes as the "grease" that keeps the wheels moving. However, even in such situations, corruption is an inefficient way of keeping the wheels moving, apart from its corrosive influence on the society. A much better option is to align the salary structure with the cost of living.

Corruption is particularly unacceptable when it becomes "high" corruption, harming the country's economic growth. This seems to have been happening in the last few years, when corruption strangled the power sector ensnarling the economy in a serious bottleneck. It is already bad when the elite misappropriates public money, but the Rubicon is crossed when it starts sending the plundered money abroad, indicating that it no longer associates its own future with the future of the country it is looting. When the political masters reach this level of depravity, the country is in real trouble. No wonder the public responded positively to the anti-corruption campaign of the current government.

However, it needs to be remembered that the main effectiveness of corruption prosecution has to be seen in its deterrent effect. For this, stiff punishment is necessary for high corruption that involves compromising national interests (as in the case of signing bad agreements with foreign companies) and inhibiting the country's economic growth. In China, for example, persons convicted of high corruption are executed. Such prosecutions are rare, but they have a strong deterrent effect.

Restoration of the integrity of public institutions is also necessary. In their desire to stay in power, protagonists of the last regime went to the extreme in debasing the public institutions, beginning with the presidency down to the local school boards. People have, therefore, welcomed efforts at restoration of integrity of the public bodies and institutions.

Economic growth in Bangladesh was also getting choked by environmental deterioration. How can economic activities thrive when it becomes difficult to move around the city, breathe clean air, find drinkable water, and avoid piles of obnoxious garbage? Economic growth cannot be sustained in unlivable cities and contaminated countryside. An environmental clean up is necessary to keep growth going.

Another way that growth can get choked is through excessive inequality. Some manifestation of this danger can already be seen in the restive labour situation in the garments sector. The powers that be seem to have a mistaken understanding of the problem. Pointing fingers at imaginary conspirators will not help much. Keeping the workers fed, clothed, and housed will do much better.

Law and order measures do not work on empty stomachs, as the recent Khalishpur incidents showed. The owners have to offer a living wage to the workers for growth of the sector to continue. Some observers (e.g. Prof. Anisur Rahman) put forward suggestions of a move toward economic democracy through asset redistribution. Unfortunately, such moves seem to be beyond the capacity of the current government. However, the anti-corruption campaign, restoration of some integrity of public institutions, some environmental clean up, some reform of the political parties, and holding of an acceptable election (with a credible voter list, excluding criminals and black money, and avoiding massive vote-rigging) can give a shot in the arm that democracy needs to go for another round in Bangladesh.

The fix may be temporary, and, down the road, democracy in Bangladesh can run aground again, requiring another lift (either in the form of a mass upsurge as in 1990, army intervention as in 2007, or in some other form). To stabilise democracy the country may also consider, in future, reducing government tenure (to say four years) and switching to proportional representation, instead of the current winner-take-all formula. (It is also possible to consider a compromise between territorial and proportional representation, as in Japan.)

But the temporariness of the fix may not be a reason for despair, because a permanent fix, short of the necessary economic leap, does not exist. More intriguingly, if Bangladesh is indeed close to take off, perhaps another shot in the arm is all that is required to push the country into the air, so that further fixes and lifts will no longer be necessary.

Is it possible to be so optimistic? No one probably knows, but it is possible to point to certain factors that may provide some ground for the optimism. First, the country is getting "internationalised," not only in terms of trade, investment, and information flow, but more importantly in terms of its people. Almost every village now has sons and daughters abroad, working, earning, and sending back money, experiences, ideas, and the enlightenment that comes from traveling and being abroad. The Bangladesh army has become "internationalised," too, in fact more so, because every second member of it has now served abroad on UN peace-keeping missions. To the extent that the material well-being of its members is now tied to a considerable degree with work abroad, like those of non-resident Bangladeshis (NRB), the Bangladesh army has attained a certain NRB character. Just like NRBs, not being caught up by Bangladesh-centric vested interests, can think more easily about the broader interests of the country, so can the army now. It may not be too speculative to say that the internationalisation and NRB-isation of the army played a no small role in the nature and modus operandi of its current intervention in the country's political affairs. The internationalisation of the population and the army should help Bangladesh avoid parochial behaviour in the future.

Second, despite the decapitation of the civilian leadership of Bangladesh's War of Liberation, some remnants, components, and traditions still remain. The recent shake up, and the public pressure for reform, have provided an impetus for soul searching and reform among themselves and the political parties they represent. Perhaps they will now galvanize themselves to lead the country along a democratic route toward economic growth.

Keep the growth going
No matter whether the current fix proves temporary or permanent, the best way to serve Bangladesh democracy is, therefore, to keep the growth going and make it environmentally sustainable. The current government has made some mis-steps, such as indiscriminate eviction of slums and hawkers, but one of the best things it has done is cleaning up the Chittagong port from the mafia's hold, a feat that has resulted in significant reduction in the time and cost of using the port. These are the kind of steps that should get priority, while the government prepares to hold the elections.

A government headed by an economist need not be reminded that opening of BDR shops is not the best way to control price hike and inflation. Appropriate economic policies need to be pursued to bring in more supply to the market from both domestic and import sources. As it tries to clean up politics and public institutions and hold elections, growth should not falter, because in the ultimate analysis it is economic growth that is the sure recipe for democracy in Bangladesh, as it is in other developing countries.

Dr. S. Nazrul Islam is Professor of Economics, Dhaka University.