Charting Progress 5 – Openness

The Liberation of War on 1971 was not just one of the worst humanitarian tragedies of the 20^th century, it also left significant material footprints. Average incomes fell by about a fifth in what was already one of the most impoverished places on earth. Pre-war income levels wouldn’t be reached until the early 1990s. Since then, however, average incomes have tripled, significantly reducing poverty along the way.

Over time, sustained rises in income reflect either a growing pool of workers, or the average worker becoming more productive. The progress notwithstanding, Bangladesh has significant unfulfilled potential. Millions still remain outside the formal labour market, and the average Bangladeshi worker in industry and services sectors remain far less productive than their peers in Southeast Asia.

Countries that are open to foreign trade and investment tend to create more jobs, and their workers tend to be more productive. On both counts, Bangladesh is behind Southeast Asian neighbours.

Charting Progress 4 – Productivity

Over time and across countries, differences in living standards ultimately come down to the differences in productivity. Productivity growth in developing countries, in turn, reflect two processes: structural changes in the economy; and adoption of new technologies and better practices from more advanced economies (the so-called ‘catch up’ growth). Bangladesh has been experiencing both processes over the past few decades.

Charting Progress 3 – labour

This series marks fifty years of Bangladesh with a set of charts each month to show the country’s economic evolution. Previously: GDP per person; poverty and inequality.

Over time, an economy grows from two sources: the number of workers in the formal market, and the productivity of each worker. The economic growth in Bangladesh has accelerated steadily in the past three decades, but employment growth made a stronger contribution to growth in the 1990s than in recent decades (Table 1).

Table 1: Sources of economic growth

	GDP	Employment	Productivity
1991-2019	5.7	2.4	3.4
1990s	4.8	2.9	1.9
2000s	5.6	2.1	3.5
2010s	6.9	2.2	4.7

Source: World Bank World Development Indicators.

Charting Progress 2 — poverty and inequality

This series marks fifty years of Bangladesh with a set of charts each month to show the country’s economic evolution. Previously: GDP per person.

A Bangladeshi today is about three times as well off than their grandparents were on the eve of the Liberation War. But have the poorer sections of the society benefitted from the economic growth of recent decades?

Bangladesh Paradox

 

A new initiative, led by Asif Shibgat Bhuiyan.

Golden fibre

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.

Books

Some time ago, there was a facebook meme about 10 books:

List 10 books that have stayed with you in some way. Don’t take more than a few minutes and do not think too hard. They do not have to be the great works of literature, just the ones that have affected you in some way. Tag 10 friends and me so I can see your list.

Over the fold, for archival purposes, are two lists — one general, the other economics related.

Demographic transition in Bangladesh

Like a match box full of sticks —that’s how the Farmgate over bridge was once described to me.  It was the early 1990s, when six or so million people lived in Dhaka, while Bangladesh’s population was around 110 million.  I can’t think of any match box that, once full, can pack in a significant rise in the number of sticks, and yet, Bangladesh has somehow found room for extra people.  In the two decades since my visiting friend saw the teeming multitudes of Farmgate, the country’s population has risen to 150 million, and depending on how one counts, Dhaka is home to 15 or more million people.

The headcount, however, does not quite capture the fact that Bangladesh is going through a demographic transition. A transition that is perhaps as remarkable as, and probably related to the Bangladesh paradox.  As Chart 1 shows, over the past three decades, population growth has slowed significantly and the fertility rate (the number of children each woman bears on average) has declined markably.  Given the fertility rate is already close to the replacement rate of around 2%, it is quite possible that population growth may well slow even further from current 1% a year.

Missing the mark about feeling good

Professor MA Taslim of Dhaka University is my favourite commentator on Bangladesh economy.  I would readily recommend most of his Off the mark columns.  However, even the great have an off day once a while, and Prof Taslim definitely missed the mark with this piece about Bangladesh’s development record.

Decoding The Bangladesh Paradox — A Research Agenda

The macroeconomic fact is, in the last decade, under all three governments, per capita GDP have grown by around 4½ per cent a year. At that rate, average real (that is, inflation-adjusted) income doubles in 16 years. …. This is impressive stuff, for which every recent government deserves some credit.

That’s the conclusion from the post on real GDP per capita growth under different governments. Of course, real GDP per capita is a means to the end, not the end in itself. What we really care more about is the standard of living that higher real GDP per capita entails —that is, it’s the development record, and not just the growth, under different governments that we want to know.

This, however, raises two questions. First, how do we attribute to any particular government the growth and development record when policies under any particular government are likely to have long term consequences? And second, how do we explain the Bangladesh Paradox:

The belief that growth brings development with it—the “Washington consensus”—is often criticised on the basis that some countries have had good growth but little poverty reduction. Bangladesh embodies the inverse of that: it has had disproportionate poverty reduction for its amount of growth.

That quote is from a November 2012 Economist article. That article, and accompanying editorial, had a go at explaining the paradox. Joseph Allchin had a crack more recently at the NY Times. The suspects are usual: garments, remittance, NGOs. But we economists are a parsimonious lot, or so we like to think. We would like to know exactly what contribution each of these factors made, what was the channel through which the factors affected growth and development, what role, if any, did government policy play, and what all that means for future.

I haven’t seen a comprehensive analysis of the Bangladesh Paradox. And no, I am not going to provide the answer in this post. Rather, over the fold is a research agenda on how to analyse the Paradox.