Neoliberalism and social justice in Bangladesh

Posted in economics by jrahman on January 28, 2012

Some time ago, a friend asked me about the advent of neoliberalism in Bangladesh.  Another has asked me whether my take on social justice is compatible with my general view of neoliberalism.  I thought a quick post should clarify.

Firstly, let me recall what I take social justice to mean.  To me, a state that provides social justice is one where: the economy grows steadily, translating jobs and income for the rural and urban poor and less affluent classes; prices are on a stable path; there are government programmes such as food vouchers for the needy; and there are active government programmes for human development, and particularly development of the marginalised sections of the society.

It is important to realise the difference between means and ends in the above.  Ultimately, social justice is about the end.  In a socially just state, on average, poor and marginalised see their lot improve over time.  Some of the things I describe above are means to that end — stable prices aren’t an end in themselves, it’s just that rapid inflation hurts the poor. 

How does neoliberalism fit into this?

Unlike social justice, there is a much bigger literature on neoliberal economic policy (start with wiki, if you are interested).  The relevant point for us is that neoliberalism is mostly, if not wholly, about means to an end.  Neoliberalism says that private markets will produce the biggest possible pie.  It says nothing about whether the way that pie is distributed is fair.  And justice is all about being fair.

In general, I agree with the neoliberal premise.  No, make that, I strongly agree with the premise.  Private markets do, in general, maximise collective wealth of a society.  Since my conception of social justice requires material improvement in poor people’s lives, I believe neoliberal means are a very good way of achieving the end of social justice. 

But it’s also important to note that neoliberal means are not sufficient.  Once the wealth is produced, there is no guarantee that the private economy, left to itself, will give the poor enough to make them better off.  And that’s where stuff like social safety net comes in.  Of course, those safety nets aren’t end in themselves either. 

Moving from the theory to practice, what have we seen in Bangladesh?  As I’ve argued before, Ziaur Rahman was the first to articulate social justice as a high ideal to base the state on.  And until recently, this high ideal was not contested by anyone. 

What about the neoliberal means?

Defining the four basic features of neoliberalism as stabilisation, privatisation, liberalisation and deregulation, here is how I see their evolution in Bangladesh:

– Stabilisation is about managing government finances, maintaining stable exchange rates, and putting a lid on inflation.  In practice, this means tight money.  Whenever a country goes to the IMF with cap in hand, this is usually what is counselled.  Conversely, avoiding the need to go beggin involves tight money to begin with.  In Bangladesh, pretty much every Finance Minister after Tajuddin Ahmed has tried this.  Saifur Rahman and SAMS Kibria were better at this than others.  But no one has really abandoned it.

– Privatisation of state owned enterprises is self explanatory.  In Bangladesh, nationalisation of large businesses was not entirely by choice.  In 1970, much of the large business in the country was owned by West Pakistanis.  In1972, there wasn’t sufficient domestic private capital to replace the Pakistanis, and foreign capital was either not interested to come, or we weren’t interested in courting it (particularly if it came from India).  The result was wholesale nationalisation of industries and banks.  More controversially, there was rhetoric of socialism under Mujib, which called for nationalisation of Bengali owned businesses too.  But Bangladesh didn’t have the required human capital — skilled professionals — to run these enterprises, and predictably the economy suffered.  Privatisation begun under Zia, and have commenced until recently.  Sometimes the privatisation has meant more efficient allocation of resources.  At other times, privatisation served crony capitalism.  But occassional rhetoric aside, this element of neoliberalism is entrenched in Bangladesh. 

– Liberalisation of trade and investment – that is, opening the country up to foreign competition and capital – happened in one big swoop in the early 1990s, under Saifur Rahman.  Subsequent governments have not reversed course on this, but no one has really pushed this agenda either. 

– Deregulation, the final element of neoliberalism, has never seriously been attempted at all.  Bangladesh still has a huge (de jure) red tape and (de facto) corruption problem.  The neoliberal moment is yet to arrive in this regard.


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