Time for economic leadership

The coming that thwarted the AL combine's political ascendancy may not have been well timed but was welcomed with a big smile by the past government, the BNP, who were increasingly out of ideas on the streets ruled by socialist veterans. The BNP leader, Begum Zia, has often accused them, the 14-party, of behaving as CBA leaders for not respecting rule of law, or institutions such as the judiciary, the parliament, and the EC.

If this labeling is true, and to many it is, the BNP leader can be equally charged for doing likewise. Her 5-year term as the prime minister broke innumerable rules and bypassed many to acquire businesses and government favors for her party supporters. Her dishing out of TV broadcasting licenses to BNP loyalists is a prime example of nepotism. Furthermore, when BNP dissidents raised their voices or floated new parties, Bikalpadhara and then the LDP, Begum Zia's government ruthlessly mowed them down. Her government goons closed their businesses and physically besieged them. Is this democracy, where the right to dissent or question is forcibly silenced? Today, Begum Zia, out of the blue, defends democracy and institutions, but not convincingly.

Begum Zia is also blamed for permitting her own son to wield authority, without holding any, in the running of the government. It is the people's belief that all accusations of BNP corruption were squashed, shelved, or never investigated by the Anti-Corruption office. This is common in an autocracy, but not in a democratic system where leaders respect democratic institutions. None in the government or outside dared bring corruption charges, produce evidence or stand witness against the big leaders because there was no guarantee about his/her safety. One is surprised why Awami League, after years of reproving BNP corruption, is quiet on this issue unless it is its own past that makes it do so. Surely, to steal from the treasury is as wrong as stealing from ballot boxes.

If the military comes to the aid of civil power it will be an opportune moment to activate all corruption charges against prominent leaders, their party stalwarts and their dynasties. Without strong law and order the corrupt parties could easily foil charges of corruption. We have seen how Begum Zia's government, for electoral gains, cleared a few corruption cases against the former military dictator Ershad. Unless democratic rules are decisively grounded beyond political misuse, Bangladesh will forever remain corrupt, and rules will always be bent for personal and political interests. Devoid of proper democracy the benefit and privileges of a free nation will remain confined to the elite and their cronies.

This caretaker administration will pay a heavy price if it leans towards the BNP against the 14-party alliance, or vice versa. A military backed government, or the army in aid of civil power, is healthy only if it remains neutral and engages itself to establish rule of law and to protect life, liberty, and property.

Apart from political programs Bangladesh also faces disruptive agitations on many economic issues. The mere talk of free ports, or free trade, or export of gas to India raises street demonstration and blockades. Such vital economic matters are, thus, suppressed by political terrorization of the economy.

Bangladesh people do not evaluate the merits of liberalization, or why free trade and open economies are useful for creating wealth without jeopardizing national sovereignty. Dr. Yunus often speaks of radical economic thoughts, and he alone can bring such ideas to the people for their endorsement, but his occasional murmuring will not help the cause of economic freedom, liberalization, and prosperity.

He should begin an organization that will consistently and vigorously promote market sovereignty, low taxes, and strong but limited government. Economic well-being cannot come unless rule of law, liberalized markets, individual rights, and less government are noticeable in an economy.

Bangladesh people, in the age of globalization are obliged to understand, debate, and discuss, open borderless economies. The world's mainstream economists no longer ignore the significance of the market, but our economists ridicule it and perceive a dominant role of the government, and of their expertise, in designing the economy.

Bangladesh government intervention and injection of capital has failed to generate growth. Their aggregates are brilliant but are meaningless to the people. Their vision, or piles of statistics, cannot promote growth.

Furthermore, our economists or the government, who are some 50 years behind in their economic thinking, do not recognize the potential of the informal economy that is primarily made up of the poor. Hernando De Soto, the Peruvian champion of informal economies, in his book "The Mystery of Capital," calls savings and assets of the poor as "dead capital." His surveys of real estate held by the poor, but not legally recognized in Third World cities as Cairo, Lima, Manila and few others, reach a "total value of at least $9 trillion."

De Soto advises that leaders of the Third World need not "roam the world's foreign ministries and international financial institutions," but should work to transform such assets and savings into live capital by legalizing the informal economy that holds one of the largest pools of capital ever accumulated in the world.

The informal sector is "The next big thing for global business" writes Peter F. Schaefer (Tec Central online) citing the example of Cemex, a Mexican cement producer, becoming the largest in the world (beating out France's Lafarge and Switzerland's Holcim) by its initial ability to serve the micro-market -- selling a bag at a time to the Mexican poor.

Bangladesh's poor, like the cross border traders, street vendors, cart pullers, hawkers, peddlers, owners of untitled dwellings and the like, constitute the informal economy. Dr. Yunus and his Grameen Bank formalized non-collateral micro-credit lending, but banking is only one part of the total economy.

Grameen phone, that targets the poor, is not without profit, but is expanding to prove that the poor can boost a market. However, the savings of the poor, unlike those in the formal economy, are illiquid. For example, they cannot back up a credit card or the purchase of a television on installments from a street retailer. Bangladesh' poor can generate wealth by entrepreneurships, but they are unable to utilize formal markets and grow further in the absence of property rights.

The Third World will not require foreign money, or depend on it solely, if the "dead" capital can be made liquid or capitalized. Transforming this dead capital is where the help is needed, not large disbursements of aid to benefit the few in the official economy.

The historic economic success of the West was built on property rights that legalized enterprise. The dwellings of squatting vendors were legal entities, and did not have to pay the extra cash to police, the customs, the street gangs, or face eviction. Their beginnings were tiny but their enterprise got larger as there were no legal hurdles to face. There are many famous names in the West that began as such.

Bangladesh prepares projects with donor funds to finalize WTO and few FTA agreements. Such agreements will manage and define free trade, although wrongly, but the country can unilaterally, and immediately, create an economic environment, grant property rights in the vast informal market, liberalize trade, and enable competition. Such steps would strengthen political democracy and the economy, instead of its faulty variant as it is now.

Sheikh Hasina's election promise to establish a price regulating authority is nonsensical and shows how much our top leaders lag behind in their collective understanding of market principles. Her pledge to compensate business losses is mere rhetoric. Firstly, prices are never controlled or regulated in market economies as they provide essential market knowledge for efficient allocation of resources. Liberalization of the economy can break any syndicate or cartel, not government price regulations.

Second, powerful people in the government can shower riches on many, as they do, but only by distorting the market and flouting government rules. When the government is ideologically responsible for developing an economy, like the generation of electricity, a selected few businesspeople will receive the go ahead but countless more will be barred. The system is unethical, unfree, and unfair. Hasina's government would be no different unless she wakes up to free market capitalism.

Market economy, formal and informal, is now a global truth and no government rejects it. But they have shifted their intervention, their strong arm, to areas as environment. Today's dilemma is how to cut government expenses, simplify taxes, and shrink the welfare state, not to expand it. It is to generate wealth, not to distribute it. China, India, and smaller countries like Estonia, South Korea, Hong Kong, or Ireland are heading towards greater economic prosperity following the same principles of market liberalization, and there is no way Bangladesh cannot do the same. It is time for economic leadership, not war on the streets for political power that will bring no economic good, except to those who will run the government.

Nizam Ahmad is Director, Liberal Bangla, UK.