10 May 2017

The Bengali pro-poor policy paradox

Kristine writes:*

During recent years, Bangladesh has experienced an increase in human well-being and economic growth. The state is amongst the most densely populated in the world, with 161 million citizens inhabiting an area slightly smaller than Florida. The improvements in living standards are a result of policies and programmes implemented by the government and NGOs within Bangladesh. This is puzzling, as the development emerged from a political system hallmarked by powerful economic and political elites. This is what some, including the World Bank, have referred to as a “paradox” [pdf].

Since the mid-1960’s the Bangladeshi fertility rate has dropped steadily, and is currently at 2.1 children per woman. Also, the numbers of years of expected schooling has increased to more than 10 years on average. Interestingly, the number of expected years of schooling for girls (10.4 years) has exceeded the number of expected years of schooling for males (9.9 years) which is likely due to a government and NGO focus on female education; often offering payment to rural families sending girls to school. The significant improvements in the well-being of Bengalis citizens beg the question of why Bangladesh's political elites have provided more public goods.

Since the Bangladeshi democratisation, in the early 1990’s, its political system can be classified as a vulnerable limited access-order [pdf], where the political costs of depriving Bengali citizens of their liberal rights are low, and political support is gained through patron-client relations. If Bangladesh has a limited-access order, then why do self-interested elites provide public goods? Many, including Hans Rosling, argue that the incentive for lowering fertility rates and bettering education is to create a more economically prosperous population (boosting the economy). I find that this argument has its drawbacks, as it does not consider the costs of elites losing political and economic power. One would expect the elite to have little incentive to change the institutional framework and increase the well-being of the citizens, because this ‘opens up’ the political and economic sphere to non-elite members, and disrupts the elite's rent seeking.

Therefore, I propose that there are three main incentives for the government and NGOs program and policy intervention. Firstly, the vulnerability of Bangladeshi political institutions may incentivise politicians to comply with some public requirements. Secondly, despite the clientelistic characteristic, the system is democratic. Although there is too little space and time to elaborate why elites are competing, suffice it to say that they do. As Kitschelt argues, increased competition between politicians leads to increases in the supply of public goods. This is because competition increases the number of citizens needed to win an election; making the provision of public goods (non-excludable and non-rivalrous) more efficient than the provision of private goods (excludable and rivalrous). Nonetheless, this does not explain why governments (actually) implement policies and support NGO intervention.

The last incentive may explain this. The level of corruption and strong-economic ties between elite members impacts political decisions. It is clear that many policy programmes are profitable. As such, many NGO’s are ‘loyal’ to political elites. In other words, the incentive to contribute to human development may be driven by the benefits derived from lucrative project initiatives. This means that the limited access-order might still be thriving on rents, and the improvements in life-quality is not as good as it could have been with a different political structure.

Bottom line: The decline in poverty and progress in human development in the absence of liberal democracy, is likely due to three factors: regime instability, political competition leading to the provision of more public goods, and the rent-seeking opportunities created by the government and NGOs. As such, Bangladeshi growth and development is not a paradox; however, the development programmes and policies are not implemented efficiently.

* Please comment on these posts by students in my growth & development economics course. It really helps if you highlight unclear analysis, alternative perspectives, better data, etc.

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