Bangladesh Economy in the Eyes of Kaushik Basu

Chief Economist and Senior Vice President of the World Bank, Kaushik Basu was in Bangladesh in mid-December at the invitation of the Bangladesh Bank to address an august gathering at the Bangabandhu International Conference Centre [BICC] on the economy of Bangladesh and contemporary issues in development. Kaushik Basu, a student of Professor of Amyrta Sen wrote his Ph.D. dissertation on social choice under his direct supervision and a distinguished international scholar on development economics for his exposure in the policy making process in India. He is a professor in the Cornell University, where he is the C. Marks Professor of International Studies and Professor of Economics. A fellow of the Econometric Society, he received India’s Padma Bhushan award as well as the National Mahalanobis Memorial Award. He did not work in the World Bank in its Young Professional Programme but his current assignments as Chief Economist will be immensely productive on two counts – his varied experience in research and operational acumen in India may mould the World Bank philosophy in a paradigm consistent with the real situation in the developing world and the bindings of the World Bank towards a poverty-free world. Indeed, Kaushik Basu is an economist with a difference.
Kaushik Basu authored many books and contributed more than 160 papers in refereed journals and articles in illustrated magazines/newspapers at both home and abroad. Some of the most important books that speak for his diversity are Prelude to Political Economy [2000], Beyond the Invisible Hand; Groundwork for a New Economics [2010], An Economist in the Real World, the Art of Policy making in India [2015] and The Retreat of Democracy and other itinerant Essays on Globalization, Economics and India [2007]. The book Beyond the Invisible Hand; Groundwork for a New Economics espoused his philosophy on collective action instead of self-propelling interest that work not only for an efficient but also for a fair society. “Beyond the Invisible Hand challenges readers to fundamentally rethink the assumptions underlying modern economic thought and proves that a more equitable society is both possible and sustainable, and hence worth striving for”.
The book An Economist in the Real World brings first-hand experience from a developing world and unfolds the complex web in the society and culture. When the implied link is ignored, the policy may not attain the desired results. The discourse with the politicians in the policy making process manifests that the politicians often think their commonsense is enough to deal with the problems and “normally treat professional policy advice dismissively.” There are exceptions in the perception of a few politicians that often “appreciate that just like designing a bridge using commonsense and no engineering skills is not advisable, designing economic policy by guess work and popular vote is not the wisest thing to do.” His acumen in dealing issues such as fiscal and monetary policies, access to food, globalization, anti-poverty programmes and the problems of corruption provides new insight in the policy making process. He gave a ranking of B+ to India with a cautious note on grade inflation but asserting that India is at the crossroads. .
Professor Kaushik Basu did not rank the performance of the Bangladesh Economy in terms of a letter grade though a letter grade could serve the level of his acceptance in the management of the Bangladesh Economy. His visit will no doubt add heat in the thaw process of normalization of relationship between Bangladesh and the World Bank.  It is encouraging to note when he appreciates the Bangladesh effort to finance a massive Padma Bridge project through own financing – a correct approach with huge amount of foreign reserves. The excellent macroeconomic management that bolsters the economy to an average growth of 6 plus per cent for twelve years and continuation of consistent policies that could shape a higher growth rate to meet the target of Mid-Level countries.  The Prospects Group Unit in the World Bank that works with the data on growth scenario of economies of the world confirms this finding. Though the growth is often inflected with the political turmoil, it is a point for reflection on the resilience of the economy and on the growth propelling forces.
Bangladesh economy is at the cusp as Kaushik Basu perceived and the ground is now set for takeoff, a very old concept that relates to Stages of Growth by Robert Rostow. An aircraft becomes airborne after a successful takeoff stage. Once the aircraft attains a stable position a few minutes after the takeoff stage, the onward movement depends on many factors; such as air density, and radar connection. The analogy of an economy with an airborne aircraft is just a one to one relationship. Take the case of headwind and the tailwind. An aircraft needs to push through the headwind but it gets positive thrusts from the tailwind. Headwinds in economics are situations or conditions that make growth harder and tailwinds favour the growth.
During his stay at Dhaka, Kaushik Basu in an exclusive interview with the Prothom Alo [December 18, 2015] delineated a few crucial issues that warrant immediate attention for a stable and congenial environment for sustainable growth when the economy is fully airborne.  Kaushik Basu was explicit on the political risks in Bangladesh though there may other risks pertaining to world commodity market. Foreign Direct Investment may not be at the anticipated level as political and social unrest prevails. Corruption is a problem and government should take appropriate measures to curb corruption at all levels. Common people and the government should also be alert on terrorism. Another important point of his discussion is the link between democracy and development. He referred the dictatorial rule of Anastasio Somoza Garcia in Nicaragua and the alternative scenario in China and Singapore but with an emphasis that only a working democracy can lead to sustained growth. Indeed, the defined contour is democracy for development and you have to live with the different opinions and the art of accommodations. Democracy attains maturity with tolerance, forbearance and mutual respects. Look at the state of democratic norms in the Scandinavians countries where participation is spontaneous and synergies are unique.
The economic scenario and political chaos at the initial years after the independence did not bid any optimism for the vibrant Bangladesh that the world now looks with curiosity today. The graduation from an agrarian base to a manufacturing base on the basis of manufacturing sector’s contribution in GDP over 30 per cent and service sector’s contribution over 50 per cent of GDP is the manifestation of the structural change in the economy. The book Bangladesh: The Test Case of Development by Just Faaland and J.R. Parkinson published by University Press Limited in 1976 is a classic book that drew the development panorama and the development experience the country was evolving through and the state of disarray in the economic management. Both of them were correct in many assumptions and imperatives, sceptical on some policy choices and were wrong in many prophesy. The Concluding Chapter, Chapter XI, Progress with Poverty paints at scenario that was true when they wrote the book but a careful reading would divulge the truth how they were wrong on the premises and we the common people struggled to make our country happy and prosperous. Currently, Bangladesh is neither a Malthusian state nor an aid dependent country.
We all wish to see a happy, prosperous and democratic Bangladesh free of corruption with firm institutional base that would place the country in the category of Mid-level countries in near future.
That is the wish of the ordinary citizen on the eve of the New Year, 2016.

The writer is a professor of Economics, United International University.