Mukti

Soothsaying

Posted in economics, politics by jrahman on January 12, 2020

It seemed to me last week that every man, woman, child, and their pet dog had an opinion about the US-Iran stand off.  But I have never seen anyone predict this October surprise — The Donald striking a deal with the Supreme Leader.  If that happens, then you hard it here first.

Meanwhile, let’s have a crack at some soothsaying.

  • Will Boris Johnson agree a trade deal with the EU?  Yes
  • Will Britain’s Labour party return to electability?  Yes
  • Will Angela Merkel’s grand coalition collapse?  No
  • Will Matteo Salvini come back to power in Italy?  Yes
  • Will Donald Trump win the popular vote in November’s election?  No
  • Will the US go into recession?  No
  • Will China become world leader in 5G telecoms?  No
  • Will India regain its status as the world’s fastest growing large economy?  No
  • Will there be a war with Iran?  No
  • Will South African debt hit junk status? Yes
  • Will the protests that have shaken Latin America continue?  No
  • Will France’s Emmanuel Macron engineer a “reset” with Vladimir Putin’s Russia? No
  • Will we see meaningful regulation of Big Tech? No
  • Will Disney+ change the game in streaming?  No
  • Will Uber become profitable in 2020? No
  • Will vaping be banned? No
  • Will global carbon dioxide emissions fall? No
  • Will Brent crude prices end the year above $65 a barrel? Yes
  • Will the three-decade bond rally finally come to an end? No
  • Will Europe’s banks keep slashing jobs? Yes

 

Update: Shafquat Rabbee speculated along these lines in 2019.

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The two-handed people

Posted in economics, macro by jrahman on January 9, 2020

বাংলাদেশের অর্থনীতিবিদেরা …. বলতেছে, ক্রাইসিস আছে আবার সম্ভাবনাও আছে। তাই যেই দিকেই অর্থনীতি যাক, ঊনারা বলতে পারবেন ।  আমি কিন্ত, আগেই বলছিলাম।  (Bangladeshi economists …. are saying there is crisis, but there is also potential.  So, whichever way the economy goes, they can claim — I told you so.)

A brilliant autodidact he may be, but if the renowned Facebook pundit / activist  Zia Hassan had any idea about economics, he probably wouldn’t have made the above statement.

For one thing, economists are notorious for not reaching unanimity on major questions.  Take the financial markets for example.  Just a few years ago, Eugene Fama and Robert Shiller jointly won the Bank of Sweden Prize (aka Economic Nobel) — except the former claimed that financial markets are efficient and things like bubbles can’t really exist, whereas the latter has shown why and how bubbles form quite frequently.

More fundamentally, economics is fundamentally about trade offs, choices, and opportunity costs.  And anyone trained in that discipline instinctively thinks about ‘on the other hand’.  This is a feature, not bug, of economists’ thinking.  Not for nothing that former American president Harry S Truman hankered for a one-handed economist!

Turning to Bangladesh, there is absolutely nothing contradictory about seeing potentials and risks — the two are not mutually exclusive.  Bangladesh has achieved remarkable economic progress in the last 30-40 years.  One can quibble about the exact magnitude, precise causes, and to whom the credit should accrue.  But progress has been made and there are potentials for more — to deny this is nonsense.

And yet, the realisation of that potential is not guaranteed.  There are many challenges that need to be overcome.  Specifically, and immediately, there are problems with non-performing loans in the state-owned banks.  This is clearly recognised by anyone who has looked at the data.  But is it crisis?  I am not aware of any economic model or tool that would allow one to accurately forecast a financial crisis.  Even in the advanced economies such a feat is not possible — the data is simply too infrequent and imprecise.  Beware of anyone making such a forecast — they are more likely to be a Facebook pundit than an economist.

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Perfomance anxiety

Posted in economics, institutions, macro, micro, political economy, Uncategorized by jrahman on December 21, 2019

Under Article IV of the IMF’s Articles of Agreement, a team of Fund staff visits each member country once a year, collects economic and financial information, and holds extensive discussions with officials on policy matters.  This is then published in its website.  The latest Article IV report for Bangladesh came out in September, stating that Failure to effectively address the problems in the banking system, including high non-performing loans pose a medium likelihood risk to the economy, with a medium-to-high impact in the near term if it hit — High and increasing non-performing loans and low capital adequacy would hamper the banking sector’s ability to finance business investment, add fiscal burden, and hamper growth.

