The government response to the virus-induced economic tsunami helped restart the economy without mitigating risks to the vulnerable. Flattening the vulnerability curve is critical to leaving no one behind in bad times
Bangladesh's development achievements are widely recognised and the narrative on what set of forces contributed to these achievements is well documented. There are debates on the specific triggers and transmission mechanisms, but the economic transformation remains beyond controversy.
Covid-19 has tipped the balance of Bangladesh's development discourse towards a re-crafting of the narrative to account for what econometricians call the "omitted variables". Some of these such as increasing inequality of opportunities across social classes and regions, nutritional disparities, urban congestion, pollution, and institutional degeneration were becoming ostensible even before the pandemic.
The health, social and economic disruptions caused by the pandemic has put vulnerability at the centre of attention. The world was caught underprepared in finding ways of responding to the challenges posed by the pandemic. Bangladesh is no exception. It could not sustain developmental gains in some key areas because of the depth of pre-existing vulnerabilities in health and livelihood systems. The public policy and market response to the economic malaise caused by the virus has been far from adequate and, its delivery, efficient casting a dampener on our rising development aspirations.
Our aspirations have risen faster than the achievements
There are good reasons. Steady non-inflationary economic growth with low public debt has been critical to making Bangladesh's development gains possible. Life expectancy has more than doubled and fertility rates have dropped to near replacement level. Bangladesh achieved many of the Millennium Development Goals such as reducing the poverty gap ratio, attaining gender parity in primary and secondary education, lowering infant and maternal mortality rates, improving immunization coverage, and reducing the incidence of communicable diseases. These achievements bolstered the nation's confidence to aspire to become a High-Income Country by 2041, leaving no one behind, building liveable cities, and protecting the ecological system through green growth.
The rising aspirations found additional legitimacy from the boundaries of the possible unveiled by some of our peers. Starting from remarkably similar or even worse initial conditions at around the same historical juncture, they have done better on income growth and poverty reduction. GNI per capita (constant $2,011) of Vietnam and China were lower than Bangladesh even in 1984. In 2017, China's GNI per capita was 315% and Vietnam's 59.3% higher than Bangladesh. Bangladesh reduced extreme poverty ($1.9 per capita per day) from 27% in 1981 to 14.8% in 2016, whereas China reduced it from 95.6% in 1981 to 0.73% in 2015 and Vietnam from 78.3% in 1981 to 1.96% in 2016. Sri Lanka and Bhutan also achieved higher poverty reduction.
The pandemic is testing the resilience of development
It exposed the plight of the 25% moderate and extreme poor and 55% vulnerable poor. Based on $3.2 per capita per day criteria, the poverty headcount rate in Bangladesh declined from 73.85% in 1981 to 52.9% in 2016. In Vietnam it declined from 93% in 1981 to 8.2% in 2016; and in China from 99.4% in 1981 to 7% in 2015.
Upward income mobility in these polities was higher leading to low pre-existing exposure to vulnerability. This allowed the authorities greater room to respond to the pandemic with a fuller set of measures.
Several analysts have highlighted the slippage of the vulnerable into poverty and the moderate poor into extreme poverty, with the former far exceeding the latter. Other than perhaps the top 5%, the rest of the population have been adversely affected, albeit with a high degree of asymmetry. Casual workers, salaried workers outside the public sector, and the self-employed in manufacturing, transport, trade, and services were among the most exposed.
Human development was on a slippery slope before the pandemic. The recently published Human Capital Index 2020 of the World Bank shows the future productivity of Bangladesh's current children is below the average South Asian or Low-Income Countries and has slid somewhat since 2018.
At the end of the day, this reflects disparities in access to human capital opportunities. Dr Hossain Zillur Rahman (TBS, September 18, 2020) aptly characterises it, in case of education, as: "Islands of quality and opportunity are surrounded by oceans of mediocre opportunities". The statement generalises beyond education, particularly health, social protection, infrastructure, and regulation.
Institutional deficiencies risk sharper slippage in poverty
What is it that were slipping on the development front? At a very general level it is plausible to hypothesise that policies and institutions form important parts of the answer because this is what appears to distinguish the cases of sustained and inclusive development.
Economic explanations of East Asia's growth with inclusion assign a central role to institutions, from the developmental state to industrial policy. There are multiple institutional means for solving the various collective action, credibility, and informational problems that hinder inclusive and resilient development. The search for a single institutional silver bullet is a flight to nowhere. Political factors consequential for growth, including the nature of the relationship between the state and the private sector, defy simple generalities.
Professor Wahiduddin Mahmud hinted a plausible generalisation when the pandemic had just hit Bangladesh (TBS (March 11, 2020): "In the case of the erstwhile authoritarian regimes in East Asia, the key to ensuring accountability lay in their quality of economic bureaucracies which were 'technically insulated' from patronage politics and whose policies were subject to performance-based scrutiny. In China, the governance reforms introduced in the wake of economic liberalisation have put in place a hierarchical system of strict accountability within the communist party's bureaucracy regarding achieving economic targets." This highlighted a pre-existing antibody in the economic system whose presence provided relatively greater immunity from the economic transmission of the virus.
Commentaries on government responses to Covid-19 in East Asia have focused on factors beyond competent leadership, policy instruments, or cultural dispositions. While necessary, these are by themselves insufficient to confront an unprecedented crisis. East Asia highlights the criticality of having in place the necessary institutional infrastructure when a crisis strikes. Policy instruments are more likely to succeed when existing institutional infrastructure supports their administration and addresses equity issues by reaching marginalised groups across all layers of the population.
An efficient bureaucracy, sufficiently insulated from political pressure to withstand rent-seeking and corruption, is a diminishing strength in Bangladesh. The patronage system linking the bureaucracy, political elites and markets has failed to deliver quality, inclusivity, and insurance against covariate shocks. Most people engaged in the process of development on all sides seem to agree that attacking corruption and improving governance; developing infrastructure; improving the quality of basic schooling are critical to responding to unanticipated shocks such as pandemics and making development self-reinforcing.
Building resilience to vulnerability
The pandemic has revealed opportunity to build resilience in the health system. After experiencing the challenges of responding to SARS and MERS, the East Asians overhauled their public health systems and relevant regulatory framework for the next round of epidemic. They created their Centers for Disease Control (CDC)-equivalent institutions. They empowered them with specialists, budget, and autonomy over the issuance of emergency guidelines to the public and policy advice to the top leadership. They invested in developing critical health infrastructures such as specialised medical centres and doctors, intensive care units (ICUs), and public-private partnerships to augment existing medical capacity; overhauled emergency manuals and guidelines; and modified legislations to streamline the approval process for test-kit development and clinical trials.
The government response to the virus-induced economic tsunami helped stimulate recovery without mitigating risks to the vulnerable. Crisis management capability is a measure of government quality and the dynamism of public administration. The commonality of robust institutional infrastructure among the East Asian polities offers insights into how the interactions between culture and policy instrument choices are enabled by the inherent design of a country's governance and intergovernmental system.
The price is too high to pay if a country is not ready to act when the crisis strikes.