Homo Sapiens
ELITE MEMBER
- Joined
- Feb 3, 2015
- Messages
- 9,641
- Reaction score
- -1
- Country
- Location
ECONOMIC GROWTH IN BANGLADESH
'The test case for development' hypothesis revisited
Akbar Ali Khan
Thomas Carlyle, the Victorian historian, characterized Economics as a dismal science. Seldom were the practitioners of this pessimistic art as dejected as on the birth of Bangladesh. The new-born state was characterized as a Malthusia where unrestrained population increase overwhelms the country's growth potentials. Kissinger viewed Bangladesh as a “bottomless basket”. In 1972 World Bank assessed the situation in Bangladesh as follows:” Even under the best of circumstances, Bangladesh constitutes a critical and complex development problem. The population is poor (per capita income of $50 to $70 – a figure which has not risen over the past 20 years), overcrowding (population density is nearly 1400 per square mile) and becoming more so (population is growing at 3 percent per annum) and largely illiterate (under 20 percent literacy rate)”. In 1976, Just Faaland and Parkinson encapsulated Bangladesh's trauma in the phrase 'test case for development'. They argued, “If development could be made successful in Bangladesh, there can be little doubt that it could be made to succeed anywhere else. It is in this sense that Bangladesh is the test case for development”. Because of dire predictions of prophets of gloom and doom, the social scientists throughout the world keenly observed the unfolding of Bangladesh drama. For more than four decades, Bangladesh belied the pessimistic prophecies of economists and displayed extraordinary resilience in the face of natural catastrophes and man-made calamities. This short note seeks to compare the actual economic achievements of Bangladesh with the predictions by economists.
“The Test case for Development' hypothesis is based on three assumptions. First, this hypothesis was influenced by Pakistani propaganda that West and East Pakistan together was a viable economy whereas a sovereign East Pakistan under the title of Bangladesh was not. Secondly, the acceleration in growth of population in newly-born Bangladesh will continue unabated and its economic growth will fall far short of population growth. Finally, Bangladesh was born as an aid-dependent economy and its aid dependence would increase with the passage of time. Unfortunately, none of these predictions were vindicated by history.
The validity of the first assumption that East Pakistan was economically more viable than independent Bangladesh may be tested by comparing pre-independence and post-independence per capita income growth in Bangladesh. Table-1 presents the main trends of per capita income growth in Pakistan till 1971.
Per capita GDP in East Pakistan declined continuously for 15 years since the birth of Pakistan. This happened despite the fact that population in East Pakistan between 1951 and 1961 grew slowly (about 2 percent)owing to higher emigration of the minorities. In the first decade of Pakistan (1950-60), per capita income in East Pakistan in real terms fell by nearly one percent per annum. This decline was arrested by mid 60s and per capita income edged up from Rs. 310 in 1949-50 to Rs. 314 in 1969-70 –registering growth of about 1.3 percent in 20 years. At this rate, per capita income in East Pakistan would have doubled in about 1500 years. In reality, per capita income in Bangladesh doubled in thirty years during the period 1975-2005. Table-2 shows the growth of per capita income in Bangladesh during the period 1971-2010.
It is obvious from table-2 that annual per capita income growth in Bangladesh since 1972 exceeded almost every year total per capita income growth in East Pakistan in twenty years. This clearly suggests that political independence provided much more conducive environment for growth in Bangladesh than united Pakistani. . Though economic growth in East Pakistan was revived during Ayub Khan's so-called decade of reforms, growth rate in erstwhile East Pakistan was much lower than that of West Pakistan. A comparison of per capita incomes in erstwhile two wings of Pakistan suggest following conclusions:
(1) In the first two decades in Pakistan, per capita income in erstwhile East Pakistan virtually stagnated (2,3 per cent in twenty years) though per capita income in West Pakistan increased by 55 per cent. GDP growth in East Pakistan increased during Ayub Khan's rule. However, GDP growth in East Pakistan during Ayub regime was much slower than that of West Pakistan. During 1960-70, GDP in East Pakistan grew at the rate of 3.7 per cent while the corresponding rate for West Pakistan was 6.7 percent.