Let’s unpack this.  In doing so, we are going to look at official data.  Yes, there is considerable scepticism about the veracity of official figures.  But official data is all there is to go on, and nihilism of trust nothing but one’s gut instincts is not analysis. As it happens, even official data tell a potentially scary story.

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Hiatus reflections

Posted in democracy, elections, political economy, politics by jrahman on November 24, 2019

Blogging went on hiatus in March 2013.  Since then, there has been occasional pieces, notably around the election seasons of 2013 and 2018, and a few forays every now and then on matters serious and not so.  But none of that has been regular.  What have I learnt in this extended time off?  What am I most surprised by?  What is something truly unpredictable from the 2013 vantage point?

The answer is, of course, a lot.  But in the context of Bangladesh, it should be no surprise to anyone that the longevity of the current regime would be the single most surprising development to the 2013-me.

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The 2020 outlook

Posted in economics, macro by jrahman on November 8, 2019

When trying to get back to the habit of writing, it is useful to start with something that is in one’s comfort zone.  That, for me, is obviously the economy, except it has been years that I have seriously read or paid attention to the Bangladesh economy.  I guess doing a post on the macroeconomic state of play months out from the new decade is a good excuse to read up on the subject.

Back when I used to think about this stuff more regularly, 7-8 per cent growth was considered outlandish.  In its October World Economic Outlook, the IMF forecasts Bangladesh’s economy to grow by over 7 per cent a year on the back of remittance inflows into the next decade, coming off recent high of 8 per cent.  Inflation is expected to be around the Bangladesh Bank’s target of 5½, and strong export growth is expected to underpin a sustainable current account deficit.

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Bangladesh Paradox

Posted in development, economic history, economics, macro, political economy by jrahman on February 24, 2019

 

A new initiative, led by Asif Shibgat Bhuiyan.

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What to expect if you are expecting?

Posted in economics, elections, institutions, politics by jrahman on December 23, 2018

In just a few days, Bangladeshis might have a chance to vote.  I have no idea whether the election will be free and fair.  Nor can I venture a guess about the winner.  For all we know, the government will follow the path of Pakistan over India — that is, it will rig the election following ZA Bhutto’s 1977 example, and not accept defeat in a free and fair election like Indira Gandhi did the same summer.  However, one can always hope, and expect.  If you were to expect a Jatiya Oikya Front victory on 30 December, what should you expect for the economy for the next five years?

As with anything to do with economy, the answer is mixed.

On the one hand, even if Mrs Hasina Wajed allows a free and fair election, accepts defeat, and peacefully hands over power, there is a significant risk that she will still have left the new government with a Pakistan-like situation.

Pakistan too had an election earlier this year.  The previous government claimed, with some justification, to have tackled the country’s electricity and other infrastructure problems.  Pakistan economy seemed to have turned a corner.  However, the government’s books were a mess, and there was a risk that the country couldn’t meet its external liabilities.  The incoming government had won the election promising good governance on a whole raft of fronts.  But the new prime minister Imran Khan and his finance minister have spent most of their time travelling the Washington DC, Beijing and Riyadh with a begging bowl.  And all the grand promises seem to be melting into thin air.  If you are expecting a triumph of democracy on 30 December, you would do well prepare for a Pakistan-style crisis in 2019.

On the other hand, if they can avoid a crisis that would be Mrs Wajed’s parting gift, there is much to look forward to a Oikya Front government for.  And a crisis is not a fait accompli.  A train wreck can be avoided if you see the locomotive rushing towards you.  The thing about expectations is, if you know what to expect, you could adjust your actions to avoid the worst possible outcome, and temper your expectations to face the situation in a stoic manner.  I suspect the would be econocrats of the Oikya Front are well aware of the mess they might inherit.  They will need to take a few steps to diffuse any looming disaster before launching their longer term tasks.  And if they can get to it, judging by its manifesto, and BNP’s Vision 2030, a new government will attempt an ambitious but realistic programme.

Let’s unpack these step by step.

