How state intervention can boost our economy
Economic interventionism, or state interventionism, is a policy perception favouring government involvement in the free market process with the aim of correcting market failures and promoting the general welfare of the nation. The idea generates from the notion that free markets are inherently inefficient and require the support of the state in order to promote national growth, increase employment levels, encourage income equality, control price levels and broadly stimulate a sustainable economy. In addition to the fundamental monetary and fiscal policies of the government, there exist several avenues for the AL administration to support Bangladesh's commercial progress, whilst ensuring the viability for businesses to prosper.
Bangladesh is at a transitional phase in its economic journey and if statistics are to be trusted, then the country is on its path to development. What needs to be addressed however is whether Bangladesh wishes to be a strong yet unequal economy, or one which is equitably prosperous for all sections of the country. To strike a balance is difficult, yet a conversation pertaining to this needs to begin in the first place. State interventionism in the economy has always been an issue of grave conflict between economists. The idea of governments intervening in the free market seems ill-motivated at first. Yet it is this very system which has helped countries like Canada, Sweden and Denmark, amongst others, to reach their output potential. On the other hand, a capitalist-based American market has indeed ensured the USA's path to being the largest economy in the world, yet questions pertaining to the American social systems remain the focal point of many in the political-left.
If one were to assess the Bangladeshi economy, the tenants of our recent progress have been a flourishing garments sector, high levels of remittance inflow and a stable agricultural sector. To ensure the continued performance of such, the government of Bangladesh has initiated several macroeconomic procedures to support these sectors. Yet it is unwise to be overly-dependent on these for long-term prosperity. It is here where state investments in the unlikely avenues of solar energy, a growing IT sector and the alternative ship-building industry, are needed.
In the case of solar energy, production cost and accessibility to land is a cause of concern. Traditional views of market interventions favour increased red-tape or bureaucratic barriers; however, in the case of renewable energy sources, the Bangladesh government would do well to provide potential investors with land and other capital resources in the northern parts of Bangladesh. Growth of the technological sector is a long-term aim of the current government, and one hopes tangible subsidies to this sector remain in the years to come. The ship-building industry has low labour costs and enhanced potential in the production of medium-ocean going vessels. What it needs from the government is further technical support and research funding to increase its competitiveness in the region.
The biggest areas of market failure in Bangladesh have stemmed from the health and education sector, whilst high levels of pollution from businesses always remain a cause of concern. Budgetary allocations for the health and education industries have increased substantially this past fiscal year, yet the qualitative nature of services in both these sectors remains a worry. For countries like Canada and Sweden, the areas where the government pushed for reforms most in regards to these sectors were in research and technological development. As such, it may be well-advised for the AL government to provide financial and scholarly support to enhance research and development capabilities. The quantity of education and healthcare services is an issue which is on its way to being addressed. Nevertheless, without state-based support, it would be nearly impossible to develop a quality education and healthcare system.
Pollution levels from chemical factories and other businesses have already had a grave impact on our water bodies and quality of air. Although there is wide-ranging consensus regarding the importance of environmental protection amongst the larger firms in Bangladesh, this is an idea which is yet to be internalised by the majority of small and medium sized businesses. Government regulations to protect the environment are in place, yet lack of information, understanding and ignorance amongst many firms have been detrimental to Bangladesh's economic sustainability. Rather than simply increasing the environmental tax and imposing regulations, the government must improve its oversight and enforcement measures. Whether this be through the Ministry of Environment or some other institution is a matter for Sheikh Hasina's administration to figure out immediately. Yet what is certain is national resources have to be, in no uncertain terms, guided towards ensuring the environmental future of the country.
All of the above, however, are dependent upon a high-performing labour market. The term 'human capital' refers to the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organisation or country. For far too long has investment in human capital remained an ignored issue in Bangladesh. The country has been so concentrated in developing its business potentials that it has forgotten its responsibility of enhancing individual potentials. Low human capital numbers tie into a low rate of post-secondary graduates and immobile workforce. Yes, a Bangladeshi garment worker is highly-skilled. Yes, a young boy from a village can fix car problems without any education. Yes, we have a resilient workforce. Yet it is certain that this workforce is surely underutilised and unused in many cases. It is here where the government needs to direct resources in mobilising human capital through training schemes across all occupational sectors, and thereby improve both geographical and occupational mobility of labour. Government internships, collegiate programmes, and specialised workshops and scholarships are some of the tried and tested ways to achieve the above. Otherwise, if history stands true, 20 years down the line we will have a strong but stagnated economy.
In summary, without the tangible support of the government, it is impossible for a country like Bangladesh to achieve its output potential. In addition to the above, large-scale reforms are required in decentralisation mechanisms, a strong environmental policy and tackling bureaucratic corruption, whilst maintaining the feasibility of the Bangladeshi market. The sad truth is our political establishment is too busy arguing with one another regarding issues which only they are concerned with. Dialogue, discussion and debate regarding policy matters seem to have been ignored for too long. Big and bold projects like the Padma Bridge are good in the sense that it adds high-value to GDP figures whilst enhancing connectivity, but most importantly for those defining this policy, it makes the AL government look good on paper.
It is only normal for one to disagree on state interventionism. Those favouring it emphasise on national institutions playing a supporting, rather than distracting, role to private businesses in this regard. But let us at least start having conversations regarding such policies, rather than ignore the plight of the common man. Let us look forward to what this country will look like three decades from now, rather than prioritising short-term gains for political points. If Bangladesh is to be a sustainable and equitable economy, then there is no alternative to highlighting the long-term trajectory of our country.
The writer is an undergraduate student of Economics and International Relations, University of Toronto.
E-mail: aftab.ahmed@mail.utoronto.ca