Neoliberal Development in Bangladesh: People on the Margins [1 ed.] 9845062660, 9789845062664

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NEOLIBERAL DEVELOPMENT IN BANGLADESH People on the Margins edited by Mohammad Tanzimuddin Khan Mohammad Sajjadur Rahman

in association with

act!Dnaid

The Universil)' Press Limited Red Crescent House, Level 6 61 Motijheel CIA Dhaka 1000, Bangladesh Phone: (+8802)9565441,(+880) 1917733741 E-mail: [email protected] Website: '\'1\'1\·.uplbooks.com First published, February, 2020 Copyright © ActionAid Bangladesh and The University Press Limited, 2020

All rights are reserved. No part of this publication may be reproduced or transmiNed in any form or by any means without prior permissioll ill writing from the publisher. Any person who does any ullauthorized act ill relation to this publicatioll may be liable to criminal prosecutioll alld civil claims for damages.

Cover artwork by Reesham Shahab Tirtho Cover layout by Mohammad Sajjadur Rahman

ISBN 978 984 506 266 4

Published by The University Press Limited, Red Crescent House (Level 6), 61 Motijheel CIA, Dhaka, Bangladesh. Book design by Dulal Bala and printed at the Color Line, G.P. Ga-188/2, School Road, Mohakhali, Dhaka-1212, Bangladesh.

Contents

List of Tables and Figures

vii

Acknowledgement

ix

Contributors

xi

Introduction Mohammad Tallzimuddin Khan & Mohammad Sajjadur Rahman Chapter 1:

Chapter 2:

Chapter 3:

Chapter 4:

Chapter 5:

1

Understanding Neoliberal Agency: The British East India Company TOllY Ly"ch

11

Development, Neoliberal Development and Microfinance: An Appraisal Mohammad lasim Uddin

29

Interrogating the "Peasant Question" in Post-Reform Bangladesh Manoj Misra

65

Neoliberalism, State, and Labor: Reflections on the Garment Industry Shahidllr Rahman

89

State-Business Nexus in Bangladesh: Quick Rental Power Plants in Perspective MahaMirza

113

Chapter 6:

Higher Education: Trapped in Neoliberal Reform Ariful Haq Kabir

Chapter 7:

Tourism and State Violence in the Chittagong Hill Tracts of Bangladesh Hana Shams Ahmed

163

Neoliberalism and Gender: Are the "Strong Women" ofMadhupur Losing Strength? Samina Lut/rfa

225

Chapter 8:

137

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I Neoliberal Development in Bangladesh

Chapter 9:

Neoliberal Policies, Development Interventions, Primitive Accumulation and Peasant Resistance: Land Grabs in the Noakltali Clrars of Bangladesh Slrapall Adllall

247

Chapter 10: Developmental Centralism, Rampal Power Plant, EIA, and the Sundarbans Molrammad Tallz;mudd;1l Klrall

293

Chapter II: The Taka, Transparency, and an Alternative Politics of Seeing From Phulbari, Bangladesh Nrlsrat S. Chowdhury

321

Index

351

Contents

I vii

List of Tables and Figures Tables 2.1: Conceptual and Theoretical Manifestations of Neoliberalism

37

4.1 : Changing Wage Structure, 2006-2018

100

4.2: List of Accidents in the Garment Industry since 2000

103

4.3: The Spectrum Collapse, Demands and Non-/Responses

104

5.1: List of Companies and Production Capacity of Quick Rental Plants

131

5.2: Different Methods for Increasing Electricity Supply in the System

132

7.1: A List of the Massacres Carried out by the Military in the Chitta gong Hill Tracts

191

8.1: Types of Land Used by the Mandi

239

Figures 4.1: Budget Allocation for DIFE

107

10.1: Location of the Rampal Power Plant and the ECA Boundary

296

10.2: Tropical Coastal Settings for the Mangroves

304

10.3: Different Kinds of Mangrove Forest

304

10.4: Ecoregions of the Sundarbans

306

10.5: The Ganges Delta and the Location of the Sundarbans in the Ganges Brahmanputra Meghna (GBM) River Catchment

307

10.6: Proposed Transit Route (Yellow Colored) for Carrying Coal through Akram Point

310

10.7: Industrial Lay-out of the Rampal Thermal Power Plant

313

11.1: Saiful Islam's Painting MemorialiZing the Phulbari Movement

(Photograph is taken by author) 11.2: A Cartoon Accompanying a News Article that Explains the Politics of Price Hike in Electricity

324 345

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Acknowledgement This book has taken a fairly long time to complete. We wish to thank our authors for their patience. We are also grateful to a number of individuals for making this book possible. Many thanks to Mahrukh Mohiuddin and her team at The University Press Limited (UPL) for overseeing the production. Special thanks go to the copyeditors who spent considerable time and effort providing authors with important comments and suggestions. Finally, we owe a debt of gratitude to Farah Kabir and her team at ActionAid Bangladesh for their generous support in bringing out this book.

I.

Contributors

Shapan Adnan is Professional Research Associate with the Department of Development Studies at the School of African and Asian Studies (SOAS), University of London. He has formerly taught at the University of Dhaka (1972-1978), the University of Chittagong (19781991), and the National University of Singapore (NUS) (2000-2009). Hana Shams Ahmed is a PhD Student at the Department of Social Anthropology, York University, Canada. Nusrat S. Chowdhury is Assistant Professor of Anthropology at Amherst College, Massachusetts, United States. Ariful Haq Kahir is a Professor of the Institute of Education and Research (IER) at the University of Dhaka, Bangladesh. Mohammad Tanzimuddin Khan is Professor of the Department of International Relations, University of Dhaka. Sam ina Luthfa is Associate Professor of the Department of Sociology, University of Dhaka. Tony Lynch is senior lecturer in the School of Humanities of the University of New England, Australia. Manoj Misra is an Assistant Professor of Sociology at Western Connecticut State UniverSity, United States. Mohammad Sajjadur Rahman is a doctoral student at the Strassler Center for Holocaust and Genocide Studies, Clark University, Massachusetts, United States. Shahidur Rahman is a Professor of Sociology in the Department of Economics and Social Sciences at BRAC University, Bangladesh. Mohammad Jasim Uddin is Professor of Sociology at Shahjalal University of Science and Technology, Sylhet, Bangladesh.

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INTRODUCTION Mohammad Tanzimuddin Khan & Mohammad Sajjadur Rahman Neoliberal development. the contemporary paradigm of capitalist progress. has been used as a legitimizing ideological tool for the developmental state since the 1980s. This paradigm. with its exclusive focus on free market. free trade. "efficient" allocation of resources and "de-territorialization" of national economy has transformed the very nature of the state. The shift from "welfarism" to "marketizationl commoditization" has permitted the global emergence of a marketsociety wherein the logic of profit and competition determines economic prosperity. For the neoliberal states. market is both the ends and means of social wellbeing. Transnational corporations and international financial institutes have played critical roles in globalizing this neoliberal logic. The market -society paradigm is. however. encountering many challenges and alternative visions are coming up from the very people who are suffering. Bangladesh's experience with neoliberal development is quite interesting in the sense that the country has already been recognized as a "development paradox". While some hail the development spree and bask in the glory of a fast-growing economy. critics of the traditional economic growth -oriented model of development point their fingers at the downsides of the same economy. The devotees of the traditional development model highlight the size of Bangladesh economy. which is nearly three hundred billion USD. They boast of the fact that the country is about to enter the lower middle-income category with per capita income of almost USD 1.700 per year (GoB. 2018). True. for the last ten years. Bangladesh has been conSistently experiencing an average GDP growth of6 percent. which has recently reached 7 percent. The prediction that Bangladesh is going to become

2

I Neoliberal Development in Bangladesh

the 26th largest economy in the world by 2031 is also being widely discussed. On the other side, critics point out that the quantitative model of development hides the dark side of the success stories. They point out that this model does not tell the fact that the Gini Co-efficient, which is employed to gauge income inequali ty, reached 0.4S3 in 2016 from 0.45S in 2010 (BBS 201 7, p. 28). The number of ultra-super rich people, \\~th a minimum USD 30 million in net worth , increased by 17.1 % between 201 2 and 2017, which was recorded as the highest growth in the world during that period (McCarthy, 20 IS). The ILO in its recent report (20IS, p. 24) put Bangladesh, along with Vietnam and Pakistan, in the category of "the most severe worsening of the youth unemployment situation". The same report confirms that the rate of unemployment among the youth, falling in the age group of 15-24, has doubled since 2011 (ibid, p. 97). Another report by the Center for Policy Dialogue (CPD) estimates that the ten major scams in the banking sector have cost the country BDT 225 billion, equivalent to USD 2.S billion, in the period between 200S and 2018 (The Daily Star, 9 December 2018). Bangladesh is also in a sorry state in ecological terms. For instance, Dhaka ranked third among the worst cities of the world in terms of its air quality (The Dhaka Tribune, 9 May 2019). A World Bank study report (2018, p. 8) found that diseases caused by environmental pollution account for 2S percent of all deaths in Bangladesh, which is the highest among the South Asian countries. Once Bangladesh had more than 700 small and large rivers. It has now come down to around 200, including those which have already been polluted and fallen victim to encroachment. Given this scenario of consistent economic growth coupled with degrading quality of life, ecology and political governance, supporters of the modern development describe Bangladesh as a "deVelopment surprise" (Chowdhury et aI., 2013). The critics of this growth-oriented numerical model of development call this "neoliberal development" to broadly describe the growing separation between state and society, or between the ruling elite and the masses

Introduction

I3

in terms of policy making, and, the state's increasing embeddedness in the market as well as the commodification of uncharted territories of economic activities (Nuruzzaman, 2004). This book brings together the critics to assess some of the implications, sector-wise, of neoliberal development in Bangladesh. The term neoliberalism is considered a "linguistic omnivore" for its ability to swallow all other words around it (Rogers, 2018). It means many things to many people. While for some observers, it connotes ideology, theory, policy perspective in relation to private capital, profit accumulation and the connected classes, supremacy of markets for the distribution of goods and services; for others, it implies minimal state, surveillance state, developmental state. Many would also argue that neoliberalism indicates a shared mental model of economic development (Harvey, 2007; Haque, 2008; Roy et aI., 2007). Whatever its meaning, this book, in its assessment of sectoral implications, reflects on five major features of neoliberal development as described by Haque (2007, pp. 14-17). First, the minimalist role of the state in terms of its development role in the public sector and reliance on market forces for service delivery; second, privatization and liberalization of trade and investment, deregulation of finance and price control; third, public-private partnership; fourth, diminishing social welfare programs and subsidized services; fifth, corporatization of the business sector. More importantly, the various chapters of the book show how the sectoral transformations of Bangladesh were initiated by embracing neoliberal values, mainly at the behest of the international financial institutions like the World Bank and the International Monetary Fund (IMF) in the 1980s under their Structural Adjustments Programs (SAPs).

