GDP growth: Illusions and fallacies | The Daily Star
12:00 AM, August 27, 2019 / LAST MODIFIED: 12:45 AM, August 27, 2019

GDP growth: Illusions and fallacies

Bangladesh has been experiencing incomparable growth in Gross Domestic Product (GDP) since the last decade. The latest forecast by the Asian Development Bank ranks Bangladesh at the top among South Asian countries. Bangladesh is set to achieve a growth of 8 percent in GDP in the current financial year. Previously, financial institutions like the JPMorgan and Goldman Sachs had branded Bangladesh as a frontier country. In becoming a member of the Frontier Five or Next-11, Bangladesh has made improvements in the investment climate, and established itself as an attractive frontier market with cheap labour cost and a large number of economically active populations. Development of the export-oriented industries, like the garment sector, has been contributing to the stable GDP growth and created millions of low-paid jobs. Recently, the World Economic Forum projected Bangladesh as the new “Asian Tiger”.    

If we investigate the depth of the matter, however, illusions and fallacies within this “growth” become eminent. Let us start by revisiting Acemoglu and Robinson’s prediction in the book Why Nations Fail. They pointed out that economic growth will never be sustainable and will be destined to fail if the political institutions are extractive in their approach. The statistics of growth shadows the nonexistence of economic dynamism. As Kaushik Basu in 2018 argued, the economic miracle of Bangladesh was driven by the economic inclusion of women and associated social changes. The economic inclusion of women was made possible by the development of the Readymade Garment (RMG) sector. The other contributing factor was foreign remittance. Undeniably, the backbone of Bangladesh’s tremendous growth has been the relocation of a huge number of people from agriculture to industry. The economy will plummet once the relocation is completed, or industries shift to cheaper destinations as has been experienced by Russia in 1970s and ’80s.

The prevailing extractive political system will only generate temporal growth. One may ask, how are the political institutions extractive? The answer lies in the fact that economic progress is coming at the expense of the public but benefitting only the elites. For instance, the general public is burdened with increasing indirect taxes such as Value Added Tax (VAT) while tax exemption, evasion, and even provisions of whitening of black money have become prevalent practices for the upper classes. A series of scams have crippled the stock market and the banking sector, forcing the state to continuously recapitalise the banks at the expense of the taxpayers.

The realities of extractive institutions are further manifested in unaccountable public procurement and bribery. Under these circumstances, it is not surprising to see high state officials being involved in unethical activities and possessing undeclared wealth. These tendencies resonate with what James Buchanan termed as “politics without romance” where public representatives and public servants are not altruistic in favour of a common good. Instead, unethical alliances between state and non-state agencies extract a nation’s wealth.

Economic growth gained through extractive institutions is internally flawed. We are achieving the highest levels of growth, and at the same time, we are experiencing the lowest levels of poverty reduction among South Asian countries. Bangladesh Bureau of Statistics (BBS) shows that the rate of poverty reduction has decreased to 1.2 percent points annually during 2010-2016 from 1.7 percent points during 2005-2010.

Growth of real wage is not promising either. According to the ILO Global Wage Report 2018-2019, Bangladesh achieved 3.4 percent real wage growth in the last 10 years, which is lower than the median growth of 3.7 percent in South Asia. An alarming sign is the increasing rate of external debt. According to Bangladesh Bank, external debt increased from USD 19.355 billion in 2007 to USD 33.1 billion in 2018. The data indicates that Bangladesh is following China in delving into debt-financed infrastructure construction, as evident in the building of bridges, flyovers, metro rails, etc. over the last five years.

Growth in GDP alone cannot ensure what people really need and want. Despite many of us reinforcing market growth by consuming ever more, the new wants and desires appear as illusions when the growth is not matched by employment generation or reduced inequity. Specifically, youth unemployment rate has risen significantly in the last 20 years. According to the “Asia-Pacific Employment and Social Outlook 2018” of the ILO, youth (age 15-24 years) unemployment increased from 6.32 percent in 2000 to 12.8 percent in 2017. The Labour Force Survey (2016-2017) found that 29.8 percent of the total youth population are neither in education, nor in employment, nor training (NEET).

Additionally, among the youth with secondary level education, 28 percent remain unemployed as most jobs are created in the informal sector. For more than one-third of the male youth, unemployment is a major obstacle in life, as the BRAC Youth Survey 2019 has revealed. These data indicate that Bangladesh is generating GDP but the youth are not benefitting from it; they are not even receiving the required skill set. Consequently, around 450,000 foreign nationals are working in Bangladesh and reverse-remitting USD 4-5 billion annually. Thus, it is legitimate to enquire whether GDP growth is enhancing prosperity or creating multi-dimensional societal strains.

We are missing out on reaping the demographic dividend while we talk about advancing towards becoming a middle-income country. We believe in the rhetoric of Digital Bangladesh, wishing to be part of a smart city. The government insists on eliminating social division, injustice, and inequality but just a few days ago, everything that we aim to eliminate became strikingly visible in the burning skies of the Chalantika slum in Rupnagar, Mirpur.

Contrary to the ruins that clearly manifest the extreme inequality and unfairness, we have some of Asia’s most expensive real estate projects in Dhaka. We see the mushrooming of gated communities, five-star hotels, shopping malls, and restaurants. These illusions have been created by the privileged classes for themselves, and injustice in the society remains real. We should strive to evaluate economic growth with an equity lens. Otherwise, the Asian-Tiger-to-be will only remain illusionary and fallacious, producing miseries for the people.


Mohammad Tareq Hasan is an anthropologist and teaches at the University of Dhaka. E-mail:

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