(2) Per capita income in West Pakistan in 1950 was only four per cent higher than that of East Pakistan. In 1970 per capita income in West Pakistan exceeded that of East Pakistan by 61 percent. The increase in disparity of two wings reinforced the secessionist argument that West Pakistan was becoming richer at the expense of East Pakistan.
(3) Pakistan experienced highest growth rates during military rules (see-table-3). During last five decades, highest growth rate in Pakistan (6.7 per cent) occurred during 1960-70 when Ayub Khan and Yahya Khan ruled. The second highest growth rate in Pakistan was achieved during the rule of Zia ul Huq (6.3 percent). In Bangladesh, growth rate picked up during 1990-2006 when democratic governments were in office. This suggests that democracy is conducive to economic growth in Bangladesh whereas military rule worked better in West Pakistan.
Bangladesh also disaproved dire predictions about population explosion. Total population in East Pakistan in 1949-50 was 42.3 million and in West Pakistan 36.5 million. In 1950, East Pakistan had 5.8 million more people than West Pakistan. In 1970, population of East Pakistan (69.6 million) exceeded that of West Pakistan (58.8 million) by 10.8 million. This trend was totally reversed since 1971.In 2008 Pakistan had 6 million more people than Bangladesh. This clearly suggests that Bangladesh succeeded in decelerating growth of population while Pakistan failed to moderate its population growth. This is all the more creditable because life expectancy in East Pakistan increased faster than that of West Pakistan. In 1960, life expectancy in East Pakistan was 42 years while life expectancy in West Pakistan was 47 years. In 2009 life expectancy in Bangladesh was 66 years - , compared to 67 years in Pakistan. Despite acute scarcity of land and devastating natural calamities like floods and cyclones, Bangladesh experienced a significant increase in food production since her birth. Total food grain production in East Pakistan in 1964-65 was 10.4 million tons. The average food grain production in Bangladesh during the period 2001-05 was 26.5 million tons. Bangladesh did not degenerate into a Malthusia because Bangladesh succeeded in curbing population growth and growing more food simultaneously.
Finally, though aid-dependence of Bangladesh was indeed high in initial years owing to devastations caused to physical infrastructure by Pakistan army and refusal of Pakistan Government to share the assets including foreign exchange reserve of Undivided Pakistan. However, Bangladesh's aid-dependence significantly declined during last four decades. Ironically, per capita aid dependence of Pakistan was very often higher than that of Bangladesh since the dismemberment of Pakistan. Table-4 presents data on aid-dependence in 2008.
There are at least eighty countries in the world where per capita aid receipt is higher than that of Bangladesh. There are at least fifty countries where aid receipts are 300% higher than that of Bangladesh. Per capita aid receipt in West Bank and Gaza is $659 in 2008 whereas the corresponding figure for Bangladesh is $13 only. If Bangladesh is a basket case, how would Kissinger characterize the first fifteen countries in Table-4?
The creative and hardworking poor in Bangladesh have disproved the “test case for development hypothesis. Even Faaland and Parkinson have revised their assessment. In a revisionist article in 2007, they wrote, “At this point with three decades and more of experience of limited and chequered progress, sustained development in Bangladesh appears to be within reach, though far from assured”
AFP
It is essential to add two caveats to optimistic assessment of Bangladesh economy portrayed above. First, Bangladesh did well during last four decades. However, her potentiatialities were much higher. Because of political turmoil and governance deficits, Bangladesh could not travel along the optimum trajectory of production possibility frontier. There is much scope for acceleration of economic growth and better distribution of benefits of growth in Bangladesh. Secondly, Bangladesh is still backward compared to average level of development in the rest of the world. Per capita gross national income (weighted average) in the world in 2008 was $8654 whereas the corresponding figure for Bangladesh was only $520.This implies that despite laudable achievements in last few decades, Bangladesh has a long way to go. However, economic backwardness of Bangladesh is not necessarily an insurmountable obstacle. As Alexander Gerschenkron rightly argued that backwardness can be an advantage rather than an obstacle. By using latest technology and avoiding the mistakes of predecessors, late comers can close the gap with developed countries much faster. Given the right political leadership, Bangladesh need not emulate what the developed countries did; she can make a new history by taking advantage of better technology, bigger market and globalization.
...........................................................................................
(The article is a reprit from our 20th Anniversary Supplement.)
