Poverty and Reforms in Bangladesh

Abu Abdullah
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Abu Abdullah: Institute of Development Economics, Dhaka, Bangladesh.

The Pakistan Development Review, 1998, vol. 37, issue 4, 1071-1079

Abstract: In a memorable speech to the United Nations General Assembly, Nikita Krushehev predicted that communism would bury capitalism. In less emotive and more economistic terms, he was saying in effect that centrally planned economies would outperform market economies in terms of both output growth and social justice. History has not been kind to Krushehev. Not only central planning but even milder forms of state interventionism now stand discredited, and developing countries round the world are desperately trying to install functioning market economics. This sea-change in development philosophy generally owes something to donor conditionalities associated with structural adjustment credits, to the extent that “reforms” and “structural adjustment” have become virtually synonymous. Shortterm internal or external balance crises, and longer-term stagnation, also signalled to policy-makers the bankruptcy of over-interventionist policies—a lesson driven home by the phenomenal growth performance of the NIC’s, apparently the fruit of marketfriendly policies. In general, reform measures can be classified into three types: expenditurereducing, i.e., monetary, fiscal and wage restraints, expenditure—switching or supply-side measures intended to shift resources from non-tradable to tradables, e.g. real devaluation, tariff and subsidy reduction (aimed at bringing domestic prices in line with world prices for tradables), and institutional and policy reforms primarily armed at providing the private sector with a congenial environment. The policy package appropriate for a century will depend on initial conditions, e.g. demand-side policies will be most effective in a country where desired absorption exceeds full employment output capacity. And a country whose social and cultural backgrounds are conducive to rapid response to expenditure switching will have less need for expenditure reduction with its inevitable contractionary consequences.

Date: 1998
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