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Proclamation of Independence

Averting K-shaped recovery

Rashed Al Mahmud Titumir | Published: 00:13, Dec 16,2020

 
 

AT A time when the country is about to celebrate its golden jubilee of independence, the COVID-19 pandemic is hitting people’s lives and livelihoods with great uncertainty. The question is what kind of recovery is needed to overcome the uncertainties posed by the ongoing pandemic. Although there is much speculation on the process of the recovery, the analysis on the type or nature of the recovery trajectory has remained a less focused issue.

Recovery is deemed to be following either a I, K, L, U, V or W shape. A V-shaped economic recovery indicates a sharp fall and then a quick return to baseline. A U-shaped recovery suffices a short-term economic stagnation, whereas an L-shaped recovery stands for a long-term one. The shape could also resemble an ‘I’ showing only a downward slip. A second wave of COVID-19 might cause the recovery to be W-shaped. The worst-case scenario is the K-shaped pathway. In this scenario, the inequality will continue to rise, even if the recovery is relatively quick. Optimists project a rapid and quick recovery to the previous growth path, resembling a V-shaped curve. Nevertheless, the nature of the recovery relies on the process in which the recovery will be carried out. However, the nature of the recovery needs to be scrutinised in the light of the three main pillars mentioned in the ‘proclamation’ of Bangladesh’s independence, made on April 10, 1971, promising the citizens of, ‘equality, human dignity and social justice’.

The independent Bangladesh came into being through hundred years of people’s struggles with the promise of becoming a citizens’ state ‘to ensure equality, human dignity and social justice’. It is however imperative to explore whether the state has a social contract — the constitution — that translates those cardinal principles into reality, whether it has a system of representation that reflects the wishes and diversity of the citizenry, whether it has the executives that work for a citizens’ state, and whether it has the functioning apparatuses that encompass and advance strategic interest at home and abroad. At the same time, it is necessary to look into if the citizens of Bangladesh are receiving justice in terms of the distribution of wealth, opportunities, and privileges within society. These require deeper investigations, at the least, into the institutional arrangements and organisation structures, including the political process, the organs of the state, the executives, the judiciary, etc. An attempt, therefore, has been made here to scrutinise whether Bangladesh provides basic services such as education, health, housing, transportation and social security to all her citizens to lead a life and livelihood with dignity and whether the state has been able to enact progressive taxation and regulation of markets to ensure fair distribution of wealth, equal opportunity and equality of outcome, as well as if the state has been able to guarantee human dignity, freedom of thought, liberty of conscience, representative democratic institutions, freedom of assembly and association.

 

Equality 

AS REGARDS equality and inequality in terms of income and access to resources, the rural-urban divide and the male-female gap are conspicuous. Most strikingly, there is little discussion on wealth inequality. Thus, advantages of birth, for instance, harbours a culture in which work and efforts are discouraged. Ideally, Bangladesh should also have a closure to zero unemployment as there are neither unemployment benefits nor any other social security provisions of a welfare state. The latest labour force survey shows that there has been an increase in unemployment rate where the educated youth holds the major share of unemployment. Most of the employment opportunities are in the informal sector, in which there is rampant practice of dispossessions of workers’ rights. Employment in the formal sector has declined. The International Labour Organisation Wage Report 2020–21 found that minimum wage in Bangladesh is the lowest among countries in the Asia-Pacific region, and much lower than the internationally agreed poverty line income, at $48, compared to a $491 in Pakistan. The COVID-19 pandemic may have exacerbated the situation.

Due to COVID-19, the poverty rate, which decreased in the recent past, has been exhibiting an upward trend for the first time since 1992. It may increase to 43.5 per cent if two million migrant workers return home due to income and job loss. A major portion of the middle class has suffered atypical loss and has become fragmented into a new poor category as they have not received a basic income grant. At least one in three live in vulnerability to poverty. Poverty has gone beyond a straightforward headcount ratio during the pandemic, indicating the differential impacts on groups without entitlements — the new poor, small businesses, female-headed enterprises — in terms of income erosion, unemployment, food security and nutrition. The vulnerable non-poor population experienced an income loss of 42 per cent in February–June 2020. Around 17.24 per cent were recorded unemployed in June 2020, affecting female salaried job-holders the most. The fallout is however not limited to the informal sector or rural areas. Rights are not protected even in the formal sector, as employees face income erosion and furlough without any subsequent financial support from the government. The pauperisation process is likely to accelerate due to natural disasters, such as cyclone Amphan and the decade’s worst floods, which have left numerous communities stranded and despondent in the middle of the pandemic. There are forecasts that by 2030 poverty will encounter a deterioration of 15 per cent, largely due to implications of climate change.