Layout of the Book This volume has eleven chapters in total. The first chapter by Tony Lynch provides a brief background on the intellectual origins of the

4

I Neoliberal Development in Bangladesh

idea of neoliberalism and how it became the dominant paradigm for economic development. Neoliberalism is analyzed more as a plan of action rather than a theory. The author argues that in order to better understand neoliberalism's strategy and tactics, we must focus on its agency - the e>.:pansionist corporation. It is within this context that Tony probes into the tactical repertOire and strategic trajectory of the British East India Company (EIC) as an example of unfettered neoliberal agency and how it displaced the Bengal state through extreme privatization. The chapter concludes that while modern democracy can arguably tame the state, it can also provide an ideal environment for the deployment of corporate power. Therefore, taking back the political realm from the corporation should be the goal now. Mohammad Jasim Uddin, in Chapter 2, attempts to demystify the mythical reputation of microfinance in Bangladesh. The chapter provides a brief historiography on the changing paradigms of development and argues that microfmancing runs on the principles of neoliberal orthodoxy. Under the neoliberal regime, Micro Finance Institutions (MFIs) gradually transform into forprofit financial enterprises and imposes a specific form of social and economic regulation. The author shows that microfinance has emerged as a form of governmentality by "spreading the values of entrepreneurship with the 'market' as the solver of all ills". The chapter also traces the processes through which microfinance has emerged as a lucrative commercial business in which different organizations create their own "economic habitus" in the rural credit market. Manoj Misra argues (Chapter 3) that neoliberal agrarian reform policies in Bangladesh have polarized peasant classes through "partial proletarianization". He demonstrates that while the state actively sides with the capitalist class in negotiating the advancement of neoliberal market principles, it nevertheless has saved peasants from mass dispossession by initiating a number of protectionist policies. However, Manoj considers such interventions

Introducti on

I5

by the state as a deliberate pl oy to keep small peasants on life support in order to contain pl ausibl e ruptures in the process of capital accumulation. In Chapter 4, Shahidur Rahman analyzes the consequences of neoliberalism within the context of Bangladeshi garment industry's integration into the world market and internati onal production chains. The author argues that prior to the Ran a Plaza tragedy, the government had mostly played an ineffective role in dealing with the work and employment conditions in the industry. Over the years, the government has also ignored the constant demand from the garment workers to ensure a standard minimum wage. The chapter elaborates on how poor enforcement of labor laws in the garment industry caused a number of workplace accidents. Shahidur also argues that the colonial inheritance of a weak and deformed state contributed to the lack of a proactive role from the government in negotiating the challenges of neoliberalism. On the one hand, the garment entrepreneur class has a large degree of influence over the state due to their close association with the political elite and ruling parties; on the other, labor rights have been undermined by the state in various ways. Shahidur concludes that reforming labor regulation requires stronger role from the state and Bangladesh's sustainable presence in the global market depends very much on how the state is going to resolve this issue. Maha Mirza, in Chapter 5, probes the evolution of statebusiness nexus in the energy sector of Bangladesh, particularly in the context of quick rental power plants. The author explores the ways international financial institutions put pressure on Bangladesh to pursue pro-market economic reforms. However, the privatization spree from the 1990s did not ensure benefits to larger societal groups. Instead, the unregulated nature of the so-called pro-business environment gave rise to a highly influential business and industrial class in the country. The chapter shows that despite its excessive cost, the existence of a large number of rental deals with

6

I Neoliberal Development in Bangladesh

private power companies confirms the expanding influence of those business groups at the highest level of policymaking domains in Bangladesh. In Chapter 6. Arif Kabir describes how neoliberal ideas and doctrines have shaped both public and private universities in Bangladesh. Analyzing the content of crucial policy documents of the government. and media reports. this chapter locates major policy shifts within Bangladesh's higher education sector between 1992 and 2014. By assessing the Private University Acts and Ordinance. and the 20-Year Strategic Plan for Higher Education 2006-2026 (SPHE). Kabir demonstrates how neoliberal ideas like "knowledge as intellectual capital" have shaped various state policies in expanding tertiary education. Lately. such profit-driven approach has affected public universities as well. Kabir argues that the depoliticization agenda behind these policies demonstrates a "democratic deficit" in the decision-making process at the top and one way to deal with the crisis. emanating from the commodification of higher education. is to introduce "educational democracy". The three districts of the Chittagong Hill Tracts (CHT) of Bangladesh have the highest military presence in Bangladesh. Following its emergence as an independent country in 1971. the military carried out a campaign of systematic repression of the Jumma indigenous people of the region. In Chapter 7. Hana Shams Ahmed focuses on tourism and argues that it is one of the ways by which ruling elites expropriate Jumma lands and circumvent indigenous land and cultural rights. The process is riddled with contradictions. On the one hand. violence against the Jumma has not ceased. and instead. the presence of the military has become normalized. On the other hand. the state promotes the Hills as a tourist site where tourists may enjoy the landscape and the "exotic" inhabitants. Hana contextualizes this conflict within the historical legacy of British colonialism. and the subsequent emergence of smaller nation-states that inherited colonial categories and institutions.

Introduction

I7

Th e next chapter by Sam ina Luthfa explores the marginalization of the Mandi women of Madhupur in livelihood decision-making and land-related issues (Chapter 8). Earlier studies show that the Mandis, a matrilineal indigenous community, traditionally had women as owners of the land and leaders in livelihood decisionmaking. However, Sam ina shows that neoliberal agricultural policies led to the expansion of commercial plantation agriculture in recent years, altering the roles and status of the strong Mandi women. Bangalees dominated commercial cultivation for years and the Mandis learnt from the Bangalees, although Mandi-Bangalee interactions on commercial agriculture were restricted within the males of both communities, for social-religious reasons. Thus, Mandi males started to make decisions about land use and use of chemicals in agriculture, having picked up knowledge from their Bangalee neighbors and/or development workers, leaving out Mandi women from the process. The increased use of chemicals in Mandi monocropped banana or pineapple plantations of Madhupur led to the infertility of the land. The chapter concludes that the worst victims of this process turned out to be Mandi women, though their stake in the decision-making process was minimal. Shapan Adnan (Chapter 9) explores the impacts of neoliberal policies and development interventions in rural Bangladesh. The chapter is based on a case study of the old Noakhali district and focuses on land grabs in the context of the establishment ofan exportoriented shrimp zone. While the author describes how the state and private agencies get involved in land grabbing in the context of neoliberal development, he also analyzes changes in the forms and modalities of peasant resistance to the land grabs. In doing so, Shapan takes into consideration the influence of socio-economic and political interactions between various actors in the struggles against land grabbing. In Chapter 10, Mohammad Tanzimuddin Khan argues that the "developmental centralism" involving the Rampal Power Plant has

8

I Neoliberal Development in Bangladesh

created a legitimacy crisis for the government of Bangladesh, as long as legitimacy is defined in terms of Weberian perspective in which a state can enjoy legitimacy only by ha\~ng a legal-rational government. The author critically examines the legal as well as the ecological considerations of the government in establishing the power plant. For this, he analyses the Environmental Impact Assessment (EIA) report which pro~ded the legal rationale for setting up a coal-based power plant. The chapter concludes by shm\~ng that the power plant was planned by sidelining the ecological significance of the Sundarbans and its surroundings. In the final chapter (Chapter 11), Nusrat S. Chowdhury explores the political significance of physical money and the idea of neoliberal transparency in Bangladesh. In doing so, she examines two significant political events: the anti-corruption campaigns during the politically volatile period of2007 -2008 and, the Phulbari movement - the anti-mining protest that erupted in 2006. In both of these cases, the author examines the fascination with money's materiality in the public culture. She suggests that against the backdrop of the obsession with "transparency"" during the armybacked government, the public culture of the Phulbari Movement indicates the future possibilities of radical politics by offering us "an alternative politics of seeing". In conclusion, we would like to make two points about this book. First, the book certainly does not claim to provide a comprehensive understanding of contemporary scholarship on Bangladesh's experience with neoliberalism. We felt that discussion on two other sectors, media and health, would have made this volume more complete. Secondly, we have not imposed conformity, in order to show the diversity of opinions in analyzing neoliberal policies and politicS. Our hope is that students, scholars and practitioners will find this book useful for a better understanding of the past, present and future state ofBangiadesh.

Introduction

I9

References Bangladesh Bureau of Statistics (BBS). (20 17). Prelimin ary Report on Household In come alld Expenditure Su rvey. Dhaka: Government of Bangladesh (GoB). Chowdhury, A.M. R., Bhuiya, A., Chowdh ury, M.E., Ras heed,S., & Chen, L. (2013 ). The Bangladesh Paradox: Exceptional Health Achievement Despite Economic Poverty. The Lancet, 382(9906), 1734-1 745. Government of Bangladesh (GoB). (2018). Bangladesh Economic Review. Dhaka: MinistryofFinance. Haque, S. (2007). Global Rise of Neoliberal State and Its Impact on Citizenship: Experiences in Developing Nations. Asian Journal ofSocial Science, 36(1), 11-34. Harvey, D. (2007). A Brief History of Neoliberalism. Oxford: Oxford UniverSity Press. International Labour Organization (ILO). (2018). Asia-Pacific Employment and Social Outlook: Advancing Decent Work for Sustainable Development. Bangkok: Regional and Social Analysis Unit, ILO. McCarthy, N. (2018, September 27). Where Super Rich Populations Are Growing Faster. The Forbes MagaZine. Retrieved, December I, 2018 from https:llwww.forbes.com/sites/ niallmccarthy/20 18/0912 7/wheresup e r -rich -pop ula t ion s -a re -grow i n g -fas t es t -in fograp h icl # 282c 37914ce3 Nuruzzaman, M. (2004). Neoliberal Economic Reforms, the Rich and the Poor in Bangladesh. Journal ofContemporary Asia, 34( 1),33-54. The Daily Star. (2018, December 9). Major Scams Cost Banks Tk. 22,502 Cr: CPO. Retrieved, June 6, 2019 from https:llwww.thedailystar.netl business/news/major-scams-cost -banks-tk-22502cr-cpd-1671175 The Dhaka Triblme. (2019, May 9) . Air Quality Index Ranks Dhaka's Pollution 3rd Worst in World. Retrieved, June 6, 2019 from https:llwww.dhakatribune.com/bangladesh/ dhaka/20 19/05/09/airquality-index-ranks-dhaka-s-pollution-3rd-worst-in-world

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Rodgers, D. (2018). The Uses and Abuses of Neolibcralism. The Dissellt Magazille (Winter). Retrieved, December OS, 2018 from https:llwww. dissentmagazinc.org/article/uses-and-abuses-ncoliberalism-debate Roy, R.K., Denzau, A.T., & Willett, T.D. (2007). Neoliberalism: Natiollal and Regiollal Experiments with Global Ideas. New York: Routledge. The World Bank. (2018, September). Ellhallcillg Opport,mities!or Cieall

alld Resilient Growth in Urball Ballgladesh: Country Ellvirollmelllal Allalysis 2018. Washington, DC: The World Bank Group.

Chapter 1

UNDERSTANDING NEOLIBERAL AGENCY: THE BRITISH EAST INDIA COMPANY' Tony Lynch When, today, we speak in policy matters of'development", even 'buman development", everyone knows we mean economic development. This assumption would not be useful or reliable if we were looking at ancient societies. Such societies might, in certain phases, experience or aim at economic development, but only in the service of other ends - not least the status and glory of the ruling elites. But in the contemporary world, economic development is not only a standing assumption of what goes into, and what counts as, human progress, it is pretty much the sole and dominant end of what we think ofas well-formed, rational governance. For some it is the very content of human flourishing, outside of which there is nothing of (real) value, while for others it is the necessary condition for the realization of whatever other values there might be (Walsh & Lynch, 2008). Either way, the upshot is the same: economic development first and always.

