Mukti

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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The transition blues

Posted in democracy, development, economics, governance, institutions, politics by jrahman on October 24, 2017

….nearly every country that experienced a large democratic transition after a period of above-average growth  ….  experienced a sharp deceleration in growth in the 10 years following the democratizing transition.

That’s from the Pritchett-Summers paper covered in the last post.  Let the sentence sink in.  Then, if you’re interested in Bangladesh, read on.

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Apocalypse later, maybe

Posted in development, economics, macro by jrahman on October 21, 2017

As I read about the 19th Congress of the Chinese Communist Party, it occurred to me that throughout my professional career, for some reason or other, I have had to think about the consequences of a hard landing in the Chinese economy.  It also occurs to me that I first started thinking about Bangladesh towards the end of graduate school — that is, I first fretted about an economic crisis in our People’s Republic before I ever thought about the other one.  Then I remembered this cautionary note about China (and India), which apply just as well to Bangladesh.

In its just released World Economic Outlook, the IMF forecasts Bangladesh economy to grow by 7% a year over the next few years.  It has been a while since I looked at the detailed data, so I am not in a position to comment on whether the IMF is too optimistic.  Look at the chart below, and think about whether 7% growth would be too optimistic?

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Political impact of remittances

Posted in democracy, elections, labour, political economy, politics by jrahman on July 12, 2017

Along with the garments industry and the NGOs, there is a broad consensus that remittances have played a key role in Bangladesh’s economic development over the past decades.  Notwithstanding that broad consensus, the economic impact of remittances may be more nuanced than one might think, as I conjectured a long time ago:

Well, how about a stylised, and very speculative, story along this line — while RMG has meant women entering the formal workforce, migrant worker boom has sent a lot of risk-taking men overseas; aided by the NGOs and microcredit, households have smoothed consumption and invested in human capital of their children; but they have not invested in physical capital, avoided entrepreneurial activities, and have not pushed for a more investment-friendly polity.

We would want to explore this story further. We would also want to explore the income side of GDP, and tie it into a political economy analysis.

The remittance boom, for example, should see the labour share of the economy rise. Of course, the question is, what happens to the money that is remitted back? It’s reasonable to assume that unskilled labourers are from the poorer parts of the society. So, in the first instance, any remittance back to the villages is a good thing in that it reduces the direst type of poverty — that is it stops things like famine or malnutrition. But what happens after that? My tentative hunch is that a lot of remittance has been saved but not invested in a productive way, rather they ended up fuelling land/stock prices —this is an area that needs to be explored in detail.

Needless to say, I have not followed up on these questions.  But at least the economic impact of remittances is something people have thought about.  What about the political impacts?  That’s the question Shafiqur Rahman of Oregon University explores.*

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Economic herstory

Posted in development, economics by jrahman on July 5, 2017

I have been trying to get back into the habit of writing.  Nothing fancy or ambitious.  Around a thousand or so words a week.  I asked a close friend on what I should be writing about.  He advised:

Rotate between three big buckets: politics/history, pop culture, and economics. When writing about the first topic, make sure it won’t sound ridiculous in six months. And avoid talking about people and focus more on theory and data.

My friend reminded me of this passage from a three-decade old paper on economic growth.

The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them, it is hard to think about anything else.

I wonder what Nancy Stokey feels about that!  My partner will for sure not be happy if I spend all my time thinking about economics.  But when not thinking about strange stuff, it is indeed harder to come up with a bigger question than why some societies have so much higher living standards than others.

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Ramadanomics

Posted in economics, labour, macro, society by jrahman on June 19, 2016

Ramadan fasting is like no other Islamic ritual.  In the month of Ramadan, those who never perform the pre-dawn Fajr prayer get up even earlier to eat, only to abstain until dusk.  And after a month of that, even those who would otherwise never set foot in a mosque line up in unison to kneel towards Mecca.   For an entire month, from cooking, attire, TV to intimacy — the very lifestyle of a billion plus people change.  Except perhaps the aversion to pork, observance of, or at least respect to, the Ramadan fasting is arguably the most ubiquitous characteristic of Muslims.