Increasing income inequality due to income concentration in the top 10 per cent at the expense of the bottom 40 per cent in the population had been occurring prior to the pandemic; however, the differential impacts of the pandemic have accelerated polarisation between the classes. The income shares of the middle 50 per cent have changed negligibly. The shares of the bottom 40 per cent decreased by 28.40 per cent between 1985 and 2016, whilst that acquired by the top 10 per cent rose by 21.30 per cent, along with a 17.3 per cent increase in ultra-wealthy individuals. This has been evidenced by a spurt in capital flight ($5.9 billion in 2015), putting Bangladesh in second highest position in South Asia.

Inequality is expected to soon cross the fault line of 0.5 in the Gini coefficient. The breaking down of the middle class into the new poor is also likely to worsen the Palma ratio, the ratio of the richest 10 per cent of the population’s share divided by the poorest 40 per cent’s share. The capacity to adapt to the so-called ‘new normal’ has favoured the capitalists, who can utilise new avenues of profit during a contraction in the economy, further heightening returns to capital vis-a-vis labour and resulting in a greater concentration of wealth. Physically disjointed sectors such as e-commerce avenues for groceries and online pharmacies experienced a sharp rise in orders as more consumers opted for zero-contact deliveries, decreasing the sales of local vendors. Farmers were compelled to adopt distress sales of their produce as transport services were halted. They incurred losses of more than Tk. 560 billion in one and a half month only.

It is observed that a lack of institutions has worsened inequality. Bangladesh is being run, like other postcolonial countries, by intermediate classes which are interested only in securing wealth by any means. Broadly, the intermediate classes comprise rich and middle-class peasants, urban petty bourgeoisies and educated middle classes, who have greater degree of organisational ability than workers, poor peasants and unemployed populations without an education. This also brings home an absence, and crisis in formation, of the elite or bourgeoisie. As result, differentiation is turning up through several avenues, including policy-induced impacts on ‘vertical inequality’— the differences between individuals or households and systemic reasons of ‘horizontal inequality’— the difference between groups of similar origin or cognitive ability that may arise due to culturally formed disparities between them. In terms of policy-induced impacts, the informal sector, comprising 87 per cent of the total employed population, remains outside the jurisdiction of labour laws, which means workers’ employment is precarious and characterised by lower than minimum wages, unfair dismissals and extreme vulnerability to joblessness.

 

Human dignity

THE concept of ‘human dignity’ of the citizens carries a number of intrinsic meanings, denoting that an individual at least enjoys freedom. Citizenship entails an individual to be an active participant, indicating his or her political, social and economic rights. The liberals have favoured ‘negative freedom’ — the rights of non-interference, absence of obstacles and no harm to others. Therefore, citizenship and rights go hand in hand, and are inalienable and sometimes even absolute.

The fundamental crisis of the Bangladesh polity is the citizens’ disempowerment. The disturbing example of citizens’ disenfranchisement reflects the tendency to cling to power, or overthrow a regime by violence, without any inclusive elections, an exercise of people’s power. In addition, the absence of active citizenship has degenerated the people at large into, what Hobbes calls, ‘continual fear and danger of violent death, and the life of man, solitary, poor, nasty, brutish, and short’. The citizens are merely empowered enough that they are freely enjoying and practising the freedoms of voting, thought and conscience, speech, expression, association, assembly, and movement. More fundamentally, people are facing fragility in terms of social cohesion, solidarity and cooperation resulting from weak institutional and limited political room to build positive and cooperative relationships with each other to live together as species-beings.

As such, the main pillars of the state, namely a functioning judiciary, an effective parliament and a civil administration to implement the political mandate for the people given by the people to the elected representatives of the people, are being eroded. The motive of the ruling elite is to simply have a centralised state with concentration of power. The system becomes authoritarian and cannot withstand even muted dissent and public scrutiny. Such an absence of deliberative democracy can only disservice the people at large and cannot by any means even guarantee the minimalistic Lockean formation of ‘the life, the liberty, health, limb, or goods of another’. Active citizenship plays a crucial role in restoring the state affairs in track by ensuring accountability through checks and balances. The urge for securing money, by any and all means, however results in the alienation between the incumbents in power and people at large, and in excessive dependence on the coercive power of the state. This form of alienation is fortified by denial of citizen’s freedoms, civil rights and socio-economic justice. Over the years, through the actions of successive regimes, the aspirations of the war of liberation have been supplanted by a completely different kind of aspiration for the power elite — primitive capital accumulation. This process runs as the clientelist network grabs the opportunities and resources of the state by using state-power.

