Elite stake and progress

Published : 20 August 2014, 01:45 PM
Updated : 20 August 2014, 01:45 PM

The Honourable President of the country goes to London for eye treatment. A few months ago he went to Singapore for medical check-ups. The chairperson of the main opposition party, BNP, also sought better cure in Singapore. The acting secretary general of the Party followed and went to Singapore for improved treatment. What does this trend mean for the country?

One thing is very clear; the elite do not have much faith in the national health system. This is true of the education sector as well. Children of the elite study abroad – the commoners study in poorly resources public universities, infested with party politics.

One does not see this in many South-East Asian countries. Here the elite built the national system – well-resourced public health and education facilities. This has created trust in the national system. More importantly, this demonstrates that elite have a stake in their countries. And this is one of the main reasons why countries in South-East Asia forged ahead.

Indonesia and Thailand were disease infested poor countries. The Nobel Laureate economist, Gunnar Myrdal, did not have much hope for Indonesia when he published his famous "Asian Drama". Philippines was much ahead of Indonesia and Thailand in the 1950s; its per capita GDP in purchasing power parity terms were about the same as South Korea's and above that of Thailand in the early 1970s. But it fell behind other South-East Asian countries since the mid-1970s. This happened when the Philippino elite began to think that their future was in the United States. This of course coincided with Marcos' usurpation of power in a coup.

Nationalism and economic progress should be closely linked. One of the reasons we fought against colonialism was to take control of our own destiny; aspirations for progress were the driving force for the masses to rise and unite against colonial powers.

However, in many newly independent countries, these hopes and aspirations were dashed. We wonder what went wrong. Many have attributed the failure to progress to the lack of good governance or the prevalence of widespread corruption.

But this thesis of "good governance" or absence of widespread corruption cannot explain South-East Asia's phenomenal progress. Indonesia or Thailand is not less corrupt than the Philippines. In fact, in 1995, Philippines was ranked above Indonesia which was at the bottom of the list of corruption perception index (CPI); Thailand was only 2 position above. In 2013, Philippines moved up the scale to be placed 8 places above Thailand and Indonesia still remained at a lower level. Yet, both Indonesia and Thailand have beaten Philippines in economic growth.

Two other interesting cases from the region are China and Vietnam.  In 1995, Philippines was ranked 4 places above China which was the second last, just above Indonesia and in 2013, Vietman's position was 22 places below Philippines. Both China and Vietman are two fastest growing economies in Asia!

So what explains this apparent anomaly – fast economic growth despite poor corruption ranking? One possible answer is elite stake. When the elite believe that they have a stake in the country, they invest the ill-gotten money in domestic economy. In this case, corruption is nothing but primitive capital accumulation – when invested, it contributes to economic growth. However, it may worsen income distribution.

On the other hand, when the elite do not think that they have a stake in the country, they take the money out; acquire foreign passport for themselves and their children. It is pure plunder, no different from the colonial exploitation.

It may be mentioned here that in a 2011 UNDP report Bangladesh was ranked no 1 among least developed countries in illicit transfer of funds between 1990 and 2008; the cumulative outflow was estimated at US$34.8 billion. The recently released Global Financial Integrity Report 2014 shows that an estimated US$132.9 billion flowed illegally out of the Philippines between 1960 and 2011.

The lack of a tight relationship between corruption and economic growth does not mean that we should give up fight against corruption and not demand good governance. They must continue; but will not be sufficient to usher in a new era.

Our leaders need to give right signals; setting up of medical universities in each divisional city will not suffice. The leaders must demonstrate confidence in the national system which is used by the commoners. Only then can we regard them as true leaders who can inspire the people to work hard to fulfil their dreams and achieve progress.

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Anis Chowdhury, former Professor of Economics, University of Western Sydney, Australia.