The writer is former secretary Bangladesh government & advisor to caretaker government.
http://www.thedailystar.net/news/the-test-case-for-development-hypothesis-revisited
'The test case for development' hypothesis revisited
Akbar Ali Khan
Thomas Carlyle, the Victorian historian, characterized Economics as a dismal science. Seldom were the practitioners of this pessimistic art as dejected as on the birth of Bangladesh. The new-born state was characterized as a Malthusia where unrestrained population increase overwhelms the country's growth potentials. Kissinger viewed Bangladesh as a “bottomless basket”. In 1972 World Bank assessed the situation in Bangladesh as follows:” Even under the best of circumstances, Bangladesh constitutes a critical and complex development problem. The population is poor (per capita income of $50 to $70 – a figure which has not risen over the past 20 years), overcrowding (population density is nearly 1400 per square mile) and becoming more so (population is growing at 3 percent per annum) and largely illiterate (under 20 percent literacy rate)”. In 1976, Just Faaland and Parkinson encapsulated Bangladesh's trauma in the phrase 'test case for development'. They argued, “If development could be made successful in Bangladesh, there can be little doubt that it could be made to succeed anywhere else. It is in this sense that Bangladesh is the test case for development”. Because of dire predictions of prophets of gloom and doom, the social scientists throughout the world keenly observed the unfolding of Bangladesh drama. For more than four decades, Bangladesh belied the pessimistic prophecies of economists and displayed extraordinary resilience in the face of natural catastrophes and man-made calamities. This short note seeks to compare the actual economic achievements of Bangladesh with the predictions by economists.
“The Test case for Development' hypothesis is based on three assumptions. First, this hypothesis was influenced by Pakistani propaganda that West and East Pakistan together was a viable economy whereas a sovereign East Pakistan under the title of Bangladesh was not. Secondly, the acceleration in growth of population in newly-born Bangladesh will continue unabated and its economic growth will fall far short of population growth. Finally, Bangladesh was born as an aid-dependent economy and its aid dependence would increase with the passage of time. Unfortunately, none of these predictions were vindicated by history.
The validity of the first assumption that East Pakistan was economically more viable than independent Bangladesh may be tested by comparing pre-independence and post-independence per capita income growth in Bangladesh. Table-1 presents the main trends of per capita income growth in Pakistan till 1971.
Per capita GDP in East Pakistan declined continuously for 15 years since the birth of Pakistan. This happened despite the fact that population in East Pakistan between 1951 and 1961 grew slowly (about 2 percent)owing to higher emigration of the minorities. In the first decade of Pakistan (1950-60), per capita income in East Pakistan in real terms fell by nearly one percent per annum. This decline was arrested by mid 60s and per capita income edged up from Rs. 310 in 1949-50 to Rs. 314 in 1969-70 –registering growth of about 1.3 percent in 20 years. At this rate, per capita income in East Pakistan would have doubled in about 1500 years. In reality, per capita income in Bangladesh doubled in thirty years during the period 1975-2005. Table-2 shows the growth of per capita income in Bangladesh during the period 1971-2010.
It is obvious from table-2 that annual per capita income growth in Bangladesh since 1972 exceeded almost every year total per capita income growth in East Pakistan in twenty years. This clearly suggests that political independence provided much more conducive environment for growth in Bangladesh than united Pakistani. . Though economic growth in East Pakistan was revived during Ayub Khan's so-called decade of reforms, growth rate in erstwhile East Pakistan was much lower than that of West Pakistan. A comparison of per capita incomes in erstwhile two wings of Pakistan suggest following conclusions:
(1) In the first two decades in Pakistan, per capita income in erstwhile East Pakistan virtually stagnated (2,3 per cent in twenty years) though per capita income in West Pakistan increased by 55 per cent. GDP growth in East Pakistan increased during Ayub Khan's rule. However, GDP growth in East Pakistan during Ayub regime was much slower than that of West Pakistan. During 1960-70, GDP in East Pakistan grew at the rate of 3.7 per cent while the corresponding rate for West Pakistan was 6.7 percent.
(2) Per capita income in West Pakistan in 1950 was only four per cent higher than that of East Pakistan. In 1970 per capita income in West Pakistan exceeded that of East Pakistan by 61 percent. The increase in disparity of two wings reinforced the secessionist argument that West Pakistan was becoming richer at the expense of East Pakistan.
