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‘If you do not have a conformable political environment, you cannot run the economy’

  • Published at 06:01 pm August 22nd, 2019
Interview
Photo : Courtesy

An Interview with Professor Salim Rashid, Professor Emeritus, University of Illinois Urbana-Champaign

Emeritus Professor Salim Rashid of the University of Illinois Urbana-Champaign has published widely in the fields of the history of economic thoughts, economic development, mathematical economics, monetary economics, Islamic economics, religion and economics, and economic methodology. 

I came to know about Prof Rashid when I entered North South University (NSU), Dhaka, as an undergraduate student in 1993. However, my first serious interaction with Prof Rashid happened in September 1996, when I enrolled in his graduate course in ‘Contemporary Economic Systems’ at NSU. 

On the first day, he assigned us to read Prof Nurul Islam’s Development Planning in Bangladesh: A Study in Political Economy. Upon noticing that a number of students did not even buy the book, let alone read it, Prof Rashid changed the topic to the East Asian growth miracle and shared with us a few copies of James Fallows’s Looking at the Sun — my first English nonfiction book that turned me on to thinking about economics intellectually. 

I also recall debating with Prof Rashid on numerous issues in that class, and it is Prof Rashid’s strength in his mastery of the intellectual history of economics that allows him to tackle questions from a much broader angle. His main message to his students was: “Ask the precise and right questions.”

Prof Rashid left offprints of many of his published papers with NSU’s library, and reading those became a part of my graduate student life at NSU. In fact, my first professional publication is a review of Prof Rashid’s co-authored book on entrepreneurship in Bangladesh’s garment industry. 

Over the past 20 years, I kept in touch with Prof Rashid through asking many questions and he would often turn them back into the right questions. The questions that follow serve mainly to satisfy my own curiosity. Besides, I am often asked similar questions by my students at East West University. This interview was taken in Dhaka between October 2017 and January 2018 when Prof Rashid was visiting the Department of Economics, East West University. This interview is lightly edited for length and clarity.

Let me start by saying that every country probably has its own ‘economic thought’. What is Bangladesh’s economic thought?

Even if Bangladesh had such a school of thought, particularly around the time of its independence, it was primarily leftist in nature. How far the intellectuals influenced the populace is unknown to me, but those ideas have since been discarded. 

After independence, as economic growth was not significant, people realized that what they were trying to do was not working for some basic reasons. So, everybody moved away from that economic philosophy. In fact, if you look at some of the leading Marxists or left-wingers of that period, many that were really good ended up in international organizations.

So, in a sense, they lost their credibility. They could not deliver growth in Bangladesh, and they themselves did not maintain the 'do or die’ attitude that one thought was essential. But this does not mean that all their ideas were wrong. Many were very good. But it means that their major thrust was wrong. This was the idea that you can build an economy without using self-interest.

An oft-repeated debate in economics is the role of state vs the market. Joseph Stiglitz wrote a book during his visit to Bangladesh in 1996. So, which force worked more in Bangladesh: the state or the market or a bit of both?

When I teach, I always say that there is a hierarchy. Economics depends on law, and law depends on politics. Therefore, politics must rule everything. 

If you do not have a conformable political environment, you cannot run the economy. For that reason, I will say that the ‘state’ is obviously primary. But, even if you have a state that wants to do the right thing, it does not mean that everything that it does will be right. That is where there is the room for economic analysis and policy.

Some recent research has raised concerns that contrary to the central role played by government in accelerating industrial development in the East Asian economies, Bangladesh’s industrial development in the Readymade Garment (RMG) sector flourished despite the absence of strong and centralized government institutions, and often with poor governance record. How do you explain this interesting counterexample?

I think the answer must be sought by looking at the biographies of the individual entrepreneurs. How many of them were linked with the bureaucracy or with politicians? If they were shown to be independent of the bureaucracy and the politicians, what I call the ‘bureaupolity’, then we have a genuine counterexample. 

But if it turns out like the first person who started it, (the owner of the Desh Garments), was an influential bureaucrat. And how did he start? By getting the Koreans to come and train Bangladeshis. 

So, one, it was not something that the home-grown entrepreneurs thought of by themselves, and two, it was not as though it occurred independently of the state. 

People with access to the state were able to use private property to make money. Perhaps the question can be turned around: if the state had intervened more actively, would the RMG sector have provided even more benefit?

A growing body of evidence shows the impact that history can have on current economic development. The historical origins of development can be traced in several ways. One line of research examines the role of geography, another explores the importance of institutions. Do any historical incidents explain the economic outcome of present-day Bangladesh? 

I do not find this a compelling line of argument because to me institutions are basically a set of rules, and rules mean words on paper. It’s not the words on paper that are as important as the spirit in which they are implemented. 

And there is so much elasticity in the way words can be interpreted and implemented that by and large it is that spirit behind the words that matter more than the words themselves. 

So, to me it is not so much the institutions that matter, meaning formal institutions, as the manner in which people conceive of the institutions as being necessary and worthwhile.

A recent survey of historical development by Nathan Nunn of Harvard University pointed out that the vast majority of the studies in the literature examine a particular event in isolation from other events. No unified theory explains how all the pieces fit together. What is your view about this?

I think more along the lines of the old political history, which was that where the whites went and settled, like Australia and Canada, they were from the very beginning treated like autonomous bodies. Therefore, they could decide for themselves. And if you look at their growth rates, they exceeded the growth rates of places that were colonies. 

Ask yourself: does this sort of autonomy or independence matter? And I think the answer is clear. In fact, there is even a short book of Shahed Alam—which is not well known—which shows that colonial rule basically used Washington Consensus ideas: stabilize, liberalize, and privatize. 

If that was enough to get development, why did not the colonies grow? Why did not the colonies develop? The answer is that it is not just those rules, but who is implementing them, how they are being implemented, and for whom. 

Syed Basher is Associate Professor of Economics at East West University. He can be reached via [email protected]

This is the first part of a four-part interview. The piece is segmented into different sections. This first part of the interview contains the ‘Historical origins of development thinking in Bangladesh’ section. The next section, titled ‘Economic development of Bangladesh’ will be published next week.