Are vested interests influencing our economic policies? | The Daily Star
12:00 AM, May 15, 2019 / LAST MODIFIED: 12:31 AM, May 15, 2019

Are vested interests influencing our economic policies?

Is Bangladesh heading in the direction where a few at the top control all the levers of power? A story published in this newspaper voices concerns about the harmful effects of influence-peddling at the highest levels of government in Bangladesh. Under the headline “Vested group influences policymaking,” the correspondent summarised the findings of a recent report by the Centre for Policy Development (CPD). The issues that the CPD review, entitled “The First 100 Days of the New Government,” addresses include the failure of the newly elected government to implement the ruling party’s election manifesto, lack of strong initiatives to introduce structural reforms in the economy, and the government’s misplaced emphasis on GDP growth rate.

For me, the interesting aspect of this study and the subsequent attention that it received in the media is the pernicious impact of the culture of “mutual back-scratching”, which was prevalent even before the general election in 2018. A few of the problem areas identified by the report are a reduction of withholding tax on export earnings, changes in rules affecting non-performing loans which favour the defaulters, and lack of reforms in the banking sector which have been pending for some time. These actions by the government would not have been surprising last year before the national election. After all, incumbents in every corner of the world curry favours with the voters and the contributors before a major election. But what is noticeable now is the lack of commitment to fulfil the pledges made in the election manifesto and the all-pervasive feeling in policy circles that any changes henceforth will benefit only the well-entrenched interests. There is an old saying in French which translates to “The more things change, the more they remain the same.”

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For some odd reason, the current environment in the country reminds me of a different time, almost 50 years ago, when I was in high school. I am referring to the sense of entitlement that prevailed among a privileged and powerful elite in the heyday of the erstwhile Pakistani regime. During the last few years before our war of independence, the influence of the 22 families in Pakistan’s economic and political life was frequently mentioned not only in newspapers and left-leaning media but also in academic circles. Every time the influence of the 22 families was brought up, it sent shivers. The name of the families who accumulated an enormous amount of wealth and exerted an unhealthy control over the Pakistani government’s decision-making apparatus became synonymous with corruption, influence-peddling, and a shadow-government. It would not be an exaggeration to consider our fight for independence as having an overlap with our determination to break the shackles of the 22 families.

What did we learn from the economic history of Pakistan? First of all, a small group of wealthy families or conglomerates often influence policymaking at the top. Secondly, these families or businesses form an oligarchy and put their own interests ahead of those of the nation. Thirdly, the ruling group lose touch with the aspirations of the majority and, as we saw after the elections in 1970, did not shy away from using state power to retain control of their vested interests.

In the context of Bangladesh, one may plausibly ask, how likely is it that a few families or cartels could dominate the affairs of the nation? Well, first of all, there are certain laws of nature and economics that favour large entities or even the formation of monopolistic interests. If the electorate or the representative of the people do not intervene, economic power gets concentrated in a few hands. These behemoths in turn influence government policy as we have seen in all countries and there is no reason to believe that Bangladesh will be an exception to the rule. Finally, lobbyists and the influence they exercise have valid currency in a modern democracy.

Bangladesh is a market economy and we have already seen signs of the influences of the owners of capital. Do we have reasons to worry? Somewhat, I might say. We already see accounts of corruption, influence-peddling, and the unholy alliance formed by some parliamentarians, bureaucracy, and trade organisations. An end result is that Bangladesh ranks 176th in the World Bank’s ease of doing business ranking and 149th in Transparency International’s Corruption Perceptions Index. If new businesses find it difficult to enter the market, it only benefits the existing firms, according to basic economic principles. If existing companies benefit from the “barriers to entry”, they will go the extra length to influence policy and to retain their economic power.

The CPD study reminds us that it is important for the government to work for every citizen regardless of income, race, colour, or religion. Various studies point to the possibility that the rapid economic growth in Bangladesh is benefitting only a few. According to the afore-mentioned CPD report, a group of powerful vested interests is influencing the government to make policies in its favour. The report cites examples of favouritism exercised by the newly installed government, particularly the reduction of withholding tax on export earnings to 0.25 percent from 0.6 percent, and the various benefits bestowed upon the loan defaulters which are likely to encourage further defaults.

Professor Rashed Al-Mahmud Titumir of Dhaka University raises the alarm in the urgency to address the issue of NPL. In an article in the “Prothom Alo” he writes, evidence proves that “the sorry state of affairs in the banking sector adversely affects the economic growth of the country.”

When Dr Mahbub Ul Haq, the then Chief Economist of Pakistan’s Planning Commission, raised the spectre of the 22 families in 1968, he foresaw the influence of the richest families and the control they came to exercise on the majority of the industrial, banking, and insurance sectors in the country.

For Bangladesh, while we do not expect a handful of “vested interests” to tear up the nation into the haves and the have-nots, we must be on guard to fight income inequality, influence-peddling by the rich and powerful, and the widespread alienation brought on by disparity.

We know that this concentration of wealth and power have had deleterious effects in many other countries including the US, the so-called champion of democratic values and a free market. During an interview on the forthcoming US presidential elections, Mike Dukakis, a senior member of the Democratic Party (and former presidential candidate), warned his party against complacency. “Most Democrats I know believe that working Americans, their families, should have decent, affordable healthcare. They want an economy that’s strong and fair. They don’t want to see a small number of people at the top of the pile making huge amounts of money while other folks are stagnating.”

The views expressed by Dukakis reveal a commonality of public sentiments in the two countries, USA and Bangladesh. CPD’s review suggests that in our country, “A powerful vested group is influencing the government to make policies in its favour. The current government made a political pledge of bringing about a change, but that change has been restrained by those who are beneficiaries of corruption, wastage and mismanagement.”


Dr Abdullah Shibli is an economist and works in information technology. He is Senior Research Fellow, International Sustainable Development Institute (ISDI), a think-tank in Boston, USA.

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