Given its prevalence and ubiquity, Ramadan must have observable economic impacts.  Exactly what might they be?  In a fascinating paper, Filipe Campanile and David Yanagizawa-Drott of Harvard’s Kennedy School provide us with some answers.*  Summary — fasting makes us happier, if poorer.

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Khichuri index

Posted in economics, labour, macro by jrahman on December 24, 2015

A staple of political rhetoric in Bangladesh is to ensure affordability of rice, lentil, oil and salt.  Throw in a kilogram of coarse rice, 250 grams of red lentil, 40 ml soya bean oil and 10 mg salt and we get a rather bland plate of khichuri.  CEIC Asia database provides monthly retail prices of these essentials in Dhaka with a lag.  Currently, the latest data point is August 2014.  Still, using the bland recipe and prices (and smoothing the data by taking a 12-month moving average), we can get a sense of how the price of our plate of khichuri has evolved over time — for example, when BNP was turfed out in January 2007, such a plate cost around 35 taka, which rose to around 60 taka when the Awami League returned to power in January 2009, and was around 70 taka when its five year term expired.

Of course, to say anything sensible about prices, we need to have a sense of income.  From the same source, we can get daily wage of a skilled factory worker.  Her wages went from around130 taka a day in January 2007 to over 210 taka two years later to over 300 taka further five years on.

Putting the two together, we can get what I am going to call the Khichuri Index — plates of khichuri an average industrial worker can buy in Dhaka.  The chart below shows how the index has evolved between January 2000 and August 2014 (the period I have data for).

khichuri

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Political business cycle in Bangladesh

Posted in economics, governance, political economy, politics by jrahman on October 10, 2015

While looking for something else, I recently discovered that in 2013-14 financial year, Bangladesh government’s current expenditure — that is, money spent on salaries, procurement, subsidies and loan repayments — increased by 0.8 per cent of GDP.  On top of that, government investment also increased by 0.7 per cent of GDP.

That is a lot of spending.

Now, I haven’t been following economic and policy developments in as much detail as in the past, so I may well have missed great policy initiatives that underline the apparent spending binge.  But according to the work of IMF’s Christian Ebeke and Dilan Olcer of Riksbankrise in government expenditure of that magnitude is not uncommon in election years in developing countries.  More worryingly, they show that this kind of binge usually ends badly.

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Golden fibre

Posted in Bangladesh, economic history, economics, history by jrahman on October 3, 2015

Naeem Mohaiemen is a well known name in Bangla cyberspace, going all the way back to the days of soc.culture.bd and DOS.  To many, its his tireless work for the marginalised peoples of Bangladesh such as the Paharis or the Ahmadiyaas that matters most.  To others, it’s his art, intricately linked with his politics.  And then there is his work on the history around the formation of Bangladesh — few things highlight the intellectual shallowness of the Sachal-Shahbag types than the way they reacted to the most detailed take down of Sarmila Bose.

Few know that Naeem is also an empirical economist.  Or was.  Or could have been an excellent one.  Consider the abstract of his honors thesis:

I will look at the factors that effect (sic) jute prices. This is important for several reasons.  Since sudden changes in the price of jute are unanticipated by the individual farmer, they are adversely affected if they produce the same amount of jute each year but suddenly receive lower prices for it. Jute prices are also important factor in Bangladesh’s development. If overall production remains stable, but prices suddenly drop, revenue fluctuates. In trying to aid the jute industry, there have been two arguments frequently repeated in Bangladesh. One is that, jute growers need to bring sudden supply shocks to a minimum. The other is that jute growers need to concentrate on developing new markets for jute, so that Polypropylene and other substitutes do not keep eroding the market. The analysis in this paper may help to isolate the more important factors effecting price variations and, therefore, point to which factors need to be concentrated on to reduce price fluctuations in the jute industry.

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Leaders

Posted in democracy, governance, institutions, politics by jrahman on August 30, 2015

If only we had the right leader….

If only Bangabandhu (or Zia) had lived….  

If only we had a Mahathir….  

I am sure you can finish the sentence with all sorts of claims about how Bangladesh would have been, or could still be, a much better place with better leadership.  Never mind the fact that all things considered, Bangladesh might actually have done more-than-okay.  To many of our chattering classes, we’re doomed because we haven’t been blessed with the right leader.

How much does leadership matter?

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