Growth fetishism must end

GDP growth as an indicator of progress is popular among politicians and policy makers all over the world. It is easy to use for demonstrating their performance and to convince voters to vote on their behalf (i.e., where people can genuinely vote). This is perhaps one reason why it has been enthroned again after being dethroned due to its limitations. Bangladesh is no exception.

To make their case convincing, policy makers in developing countries sometimes add performances in areas, e.g., poverty reduction, education and health care as palliatives. But important questions relating to real development which may be difficult or uncomfortable are either ignored completely or given lip service. Interestingly, development discourse outside the government also does not usually go beyond basic economic issues.

A strong focus on economic growth in Bangladesh is understandable because at the time of independence of the country, doubts were expressed by many about the ability of the country to sustain itself economically; and it was important to dispel such doubts. It was more so because during the early years after independence the country remained heavily dependent on external assistance. Economic growth was lack-lustre.

There was a gradual acceleration in economic growth, and it has been associated with improvements in some social indicators like poverty reduction, enrolment in primary education, and decline in child mortality. While successive political regimes have taken credit for this and have used it to demonstrate their success, they have ignored the more difficult questions like rising inequality, persistence of employment in the informal economy and shortfall from decent work, low quality of education, vulnerability of the economy in the face of shocks (e.g., pandemic, war, global economic recession), etc.

Moreover, when the economy faces a shock, only the immediate issues receive attention – as is the case with the economic challenges being faced currently. Voices of broader development issues get drowned under the noise for immediate fix. Of course, issues relating to poverty and vulnerability came to the fore when the country was hit by the covid pandemic during 2020 and 2021. But even at that time, there was a tendency on the part of the government to initially go on a denial mode and then to quickly consider it to be a problem of the past. The lesson from the covid pandemic was not used to forge any long-term strategy to address the vulnerability of people and building resilience. Even though the pandemic is not yet over, policy making has gone back to business as usual with the eye fixed on GDP growth.

Although what I am referring to as difficult and uncomfortable questions are well known, a brief recapitulation may be useful. First, GDP growth itself. In order to reach the upper middle-income status by 2031 and high-income status by 2041, GDP growth would have to be around nine to ten per cent per annum. Whether that would have been possible had there been no break due to the covid pandemic is a moot question. It may, however, be noted that a number of tough conditions like a sharp increase in investment rate and improvements in the productivity of capital had to be fulfilled in order to attain those goals. There are serious questions about the realism in such assumptions. Now with the break in growth trend created by the covid pandemic and the Russia-Ukraine war, the more immediate challenge seems to be to get the economy back on the growth path it was on and then to lift it to the higher growth trajectory. So, on growth itself, there is a dual challenge that has to be addressed.

Then comes the issue of vulnerability of the economy and the people to shocks of various kinds. While a growing integration of the economy with the global economy has its benefits, there are risks as well. And it is important for all economic actors to develop resilience in the face of vulnerability. There are different ways in which this can be done; and public policy has an important role to play. When policy remains addicted to GDP growth, other considerations don't get much space there.

During the past couple of decades, rising inequality in the distribution of income, wealth and opportunities has become a major development issue in Bangladesh. Although this is occasionally recognized, there is hardly any policy initiative to address it. Inequality is not just a question of justice and ethics; it is also an economic issue because it gives rise to inefficiencies of various kinds. A couple of examples from the field of education may help illustrate the point.

First, although enrolment in primary education is impressive on the average, the rate of completion is much lower and the rate of drop-out higher for low-income groups. Second, the quality of education varies substantially between types of school (government and private) and their location (urban and rural). It can be easily inferred that such variation in quality creates inequality in the access to quality education which, in turn, prevents a large number of young people from developing themselves into true human resource. This also perpetuates and accentuates inequality because a large number are left behind due to lack of opportunities. 

Opportunities for productive employment and decent work are considered to be sine qua non for inclusive and pro-poor growth. And in that respect also, the performance of the economy remains disappointing. Moreover, the situation has deteriorated in recent times. Industrialization has been limited and has not proceeded in the desired direction. The result has been a persistence of low-quality jobs in the informal economy. In the absence of social protection, there is very little resilience and ability to face difficult situations and crises. 

Inadequacy and poor quality of health service is another area of question mark. And that is not surprising in view of the low spending for the sector - percentage of GDP allocated for the sector is lower than in countries like India, Sri Lanka and Vietnam. The number of doctors per thousand of population is also lower in Bangladesh than those countries. Of course, it must be acknowledged that just allocation does not guarantee results. And the figures mentioned here are averages. The access of the poor and lower income people is worse.

Given the multifarious issues staring at the country, single-minded pursuit of GDP growth is a wrong strategy even from the point of view of growth itself. For example, bunching of a large number of people at low levels of income and with low paying poor quality jobs implies that the potentials of a stronger domestic market cannot be fully realized. As a result, the economy is unable to diversify its demand base and is having to depend on external demand and remittances to prop up domestic demand. Hence, even from the point of view of a narrow growth-focused goal, the strategy for development needs to be revisited. And if one talks about growth for the people, the need is even stronger. Policy making needs to have space for addressing issues like broad based growth, building resilience, and protecting the people for whom development is meant. Addiction for GDP growth must end.

Rizwanul Islam is an economist. He is a former Special Adviser, Employment Sector, International Labour Office, Geneva