Which economic model should Bangladesh choose?

Bangladesh stands at a crossroads; behind it lies its difficult economic past while ahead lies the promise of a much brighter future. However the route to that brighter future is by no means direct. Bangladeshis must collectively decide how to get there. The West, led by America, offers one model of growth which is driven by the free market and mass consumption. Essentially, this western model believes that individuals (either people or firms) should bear the risk -- and reward -- of success or failure. It espouses low taxes, few regulations and individual ownership of the factors of production. While this model certainly works, it works more for some than for others, generating a lot of inequality amid the wealth it creates. As one of my economics professors used to say “do not confuse efficiency with equality”.

OTHER EXISTING MODELS

Alternative models believe the investment risks faced by an economy are enormous, unknowable and far greater than any individual group can effectively manage. This model believes that risk must be managed collectively by government so growth may be slower but it is far more stable and equitable. The strengths and weakness of these two systems is still debated around the world but many countries have quietly slipped off to adapt their own models according to the structure and history of their individual society. China is one clear example but we have also seen that what works in Singapore cannot be done in, say, Brazil and what can be achieved in Norway will not necessarily work in the USA.

WHAT WE DO KNOW

What is evident is that a broad, diverse ownership of assets, where all stakeholders' concerns are considered, leads to positive social outcomes. We know that the power of the free market -- where the price mechanism determines how resources should be allocated -- is extremely efficient. We want to see all of society benefit but we also know all about “the dead hand of government”. We know there is an innate desire within mankind to better his life and that of his family. We have also seen that the mass consumption/resource depletion model of the west is wholly unsustainable and will devastate future generations.

SO, WHAT WILL WORK FOR BANGLADESH?

Bangladesh is a homogenous society, densely populated with few natural resources. So, on the surface it is sounds more like Japan than America, but of course, Bangladesh is no Japan; Bangladesh is uniquely Bangladeshi combining Islamic faith, Bengali culture and the family unit.

SOCIAL ENTREPRENEURSHIP

It seems that Bangladesh may be best suited to a model of broad social entrepreneurship. This model recognises the value of competition, the rules of finance and the importance of the individual in fostering creativity and innovation. At the same time it harnesses the profit motive so that the benefits of business success accrue to more than a fortunate few risk takers. Investors can recoup the money invested, with interest, but beyond that dividends are mainly paid through the achievement of social objectives (healthcare, education and housing). The roots of social entrepreneurialism extend back hundreds of years but one of the most commonly recognised variations -- microfinance -- originated right here in Bangladesh and has been rapidly adopted around the world.

Perhaps Bangladesh should become a hotbed of social entrepreneurialism where the concept is taught in schools and universities and embraced by the wider business community. It is certainly a model that appears to accord with many Bangladeshis I have met and spoken -- especially the all-important younger generation.

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William Westgate is an economist and director of London Training Services and also lectures at Regent College in Gulshan, Dhaka. He can reached at wwestgate@gmail.com.