The political process in Bangladesh has evolved in a particular direction, corresponding to the characteristics of political activists and the incentive-structure to reproduce the political system. The particular form of materialist incentives of primitive accumulation of resources through use of power and coercion has led to a system of clientelist political networks in Bangladesh. The clientelist resource-dependent networks, for perpetuating their objective of accumulation of wealth and power, are symbiotically connected at vertical layer (local, regional and national) and are intrinsically interlinked at horizontal level with business, administration, law-enforcing agencies and judicial system. For example, political party leaders employ cadres and mastaans (musclemen) to expropriate public resources and loot or deprive soft targets (minorities, indigenous people, opposition, and general people without political affiliation). The police usually do not arrest the ruling party leaders and cadres for their wrongdoings because they are backed by the government of the day. The administration dishes away bounty to, and benefit from, the ruling political ring. The businessmen elect supporters of the ruling party to lead the business associations.

On another end, democracy and pluralism are at stake; so is creativity. Enterprise making is ditched for sycophancy, nepotism and systematic misappropriation, subverting productivity. As such, the pace of growth obtained by the toils of labour and enterprise goes largely to waste and becomes unsustainable. The economy, even if its size expands, jumps from the frying pan of one crisis to the fire of another, until a gaping hole in the system becomes too big to cover up by stop gap measures. For guaranteeing equality and human dignity, the country warrants a new social order for moving towards a system of government that ensures ‘from each according to his ability, to each according to his need.’

 

Social justice

THE concept of social justice denotes liberation from unjust economic, political and social conditions. The state is supposed to ensure justice within the society in terms of wealth, opportunity etc. The Bangladesh polity, however, is far behind to turn this principle into reality, which becomes evident from the provision of its social and economic policies. It is observed that the regressive tax structure is ridden with low base, avoidance and evasion. There is a missing in terms of distributive justice. The narrow tax-GDP ratio provides little scope for increasing the size of the budget, suited to the size and needs of the population. The government is yet to achieve the statistical regularity — the higher the generation of direct taxes, the better it provides basic services and the more accountable the government is to people.

The expenditure in social sectors such as education and health has increased in nominal terms. The rate of increase, however, has slowed down in the last several years. In addition, these two sectors have been suffering from insufficient budgetary allocation as well as from the slow rate of implementation of the annual development programme. The declaration in allocation is attributed to the diversion of resources to meet the growing payment on account of principal and interest (this has become the largest expenditure item in the revenue budget of the country) and rent-accruing subsidies.

In the labour market, the opportunity of employment in the formal sector presents a negative growth, leading to more informalisation of employment. There has been a high growth in economically active population (i. growing youth labour force), yet the creation of employment has not matched the growth of people looking for employment. Moreover, unemployment rate has worsened in the country and the problem of disguised unemployment remains as severe as ever.

In response to any shock, social protection provisions are marred by problems of fragmentation, errors of inclusion and political patronage-based targeting. A total of 125 programmes under 25 ministries are financed through the budget of FY2020–21, allocating Tk 955.74 billion, which is 3.01 per cent of GDP. On top of that, the formal mechanism for sharing information and communicating among the implementing ministries/divisions are quite lengthy and complicated. Moreover, some programmes are quite similar but initiated differently. For example, allowance for the financially insolvent population with disabilities and stipend for students with disabilities are different schemes. Around 30 per cent of the social security budget is allocated for pensions for retired government employees, whilst there are also 85 small programmes that together take up only 0.5 per cent of the budget. If the emerging new poor is included, the intended number of beneficiaries for safety net programmes is very few. Around eight million people receive different allowances, which has been expanded to 9.6 million in ongoing fiscal year. The lack of inclusive social safety nets has given rise to shortcomings in constructing the list of recipients, allowing room for ineffective management of resources, extortion and abuse of power.

Systemic or inter-locking inequality — referring to discrimination against certain groups based on gender or race — has resulted in more adverse impacts on the marginalised who are without power and unable to take collective action. For example, women employed in the readymade garments sector lack collective bargaining power with their employers, and face threats of job loss due to an absence of unions to uphold their rights. Farmers, too, face the drawback of not having associations or cooperatives in bargaining with intermediaries who exercise illicit power in setting prices. Private hospitals too were accused of treatment refusals and charging exorbitantly high for the treatment of COVID-19 patients, making their services unaffordable and inaccessible for the bulk of the population.