The Beginnings In this distinctively modern sense, the project of economic development was a matter of European state-building in a cont~1 of a permanent and pressing rivalry of the kind Hobbes called a "state of war". This was the mercantilist era, and in it economic development moved from being a tool for state development to its essential constituent. It funded that military, administrative, and cultural development without which a state becanle vulnerable to the predatory intentions ofits richer, better organized, neighbors (Schmoller, 1910) . • This essay was originally written for this volume. It first appeared in Social Alternat;I"s, 27(4),2019.

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I Neoliberal Development in Bangladesh

This state building aspect of economic development has never gone away, in part just because competition between states has never gone away. On this level- the level of states - economic development is a simple concept. It is whatever it is - both at home and abroad - that favors (that is, is taken by the ruling elite to favor) the development interests of the state.

A Bifurcation In the post-colonial era of state building the idea of economic development became more complicated, for there emerged the idea that economic development meant, in fact, two things. It was one thing for "developed" nations (in fact, pretty much what it had always been), but quite another thing for those nations emerging from the break -up of the old mercantilist empires. This idea - that there was a special kind of economic development specific to emerging nations in an already developed capitalist world triumphed in the post "V"VII era, and was institutionalized in such places as the World Bank, the International Monetary Fund (IMF), and academic economics, as "Development Economics." VVhile there was certainly no retreat by "developed" states from economic selfinterest, the idea was that this might be furthered by economic development in "developing" nations, and that this development would promote the well-being of these states and their citizens. This bifurcation of the idea of economic development - rested, as Geoffrey Hawthorn (2014, p. 35) observed, on The prevailing view [that] the difference between an economics for the more developed countries and an economics for the less was that the less didn't know how to do economics at all. This bifurcation - built on developed nations' sense of mature self-achievement and superiority and expressed in a paternalism "often bereft of altruism" (Zafarullah & Huque, 2006, p. 15) - saw "postcolonial development strategies [that] generally faltered in

Understanding Neoliberal Agency

I 13

attacking poverty and were only partl y productive in alleviating social malaise". Still, however disappointing its track record, and however irremovable its paternalism, this bifurcated understanding did sometimes allow for a certain flexibility and experimentalism of development strategies, particularly in the context of Cold War competition between "capitalist" and "socialist" development models (Parfitt, 2002). Today all that is gone. Today, nationally and internationally, economic development again means one thing, just as it did under mercantilism, though the language in which it is expressed - not so much its operations - has been altered in the light of Adam Smith's "free market and free trade" critique of mercantilism in The Wealth of Nations (I940). Today the global development paradigm for economic development, on all scales, is neoliberalism. Approaching Neoliberal Development While there are challenges and resistance to the hegemony of neoliberalism, these tend to be defined by their opposition to it, rather than the attractions of proposed alternatives. One might bemoan this, seeking instead an inspiring vision that will see us slouching towards utopia; but to look fon\'ard without a sense of the past and our place in it, is to leave oneself open to the rebuke of the Irish farmer who, being asked by a traveler how he might arrive at X, replied "Well, I wouldn't start from here". We cannot make our way from our neoliberal present to a better future, a better world, ifwe don't understand where our journey begins. VIle must know neoliberalism: its end, strategy, tactics. And that means understanding its agency, and so its prime agent. And that, as we shall see, means knowing the Neoliberal Corporation. Neoliberalism as Theory Some seek to understand neoliberalism by looking at the theory of neoliberalism. This is a mistake.

14

I Neoliberal Development in Bangladesh The theory of neoliberalism can be succinctly expressed: Neoliberalism is ... a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private pro perT)' rights, free markets and free trade (Harvel', 2005, p. 2).

This is a nice theory. It aims at human well-being, and it claims to know the route to that well-being. It melds two fundamental strands of post-Enlightenment ethical theory. On the one hand it is utilitarian: it claims that, on average, everyone will be better off in a world of "entrepreneurial freedoms" than they would be under any alternative system; and on the other it is firmly based in the deontological "individual rights" tradition, with its universalism and its egalitarian concern for indi\~dual freedom and the sanctity of private property (Lynch, 2009). On the basis of this neat conjunction it formulates a theory of action: [the] social good [deontological and consequentialist] will be maximized by maximizing the reach and frequency of market transactions ... all human action [must be brought] into the domain of the market (Harvey, 2005, p. 2). As an economic and ethical theory, all this is admirable. We have a conception of human well-being, we have a conception ofindividual rights, and on this basis, an admirably clear political and economic program. All we need to do, as we must do with any theory, is to test it against reality. But here is the rub. For this is the one thing neoliberalism has tended always to shy away from, and increasingly refuses altogether. The Falsification Problem First - tribute perhaps to its propensity to a priori formulations neoliberalism tends to ignore actual. rather than imaginary, history. For the truth is that the development of capitalism and capitaliststates

Understanding Ncolibcral Agency

I 15

was rarely a matter of free trade and free markets in the sense Adam Smith meant. Capitalism grew through the competition of mercantilist states that saw themselves engaged in a zero-sum game, and so had no qualms about restricting trade with protectionist and punitive taxes, quotas, duties, and tariffs; nor did they or their agents shy away from using force to open, and to dominate markets. And as for sacrosanct property rights - well, that depended on whose property was in question. If, for example, you lived in 19C Bengal, and you were an Englishman connected to the East India Company, your property was certainly protected, but if you were a Bangalee, and of whatever status, not so much. This is not to say that history can teach us nothing about neoliberalism. I think it can teach us more than we normally appreciate. But it does not teach us that neoliberal theory is right. And it does not even teach us this today, in a world deeply shaped by neoliberal ambitions. The last 40 or so years - the neoliberal years - far from seeing an ever more quickly rising tide lifting all boats ever higher, has seen global economic growth well below that achieved in the previous post WWII "social democratic" era, at the same time as economic inequality in the developed world has returned to 19C levels and continues to increase, with all the obvious and adverse consequences for moral universalism and political equality (Pike tty, 2014). Indeed, China aside, it is not even clear on the global level that absolute poverty has reduced (Hickell, 2014) while, in the capitalist heartlands of Europe and the United States, it has certainly increased, even dramatically so, over the last few years (Ostry, Berg, & Charalambos, 2014) . As if these consequences were not enough to cast doubt on neoliberal theory, the 2008 Global Financial Crisis upturned pretty much all of it, and in the most spectacular fashion (Stiglitz, 2010). Far from "entrepreneurial freedoms" dedicated to "maximizing the reach and frequency of market transactions" generating well-being for all, and far from the neoliberal private property regime standing proud in

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I Neoliberal Development in Bangladesh

its self-contained, self-correcting, cataUaxic autonomy, we saw such freedoms morph into hysterical speculation and outright fraud on a scale that saw the world's financial system freeze up, only to be freed through state intervention and public provision. This process stripped our proud neoliberal property holders of responsibility for their actions, socializing their losses in a way the theory claims is both unnecessary and evil ("morally hazardous"), while externalizing their losses onto taxpayers without their input or consent (a price distorting "negative externality"). If neoliberalism were a theory, so a project of economic development based on the soundness of that theory, then it has been about as thoroughly refuted as a theory can be. This is the only verdict compatible with intellectual honesty. And for many people - even, for one brief moment, its chief priest, Alan Greenspan himself - this was the conclusion. Neoliberal theory had been falsified . But - the truly revealing point - our neoliberal world goes on as before, even more furiously so, though with a new brutalist cast to its rhetoric. For the ethical language of utilitarianism and de ontological rights has been twisted into a framework of necessity ("There Is No Alternative!"), or has assumed a "Libertarian" form, so that what matters are not the freedoms and rights of aU, but those of a select few, the "wealth creators", who, as the assumption goes, are the only productive, therefore true or proper, people there are. ""hile neoliberalism has a theory, it is not itself a theory. While its theory may interest or amuse the intellectually disputatious or curious, such discussions are largely irrelevant when it comes to its actual political economic practices. For the truth is that neoliberalism is not so much a theory as a strategy. It is "a plan of action or policy designed to achieve a major or overall aim" (The Oxford Essential Dictionary of the U.S. Military, OED). As a strategy neoliberalism cannot be refuted by experience; it can only succeed or fail. It is not an attempt to lay bare the workings of the human world for the purposes of the utility or human rights of

Understanding Neoliberal Agency

I 17

all- we are well past the sell-by date of all this - rather it is an attempt to change that world. and in a way that serves the interests and ends of those who most benefit from bringing human action "into the domain of the market".

Neoliberalism as Strategy Not for the Personal Realm Neoliberalism as the effort to bring all things human into the domain of the market. so as to commodify it for the purpose of profit. is not the kind of strategy that an individual. as an individual among others. would normally find attractive. It is not. for instance. attractive to use this strategy as a parent. a child. a sibling. a friend or partner. Playing such a strategy would seem to undermine. even destroy. the relationship itself. In the personal sphere. neoliberal strategy is nihilistic (Frey. 1997).

Not for the Sovereign State If neoliberalism is not generally an attractive strategy to play for the individual in the personal realm. neither is it naturally attractive to the State qua State. Obviously - and as we will see with the British State and the British East India Company - a state may find certain of its interests furthered by playing. or allowing others to play. the neoliberal strategy. but the essential logic - the Sovereign logic - of the state is not at all neoliberal (Oakeshott. 197 5) . On the contrary. it depends very much on non-commodified relationships - that between state and citizen, for example. or those involved in its political and juridical authority generally. It demands a sense of political and social solidarity. not only to minimize the costs of maintaining and enforcing order. but also so that it may rely on its citizens' Willingness to work for it. defend it. even to die in its service. In short. it demands identification and loyalty. commitment and respect. To try and commodify these in the neoliberal way would be, as in the personal sphere. to undermine these relationships. It would

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be an act of political nihilism. To the extent these relationships are commodified, the state (like the personal sphere) is under threat from neoliberal agency.

Not for Small Bllsiness Neoliberalism is a business strategy, but it is not, therefore, the strategy of all business agents, for even as a business strategy neoliberalism is not always and everywhere attractive. When it comes to small businesses, ties of trust and community may, and often do, help secure survival and profit. Customer loyalty ("good will") may, like staffloyalty, help with hard times and cash flow problems, and \\~ll certainly facilitate the good times. A sense of solidarity and trust rna)' assist with relationships to creditors and debtors, as well as relationships between suppliers and clients. Even between market competitors these ties may help stabilize prices and market share. In general, and in all areas, they will diminish or hold down transactions costs and moderate risk. Certainly, they aren't something to be easily or lightly abandoned in favor of extending commodified ties and connections (Polyani, 1944).

Neoliberalism a Strategy for the Corporation (but not all Corporations, and not all the time) If neoliberal strategy isn't attractive in the personal sphere or that of political sovereignty, and not all that attractive when it comes to small business, for whom is it attractive? The short answer is that it is attractive for large businesses: in particular for Corporations of a size sufficient to give them the political capacity to open up previously protected or independent realms of human interaction for commodified exploitation. Not all corporations possess such political capacity - they may simply be too small to matter much on the political scale, or - more importantly - they may be subject to effective political-legal regulation that closes off the possibility of monopolization, so limiting their capacity to assume the size and economic power that might deliver

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I 19

them the political capacity to create and dominate new market domains. Where such conditions obtain - as to a large degree they did during the "Long Boom" - the corporation, being limited to established market domains, will tend to be concerned, as Galbraith (1967) pointed out, with profit security, rather than profit-growth. This is because in an established market domain serious and dedicated competition will inevitably see some players lose. Often it is better to co-exist more or less peacefully with one's competitors, especially if the market is already oligopolistically profitable, and even more especially so if the market is "saturated", so that there is no demand for further supply, or no cost-effective way of increasing demand by lowering prices. And so for these corporation, just as for small business, those elements of trust and loyalty important for market security and minimizing transaction costs, have weight. The NeoliberaI Corporation The natural agent for the neoliberal strategy is the corporation that, in a search not only for profit security, but profit growth, has the political capacity to penetrate into previously non-monetized realms, and by so doing create entirely new markets to monopolize. In the grip of this predatory and expansive project it insists on the necessity of "liberating . . . entrepreneurial freedoms and skills ,vithin an institutional framework characterized by strong private property rights, free markets and free trade" (Harvey, 2005, p. 2). It may - and typically will - dress this up with claims about "the social good", but this will not be its language to its bankers, financiers and shareholders. That language will be one of'creative disruption' in the pursuit of profit growth, higher share prices, and impressive returns. This kind of corporation will naturally play the neoliberal strategy. It will use its market power and the political capacity it enables to pursue the neoliberal strategy, and it will play it as ,videly as it can (encroaching thereby into the personal and the political spheres and disrupting the small business sector) in the process of opening up and dominating new markets for monopolistic profit taking.

