As Bangladesh develops, should it desire to become a social democracy, as with say Sweden and Denmark? Or should it desire to aim at being something a little more red in tooth and claw capitalist like Singapore, or as Hong Kong used to be? That is really for those who come after us to decide, given that it will be them, not us, living in that future world.
But it is still possible to lay out some of the underlying points for such a decision. We probably should as well, for Ashikur Rahman, a senior economist at the Policy Research Institute (PRI) of Bangladesh, in this newspaper, insisted that the goal must be social democracy.
We are told that the current tax to GDP ratio is only 8%, for example, and the goal must be to reach at least 30%. Otherwise, that sunlit upland of a socially just society cannot be reached. This is not wholly and precisely true— it is, instead, a choice.
It is true that in order to provide all of the things we think a government should, more of Bangladesh's economy needs to cycle through the government. In order to provide reasonable education, health care, social safety net and so on, perhaps 15-20% of everything — for that is what GDP is, everything in the economy — must be directed by and through the government.
This is true whether the government directly does these various things or just makes sure they are done and then finances them.
We know this is possible because other places manage it. The aforementioned Singapore and Hong Kong for example, both have all those government necessities. Taking more of GDP through government becomes just an exercise in moving money from one group of people to another.
Sure, this is a valid political goal; it is an allowable belief even though it is one I vehemently disagree with. But it is a choice. Above that 15-20% of GDP, we are talking about income redistribution, not the provision of government and its services. If that is what we want to do, then of course we can go and do it but it is not actually necessary.
Rahman also mentions Keynes' essay “Economic Opportunities for our Grandchildren,” in which Keynes estimates, from the view point of 1930, that in a century people would be about eight times richer than in his day.
This is roughly how things have turned out too, at least in the rich countries of Europe and North America.
Keynes then goes on to suggest that people will work less at this level of income and wealth. Which is also what has happened.
Working hours have declined precipitately because it's a normal human reaction to take some part of greater wealth as leisure.
What confuses people is that it is largely domestic labour — the unpaid work normally done by women — which has declined so precipitately. Washing machines are easier than taking clothes to the river, a modern stove beats a pot and a fire, buying clothes beats hand spinning and weaving. This being how we have, collectively, decided to deploy that greater wealth. It is also what has allowed that most welcome economic emancipation of women.
However, there is an important point here.
We only have that choice of larger government, more redistribution, as and when we have created the wealth itself. At which point we can call upon Karl Marx in evidence. His point about communism — the true kind, not what the Soviet Union did — was that it could only happen when the problem of economic scarcity had been solved; this just being another way of saying when the society is rich.
Marx also went on to not just note but insist that it was capitalism which was going to achieve this highly desirable goal.
This odd mixture of markets and capitalism is exactly what would drive technological change forward to create the wealth which meant that communism could arrive. Or, if we prefer, that vastly greater leisure that Keynes talked about. Or even that surplus which means that we can take from one part of society to redistribute to another as Rahman envisages.
These are all choices and we can make them at our leisure. Except for this one important point, which is that we must be rich first in order to be able to make the choices. Which is an interesting thought really, because a synonym for being rich is that one has choices in life.
However, we must not lose sight of the base point here. Which is that it is necessary to get rich first.
As Marx himself pointed out in fact, it is vital — a law of economic development even — to go through the capitalist stage, to have the industrial revolution, because that is what produces the wealth that enables further choices. Whether those be redistribution, more leisure, or even that chimera of true communism.
Let us go make the money first before we decide how to spend it.
The author is a senior fellow at the Adam Smith Institute in London
