Social Progress Without Growth

by Reihan Salam

Pankaj Mishra has a new Bloomberg View column on Bangladesh, and it is disappointing:

Shackled by irreconcilable differences between political personalities, the country offers yet another instance of a fledgling democracy undermined by an undemocratic winner-takes-all attitude among its leaders. Bangladesh does have its innovators, such as Muhammed Yunus, the pioneer of microcredit. The banking system seems more responsive to the poor majority than in it does India. Bangladesh also does better than its much richer neighbor in almost all indicators of the United Nations’ Human Development Index.

But the benefits of trade liberalization — and, in general, Bangladesh’s integration into the global economy — have been more limited than previously expected. Certainly, the country’s economic modernization, which seems necessary to pull tens of millions out of destitution, seems to be proceeding much too slowly.

India is building a security fence on its border with Bangladesh, ostensibly to keep out Bangladeshi immigrants whose presence provides fodder to Indian demagogues. Meanwhile, a weakened state has ceded, often opportunistically, its responsibility to mitigate poverty and improve social infrastructure to such nonstate actors as aid organizations, corporations, security companies, consultants, and various domestic and international nongovernmental organizations. Bangladesh is one of the most NGO-ized countries in the world. [Emphasis added]

The rest of Mishra’s column is a paean to state-led economic development, an entirely data-free critique of Bangladesh’s labor-intensive manufacturing sector and its voluntary sector, and a not entirely coherent critique of the country’s “unsupervised social order.” What I find odd is that Mishra doesn’t spend more time dwelling on what you’d think is a pretty important fact, which I’ve highlighted above. The fact that Bangladesh outperforms India “in almost all indicators of the United Nations’ Human Development Index,” it’s not exactly a throwaway line. Bangladesh’s GDP per capita (PPP) is $2,100, among the lowest in the world; India’s is $3,900. Yet life expectancy at birth is 69.2 years in Bangladesh and 65.8 in India. The mean level of educational attainment for adults is 4.8 years in Bangladesh and 4.4 years in India. The level of “multi-dimensional poverty” — a measure that takes income poverty and other deprivations in education, health, and standard of living into account — is nearly identical for both countries, with Bangladesh at 0.292 and India at 0.283. The numbers for both countries are appalling by any reasonable standard. Yet it is striking that though India is substantially richer than Bangladesh, Bangladesh is punching above its weight when it comes to human development. One thing to keep in mind is that economic and social conditions vary dramatically across India’s regions, with Indian regions like Kerala, Goa, Delhi, Himachal Pradesh, and Punjab faring far better than Uttar Pradesh, Uttarakhand, Bihar, Jharkand, Odisha, Assam, and West Bengal. Bangladesh has strong cultural similarities with neighboring Indian regions like West Bengal, with which it shares a language, and these regions are near the bottom of the pack within India.

So the really remarkable thing about Bangladesh is that despite its dysfunctional politics, its social institutions are performing reasonably well. Mishra is convinced that this has nothing to do with the voluntary sector or with the advent of a labor-intensive manufacturing sector, which he condemns for “slavery-like conditions.” (Bangladesh’s garment sector is notorious, yet it employs over 4 million, and large numbers of people flock to it from rural regions where subsistence agriculture remains the dominant mode of economic life.) Could it be that Bangladesh is outperforming India because Bangladeshis are somehow “awesomer” than their ethnically indistinguishable Bengali-speaking neighbors across the border? That seems unlikely.

For an alternative view, I recommend an article published in The Economist last fall:

For the first decades of its independent history Bangladesh’s economy grew by a paltry 2% a year. Since 1990 its GDP has been rising at a more respectable 5% a year, in real terms. That has helped reduce the percentage of people below the poverty line from 49% in 2000 to 32% in 2010. Still, Bangladeshi growth has been slower than India’s, which for most of the past 20 years grew at around 8% a year. Nevertheless the gains in its development have been greater. The belief that growth brings development with it—the “Washington consensus”—is often criticised on the basis that some countries have had good growth but little poverty reduction. Bangladesh embodies the inverse of that: it has had disproportionate poverty reduction for its amount of growth.

The article cites four main sources of Bangladesh’s modest but real success: (1) the success of voluntary family planning efforts and substantial investment in primary education, particularly for girls; (2) advances in agricultural production increased yields and allowed rice growers to move to two harvests a year, and Bangladeshi laborers working in the Gulf and other countries have sent remittances back home; (3) and though Bangladesh’s suffers from fierce political conflict, virtually all political factions back social programs that have alleviated extreme poverty. And finally, the article cites the central contribution of NGOs, which Misra dismisses (“NGOs have not managed to reduce poverty“) out of hand:

The government of Bangladesh has been unusually friendly to NGOs, perhaps because, to begin with, it realised it needed all the help it could get.

BRAC began life distributing emergency aid in a corner of eastern Bangladesh after the war of independence. It is now the largest NGO in the world by the number of employees and the number of people it has helped (three-quarters of all Bangladeshis have benefited in one way or another). Unlike Grameen, which is mainly a microfinance and savings operation, BRAC does practically everything. In the 1980s it sent out volunteers to every household in the country showing mothers how to mix salt, sugar and water in the right proportions to rehydrate a child suffering from diarrhoea. This probably did more to lower child mortality in the country than anything else. BRAC and the government jointly ran a huge programme to inoculate every Bangladeshi against tuberculosis. BRAC’s primary schools are a safety net for children who drop out of state schools. BRAC even has the world’s largest legal-aid programme: there are more BRAC legal centres than police stations in Bangladesh.

The scale is a response to one of the biggest challenges of development: that solving one problem leads to others. This happens in economic development as well as the social kind. In the 1950s South Korea’s Samsung had a big woollen mill. It found that to expand, it had to make its own textile machinery; then, to export, it built its own ships; and so on. Samsung now has around 80 companies and is the world’s largest information-technology firm. BRAC is a sort of chaebol (South Korean conglomerate)for social development. It began with microcredit, but found its poor clients could not sell the milk and eggs produced by the animals they had bought. So BRAC got into food processing. When it found the most destitute were too poor for micro-loans, it set up a programme which gave them animals. Now it runs dairies, a packaging business, a hybrid-seed producer, textile plants and its own shops—as well as schools for dropouts, clinics and sanitation plants.

It is easy to see why those of a socialist inclination might dismiss Bangladesh’s NGOs — they demonstrate that civil society can succeed where governments fail. And Bangladeshi politicians resent NGOs for being beyond their reach. But the best NGOs have fostered a sense of ownership among their beneficiaries, and they’ve made a deep and meaningful contribution to social and economic progress. One wonders what Bangladesh might accomplish if its politicians managed to get their act together, and gave civil society groups and entrepreneurs the stability and security they need to flourish.