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Meet the British East India Company We are fortunate to have an example of a neoliberal corporation. pursuing profit through its political capacity to open up and exploit new markets. that. in the openness of its historical context and the scale of its activities. lets us see \\~th a special clarity the tactical repertoire and strategic trajectory of the unfettered neoliberal corporation. This corporation is-or rather. it was-the British East India Company (EIC).

A NeoliberaI Corporation in the Wild The East India Company was chartered in 1600 as a joint stock limited liability corporation and granted by the Elizabethan State a "monopoly at the trade with the East". It was dissolved in 1874. In that time its acti\~ties had helped fund the British State. inspire the American War ofindependence. humiliate Qing Dynasty China. and subdue India for Empire. Here was a transnational corporation whose privatizations and commodifications. whose financial interests and activities. and whose creation. manipulation and management of crises. not only made it the largest and richest corporation in the world. but arguably the largest single causal power shaping the globe. Starting with a focus on importing spices to Britain. it soon diversified into cotton. linen. saltpetre. tea. silks. ivory. carpets. feathers and opium. in each case creating a commodified supply market that undermined any pre-existing "moral economy" abroad, and. at the same time. created new distributional markets at home. It aimed to monopolize its access to these goods (its Royal Charter gave it the power to identify "interlopers" and to seize their ships and cargoes). and to the markets in which they were acquired and disbursed (Robins. 2006). This political sanctioned twinned ambition-opening. then dominating markets-the EIC pursued through whatever means were available and seemed appropriate to its officials. In doing this it was never hindered by any undue concern for moral or political

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I 21

legalities, neither at home nor overseas (it was, in this way, a paradigm example of homo ecol1omicus unleashed). It warred, bribed, murdered ("judicially" and otherwise), imprisoned, defrauded, kidnapped, extorted, and traded in contraband, with the gleeful vigor of the sociopath, and it did so with a clarity of mind often hidden or occluded by the corporation and its defenders today. As its largest shareholder, board member, and governor in the latter 17C, Josiah Child, insisted, "profit and power must go together" (Robins, 2006, p. 48). This pellucid honesty about strategy and tactics-that corporate profiteering demanded and, in crucial part, depended on, corporate political power-played out along a number of dimensions. To begin with it played out in the usual capitalist way, exacerbated by the EIC's oligopolistic and monopolistic power. The Company squeezed its suppliers as hard it could, which in Bengal, was very hard indeed. As the trader and one time EIC official, William Bolts (I998, p. 74) wrote of the Company's treatment of its cloth-providing weavers: Various and innumerable [were1 the methods of oppressing the poor weavers, such as by fines, imprisonments, floggings, forcing bonds on them etc. It also played out politically, both in Britain and abroad. Not only was the Company formed by stockholders who were themselves SOcially and politically prominent aristocrats and merchants, but the profits the Company generated could be tapped by the British state in the form of "gifts" and loans, providing a much needed supplement to what was still a low-income government, while governments abroad (initially, at least) sometimes found its trade a useful way of acquiring bullion. Even more important for the Company was that its size and reach operated to make it pretty much a political imperative for the British state to sustain it. It soon became, in modern terminology, "too big to fail". Not only did much (indeed most) British trade to and from Asia

22

I Neoliberal De\'clopment in Bangladesh

depend on it, not only was it a needed creditor to permanently cash strapped rulers, but the Company underpinned the whole stocktrading system itself: its shares were the "blue chip" standard, and its dividends were a major contributor to the growth of that market. This "too big to fail" stranglehold on the British State meant that in times of economic stress - often generated by the collapse of speculative bubbles its acth~ties and profits stimulated - the Company could, and did, rely on the state to bail it out. This immunity to the risks of the market-place, allied to the limited liability it had been granted by the Crown, allowed the El C to take risks, to speculate and peculate, secure in its capacity to externalize its losses as effectively as it privatized its gains. This security in risk-taking was further enhanced because the size and profits of the EIC meant its officials had a de facto legal immunity for the crimes they committed in pursuit of profit both at home and, especially, overseas. As Bolts (J 998, p. 213) sourly noted from England on being dismissed from the Company: We behold the impotency of power to be such on this side of the ocean that not one delinquent in India is brought to justice in Europe. Certain of its State backed ability to ride out any economic disturbances there might be, and that it might cause, and so of its immunity from charges of corporate criminality, the EIC could and did act as a fearless, ruthless, economic predator. If this unrestrained predation produced economic, social and political crises, it saw these not so much as threats, but as opportunities for further predation and growth. Thus the appalling 1770 Bengal Famine in which up to 10 million died was not only a human disaster largely caused by the EIC's postPlassey privatization of the Bangalee state (surely the supreme neoliberal privatization of all time), and its consequent destruction of the old Mughal moral economy, which met famine by "embargoes on food exports, anti-speculative price regulation, tax relief and distribution of free food" (Davis, 2002, p. 286), (and, for

Understanding Neoliberal Agency

I 23

shortchanging merchants, demanded from them an equivalent weight in human flesh) ; but it was also an opportunity for profit and the demonstration of corporate power. Rather than ameliorate or mitigate the disaster compounded by its five-fold increase in land tax, its destruction of domestic fo od production for the contraband export crop, opium, and its forbidding of any non-Company "hoarding" of rice, company officials instead bought up all the grain they could, making fortunes as prices soared, and, even as perhaps a third of the population died, raised their demands for tax revenues, so that "notwithstanding the great severity of the late famine and the great reduction of people thereby, some increase [in revenue collection] has been made" (D utt, 1908, p. 52). The neoliberal corporation is an economic predator which, in the service of profit, will not only ignore, but will produce and e}..-ploit human suffering in defiance of those utilitarian and deontological ethical claims embedded in its theoretical fac;:ade. This is nicely illustrated by a letter, a few years later, from the Company's Directors in London to the Governor of Bengal, Warren Hastings. With an eye to the Company's public standing after the privatization of the Bengal state, and its contribution to the horrors of the subsequent famine, they wrote, according to Thomas Babington Macaulay (I 841, p. 115): Govern leniently and send more money ... practice strict justice and moderation towards neighbouring powers, and send more money. As Macaulay continued, the direction could be re-eA-pressed as "Be the father and the oppressor of the people; be just and unjust, mode'rate and rapacious". Hastings, of course, understood the meaning - how could he not? - and wisely decided "to neglect the sermons and find the rupees" (ibid).

Plassey - The Greatest Neoliberal Achievement of All Time Robert Clive's violent privatization of the Bangalee state - initiated at the Battle of Plassey in 1757, and fulfilled by installing a collaborationist and puppet ruler, Mir Jafar, a General in the forces of

24

I Neoliberal Development in Bangladesh

the Nawab of Bengal's army - is perhaps the supreme neoliberal achievement, \\~lh corporate power consuming the state itself. On victory, the EIC emptied the Bengal treasury, using over ]00 boats to ship gold and silver to its Calcutta headquarters, enriching the Company and Clive, and, back in London, sending its share price into the stratosphere. Unable to restrain itself from the profit opportunities its political intervention opened up, the Company soon assumed control (Diwani) over the tax revenues of Bengal, and so became a state in everything except political responsibility: for a corporation may have suppliers, financiers, clients, and its own mercenary armies, but it does not have citizens, nor does it want them. The full corporate privatization of the state is the end of the state, and it ine\~tably sees the demands of rule outstrip corporate institutional management capacity - as was ultimately the case for the EIC, with the Indian Mutiny of 1857-58 seeing it swallowed entire by the Raj. For a corporation that displaces the state still has need of certain state functions and provisions, though without the state's underpinnings of identification and loyalty, commitment and respect. It needs an army, and it needs an administrative and judicial order, it needs a reliable revenue collection system, and it needs at all times to reduce the transaction costs of rule; but none of this is easily or well provided by corporate means. The army is mercenary, the administrative and judicial order lacks any sense of the common or public interest, revenue collection is typically a matter of forced extraction in a context of all-pervasive corruption, and the transaction costs (as the EIC discovered) are appallingly high.

Against Neoliberal Corporate Agency: Adam Smith & Edmund Burke One can hardly class Adam Smith and Edmund Burke as anticapitalist thinkers, and certainly the former's name is commonly associated today with neoliberaHsm itself; but it is a mark of the toxicity of neoliberal corporate agency on the personal, on small

Understanding Neoli beral Agency

I 25

business, and especially on the sovereign logic of the state, that both were absolutely hostile to British East India Company in particular, and to large scale corporate organization generally. Burke wanted corporations - investors and officers - to be stripped of the protections oflimited liability, and - crucially - for there to be a clear separation between commercial and political power, with the creation and domination of new markets seen as an infringement of the commercial into the political realm because it "create[s] power" (Burke, 1783). Adam Smith wanted much the same, insisting that commerce was not an end in itself, but a means to human well-being, and, in Book IV of The Wealth of Nations, held that it could only be that if commerce respected .. the laws of justice", where this meant anti-trust and "competition"laws, limits on financial speculation and risk-taking so that it possessed "dignity and steadiness", and limits on the size or scale of corporate impact in and on a market. And wherefor reasons of 'natural' monopoly or othen,~s e - monopoly can't easily be so managed, Smith almost anticipates those who later see nationalization as the answer, suggesting a magistrate or "clerk of the market" actively regulate the prices the monopolist may charge.

Democracy and Neoliberal Agency - The Ultimate Question Smith and Burke launched their critiques of neoliberal agency, and made their suggestions as to how it might be thwarted, from within a general commitment to capitalism, and it may be - as radical political economists have long insisted - that given such a commitment such countervailing efforts are doomed to failure. But if that is the case, then it will be because democracy itself has failed, for both Smith and Burke rested their ultimate hopes here in democracy, and it supposed capacity to effectively limit, censure and shape, the political economy of capitalism. The trouble with this hope is that a case can be made that modern democracy is pretty much the ideal environment for the deployment of corporate power. After all, while the actual popular sovereignty expressed in voting might be minimal, the political parties

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I Neolibernl Development in Bangladesh

corporately funded . and the information environment itselflargely a corporate construction. the ritual of voting gives a concrete. personal. representation of popular soverei gnty. and in so doing - and whatever the despondency of its voters and the emptiness of their choice legitimates or "mandates" whatever it is the government does. and however corporate friendly. indeed corporate dominated. it might be.