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Basu’s bizarre bakwas

Posted in development, economics, macro, political economy by jrahman on May 6, 2018
Rubbish, Worthless, Nonsense, Silliness
(Urban Dictionary)

Upon being asked by a friend whether I had read Kaushik Basu’s recent piece on Bangladesh, my first reaction was — is that the rather lazy piece on why Bangladesh is doing well?

Let me note my gratitude to the friend for pushing me to read the piece. It is, to use the favourite adjective of Bangladesh’s Finance Minister, just bogus.  Out of respect for my personal interactions with the author, I will refrain from using that term.  But this bizarre article should still be debunked.

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Jammin until the break of dawn

Posted in army, books, democracy, economics, history, political economy, politics, uprisings by jrahman on December 2, 2017

What do you do during the evenings, after the day’s tasks are done, of work trips?  You might be tired of being up in the air, or just simply tired.  But depending on the jet lag, you might not find much sleep.  I certainly don’t, even when there is no jet lag — I hate hotel beds.  If you find yourself in a hotel that used to be one of Idi Amin’s torture chambers palaces, and your colleagues are fellow political junkies, you will likely talk about politics over a nightcap.  So did we that rain-soaked Kampala evening.  We talked about, among other things, Zimbabwe.

Why didn’t they get rid of him the old fashioned way, you know, APCs on the streets, tanks in front of the presidential palace, radio or TV broadcast by some unknown major…..

An old Africa hand explained why Robert Mugabe wasn’t toppled in a coup.  No, it wasn’t because of his liberation cred.  Kwame Nkrumah or Milton Obote were no less of independence heroes to their respective countries.  Both were ingloriously booted out, not just of their presidential palaces, but also the countries they led to existence.  At least they lived, unlike say Patrice Lumumba.  Clearly being a national liberator figure didn’t make one coup-proof, particularly if one had turned his (can’t think of a mother of the nation top of my head!) country into a basket case, and had faced concerted political pressure from home and abroad.  According to my colleague with years of experience in the continent, the key to Mugabe’s survival was in relative ‘latecomer’ status.

Mugabe came to power much later than was the case for other African founding fathers.  And the disastrous denouement of his rule happened during a period when the great powers saw little strategic importance in regime change in an obscure corner of the world.  The second factor meant there was no foreign sponsor to any coup.  The former meant that any would be coupmaker, and their domestic supporters, knew from the experiences elsewhere in the continent about what could happen when a game of coups went wrong.

Mugabe gave them hyperinflation.  Getting rid of him could lead to inter-ethnic war.  Easier to do currency reform than deal with refugees fleeing genocide….. 

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The middle

Posted in democracy, economics, elections, governance, political economy, politics by jrahman on November 3, 2017

The Middle is an American sitcom about a middle class family’s struggle in the wake of the Great Recession.  I never watched the show beyond the first episode in 2009.  At that time, it seemed to me to be a poor derivative of Malcolm in the Middle and Roseanne.  Facebook tells me that this will be the final season of The Middle.  Maybe I should watch the show.  Set in the mid-western state of Indiana, the protagonist white family might have been just the type that put Donald Trump where he is.  Aristotle wrote that …those states are likely to be well-administered in which the middle class is large.  Some argue that stagnation of the American middle class lies behind the rise of Trump.  I am not so sure — perhaps tribes matter more than class.

I don’t want to spend precious time and energy pondering about the plight of the white American middle class.  Instead, let me talk about the role of the middle class in Bangladeshi politics.  The term Bangladesh paradox is now at least half a decade old, and refers to the idea that Bangladesh has been surprisingly good at improving the lives of its poor despite dysfunctional politics and a stunted private sector — that’s from the Economist.  William B Milam, former American envoy to Dhaka and Islamabad and a keen observer of both countries, often talks about another Bangladesh paradox:

….Bangladesh should have become, over the past 25 years, a modernized democracy, knocking on the door of entry into the middle income category of developing countries. Its economy has grown for most of the last two decades around 5-6 % per year, and its social development indices have improved rapidly and now are generally better than most other South Asian countries except Sri Lanka. Instead, over those same two decades, Bangladesh has regressed along the democracy/authoritarian axis no matter which of the two major parties was in power.

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