IS GREATER REGIONAL COOPERATION A WAY OUT  OF GLOBAL MELTDOWN FOR SAARC?

By Kazi Anwarul Masud (former Secretary and ambassador of Bangladesh)
The landslide victory in the election has given Bangladesh Prime Minister Sheikh Hasina a grave and great challenge to lift the country out of poverty to relative prosperity. The quest of the government for resources to finance the subsidies of agricultural inputs  to ease the condition of the farmers, to bring down the price of essentials and other developmental works would be a difficult task given  the kleptocracy seen during the BNP-Jamaat rule of 2001-2005 that has bequeathed an empty treasury to the present government. Added factor will be reduced external capital in the form of assistance and foreign investment. In developing countries in particular macro-empirical work on the FDI-growth relationship has shown that subject to a number of crucial factors, such as human capital base in the host country, the trade regime and the degree of openness of the economy the FDI has a positive impact on the economy.  FDI determinants of infrastructures, macro-economic stability, skills and sound institutions attract investment. Dissenting views of Raul Prebisch about accretion of national wealth through foreign investment that often has high social cost  is now gaining focus as is   Adam Smith’s theory that minimalist role by the government can lead a country to prosperity given he failure of unbridled capitalism.  Advocates of capitalism ignored the fact  that perfect marriage between demand and supply is a theoretical concept, particularly in places where few firms forming syndicates control the supply and price  of commodities.  Concentric relationship between the politicians and captains of industry invariably leads to inequity and social stratification in terms of wealth and power.  In case of the US, Nobel laureate Paul Krugman lamented that the fruits of growth has been remarkably small for most Americans though people are perhaps materially better off than they were before but nearly not as much as they should have been given the extent of more productive US economy. Nobel laureate Joseph Stiglitz cautioned that market economy did not automatically guarantee, social justice, or even economic efficiency. Achieving those ends requires that government play an important role and consequently he advocated for “moral growth”. The state must ensure that the system and services needed for a market economy to function efficiently exist.  Harvard University Professor David Scott adds” Economic development requires the transformation of institutions as well as the freeing of prices, which in turn requires political and social modernization as well as economic reform. The state plays a key role in this process; without it, developmental strategies have little hope of succeeding. The creation of effective states in the developing World will not be driven by familiar market forces, even if pressures form capital markets can force fiscal and monetary discipline. And in a world still governed by "states rights," real progress in achieving accountable governments will require reforms beyond the mandate of multilateral institutions”.

The Bangladesh government   would have to face up to the choice of taking a path between political and developmental approach to democracy promotion. Political approach proceeds from a relatively narrow conception of democracy focused on the election and political liberty and a society in which democrats have an upper hand over non-democrats. Developmental approach rests on a broader notion of democracy encompassing concern for equality and justice. It favors democratization as a process of long term political and socio-economic development. Democracy is valuable in its own right but is secondary to a core developmental rationale.  Early concept of economic development basically put emphasis on growth and industrialization. Europe and the US were considered as developed and the other areas of the world were considered as primitive versions of European nations that would develop by stages. Walt W Rostow's Stages of Economic Development stressed that Europe and North America were at a   linear stage of development that the underdeveloped countries would eventually catch up with. He argued that all countries must develop through a number of stages starting with traditional agrarian society and culminating in a modern industrialized society. The key to this transformation was seen to be mobilization of domestic and foreign resources for investment in economic growth. Capital formation was considered  crucial to accelerated development.  This robotic development presupposed fruits of growth to trickle down through from the top to the lower strata of society and ignored the concept of equity and justice that every society demands.

Though the Bangladesh government is peopled with left of center background given the realities of the present day world the economy has to run on free market basis with governmental intervention in areas when necessary. The global meltdown has brought about an opportunity for the people to rethink whether neo-liberalism of the past decades that was based on orthodox developmental theory that production, distribution, and consumption of all commodities should be left to market forces without governmental intervention for an economy to reach the heights of progress. While the world is holding its breath to see if Barak Obama and European leaders  succeed in their stimulus plans before deciding on the fate  of capitalism as practiced in the West and in most developing countries after the Second World War,  Bangladesh may wish to delve deeper into the further  possibilities of regional cooperation, food security in the SAARC countries, balanced trade amongst one another, coordinated position on adverse effects of climate change, and, terrorism affecting the socio-economic and political development of all countries in the region, a realistic approach to the Indo-Pak unresolved issues. If Greece, Spain and Ireland could be brought at per with other EU countries then SAARC countries should shed off medieval thought process  and move towards modernization of the of the area.