The Irish Farmer In that case then perhaps the final words here are those of our Irish Farmer: "You want to get to there? A world free from the pernicious and corrosive effects of neoliberal agency? Then I most certainly would not start from here!" But then again. we have nowhere else to start from. We have - somehow - to retake the political realm (just as we must retake the personal realm. and much of the business realm too) from the neoliberal corporation. And if we do not. if we fail. what happened to Bengal at the hands of the EIC may. in its own way. happen to us all (it already is)!

References Bolts. W. (1998). Considerations on Indian Affairs:Present State ofBengal and Its Dependencies. London: Routledge. Burke. E. (1 783). Speech on Mr. Fox's East India Bill. In The Works ofthe Right Honourable Edmund Burke (Vol. 1/). London: John C Nimmo. Davis. M. (2002). Late Victorian Holocausts:EI Nino, Famines and the Making ofthe Third World. London: Verso. Dutt, R.C. (1902). The Economic History of India Under Early British Rule. London: Kegan Paul Ltd .•Trench. Trubner & Co. Frey. B.S. (1997). Not Just for the Money: An Economic Theory of Personal Motivation . Cheltenham: E. Elgar. Galbraith. J.K. (1967). The New Industrial State. Boston: Houghton Mifflin.

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Harvey, D. (2005). A Brief History of Neoliberalism. Oxford: Oxford University Press. Hawthorn, G. (2014). Plan it Maiiana. London Review of Books, 36( 17), 3437. Hickel, J. (2014). Exposing the Great 'Poverty Reduction' Lie. Aijazeera. Retrieved, December 08, 2018 from https:llwww.aljazeera.com/ in depth 1opinion120 14/081 exposi ng- great - poverty-reductio20148121 I 590729809.html Lynch, T. (2009). Legitimating Market Egoism: The Availability Problem. Journal ofBusilless Ethics, 84(1), 89-95. Macaulay, T.B. (1841). Warren Hastings. In G.R. Gleig (Ed.),Memoirsofthe Life of Warren Hastings, First Governor-General of Bengal (Compiled from Original Papers, Vol. 3). London: R. Bentley. Oakeshott, M. (1975). On Human Conduct. Oxford: Oxford University Press. Ostry, J.D., Berg, A.T., & Charalambos, G. (2014, February). Redistributioll, Illequality, and Growth. IMF Staff Discussion Note. Retrieved, January 01, 2019 from https:llwww.imf.org/external/pubs/ft/sdn/2014/ sdn 1402.pdf Parfitt, T. (2002). The End of Development? Modernity, Postmodernity and Development. London: Pluto Press. Piketty, T. (2014). Capital in the Twenty-First Century (A. Goldhammer, Trans.). Belknap: Harvard University Press. Polanyi, K. (1944). The Great Transfonnation : The Political and Economic Origins ofOllr Time. New York: Farrar & Rinehart. Robins, N. (2006). The Corporation that Changed the World: How the East India Company Shaped the Modern Multinational. London: Pluto Press. Schmoller, G. (1910). The Mercantile System and Its Historical Significance. New York: Macmillan. Smith, A. (1940). An lrlquiry into the Nature and Causes of the Wealth of Nations. London: Methuen & Co. Ltd.

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Stiglitz. J.E. (2010). Freefall: America, Free Markets, alld the Sil1killg of the World Ecol1omy. New York: W. W. Norton & Company, Inc. Walsh, A., & Lynch, T. (2016). The Morality of Money: An Exploration ill Allalytic Philosophy. London: Palgrave Macmillan. Zafarullah, H., & Huque, A.S. (2006). Understanding Development Governance: Concepts, Institutions, and Processes. In A.S. Huque, & H. Zafarullah (Eds.), intemational Development Govemance (pp. 1350). New York: Taylor & Francis.

Chapter 2

DEVELOPMENT, NEOLIBERAL DEVELOPMENT AND MICRO FINANCE: AN APPRAISAL Mohammad Jasim Uddin The role of microfinance in alleviating poverty and empowering women at the grassroots level has played an important role in creating a positive image of Bangladesh in the global stage. Microfinance, as a development strategy, has gained an almost mythical reputation among development agencies, researchers and practitioners, making it one of the hottest poverty alleviation tools world,vide. In spite of all the enthusiasm surrounding microfmance's role in ushering in the empowerment of women and alleviating poverty, a number of criticisms have also developed revolving around the commercialization ofMFls. There is an intellectual debate going on between advocates of microfinance who see it as a win-win approach and a growing group of intellectuals criticizing its connection to neoliberalism. There is empirical evidence that MFI gradually turns into a lucrative commercial business and undergoes a silent moral drift and diffusion at the local level. Using Bangladesh as a context, I intend to explore some of these issues and concerns. FollOWing an introduction, which includes a historiographic note on the changing paradigms of development, this chapter intends to provide a brief history of the development of microfinance over the last few decades and describe how microfinance relates to the modern capitalist world system and neoliberalist frameworks.

Changing Paradigms of Development The concept of development, one of the key concepts in social science lexicon, is neither new nor a monolithic concept. It is instead a flexible

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I Neoliberal Development in Bangladesh

idea. The concept of development has been used in economic, social and political analysis over the years, but the word is probably nowadays used more widely in public discourse than ever before. As a result, development has become a part of our everyday language. Development in common parlance entails the process of improving or ensuring a "better quality oflife for everyone", but there are broad disagreements on holl' to achieve this. We could say development produces an economy, or more broadly, it nurtures a society, culture and a political system that confirm how people lead better lives- in terms of income, goods and services, governance, education, health care services and so on. A good example is provided in Amartya Sen's work on Development as Freedom (2000), in which he views development as e":pansion of citizens' capabilities. Sen explicates on how society allows individuals the capacity for taking part in creating their own livelihoods, governing their own affairs, and participating in self-government. Cowen and Shenton (I996, p. 2) echo these sentiments arguing that: Development is construed as 'a process of enlarging people's choices'; of enhancing 'participatory democratic processes' and the 'ability of people to have a say in the decisions that shape their lives'; of providing 'human beings with the opportunity to develop their fullest potential'; of enabling the poor, women, and 'free independent peasants' to organize for themselves and work together. Viewing development as better quality of life is an emotional ideal. Can the processes/strategies of development not favor the prosperity of both the rich and poor in the same manner? How could we possibly resist the idea that there is a way of eliminating poverty which troubles everyone? It would be more accurate to say that, while there is agreement on the ideal, developmentalism, or the process of achieving this ideal, is a contentious issue. It is contentious over both theory and praxis. The domain of developmentalism is a battleground where contention rages among economists, sociologists, environmental activists, feminist critics, post-

Development, Ncoliberal Development and Microfin.ncc

I 31

modernists, and Marxist revolutionaries (Peet & Hartwick, 2009). As a result, the model s of devel opment have shifted over time. It has given rise to a numb er of categories, some of which are referred to as the neoclassical approach , the moderni zation theories or, in some cases, the developmental perspective. The most popular nomenclature, however, is the modernization paradigm. The paradigm began its journey in 1945 with the emergence of the so-called "developing countries". Following the breakdown of the European colonialism, the United States first launched the idea of development with a call to every nation to follow in their footsteps: catching up with the modern industrialized countries. The dominant conceptions of development paradigm, popularized during the I 950s and early 1960s, were closely related to the ideals of modernization paradigm: "development involved the passage of the Third World along the same path of progress from tradition to modernity previously travelled by the developed countries" (Payne & Phillips, 2010). Modernization is supposed to be "a process of social change whereby less developed countries acquire certain characteristics, that is, social, political, economic and cultural, similar to those existing in the already industrialized, developed countries" (Lerner, 1972). The effects of modernization are intended to "trickle-down" or move "top-down" to other areas of life. Scholars from various disciplines, including sociology, political science, economics and psychology, have attempted to interpret the development process from the perspective of modernization theory, which predominantly relied on abstracting from the structural and dynamic experiences of ""estern societies. Concentration was on industrialization in the vein of the West, altering archaic social structures, social norms, values and attitudes and promoting a modern, industrial sector by means of investment, entrepreneurship, and the transfer of knowledge and technology from the West. For example, in his book Stages of ECOl1omic Growth: A NOll-Communist Manifesto, development economist w.w. Rostow (1960, p. 4) claims that:

32

I Neoliberal Development in Bangladesh It is possible to identify all societies, in their economic dimensions,

as lying within one of five categories: the traditional society, the preconditions for take-off, take off, the drive to maturity, and the age of high mass-consumption. Rostow's thesis on stages of growth was treated as the apogee of modernization paradigm throughout most of the 1950s and 1960s, creating the justification for international aid. Aid flowed from developed nations like the United States to the "less developed" nations throughout the world, arguing that they were "helping" those nations that could not help themselves (Dickson, 1997). Following the modernization paradigm, the development sector was constantly looking for innovative ideas and approaches to reduce poverty. The traditional economic development approach of the 1950s and 1960s mainly emphasized economic growth, while the basic needs approach of the 1970s emphasized the direct provision of health, nutrition, and education, rather than economic growth. Various policies were implemented and one of the key policies was offering loans at subsidized rates ofinterests to the rural poor farmers. From the early 1970s, targeted and subsidized rural credit programs were dominant state interventions in the development process. Development thinkers and policy makers largely agreed that credit is a form of financial support offered to the poor due to their capital constraint or lack of access to productive capita!. In the mid-1970s, however, it was identified that subsidized rural credit programs largely failed to meet financial needs of the poor at the localleve!. The main reasons were that formal institutions such as banks were often unwilling to serve the poor because of high transaction costs and perceived high default rates on loan paybacks. The most economically wretched and vulnerable people could not often access credit because they did not have collateral as required by formal banking institutions. Moreover, the subsidized rural credit programs that were prevalent in the 1970s and 1980s experienced a number of problems: weak information channels and incentive structures; high administrative set-up costs; excessively bureaucratic, politicized

Developm en t. Neoliberal Development and Microfinance

I 33

leakage of fund s to the rural elite. and high loan default rates that diminished th e resource base for furth er lending. affectin g the viability of these programs (Adams & Von Pischke. 1984; Hulme & Mosley, 1996; Armendari z & Morduch, 2005). Thus, the alternative left for the poor to meet their financial services needs was informal sources such as local money lenders, traders, landlords and employers (commercial sources), and friends , neighbours and relatives (non-commercial sources). Rotating Savings and Credit Associations (ROSCAs) and informal savings clubs were also among the informal sources of finance used by the poor (Rutherford, 2003). Informal credit sources suffer from a number of limitations: their loan sizes are often limited and hence insufficient for investment activities; and commercial sources such as money lenders tend to charge high rates of interest on their loans (Robinson, 2001; Armendariz & Morduch, 2005).

