The mysterious nexus of development, corruption and GDP

The mysterious nexus of development, corruption and GDP
The mysterious nexus of development, corruption and GDP

Along with Bangladesh, this year Afghanistan and Myanmar have also found place on the list of ‘developing’ nations. Only if they can meet all criteria by 2012 will they be able to achieve mid-income status by 2014. But the unfortunate fact remains that we are in strong competition with these countries when it comes to corruption, poverty and and a breakdown in the rule of law. And we hardly have the drive to look a little higher.

‘They’ often want to know, if there is so much corruption, then how come the GDP is on a rise? As if the GDP can’t grow with corruption! When economic transactions increase, so does the GDP. So no matter what looting and pilferage takes place with the construction of roads, culverts, bridges and flyovers, no matter how the MPs, leaders and contractors share the spoils, no matter how project costs increase in leaps and bounds, financial transactions are on the rise. And the GDP is on the rise as well. A street may be unnecessarily dug up ten times over and the GDP will rise. It will rise even if half the population of the country is assailed by all sorts of ailments due to polluted air, polluted water and lead poisoning. Influential bigwigs destroy Dhaka’s lifelines by filling up canals and water bodies, but the GDP grows. Children’s playing grounds are overtaken by multi-storeys, and the GDP continues to swell.

And so changes are being made to economics textbooks and even to the high-flying international conferences at Davos and beyond. It is being recognised that development cannot come about merely with GDP or per capita income, in exclusion of environment, public health, rule of law and similarly significant factors.

According to the Global Competitive Index, Bangladesh has the worse roads in Asia, after Nepal. Roads are constructed at double or triple the cost of other countries, but crumble in no time. Repairs are required all over again, meaning fresh allocation, more transactions, and even more sharing of the spoils all over again. It is certainly unfortunate that the more the project cost and pilferage, the higher the GDP. GDP only looks at the final product. It is not concerned if the money goes to the leaders or the people or the contractors.

The GDP has no bone to pick with corruption as long as the money stays within the country and is invested in various sectors within the country. For example, Indonesia was the world’s most corrupt country during the rule of General Suharto, yet its GDP and per capita income was on an upward spiral at the time. The black money remained within the country and had a role to play in production, investment and employment. But things are not quite so simple in Bangladesh.

Corruption is endemic in Bangladesh. Banks are being ‘looted’ in collusion with those in power, persons close to the government are amassing wealth, but the ill-gotten wealth is being siphoned off out of the country. Small investors lost around Tk 150 billion in the share market scam and a huge chunk of this was channelled out of the country. The Global Financial Integrity report says Tk 6 trillion has been smuggled out of the country over the past 10 years. That is twice our national budget!

Two relevant questions arise here. Firstly, how far has this huge amount looted from the banks directly impacted the overall economy? Secondly, why has the per capital income not been affected by the massive capital flight?

First, international risk assessment institutions say that Bangladesh’s banking sector is in a precarious position. (Yet those in power are getting approval for one new bank after the other!) According to the finance ministry itself, around Tk 160 billion had to be paid in subsidy to the banking sector over a period of nine years to overcome the sector’s mismanagement (read: ‘looting’). The worst thing is that the central bank is acquiescing to all these unjust demands of the private banks. It has been decided to deposit 50 per cent of the hard-earned money deposited by the public in state-owned banks, in the private banks.

And at the outset of the year, six state-owned banks asked the central banks for Tk 200 billion to bail them out. Where will this massive subsidy come from? Where else than from the public, burdening them will additional taxes and VAT?

The second question was how per capital income increased despite all this corruption? The answer is a sad, heart-breaking one. One one hand Tk 600 billion to Tk 700 billion is being siphoned off overseas every year, while on the other hand Bangladeshi migrant workers are breaking their backs to send around Tk 900 billion home every year. Per capita income is on a rise despite the massive pilferage in banks, the blatant looting of banks. Note that the lifeblood of the banking sector comes from the sweat, blood and tears of the struggling migrant labour force. It is this hard-earned remittance that enables ‘them’ to say that Tk 40 billion is peanuts! Even though Tk 80 billion has been purloined from the reserves invisible quarters, the central bank can still stand with its head held high.

So how are the people who are the drivers of economy in this country of development? They are not well, and that is the plain and simple truth. In this land of development, the farmers do not get due value for their crops. In this land of development, workers are paid the lowest wages in Asia’s garment sector and work at the highest risk. Not being able to survive in this land of development, over 13 years 33 thousand workers return home as corpses after back-breaking work overseas. Local and foreign surveys give a horrifying picture of a breakdown in public security, the environment, the economy and the rule of law.

Canadian researcher Naomi Klein in her book ‘No Logo’ showed how companies spend relentlessly on branding and advertising their products, but drastically cut their workers’ wages. That is the state of Bangladesh’s development. The government’s only escape route in this country of injustice is to spend huge sums of money to advertise the commodity called development. That is the only way to fool the people. But the long-suffering people know only too well that this glamorous branding of development to portray the ‘development’ of a few as the development of the masses, is nothing but Goebbelsian propaganda. It is imperative to constantly question the ‘development’ that does not keep the people well.

* Maha Mirza is a researcher on international political economy