The new and real Bangladesh paradox

I had thought of writing again this week about the Pashtun Tahaffuz Movement (PTM). It has had an interesting two weeks since I wrote about it. It has burnished its credentials as a movement with a successful rally in Lahore, had some of its leaders detained, and limited its immediate political aims. I see that it has scheduled a Karachi rally in two weeks, which is when the article after this one is due to be published.

The PTM may see some interesting times between now and then, and I think I will wait until the eve of the Karachi rally to write about it again.In the meantime, I have had another interesting issue on my mind for some time which I have been trying to find a time to write about. It is whether Pakistan's former other half, Bangladesh is headed for disaster.

I am sure that many readers are not amused when I refer to Bangladesh as Pakistan's former other half. Bangladeshis are equally, if not more, annoyed by that appellation. As an aside, I should relate that when I launched my book comparing the two countries in London, the mostly Bangladesh audience complained mainly about their homeland being included in the same book with Pakistan. I keep asking myself if its dash toward authoritarianism is destined to be a dash also toward more acute political instability and renewed and serious internal violence.

Elites receiving economic rents were granted them by the government, which gives them the incentive to stop or minimize violence. Thus, the term 'economic rents' has come to be a synonym for corruption The question also includes whether such a future would not also lead to the rapid growth of transnational extremism. Let me set the intellectual context of these musings.

I have been a partisan for some time now of the institutional approach to economics, and in particular, to the focus that a certain school of institutional economics brings to political and economic institutions as the drivers of both political and economic development. The beginnings of this theory go back to the work of Douglass North in the 1970s, 80s, and 90s for which he won the Nobel Prize for economics in 1993. That work focused on institutions, which he defined as "humanly devised constraints that structure political, economic, and social interactions." These can be both formal rules of the road like constitutions and informal constraints like sanctions or taboos, all aimed at organizing and ensuring safety in a society and/or a market.

How well they work depends on how organized and effective the state is, and that determines the kind of state it is because these institutions are how states solve the problem of violence. North's work evolved over the years and perhaps found its final expression in a paper he wrote with three co-authors in 2014, just one year before he passed away at the age of 95. I do not have space to go into much detail about the elaborate theory that evolved from North's early work, and I hope readers will find the following brief description adequate for understanding the questions that I will pose in the paragraphs below about Bangladesh. North and his collaborators believe that there are two ways that societies control violence.

The first includes most of the countries of the world, and especially the developing countries, which restrain violence by "granting political elites control over parts of the economy," and these elites share the "economic rents" (which means simply unearned income) of those sectors. The key concept here is that the elites receiving economic rents were granted them by the government, which gives them the incentive to stop or minimize violence.

Thus, the term "economic rents" has come to be a synonym for corruption, which is not necessarily the case, but often is in developing countries. North and his colleagues label these kinds of societies Limited Access Orders (LAOs). On the other hand, some societies control violence by growing strong institutions, or having them grow strong on their own, and by requiring elites to compete openly for access to economic sectors and the rents they produce. These are called Open Access Orders (OAOs). As nations develop political and economic institutions that are inclusive (a term that is used to describe OAOs) they can transition from LAO to OAO. Most of the now developed countries began that transition only a few hundred years ago at best.

The economist Mushtaq Khan, originally from Bangladesh, teaching at SOAS in London, has examined Bangladesh among his wide-ranging work, in the framework created by North and his colleagues. His work was in 2013 which precedes the one-party election of 2014 and the one-party government that ensued, which has allowed the government to move deliberately toward a one-party authoritarian state. Khan posited five different phases of a LAO. The first was the period between 1947 and 1958, when Bangladesh was part of a newly independent, unified Pakistan which was undergoing a constitutional crisis, caused mainly by the inability of the elites of the two parts to agree on how to share power.

The second was between 1958 and 1971, when united Pakistan was a Praetorian LAO ruled by the army which used rents to maintain political stability by allowing access by a narrow group of mainly West Pakistani elites and used force to keep the access narrow, mainly excluding Bengali elites. The third phase, 1971-75, was after separation when Bangladesh was a populist authoritarian LAO in which the government was too weak to limit strictly access to economic rents and economic rents were too meager to come close to satisfying the powerful elites competing for them. Violence seemed endemic and out of control. The fourth phase was again an authoritarian LAO, but this time with a Bangladeshi authoritarian, the military, calling the shots. Access was better controlled, and the government managed economic policies that increased economic rents. The fifth phase 1990 to 2014 was what Khan calls a "competitive" LAO.

This is what I think is the most interesting phase as it seemed to hold the seeds of long-lasting stability and gave Bangladesh a period in which electoral democracy gave both sets of elites (the two major political parties and their allies) an equal chance at economic rents as the parties traded places in government every 5 years. This was fostered by a constitutional amendment that required an interim government to run a free and fair election.

And since neither party showed much interest if governing, other than making sure it got the accessible economic rents, it allowed NGOs and other organizations to grow and to meet the social development needs of the country. This came to a de facto end in 2007 with a military coup but lasted de jure until 2014 with the election of a one-party government.

The opposition, knowing that it could not win without the interim government clause of the constitution, boycotted the election. But here is, I suspect, the key question: why should a populist, authoritarian LAO work any better in 2019, when I expect the one-party state will be locked in, than it did in 1972-5, when the prime minister's father was running it.

Are there more resources to fill the trough of economic rents? Yes, lots more. The Bangladesh economy is doing quite well. But there are lots more elites too. A much larger middle class with its own demands. And a much larger rich and very rich class.

And more importantly there are a great many elite who have been ruled out because they were opposition; are there economic rents for them too? In other words, I think that the Awami League's plans to remain in power in an authoritarian LAO are problematical, and I would have been more confident of a government that either intended to keep the competitive LAO of 1990-2014, or (less likely) to push ahead with the transition to a OAO. to push ahead with the transition to a OAO.

The article was first published Here