The Rise of Micro finance in Bangladesh In the late 1980s and mainly during the 1990s, microcredit (hereafter microfinance, microloan, microenterprise) programs became a new wave in the parlance of the mainstream development interventions to address poverty alleviation and women's empowerment, particularly in the developing south. In 1976, Muhammad Yunus, a Bangladeshi professor of Economics launched this new model - group-based microcredit - in a small village, as an experimental project to test if credit could be provided to un-bankable low income poor without physical collateral, with a belief that the most immediate need of the poor is financial capital to create and expand self-employment opportunities. Microcredit is conceived by Professor Yunus as a means of enabling the poor women to have easy access small amounts of (few thousands taka) financial loans for undertaking small-scale economically productive activities and, allowing them to care for themselves and their families. The Grameen model of microcredit program is explicitly designed for and targeted towards poor women, realizing that they have minimal or no access to the credit market,

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have limited opportunity in the wage labor market, and are likely to encounter gender hierarchies in household decision-making process. Yunus believes that the poor were poor because "the financial institutions in the country did not help them widen their economic base" (Yunus. 1999, p. 50). Microfinance now prOvides a variety of financial services including loans. savings and insurance to economically impoverished households. The unique features of the Grameen model of group-based microfinance are the prO\~sion of a package of financial services against the top-down minimalist credit only approach. use of social collateral or jOined liability instead of physical collateral and dynamic incentive structures such as progressive lending and regular weekly repayment schedules (Morduch, 1999a; Armendariz & Morduch, 2005). The borrower-groups have been viewed as "solidarity groups . .. attaining economics of scale" (Berenbach & Guzman as cited in Otero & Rhyne. 1994, p. 120). The group plays important role in minimalizing the cost of gathering information about the borrower. but its more decisive role is in motivating repayments on time. Social mobilization is another important aspect of group-lending microfinance intervention. Peer groups are seen as an important mechanism of fostering social networks. collective identity and reducing women's relative isolation by exposing them outside their family quarters (Uddin, 20 13). Yunus's solution to poverty has captured the imagination of the international aid community, development thinkers and practitioners who see it as an important instrument to ensure fmancial services to poor households - the bottom billioll. It has shaped much of the modern-day microfinance industry and is currently being implemented in many parts of the world as an antipoverty magic tool. The appeal of microfinance to the development community is its capacity to encompass a variety of ideological perspectives, as noted by Morduch (1999b, p. 1570): Advocates who lean left highlight the 'bollom-up' aspects. attention to community, focus on women, and. most importantly.

Development, Ncoliberal Development and Microfinance

I 35

the aim to help the underserved. Those who lean right highlight the prospect of alleviating poverty while providing incentives to work, the nongovernmental leadership, the use of mechanisms diSCiplined by market forces, and the general suspicion of ongoing subsidization. This microfinance policy has received noteworthy financial support through grants and subsidies from international donor agencies and foreign governments (Cull et al., 2009), who claim that microfinance is a powerful poverty alleviation tool, "global development architecture" (Weber, 2004) and "one of the world's most efficient solutions to alleviate poverty, as well as wars, diseases, and suffering that poverty ignites" (Datar et al., 2008). It is characterized as a remedial strategy of both formal financial institutions and the subsidized credit schemes funded by governments and donors, together with the shortcomings of informal sources of fmance (Hulme & Mosley, 1996; Armendariz & Morduch, 2005). Microcredit practitioners are confident they can help many people because they offer a "win-win" poverty reducing intervention that would bring benefit to both clients and MFIs (Morduch, 1999b, 2000). Microfinance has become increasingly popular in public and the development partners' agenda as it was advocated in the G8 Declarations of 2004 and 2005; the UN 2005 World Summit, the Commission on Private Sector Development, the Brussels Programme of Action; and the Africa Commission Report. Its popularity reached a peak in 2005 when the former UN Secretary General Kofi Annan declared the year as "the year of microfinance", and one year later Yunus and the Grameen Bank (GB) were jOintly awarded the Nobel Peace Prize. Yunus presented a courageous vision for the future: a world in which poverty becomes a relic of the past- "a phenomenon only seen in museums".

Microfinance, Neoliberalism and Global Governance Paralleling the expansion of microfinance as a development strategy we have also seen the rise of ncoliberalism as a dominant doctrine of

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I Ncoliberal Development in Bangladesh

political economy. Even though the concept neoliberalism has been in use for a century (the recorded usage of the term can be traced back to the very end of 19th century Oxford English Dictionary), it has become widespread in some political-economic theory and development circles in the recent times. Bourdieu and Wacquant (2001, p. 2) portray neoliberalism as a "new planetary vulgate", and Beck (2000, p. 122), on the other hand, depicts the same phenomenon as an ideological "thought virus". Although neoliberalism is first and foremost a doctrine of political economy, it is also, rather more diffusely, a principle of civilization that shapes the lives of billions of people in every part of the world in a range of areas including economics, politics, international relations, ideology, culture and so on, and that we live in an "age of neoliberalism" (SaadFilho & Johnston, 2005, p. I). Neoliberalism is seen as "an encompassing hegemonic project" involving "the de-statization of governmental activity and the marketization oflabour and budgetary austerity policies" {Hoffman, DeHart, & Collier, 2006, pp. 10-11}. It is typically characterized by a cutback in the role and influence of the state, in both economic and public good, as well as by the growth and prominence of the market, which has impacts on all walks oflife. Neoliberal thinkers believe that human interest can be best served through deregulation of the economy, liberalization of trade and industry, and privatization of state-owned enterprises, including the withdrawal of the state from many areas of welfare provision. This is sometimes referred to as the D-L- P (Deregulation -LiberalizationPrivatization) formula for development (Steger & Roy, 2010). There is a growing consensus that neoliberalism is a development model around the ideal of the self-regulating market with three entangled manifestations: (I) a policy package, (2) ideology, and (3) a mode of governance (Lamer, 2000; Steger & Roy, 2010). An overview of the three perspectives is presented in Table 2.1.

Development. Neolib eral Development and Micronnancc

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Table 2.1: Conceptual and Theoretical Manifestations of Neoliberalism Theory

Conception

Development PoliC)'/Prncticc: (Economics) ncolibcral policies th at

support

Manifestation • De regul ation of the economy: remo\;ng government regu lation on everything that could d iminish profits; free movement of goods. services. capital and people (labor

market flexibil ity, export-oriented policies, encouraging

foreign-direct investment ) economic groMh through state • Libcrali7.ation of trade and industry: market frie ndl y restructuring and re-regulation (tight fiscal and monetary policy, reducing

the forces of the market

tariffs and non-tariff barriers, freeing the exchange rate, lower corporate taxes)

• Privatization: seUing state-owned enterprizes. goods and sen'ices to private i nvestorslcompanics • Ant i· welfarism: eliminating lhe concept of the public good or social provision and replaCing it \~ilh individual responsibilit)'

• Washington Consensus: Structural Adjustment Programs (SAPs); Shock Therap), Critical/Neo - Ideology/Political • Promotion of a belief system around individual Marxist Project: entrepreneurial freedoms and skills as weU as private neolibemlism is property rights. free enterprise. free trnde. and free the new phase of competition global capitalism • A political project to re-establish conditions for capital accumulation and to restore the power of economic elites through : ( 1) privatization and commodification; (2) financialization; (3) the management and manipu1ation of crisis; (4) state redistribution oftheeconomy • Deepening and \\idening of transnational economic connections through global free trade • Increasing social inequalities within and between countries PostGovernmentalit)': • Marketization: adoption of the ~e w Public Managemenf Structuralism neolibera1ism is a model based on market logic

form of governmentality that seeks to extend market rntionality to non-economic domains and to crtate new

political subJcclS

• Commodification: turning eveT)'thing into items that can be bought and sold • Go,'ernmcnt by proxy: tra nsferring management fUnctions from the state to the pri\,3te/ non-profit sectors (contr.lCting out of state r'l"Sponsibilitics for the provision of health . education. water and sanitation. and security and administrative functions such as the issuing of licenses. colb:tion o fl~",'S :.lnd nUl's. issu ing of fin es. etc.) • Post · Washington consensus: good go\'Crnance ~ • Shifl from civil (citizens) societ)' to consumer (clients) sockt)' M

Source: Adapted from Dmitrova.2016.

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I Neoliberal Development in Bangladesh

In neoliberal policy. the state's role in people's lives is minimized and individuals are given the responsibility to take control of their own fortunes and well-being. Neoliberal political economy envisages that free markets and free trade will set free the creative potential and the entrepreneurial spirit. which is built into the spontaneous order of any human society. and thereby lead to more individual liberty and well-being. and a more efficient allocation of resources (Hayek. 1973). In the recent critical literature. David Harvey is one of the few who tries. in his A Brief History ofNeoliberalism, to give the concept a wide-ranging definition. According to Harvey (2005, p. 2): Neoliberalism is in the first instance a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights. free markets and free trade. The role of the state is to create and preserve an institutional framework appropriate to such practices. The state has to guarantee. for example. the quality and integrity of money. It must also set up those military, defence. police and legal structures and functions required to secure private property rights and to guarantee, by force if need be. the proper functioning of markets. Neoliberalism has far-reaching and intrusive interventions in every sphere of social life. It actually frames the ways of thought, understanding the world, and the meaning of everyday reality for people: "Neoliberalism has, in short, become hegemonic as a mode of discourse ... [with) pervasive effects" (Harvey. 2005, p. 3). It imposes a specific form of social and economic regulation based on the prominence of finance, international elite integration, subordination of the poor in every country. Harvey notes that. although neoliberal states minimize the welfare policies of its citizens, the governments have increased their interventions in other arenas in their efforts to construct social and political environments that actively encourage market rationality. In the same manner. Ong (2006, p. 4) views neoliberalism as a technology of government which relies on

Development, Neoliberal Development and Microfinance

I 39

calculable choices and techniques in the domain of citizenship and governance. It subjects citizens to act in accordance with the "market principles of discipline, efficiency and competitiveness". This understandings of neoliberalism harmonize with Foucault's notions of govern mentality (I979 , 1988) and disciplinary power (1977). Foucault visualizes governmentality as a means of political rationality that materializes with the development ofliberaHsm. The purpose of govern mentality is to apply the discipline on the population in respect to their everyday conduct through systematic and pragmatic guidance in order to behave in a specific style. Foucault (1988, p. 19) goes on to say: I say that governmentality implies the relationship of self to self, which means exactly that, in the idea of governmentality, I am aiming at the totality of practices, by which one can constitute, define, organize, instrumentalize the strategies which individuals in their liberty can have in regard to each other. It is free individuals who try to control, to determine, to delimit the liberty of others and, in order to do that, they dispose of certain instruments to govern others [sic]. Neoliberal policies are promoted by the World Bank (WB) and the International Monetary Fund (IMF) through disbursement of grants or soft loans which often require dramatic cutbacks in public welfare budget, as well as the elimination of price controls. Because of the nature of the competition to seek grants as well as the desirability to become profitable business, NGOs have also become the advocates of imposing neoliberal policies of the North on the South and, therefore, have established new/enhanced conditions for capital accumulation all over the world (Harvey, 2005, 2014; Connell, 2014). Neoliberalism implies that NGOs are authorized by international agencies who subject clients to act in accordance with the principles stipulated by the organizations. Microfinance's policy and practices match duly with neoliberalism and capitalist approaches advocated by "Northern" funders, which is firmly entrenched in the ideals of self-sufficiency

40

I Neoliberal Development in Bangladesh

and free market capitalism (McDermott, 2001, pp. 67-73). Itis framed as a development approach that seeks market-based solutions to a wide range of questions (such as poverty, unemployment, and empowerment) and uses the justification of individual liberty, to deploy the strategies of self-help and responsibility, rather than public responsibility (Keating, Rasmussen, & Rishi, 2010). The president of the World Bank, James D. Wolfensohn, stated in 1996 that "micro credit programs have brought the vibrancy of market economy to the poorest villages and people of the world. This business approach to the alleviation of poverty has allowed millions of individuals to work their way out of poverty with dignity" (see, Fernando, 2006, p. 66). In his essay, "Credit for SelfEmployment: A Fundamental Human Right", Professor Yunus (1989, p. 49) wrote: ... employment per se does not remove poverty .... Employment may mean being condemned to a life in a squalid city slum or working for two meals a day for the rest of life .... Wage employment is not a happy road to the reduction of poverty. Removal or reduction of poverty must be a continuous process of creation of assets, so that the asset-base of a poor person becomes stronger at each economic cycle, enabling him to earn more and more. Self-employment, supported by credit, has more potential for improving the asset base ofthe poor than wage employment has. Self-employment through a miero-loan is connected to the notion of individuals taking responsibility for their own situations and this aligns directly with the ideologies of neoliberalism (Peck & Tiekell,2002). Yunus sees povertty not as a distributional problem, but as a problem of lack of opportunities. Poverty is not created by the poor but rather by the structures and policies created by a society. He argues that the time has come for market forces to control statedriven programs, because "whatever governmental programs have achieved, they certainly have not created equality of opportunity" (Yunus, 1999, p. 250). Criticizing the corruption of government

