Publish : 30 Oct 2021, 09:55 PMUpdate : 24 Dec 2021, 10:57 AM
The Rampura-Amulia-Demra (RAD) expressway is, as this newspaper reports, an excellent example of how not to grow the economy.
Deciding to do it in 2015 and not even having started it a yet is not a grand advertisement for the efficiency of either the Bangladeshi public sector or its ability to upgrade infrastructure.
The dolorous progress will dampen foreign investment and slow future economic growth.
However, there's a deeper economic meaning here too, one that extends further than public sector to the whole economy. We need to speed up all parts of the economy, not just the one that doesn't build roads.
Consider what economic growth is. Our usual measure of the economy is Gross Domestic Product, which is the final value of all goods and services produced. That's the same as, by definition, all value added in the economy. A higher GDP is taken to be economic growth.
We all know that GDP isn't everything, much isn't measured. But GDP is what we use, so let's stick with it for our point here.
Some part of a rising GDP comes from just doing more of the same thing. Running more cotton into more t-shirts, say. Running more resources through the same process.
But that's only a minority of economic growth. If repetition were all there is to growth, the Soviets would have been stinking rich.
In the market economies, which did by any historical standard become stinking rich, about 80 percent of economic growth came from productivity increases. This is either doing new things or doing old things new ways. We get more value added from the same resources by new approaches to value added.
The importance for this argument is that rising productivity, that's change. It's a change in the methods and processes by which we do something. Change is the economic growth that we desire.
So, bureaucracy – or, if we prefer, simple bumbling incompetency – in the public administration and building of roads is something we don't want. It defers change and thus slows economic growth. But again this is not restricted to public administration.
Any inefficiency that delays change, reduces the rate of economic growth.
This then tells us something about how we should be approaching that task of growing the economy. For don't forget the only way that all Bangladeshis will have the resources required to live a decent life and expand to their full potential is if we create the resources for them to do so.
Creating more resources is also economic growth; or, economic growth is creating the resources for all to reach their full potential.
There are, roughly speaking and in outline, two manners of gaining that growth.
We can all discuss what is to be done, iron out and allocate who is to do it, and then try it. This is known as planning. This can, as we see with the unbuilt roads, take some time. There is also the problem that even when we've done all that planning it might not work and we've got to run the process through another iteration – or five.
The other method is just to allow people to get on with whatever they think might be a good idea.
Then we see what sinks, what swims, and we all copy and do more of what works. This is known as the market approach.
The problem here is that people do an awful lot of silly things along the way. Yet that is part of the charm of the process.
And sometimes silly things work .
But more importantly we have a vast envelope of what is technologically possible within our economy. Our difficulty is in working out what, among that plenty, people actually desire to have done.
The fastest way to do this is simply to try everything, or as close as we can get, and spot and support what works.
It is this that makes the market system the fastest way to economic growth. Not because it never makes mistakes, nor because planning is not more rational, but because the market system sorts through good and bad ideas faster than a bureaucracy.
Since the speed of economic growth is the speed at which we do those new things, or at least try new ways of doing old things, then the market system produces that faster economic growth.
Sadly, there's no real free market manner of deciding where to build a new expressway – at least not through the middle of a major city.
But the lesson of the bureaucracy’s long-stalled attempt, still holds useful information for us.
Which is, if we don't have to use government and planning –don't absolutely have to –then let's not.
Tim Worstall is a senior fellow at the Adam Smith Institute in London
OP-ED: An expressway and how not to grow the economy
The Rampura-Amulia-Demra (RAD) expressway is, as this newspaper reports, an excellent example of how not to grow the economy.
Deciding to do it in 2015 and not even having started it a yet is not a grand advertisement for the efficiency of either the Bangladeshi public sector or its ability to upgrade infrastructure.
The dolorous progress will dampen foreign investment and slow future economic growth.
However, there's a deeper economic meaning here too, one that extends further than public sector to the whole economy. We need to speed up all parts of the economy, not just the one that doesn't build roads.
Consider what economic growth is. Our usual measure of the economy is Gross Domestic Product, which is the final value of all goods and services produced. That's the same as, by definition, all value added in the economy. A higher GDP is taken to be economic growth.
We all know that GDP isn't everything, much isn't measured. But GDP is what we use, so let's stick with it for our point here.
Some part of a rising GDP comes from just doing more of the same thing. Running more cotton into more t-shirts, say. Running more resources through the same process.
But that's only a minority of economic growth. If repetition were all there is to growth, the Soviets would have been stinking rich.
In the market economies, which did by any historical standard become stinking rich, about 80 percent of economic growth came from productivity increases. This is either doing new things or doing old things new ways. We get more value added from the same resources by new approaches to value added.
The importance for this argument is that rising productivity, that's change. It's a change in the methods and processes by which we do something. Change is the economic growth that we desire.
So, bureaucracy – or, if we prefer, simple bumbling incompetency – in the public administration and building of roads is something we don't want. It defers change and thus slows economic growth. But again this is not restricted to public administration.
Any inefficiency that delays change, reduces the rate of economic growth.
This then tells us something about how we should be approaching that task of growing the economy. For don't forget the only way that all Bangladeshis will have the resources required to live a decent life and expand to their full potential is if we create the resources for them to do so.
Creating more resources is also economic growth; or, economic growth is creating the resources for all to reach their full potential.
There are, roughly speaking and in outline, two manners of gaining that growth.
We can all discuss what is to be done, iron out and allocate who is to do it, and then try it. This is known as planning. This can, as we see with the unbuilt roads, take some time. There is also the problem that even when we've done all that planning it might not work and we've got to run the process through another iteration – or five.
The other method is just to allow people to get on with whatever they think might be a good idea.
Then we see what sinks, what swims, and we all copy and do more of what works. This is known as the market approach.
The problem here is that people do an awful lot of silly things along the way. Yet that is part of the charm of the process.
And sometimes silly things work .
But more importantly we have a vast envelope of what is technologically possible within our economy. Our difficulty is in working out what, among that plenty, people actually desire to have done.
The fastest way to do this is simply to try everything, or as close as we can get, and spot and support what works.
It is this that makes the market system the fastest way to economic growth. Not because it never makes mistakes, nor because planning is not more rational, but because the market system sorts through good and bad ideas faster than a bureaucracy.
Since the speed of economic growth is the speed at which we do those new things, or at least try new ways of doing old things, then the market system produces that faster economic growth.
Sadly, there's no real free market manner of deciding where to build a new expressway – at least not through the middle of a major city.
But the lesson of the bureaucracy’s long-stalled attempt, still holds useful information for us.
Which is, if we don't have to use government and planning –don't absolutely have to –then let's not.
Tim Worstall is a senior fellow at the Adam Smith Institute in London