Even as people stand deep in the virus crisis right now, the economy of the future remains a major concern. For Bangladesh the problems are many as it has a weak economic structural framework. It depends on connection capitalism and informal decision making instead of market dynamics. The result is the near absence of a formal system in the economy. It functions mostly around informal arrangement based on networks and connections. Among these inter-locked networks there are connections as well.
The BGMEA lesson
This produces a group of hyper rich, all linked to each other and with political connections. BGMEA is a good example as are major infrastructure players. Some dabble in several sectors which is again possible due to connections.
The bailout package announced by the Government and the response of the RMG sector was a good example of the essential informality of the sector. It seemed to operate on a profit to profit basis rather than regulatory mechanism based decision making systems.
Its the most powerful group in the business community and governments have always stood by them naturally. However, at a critical moment, its mismatch with the Government's intent even after receiving a massive bailout package. Its acts sent bad vibes to the people which embarrassed the Government considerably.
No decision has been so roundly criticized as was BGMEA's delay in closing the factories and later inviting workers back to work in a locked down world. It did back down and shut factories under pressure later. This showed that BGMEA is more of a lobbyist for hyper profit protection lobby and not a significant member / players that helps the ruling class.
Its lack of understanding of government priority was unusual given how many members are part of the official and out of power political clusters. The result is a loss of face for the Government and hence possibly reduced dependence on the BGMEA as a dependable group in future.
Urban work force face slashing
BGMEA's main problem is dramatic loss of demand globally as its main consumer countries are the worst hit ones. Since, the RMG sector as a whole has not pro-actively diversified, the conventional consumer markets, badly down will affect it too. While the BGMEA is a collection of the rich, they will individually survive in a downturn economy but the real whack will be on the workers.
These workers, mostly from the villages and without significant skills are very vulnerable. If the RMGs start shutting down, they have to little else to do but return to the villages. The urban informal economy will absorb some but any recessionary economy will be hard pressed to provide so many as they do now. The conclusion obviously is the depopulation of the cities as we have seen revently. People will go where work is and so they will go back left without employment options and the pressure on the rural economy will steeply rise.
Post remittance agro shift?
The rural economies will be hit by the decline of remittance economy massively as the hiring source countries are all hit. As consumption declines, so does oil demand and price and so does hiring of low end workers. Bangladeshis mostly are employed in the by-product sector of the oil economies. Common sense tells of termination of demand but how that will impact on Bangladesh is still not clear.
The PM's declaration of agricultural incentive is very timely but money alone will only go so far. Two issues are showing up in research as significant in the last two decades a rise in off farm economic activity b. decline of poverty with some investable rural surplus available. Its fair to say that while institutions have played a role, the villagers have played the biggest in both.
Compared to the cities which has come out looking far more vulnerable than expected in this crisis, the villagers may survive simply because the socio-economic back ups are bigger and embedded in rural socio-economy. But where will be the next economic space be?
It was said during the floods of 1998 that a famine was inevitable but the farmers turned the story around as they built seed beds very quickly after losing them to the floods. This was possible because various institutions particularly the NGOs were able to supply them mother seeds very rapidly. Hence a partnership is needed like 1998.
This was possible and as a result the agro-sector boomed by the early 90s. That is also needed now but who will build this partnership once more is the question.
Can the ruling class segments deliver once more?
The local level politicians and the field level bureaucracy are not looking good given their performance till date. Even a few accusations around this period would have trashed the local politicians and the bureaucracy's reputation but there have been more than several such instances. The health sector is in confusion as they have never performed in any emergency not to mention a massive pandemic. As a relatively high pampered group of professions they too have lost public confidence. The Government knows it. It has however found the police and the army much more reliable.
As the situation gets more grim, this new partnership pattern will be spelt out more clearly. Currently, the traditional ruling class partnership has been shaken and that will strengthen some groups and weaken others. Increasingly the key seems to lie in credibility of services rendered during the current emergency.
Rural societies will be key and the shift to agriculture in the absence of options will be a big factor in new configurations. So will be the representative members of the ruling class who form the critical partnership with the peasantry. Who that is and how much waits to be seen.
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