Development, Neolib eral Devel opment and Microfinance

I 41

officials and the incompetence of bureaucracy, Yunus made the following statement about the role of the state: "government, as we know it, should pull out of most things except from law enforcement, the justice system, national defense, and foreign policy, and let the private sector, a 'Grameenized private sector', a social-consciousnessdriven private sector, take over its other functions" (Yunus, 1999, p. 204). If this materializes, the market forces will rule, and people would be able to access education and health because they would have to pay a price for it. As a consequence, Yunus (I 999, p. 261) believes: all state organizations that provide free or subsidize services for the poor could be done away with. There would be no need for welfare agencies, handouts, soup kitchens, food stamps, free schools, free hospital care. In fact, the demise of the public sector on the one hand, and the development of the market mechanism, on the other, is the main goal of microfinance organizations. A big, open competitive market is the best solution to address poverty. Only a bigger open market would bring more benefit to the poor than a small protected market. In a bigger open market everyone would benefit from the free flow of commodities, finances and people (Yunus, 1999). He argues that "the economic system must be competitive" and that "competition is the driving force for all innovation, technological change, and improved management" (Yunus, 2003, p. 206). He also claims that profit maximization is essential (ibid, pp. 205-207), which again proves that microfinance is firmly rooted in the logics of capitalism and neoliberal orthodoxy. Alexander Cockburn, one of America's best-known radical journalists, commented "Yunus won a Nobel Peace Prize for neoliberalism" (Cockburn as cited in Bond, 2007, p. 246). Today, microcredit programs are not a non-profit model financial services for poverty alleviation, social capital formation, and women's empowerment. They are moving toward a "financial selfsustain ability paradigm" (Mayoux, 200 I, p. 248; Yunus, 2003, p. 204). This is labeled as "new wave" microcredit, indicating a drastic shift in the focus of microfinance programs from donor-driven schemes that

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I Neoliberal Development in Bangladesh

provide subsidized credit to borrowers, 10 commercially-oriented operations that impose high interest rate and emphasize profits that cover full costs, and thus are financially sustainable (Montgomery & Weiss, 20 II). Harper (20 II) made similar critique and questioned the business-orientation of MFls. While reviewing a Mexican MFI named Compartamos, he points out that the two founders of this microfinance bank have made capital gains of several million dollars. Not only that, Compartamos has now become a fully commercialized bank and it charges "an annual interest rate of over 90% on its mainly very small loans to Mexican women" (ibid, pp. SO-51). Harper believes that microfmance is an ineffective tool in the battle against poverty, offering little more than a temporary abatement in relation to underl)~ng structural causes of poverty. Bateman (20 I I) and Karnani (2009) endorse these sentiments stating that commercialized, profit driven microfinance is "making a fortune - by exploiting the poor!" (Karnani, 2009, p. 2). Harper (2011, p. 51) states: "exploitative aspect[s] may be taking over from the more benign face that the movement had at its inception ... suggest ting] that microfinance may actually be contributing to the perpetuation of poverty, rather than to its alleviation". Yunus himself criticized exploitative lending practices and high interest rates within the sector stating, "that if the microcredit interest rate is more than 15% above the cost of funds, then it is too high ... you are moving into the loan shark zone" (Yunus as cited in Karnani, 2009, p. 13), although the effective annual rate of interest for a small loan ofGB is about 32 percent (Karim, 2008). Microfmance offers a new promise: the "bottom billion", the world's poorest, will serve as a "frontier market" by opening up new horizons of capital accumulation (Roy, 2010). The "commercialization of microfmance" has sparked off an intensely heated debate as to how far it is harmonized with the original mission of microfinance programs. Some argue that microcredit programs may shift towards their own financial sustainability instead of providing service to the poor (Montgomery & Weiss, 2005, 201 I; Augsburg & Fouillet, 2010). Harford (2008) has gone as far as referring to the new mission as

Dcvelopmcnt, Ncoliberal Development and Microfinance

I 43

"a battle for the soul of microfinance" (Harford, 2008). Micro-loan as a system is structured by neoliberalism ideology, which at the individual level includes the cultivation of the rational economic actor who is logical, goal oriented, and intelligent to respond to the problems and challenges in his or her surroundings, and in ways that make intelligent use of existing resources. The next section of this chapter revolves around the question of the extent to which microfinance, a product of neoliberalism and the capitalist world system, intersects and connects with local female borrowers to facilitate women's empowerment, poverty alleviation and social capital formation, in rural Bangladesh.

Neoliberal Microfinance in Practice - The Local Level Poverty Alleviation - Credit Begets Credit? A substantial number of studies on micro credit programs carried out during the late 1980s to 1990s played a pivotal role in establishing micro finance both at home and abroad. Most of the studies and claims made about the economic success and women's empowerment created by microcredit in Bangladesh are based on statistical surveys, quantitative data and econometric analyses. These studies were sponsored by the World Bank, International organizations or NGOs themselves. Much empirical evidence suggests that microfinance programs have helped their clients promote employment opportunities, improve income, accumulate assets and deal with risks and shocks. Yet, there are gaps between the claims and the actual realities of microcredit programs. Carrying out perfect scientific studies on the impact of micro finance is triel]" and as pointed out in one review paper: "30 years into the microfinance movement we have little solid evidence that it improves the lives of clients in a measurable way" (Roodman & Morduch, 2009, pp. 3-4). Hulme and Mosley (1996) were probably the first who showed the lack of reliability of the data presented by MFls to prove their impact. They arrived at the conclusion that microcredit had a negligible impact on the poor members' monthly income. Similarly, Morduch (1998) analyzed the

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I Neoliberal Development in Bangladesh

BIDS-World Bank survey data which had been previously used by Khandker (1998), but he applied a different statistical tool and found that microcredit did not have a significant impact on the increase of consumption levels and therefore on income upsurges and poverty alle\~ation. Khandker (ibid) originally concluded that microfinance reduced poverty by increasing the per capita consumption of the credit borrowers and their families. About 5 percent of the program participants were able to lift their families out of poverty each year by participating in and borrowing from microfinance programs. As time went by, there has been an increasing understanding of the widening gap between reality and the success of microfinance, which has become more \~sible through the scholarship of Fernando (2006), Dichter and Harper (2007), Bateman and Chang (2008), Bateman (2010), Roy (2010), Karim (2011) and Uddin (2015). These scholars have a common criticism of microfinance, i.e., its central role and development policy is deeply connected to the neoliberal global agenda. Microfinance runs through the principles of neoliberal ideology: "the unquestioned application of market forces and private ind.i~dual entrepreneurship" (Bateman & Chang, 2008, p. 2) and "the methodological indi~dualism of neoclassical economics" (Fernando, 2006, p. 19). It is framed as a development strategy that can go handin-hand \~th these premises, without opposing the principles of the neoliberal capitalist world systems. In the book Micro-Finance and Its Discontents (2011), Lamia Karim showed how microcredit NGOs operate within the framework of neoliberal orthodoxy. Karim explored how women who benefited from microfinance loans were well aware of the acti~ties of markets and lived by the principle of competition and rationality. According to Karim, NGOs and their Western sponsors had privatized the Bangladeshi State by promoting the NGO sector as an alternative proVider of necessary services. In Bangladesh, NGOs have taken over most of the functions that a welfare state is expected to perform, from rural credit to primary education and basic health care. NGOs and

Development. Neoliberal Development and Microfinance

I 45

rural people have a relationship of dependency. The NGOs need the rural poor to carry out their development mandates. and the poor need the NGOs to receive their necessary services. The proliferation of NGOs in Bangladesh has been so striking that Karim describes them as a sltadow state. In his book. Tlte Micro-politics ofMicrocredit (2015). Mohammad Jasim Uddin has addressed the question of how, on the one hand, NGOs use neoliberal policies and credit, and on the other, how local people access and appropriate credit. More specifically, Uddin's study has explored to what extent do microfinance programs. purveyors of neoliberalism and capitalist world systems. interact with female borrowers to facilitate social capital. women's empowerment and poverty alleviation in rural Bangladesh. Microfinance has always relied on a splendid narrative about its capacity to alleviate poverty and empower women in order to justify its existence. Based on the findings of his ethnographic study on GB and BRAe. Uddin (2015) shows that in practice microcredit does not accomplish perfectly any of the goals. Taking the loans generally solve a whole set of immediate problems or temporary sufferings of the borrowers - paying offloan. buying food for immediate consumption. buying urgently needed medicine. kitchen utensils. house repair or construction. dowry payment etc. - but their impact is not as positive or as drastic as described by much of the earlier scholarship on the subject. Uddin found that there are many borrowers who take credit year after year. and thus become further mired in debt. A borrower's statement cited by Uddin (2015. p. 172) reveals: The GB credit system sucks the poor borrowers into the wheel of debt; the wheel of debt never stops. The wheels of rickshaw or bus or other vehicles stop once in a while. but the wheel of GB debt always moves. So if one gets entangled in this wheel it is very difficult to get free from this debt. Uddin (2015) in his study shows how the activities of microlending organizations at the local level have gradually drifted away

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I Neoliberal Development in Bangladesh

from their declared poverty alleviation mission and moved to implementing the goals of market-driven commercial organizations of capital accumulation. The micro-lenders simply provide money in the manner of traditional money-lenders without offering or giving any training to develop borrowers' skills, which might alleviate their poverty. The old moral arguments about the social role of microfinance-the package of training, meetings to discuss problems, helping people plan for their future needs, and consciousness-raising lessons-are no longer part of the practice of micro credit organizations. An indh~dual borrower is responsible for the success or failure of her credit investments. The NGO officials do not give any ad\~ce on the use of credit. Being an integral part of neoliberal capitalism, microcredit NGOs are not inclined to take responsibility for borrowers' success or failure. The officials' duties revolve around the day-to-day activities with the borrowers. According to Uddin (2015), owing to the maintenance and improvement of institutional performance and self-sustainability, micro-lending NGOs have created patronage relationships with clients so as to recruit new members, motivating existing members to continue their membership in the program and collect installments and sa\~gs on time, regardless of whether or not a borrower can manage credit andlor can generate income from a loan. Uddin also found that most borrowers' incomes have never matched their expenses, which contributes to borrowers being constantly under adverse conditions of lension, insomnia and hunger. They took new loans for the payment of outstanding dues: amra loan diye loan maTi (Uddin, 2015, p. ]7]). In other words, microfinance works by expanding the market-logic at the local level and is making a fortune by exploiting the poor. A borrower's statement cited by Uddin (ibid, p. 155) shows how micro credit shapes borrower's everyday life: How can] explain it? We pay the installments through fasting.] buy rice to eat but when] go to cook it, I change my mind because] am afraid that I won't be able pay kisti (installment). So ] sell the rice for the kisti payment. It has become a habit.