There are thus various reasons for the recovery to assume a K-shaped path of polarisation, as income groups diverge due to economic fallouts. Conventional budgetary measures to address the new poor, who possess distinct characteristics of their own, may prove to be ineffectual. Simultaneously, placing more liquidity into the hands of people fails to ensure that support reaches the last individual, thereby creating scope for greater inequality. This was illustrated by a reduction in consumption as a coping mechanism for households, and a decline in factory activity. Manufacturing activity declined 25.57 per cent in April compared to the previous year and wage rate in this sector also reduced to 5.18 per cent in July from 5.57 per cent in January 2020, according to the Bangladesh Bureau of Statistics. Several labour-intensive cottage-micro-small-medium industries are often out of the bounds of the mainstream financial sector ie the ‘unbanked’ population. As a result, these firms lack access to credit to keep their businesses afloat, which is more critical during a contraction. The cottage, micro and small enterprises however together cover 99.84 per cent of the total enterprises in the country. SMEs, comprising the self-employed, small business owners and vendors, contribute one-fourth to the GDP as of 2018 it stands at $79 billion and accounts for 40 per cent of the manufacturing output as per the Asian Development Bank. The industrial sector itself contributes most efficiently to poverty reduction. The excessive dependence on monetary policy with stringent conditions in the absence of actionable fiscal support may be a deterrent in bouncing back to the growth path.

Policymaking in Bangladesh has remained fraught with orthodoxy and a lack of creativity despite economic and social progress. These have been further aggravated due to the lessening of the freedom of expression and the government’s intolerance towards differing perspectives. A key overriding challenge, thus, remains to develop and enhance productive capacity and provision of public services for a decent living. This would require productive use of technology and infrastructural facilities. Skills — much beyond the traditional concept of education — and technology are key elements in the future transformative equation; so are the questions of employment creation and reduction in inequality to establish a fairer society. An inclusive political system is the pre-condition for achieving those objectives. All of these lead to the idea of a new social order between the citizens and the state.

 

Road to sustainable recovery

THE ever increasing hunger for accretion of economic rents wants an exclusive political system to spread all over the horizontal and vertical levels, creating a culture of occupying a position — from member of parliament to down to the chairman of the Union Parishad — uncontested or without any competition from opposition political parties. The process of fear and exclusivity has created a sense of low business confidence, which has resulted into depressed investment demand, leading to a lesser creation of jobs. The economic rents also fly out from the country as is evident in an increased capital flight from Bangladesh. The absence of inclusive political system has also exerted pressures on the institutions, and, as a result, the institutions have degenerated. In order for economic growth and social development to be sustainable, a representational public order is required. Only a democratically accountable system of governance can advance the three core principles of the war of independence. Bangladesh’s hope sits on pluralism and an inclusive political system can infuse actualisation of its unlimited potentials.

A sustainable solution warrants delving into the roots of the crisis — the formation of postcolonial independent state, the punctured institutions and the contingent political competition for primitive capital accumulation. These have largely been ignored and the formation of a citizen state has been held back, with frequent conflicts. The compulsion of citizenship and state building warrants a new social settlement, new democratic constitution, to build institutions for citizens.

In light of past experiences, in order to recover from the current recession, the cash must reach the last mile beneficiary directly. For doing so, seven principles for overcoming the crisis are listed here and if these are fulfilled, a relatively non-discriminatory recovery can be made possible. First, the cash must reach the pockets of every citizen regardless of current income, in the form of universal basic income. Second, provisions for universal public goods should be made adequate, such as education, health and social security. Third, policies must be taken for the majority instead of considering only the interests of a few, and in that regard, cottage, micro, small and medium enterprises, which employ most of the people, need to be brought under financial incentives with emphasis. Fourth, diversification of products and their markets is crucial to augment competitiveness. Fifth, the production system must be green and clean in order to ensure sustainable and green development. Sixth, new investment and new employment must be created through fiscal policy rather than relying solely on monetary policy. Seventh, programmes and policies need to be mission-oriented and public spending should be made to create multiplier effects on the economy, which will provide public goods and internalise externalities. 

The consequential question is whether it is feasible or not. Bangladesh has a track record. The frequency of elections has increased from only two in British India and two in Pakistan to 10 in Bangladesh. The movements of 11 points to six points to an eventual one point gave birth to an independent Bangladesh, the only country in the whole of South Asia that has earned her independence shedding blood and defeating authoritarian and military governance. Subsequent movements fought against one-party populist authoritarianism and clientelistic governance, with a positive consequence in which political organisations can be set up and operated to challenge the ruling coalition, and a negative unintended consequence of the cyclical pattern of the conflicts ensuing in every fourth year after an election. The demonstrated resilience of the people only vouches in favour of a struggle for a new democratic order for an empowered citizenry.

 

Dr Rashed Al Mahmud Titumir, a professor of economics at the development studies at Dhaka University, is the chairperson of Unnayan Onneshan, an independent multidisciplinary think-tank. [email protected]

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