Our journey to the remote region of Gabura in Bangladesh took us down unpaved roads, through meandering rivers and to the edges of the Sundarban mangrove forest. The first thing that struck us was the near absence of trees in the village. During cyclones Sidr and Aila, saline water had destroyed agricultural land and although the place was surrounded by water, it was unfit to drink. The embankment, which was built to protect the area from tidal surges, was in severe disrepair. To make matters worse, once the aid funds had dried up in the aftermath of the cyclones, almost all the NGOs had left and there was little assistance coming from the government.
Bangladesh was born on December 16 1971, following a devastating war that cost the lives of 3,000,000 people. They were victorious in their fight for independence, yet the prospects of the Bangladeshi people living in the 70’s were disheartening, earning it the now rather infamous connotation of a basket case, as Henry Kissinger called it back in 1971. Emerging from the rubbles left by the war, the resilient Bangladeshis began the rebuilding of their newly established nation. Economic growth was slow to take off, and it rebounded to the pre-war level about twenty years later, in the 90’s. Yet, it was after the 90’s that the country began to attain palpable progress and only over the 2000-2010 decade that the country achieved great poverty reduction. The depth-of-poverty MDG target of 8 percent was attained five years ahead of schedule, and Bangladesh was set in the right path for achieving the first MDG goal of halving the poverty headcount to 28.5 percent by 2015.
Bangladesh has turned the political business cycle phenomenon upside down.
Political business cycles are cycles in macroeconomic variables – output, unemployment, inflation – induced by the electoral cycle. This type of business cycle results primarily from the manipulation of policy tools by incumbent politicians hoping to stimulate the economy just prior to an election and thereby improve their reelection chances.
Expansionary monetary and fiscal policies have politically palatable consequences in the short run. When pursued to excess, these very policies can also have very unpleasant consequences in the longer term in the form of accelerating inflation, decreasing savings, worsening foreign trade balance, and long-term expansion of government's share of the GDP at the expense of private consumption and investment. So immediately after the election, politicians tend to “bite the bullet” and reverse course by raising taxes, cutting spending, slowing the growth of the money supply, and allowing interest rates to rise. As a result, the regular holding of elections tends to produce a boom-and-bust pattern in the economy because of the on-again-off-again pattern of government stimulus and restraint to induce an artificial boom at every election time.
Bangladesh’s experience also shows the existence of a political business cycle in GDP growth, albeit with exactly the opposite pattern of boom and bust. GDP growth has consistently declined in each of the last five election years. It happened in 1991, 1996, 2002, 2007 (an election year without election) and 2009 (Figure 1). From the perspective of Western political business cycle theory these growth tendencies appear suicidal for the incumbent. Instead of expanding the economy faster to gain votes, the incumbents appear to be shooting themselves in the foot by allowing the pace of expansion to slow in the election year!
Is this another case of the Bangladesh paradox?
South Asia is the least integrated region in the world. Intra-regional trade in South Asia is less than 2% of GDP compared to over 20% in East Asia. Labor mobility and regional travel is minimal, with few exceptions. Even remote communication is low – only 7% of international telephone calls in South Asia are to countries within the region, compared to 71% for East Asia. The case for closer integration has remained strong for a while now, and it is refreshing to see that some movement, albeit watchful, in addressing some of the region's deep rooted political economy issues, particularly between India and Pakistan.
The discussions around closer integration have centered on energy, trade, connectivity and stability. All of these offer strong potential to enhance growth in the region. However, financial sector integration overall, and access to finance in particular, hardly ever make it to the agenda of regional integration forums and deliberations. This is unfortunate, because the region has a long way to go in providing adequate access to financial services and insurance products, especially to the vulnerable segments of the population. Given that South Asia is home to more than half a billion of the world’s poor, this becomes a poverty reduction goal as much as a financial inclusion goal.
A forthcoming book (The Shame of it: Global Perspectives on Anti-poverty Policy, Gubrium E. K., Pellissery S. and Lodemel I., Policy Press, 2013), the first of a series reporting on a stream of field surveys in developed and developing countries, draws attention on the social, political and psychological (in one word human) dimensions of poverty and stresses the risk that anti-poverty policies and programs inadvertently stigmatize their beneficiaries and aggravate their own shame.
Losses due to disasters to human and physical capital are on the rise across the world. Over the past 30 years, total losses have tripled, amounting to $3.5 trillion. While the majority of these losses were experienced in OECD countries, the trend is increasingly moving towards losses in rapidly growing states.
In a sense, increasing risk and losses caused by disaster are the byproduct of a positive trend - strong development gains and economic growth. This is because disaster loss is a function of the amount of human and physical assets exposed to seismic or hydrometeorological hazards, and the level of vulnerability of the assets. The richer a country gets, the more assets it builds or acquires, and therefore the more losses it potentially faces.
Rapid development across South Asia signals the need to commit greater efforts to increase resilience to disaster and climate risk. It also requires governments to develop a strategy to both protect against events today and to develop strategies to address the losses of the future. This is a challenge somewhat unique to South Asia. The losses of today, predominantly rural flooding that impacts wide swaths of vulnerable populations, will begin to diminish in relative importance to the losses of the future.
What does open data and development mean for Afghanistan?
Last November, the first open data mission revealed Afghans’ interest and commitment to foster knowledge sharing, collaboration and openness for a broader and targeted engagement in Afghanistan. In my blog, Afghanistan’s First Open Data Dialogue Delivers, I described my first-hand experience on Afghans enthusiasm about improving data dissemination, national dialogue and partnership between users and producers of statistics, and the drive for more effective aid and technical assistance through better coordination and alignment to the agreed National Statistical Plans.
Leading newspapers in Bangladesh on July 10, 2013 sensationally headlined the survey findings from Transparency International (TI)'s Global Corruption Barometer 2013. Approximately 1,000 people from each of 107 countries were surveyed between September 2012 and March 2013. In Bangladesh, 1822 people participated in the survey conducted from February 10 - March 15, 2013. Of the total sample, 61 % were from rural and 39 % from urban areas. Based on Transparency International Bangladesh (TIB) presentation of the TI report to the media on July 9, the media coverage gave the clear impression that most of the important institutional pillars of Bangladesh are perceived to be extremely corrupt. Corruption undoubtedly is a major problem here. However, the way TIB constructed the survey results led to predictably excessive perception bias in favor of corruption.
Poverty has been a concern in societies even before the beginning of recorded history. In the past three decades extreme poverty in the world has decreased significantly. More than half of population in the developing world lived on less than $1.25 a day in 1981. This has dropped to 21% in 2010. More impressively, notwithstanding a 59% increase in population in developing countries, there were 1.2 people living on less than $1.25 a day in 2010, compared with 1.9 billion decades ago. However, the challenge of poverty reduction ahead remains daunting with 1.2 billion still living in extreme poverty. Freeing the world from poverty is perhaps the most important economic goal for the world today. More than a hundred countries are still not able to move away from high poverty traps.