Explained: Bangladesh’s Economy
You may have come across terms like "the economy", "inflation", "exports", etc. and wondered what these seemingly complex words might mean and how they were relevant to you and your surroundings.
Think of an economy as a system by which a country or a place makes and uses things, like the stuff we buy, sell, and share. Like all other countries in the world, Bangladesh has its own economy, and it is called a developing economy because it is still growing and getting stronger.
Bangladesh's economy encompasses various elements, such as households, businesses, the government, and financial institutions, that interact to manage resources and generate wealth. In Bangladesh, many people work in agriculture as well as in garment factories. People from Bangladesh who work in other countries and send money back home also help the economy. Additionally, many people are employed in the service sector working for businesses, financial institutions, and the government.
One of the critical aspects of understanding how an economy works is understanding how money flows.
Your family and you make up a household. Your family may earn money through various sources, such as jobs, businesses, or investments. Now, think about the companies or firms that produce goods and services. For many of us, our household income is generated by working at these businesses. When your family spends this income on goods like groceries, clothes, or services like healthcare, you are engaging with these firms. Your spending becomes their revenue. In short, money flows from households to firms in exchange for the goods and services you consume, and when firms pay households for resources such as land, labour, and capital, money goes back to households. This is called the circular flow.
The overseer of this money flow is the central bank, which, in our case, is the Bangladesh Bank, which regulates all the banks in the country and ensures everything runs smoothly. If there is too much money, prices might rise causing an inflation. If there's too little, it can slow down the economy, resulting in fewer goods and services being produced and higher unemployment.
The government collects taxes from households and firms, which is like a small chunk of money flowing in the circular flow. The government then uses these taxes to provide public services like education, healthcare, and infrastructure. The government also attempts to ensure everyone is treated fairly and holds households, businesses, and financial institutions accountable for their actions.
Like almost every country in the world, Bangladesh trades with other countries. Trade is like sharing and playing to your strengths. For instance, Bangladesh can manufacture garments in bulk at a low production cost due to the availability of cheap labour. Other countries might not be as efficient at making clothes, but they might excel at something else, like machinery. So, when our country trades its garments with other countries, we get machinery or other things we need. Our significant exports include readymade garments, pharmaceuticals, agricultural and jute products, while our major imports include refined petroleum, raw cotton, electronics, and machinery.
Our country faces various economic challenges, including poverty, infrastructural constraints, and environmental issues. Bangladesh's economy, like most modern economies, has many more complexities, which are beyond the scope of this article.
Bipra Prasun Das is a first-year student at North South University.