(3) Pakistan experienced highest growth rates during military rules (see-table-3). During last five decades, highest growth rate in Pakistan (6.7 per cent) occurred during 1960-70 when Ayub Khan and Yahya Khan ruled. The second highest growth rate in Pakistan was achieved during the rule of Zia ul Huq (6.3 percent). In Bangladesh, growth rate picked up during 1990-2006 when democratic governments were in office. This suggests that democracy is conducive to economic growth in Bangladesh whereas military rule worked better in West Pakistan.
Bangladesh also disaproved dire predictions about population explosion. Total population in East Pakistan in 1949-50 was 42.3 million and in West Pakistan 36.5 million. In 1950, East Pakistan had 5.8 million more people than West Pakistan. In 1970, population of East Pakistan (69.6 million) exceeded that of West Pakistan (58.8 million) by 10.8 million. This trend was totally reversed since 1971.In 2008 Pakistan had 6 million more people than Bangladesh. This clearly suggests that Bangladesh succeeded in decelerating growth of population while Pakistan failed to moderate its population growth. This is all the more creditable because life expectancy in East Pakistan increased faster than that of West Pakistan. In 1960, life expectancy in East Pakistan was 42 years while life expectancy in West Pakistan was 47 years. In 2009 life expectancy in Bangladesh was 66 years - , compared to 67 years in Pakistan. Despite acute scarcity of land and devastating natural calamities like floods and cyclones, Bangladesh experienced a significant increase in food production since her birth. Total food grain production in East Pakistan in 1964-65 was 10.4 million tons. The average food grain production in Bangladesh during the period 2001-05 was 26.5 million tons. Bangladesh did not degenerate into a Malthusia because Bangladesh succeeded in curbing population growth and growing more food simultaneously.
Finally, though aid-dependence of Bangladesh was indeed high in initial years owing to devastations caused to physical infrastructure by Pakistan army and refusal of Pakistan Government to share the assets including foreign exchange reserve of Undivided Pakistan. However, Bangladesh's aid-dependence significantly declined during last four decades. Ironically, per capita aid dependence of Pakistan was very often higher than that of Bangladesh since the dismemberment of Pakistan. Table-4 presents data on aid-dependence in 2008.
There are at least eighty countries in the world where per capita aid receipt is higher than that of Bangladesh. There are at least fifty countries where aid receipts are 300% higher than that of Bangladesh. Per capita aid receipt in West Bank and Gaza is $659 in 2008 whereas the corresponding figure for Bangladesh is $13 only. If Bangladesh is a basket case, how would Kissinger characterize the first fifteen countries in Table-4?
The creative and hardworking poor in Bangladesh have disproved the “test case for development hypothesis. Even Faaland and Parkinson have revised their assessment. In a revisionist article in 2007, they wrote, “At this point with three decades and more of experience of limited and chequered progress, sustained development in Bangladesh appears to be within reach, though far from assured”
AFP
It is essential to add two caveats to optimistic assessment of Bangladesh economy portrayed above. First, Bangladesh did well during last four decades. However, her potentiatialities were much higher. Because of political turmoil and governance deficits, Bangladesh could not travel along the optimum trajectory of production possibility frontier. There is much scope for acceleration of economic growth and better distribution of benefits of growth in Bangladesh. Secondly, Bangladesh is still backward compared to average level of development in the rest of the world. Per capita gross national income (weighted average) in the world in 2008 was $8654 whereas the corresponding figure for Bangladesh was only $520.This implies that despite laudable achievements in last few decades, Bangladesh has a long way to go. However, economic backwardness of Bangladesh is not necessarily an insurmountable obstacle. As Alexander Gerschenkron rightly argued that backwardness can be an advantage rather than an obstacle. By using latest technology and avoiding the mistakes of predecessors, late comers can close the gap with developed countries much faster. Given the right political leadership, Bangladesh need not emulate what the developed countries did; she can make a new history by taking advantage of better technology, bigger market and globalization.
...........................................................................................
(The article is a reprit from our 20th Anniversary Supplement.)
The writer is former secretary Bangladesh government & advisor to caretaker government.
http://www.thedailystar.net/news/the-test-case-for-development-hypothesis-revisited
