Off the mark: The ‘feel good’ feel

A common narrative of economic development of Bangladesh is that it has done remarkably well despite all natural and self-made catastrophes. A sustained increase in economic growth over the last two decades has helped to create such a view. The rise in per capita income has allowed a substantial reduction in the incidence of poverty and hunger. A notable aspect of economic growth of Bangladesh is the absence of sharp fluctuations despite the fact that the world economy has been on a roller coaster during this time. Bangladesh escaped almost unscathed from the severe financial crisis in the West in 2007 and the deep global recession of 2008-09. Some prestigious institutions such as Goldman Sachs have recognized Bangladesh as one of the prospective emerging nations of the future. All these have strengthened the complacent 'feel good' view of the performance of the economy. Policymakers often go overboard in their praise of the 'shining' economy.

Bangladesh also has a commendable record on social development (see Table 1). It has made great strides in reducing infant and maternal mortality rates. Life expectancy has increased and the rate of illiteracy has declined. School enrolment, especially of female children, has increased markedly. People have safe drinking water and good sanitation. These social indicators compare well with those of the neighbouring countries, and suggest significant improvement in the health and living standard of the ordinary people. There can be little doubt that there has been considerable improvement in the material well-being of the people since the 1970s.

It should be emphasised that whatever achievements Bangladesh has made were not the making of a single regime. The available data shows that there has been a trend improvement in the living standard over a long period. This might be due to the fact there has been relatively greater certainty over economic policies; no government since the early 1980s reversed the economic policies of the previous regimes. The rapid growth of the private sector including the non-government organizations (NGOs) has played a vital role in the social and economic transformation of the country.

A notable pattern of economic development of Bangladesh is that the average compound GDP growth rate during each regime since independence has been greater than that of the previous regime (see Table 2). Even the much maligned Ershad regime had increased the average growth rate over the rate of the previous regime, although insignificantly. For the first time this pattern is likely to be disrupted by the current regime if the growth rate falls below 5.6 percent in this fiscal year. The IMF forecasts the growth rate for the fiscal year 2013-14 to be 5.5 percent (which is the assumed growth rate for the calculation of the growth rate of Hasina II regime in the table below). With the deterioration of the law and order situation, disruption of communication, rise in precautionary saving and collapse of business confidence, even this rate appears to be rather optimistic. If this year's growth rate falls below 5 percent, this regime would fall back to sub-six percent growth.

The well-being or poverty of people is frequently a relative, rather than an absolute, concept. If Bangladesh had the current per capita income three hundred years ago, it would be one of the richest countries of the world. Instead it is now one of the poorest countries because other countries have resolutely marched ahead, while it lagged behind. The poverty line is also defined in the context of the average income of the people. Thus the poverty line of a country with a per capita income of $25,000 is considerably higher than the poverty line of a country with a per capita income of less than $1000.

Economic performance must also be viewed as a relative concept. The performance of a country with economic growth of 3 percent will be regarded as exceptional if no other country has attained a growth rate of 2 percent. The same country would be regarded as a poor performer if most countries of the world have growth rates in excess of 4 percent.

Hence, to put the achievements of Bangladesh in perspective, it is useful to compare these with the achievements of some of the countries of the region or of those in a similar situation. This paper is devoted to an analysis of only per capita GDP, which is widely regarded as a blanket measure of the potential well-being of a country. In order for the GDP to be comparable across countries it must be expressed in a common currency and should be measured in a similar manner. The World Bank regularly publishes cross country data on many variables including per capita GDP in current US dollars. These data have been used in the analysis below.

Table below shows the ratio of the per capita GDP in current US dollar of Bangladesh to that of the major SAARC countries, i.e. India, Nepal, Pakistan and Sri Lanka. It is evident that Bangladesh has fallen increasingly behind. It had an average per capita income of over nine-tenths of that of India or Pakistan, and over two-thirds of that of Sri Lanka during the ten year period 1971-80. But by 2001-10, it has fallen to about three-fifths of the per capita income of India or Pakistan and less than one-third of that of Sri Lanka. Bangladesh had an average per capita income of well over one and half times that of Nepal, but by 2001-10 it was only 127 percent. By 2011-12 the situation worsened even more.

Bangladesh belongs to a group of 48 poor countries of the world labeled least developed countries comprising largely poor countries of Africa (32 countries). The per capita GDP of Bangladesh was 121 percent of the per capita GDP of the least developed countries during the 1990s, but during the next decade it fell to 103 percent. (By 2011-12, it was only 93 percent of the average LDC per capita GDP.) Bangladesh's per capita GDP was 11 percent of the world average per capita GDP, but by 2001-10, it fell to only about 6 percent.

A picture is often far more eloquent than words. The chart below shows the decadal trend of per capita GDP of Bangladesh relative to the four South Asian countries. The downward trend is too pronounced to require an explanation or to brook any controversy.

These comparisons leave little doubt that the rate of economic advancement of Bangladesh has been much slower than that of the other countries of South Asia during the past four decades. This has happened despite the fact that all these countries have been engaged in very destructive internecine insurgencies during a large part of this period. It would seem that whatever problems Bangladesh had were a greater deterrence to accelerated economic growth than the insurgencies in these countries. Worse still is the fact that the GDP of Bangladesh relative to the average of the least developed countries as well as that of the world has also declined.

The main purpose of this analysis is to draw attention to the opportunities lost by Bangladesh. If it had been able to simply keep pace with its fellow SAARC members such as India, Pakistan or Sri Lanka (not too much to expect) the per capita income of the country would be at least twice as much as it is now. Millions of families could have been lifted out of poverty, millions saved from premature death due to malnutrition and diseases, and many more could have had a better health and living standard. By not utilising the available economic opportunities, be it for policy shortcomings, governance issues or political misadventure, our governments have failed to ensure a better life for the people that they deserved.

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M. A. Taslim is Professor and Chairman of the Department of Economics, University of Dhaka.