Development, Neoliberal Development and Microfin.nce

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A defaulter is not only bad for herself; she is also bad for NGO officials. As a high loan recovery rate ensures good prospects for officials, they do not even follow the schedule of government holidays in carrying out their tasks. Microcredit NGOs are trapped in a neoliberal orthodo),:y that prioritizes blind adherence to market principles of competition, profit and entrepreneurship, although most borrowers in the rural areas are not located in the mainstream market economy. Under the neoliberal regime, the micro-lending organizations and their clients become involved in uneven relationships: creditors and debtors (Karim, 2011; Uddin, 2013). On the one hand, MFIs want to change the condition of the "developmental subjects" and on the other, they also want to increase their own power and/or wealth in order to advance their own agendas. The borrowers are obliged to demonstrate their allegiance to micro-lending NGOs' governmentality, rules and regulations; otherwise, they must face fines, harassment and lose the possibility of obtaining future loans. Sickness, family problems, death, or natural disasters are not accepted as excuses for not paying the installment on time. Therefore, the villagers commonly treat micro-lending organizations as money-lending or installment collecting banks (J..:isti tolar bank) (Uddin, 20 IS, p. 157). The most powerful criticism of micro-lending is that it grants loans at a higher rate of interest than the government and commercial banks. Underlining the mission of microcredit NGOs, Professor Yunus declared that microcredit NGOs were developed to fight against the traditional money-lenders, and not to become traditional money-lenders themselves. However, the principle of profit maximization is the driving force of microfinance. Micro-lending organizations have justified their policy of high interest rates, going up to as much as 100 percent per annum, on various grounds. First, they argue that the poor are concerned only about the availability of credit and not the cost of credit (Chavan, 2011). Second, as argued by the Consultative Group to Assist the Poor (CGAP), a body created by the World Bank to promote microfinance in developing countries,

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I Neoliberal Development in Bangladesh

the revenues from high interest rates are ultimately used for the benefit of the poor (CGAP, 2003, p.2). According to Robinson (2001), despite the higher interest rates compared to traditional NGOs, MFIs, through commercial microfinance, offer two main advantages: they are cheaper than the informal moneylenders poor people are used to rel)~ng on and they offer a much more reliable source of credit. However, most borrowers are unaware or have insufficient knowledge of the charges they are pa~ng and which micro-lending organizations charge interest on small loans. The micro-lending NGOs do not feel the necessity to explain and break down their real rates of interest. As the power relationship is uneven in favor of the lenders, it is unsurprising that micro-borrowers surreptitiously criticize microcredit NGOs' rules. Microfinance NGOs are privateyet-public organizations that do not have a built-in mechanism of accountability (Uddin, 20 13, 2015).

Lending to Women - A New Form ojDomination Within the studies on microfinance in the global South, perhaps one of the most explored questions revolves around the impact of microfmance on female borrowers. Since loans are delivered to women, scholars diverge on whether or not these ventures empower female borrowers. Bernasek (2003, p. 377) claims that as women have become members of savings and credit groups, their incomes have increased, they have increased "their negotiating skills, social network affiliations and knowledge - all of which enhance decisionmaking abilities". According to Kabeer (2001, p. 73), women's involvement with microfinance has shrank the patriarchal gender norms in family decision-making process in rural Bangladesh. A survey cited by Kabeer (2001, p. 73) suggested that in female loanee households, between 40 percent and 90 percent of women had some role in decision-making. This indicated a major improvement from the 20 percent of women that had some role in decision-making from male loanee households. Desai and Jain (1994, p. lIS) claim that "increasing women's participation in 'outside' economic activities is

Develop ment , Neoliberal Development and Micronnance

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seen as a key to reduced child mortality, [better nutrition] and declining fertility". In fact , a substantial number of studies have been conducted on women's empowerment through microfinance involvement that also concluded that women 's microcredit involvement results in salutary effects on women 's empowerment in addition to their significant economic contribution to family. However, there is a confiation in the rhetoric of microfmance between access to credit and women's empowerment A number of qualitative scholarships (e.g. Goetz & Sen Gupta, 1996; Rahman, 1999; Karim, 2011; Uddin, 2015) on microcredit initiatives in Bangladesh have expressed doubt about the donor-driven quantitative studies on the impact of microcredit on female autonomy or women's empowerment. There is evidence to suggest that women are frequently pressured by their husbands to take microfinance loans, and they are physically abused by their husbands. Also present within critical microfinance scholarship is a question of who controls loans once distributed. Scholars provide evidence suggesting that in many cases female borrowers are the recipients of the loans but in actuality do not control the use of the loan. In an early study of microfinance programs in rural Bangladesh, Goetz and Gupta (1996, p. 49) found that in a significant portion of cases, 63 percent of women had "partial, very limited or no control; indicating a fairly significant pattern ofloss of direct control over credit". The findings of the study led the authors to hold strong reservations about the empowerment potential of microcredit programs for women in Bangladesh. If real empowerment is far from being a reality for those critiques of microfinance, are there hidden reasons of why women are targeted? Some critical studies (see Rahman, 1999; Karim, 2011; Uddin; 2013, 2015) took this issue as their area of inquiry and found that Grameen microcredit-model's "public transcript" of poverty alleviation and women's empowerment is at odds with a "hidden transcript", which is patriarchal and hegemonic exploitation of poor women by men and even by wealthier women (Rahman, 1999).

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I Ncoliberal Development in Bangladesh

Lamia Karim (2011) criticized how MFls have operationalized and instrumentally appropriated Bangladeshi rural women's codes of honor and shame to manufacture a culturally specific governmentality and furtherance of their capitalist interests, i.e. the recovery of loans. According to her, microfinance has created new forms of domination and oppression of poor women both at the household and community levels. While the loans are delivered to the women, the real users remain the men of the household. Consequently, the men control and use the loan, while the women remain contractually obligated for the payments to the NGO. NGOs hold women responsible for the loans not because of their entrepreneurial skills, rather because of their "positional vulnerability", as also mentioned by Rahman (1999) and Uddin (2013). Uddin (2013, 2015) argued that credit sanctioned to women is not entirely a noble mission in Bangladesh. To explore disadvantageous ways in which poor people are incorporated into economic and social life, the study looked at the major disjuncture between microcredit policies, their practices and the inherent structural obstacles that the poor encounter in everyday life. The following statement of a woman microcredit borrower exemplifies why women cannot use their credit themselves: Can you tell me where will women use credit? Is there any space or scope to invest credit by women in the village? Women have no work in the village. In this village, women do household work and the males do outside work. Women cannot do business in the market place .... By selling gourds, papaya, and eggs (Iall-kodll, pepe, dim) it is not possible for women to pay the weekly installments (cited in, Uddin,2013, p. 92).

According to Uddin (2015), there is a number of crucial factors, including gendered norms and division of labour, patriarchy, women's lack of marketable skills, traditional economic limitations and pardah system. which bar women's income-earning opportunities. restricts their choice and abilities to carry out business

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in the market place and autonomous decision-making capacity, ensuring dependence on men. The high repayment rates ofMFls are not simply a product of their clients' ability to (always) be successful entrepreneurs but also a form of coercion and threat. When the women borrowers fail to make the weekly installment, they hide under their beds as soon as the loan officers visit their home. They even prefer to stay away from home fearing officers' visits. Sometimes defaulter households migrate to escape their MFI debts (Uddin, 2013). In one leading MFI, 47 percent of the total number of loan officers revealed that they would employ verbal threats and public humiliation to maintain high repayment rates (Maitrot, 2013). Some women also reported that their husbands forced them to borrow money from different MFIs, but when these women demanded money from their husbands for kisti, their husbands physically punished them or forced them to bring money from their parents. Sometimes loan officers meet with husbands to persuade them to use their wives to access loans (Uddin, 2013, p. 20). Some women were violently chastised by their husbands when they refused to apply for loans (Hulme & Maitrot, 20 14; Uddin, 2013). Reports gathered in Villages from women showed that harassment, violent threat, coercion by MFI group members, public humiliation, verbal abuse, as well as seizure of assets, are common strategies used by loans officers (Uddin, 2013; Maitrot, 2013). Loans push defaulting clients to borrow from another MFI to repay their current loan. Delay in repayment is never allowed. Ex1'laining the rigidity in kisti collection, microcredit officials claim that if they are flexible it would create the perception among borrowers that defaulting is acceptable; consequently, the discipline of the organization would break down and therefore the business would not work. Some micro-lending officials expressed anguish about the "inhuman" behavior they adopt to meet financial targets, develop their career prospects and avoid sanctions (Uddin 2013, 2015; Hulme & Maitort, 2014),

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There is a glaring ideological clash between the public transcript of microfinance policy that supposedly inspires women to become self-determining economic agents and the reality. which reaffirms their subordinate position in society and patriarchal gender relations. A woman borrower's statement cited by Uddin (2013. p.106) states: I always feci the tension about paying the installment. Failure to pay installment brings disgrace upon the family. Because of the insults heaped upon me by an officer lance cried in front of all the borrowers at the centre. I failed to pay the installment. The official labelled me a liar. If the borrower is a man. the official does not dare humiliate him. Theoretically. by offering credit to women. microcredit NGOs have taken the initiative to change women's position in society. but Uddin's study (2015) found that micro credit organizations in reality offer credit through women due to their restricted geographical mobility. gender relations of obligation. cultural construction of passivity and docility (honor. shyness. fear of shame. social modesty and submissiveness). Women's mobility is restricted at the local level. Women are tied to the home. Microcredit organizations. the guarantors and group leaders can easily find out where women are located. track their movements. and keep them under close observation or even constant surveillance. which is not always possible in the case of men. Women are much more accessible than men because they spend more time at the house. they are more likely to repay on time. more pliable and patient than men. and cheaper to service. The use of intimidation techniques to recover weekly loan payments is also more effective with women than with men. All these characteristics of women. according to the researcher. help NGOs to "control'". "mold". "discipline"' "socialize" and "conduct surveillance" of women borrowers. and exercise their (NGOs) "power" over the group (women borrowers) for creating useful bodies/"good citizens" (Foucault, 1977). Thus a good borrower. who maintains higherl

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complete repayment hi story, is helpful for the furtherance of the NGOs' capitalist interests. As Karim (20 II , p. 67) also argued: Socially responsible business combines "maximizing profit" with "doing good to people in the world" as mutually reinforcing instrumentalities. These new businesses signify moralism in development - benign relationship between capital and altruism as multinational corporations target communities to generate profit, and concurrently, help the poor with income and social opportunities. Microcredit is not necessarily an emancipatory intervention for poor women. Rather it operates as a form of governmentality that appropriates the rural kinship networks and gender norms. It increases the penetration of power into the individual and social body of the Third World through disciplinary power and technologies.

Social Capital as a New Form ofNeoliberal Governmentality On another front, a large body of literature has argued that microcredit providing organizations facilitate social capital in the forms of solidarity group formation, group lending technique or group guarantee. The concept of social capital has drawn widespread interest and researchers have been consistently documenting that social capital has positive consequences on all walks oflife. The basic argument is that social capital facilitates cooperation, collaboration, and coordination, and thereby has a variety of micro and macro level outcomes that are beneficial to local as well as national development. Robert Putnam has inarguably provided the most influential work on social capital research. Putnam (1998, p. v) defined social capital as "the norms and networks of civil society that lubricate cooperative action among both citizens and their institutions". Membership in organization is seen as an imperative component of social capital. Members in organizations, who meet more frequently, exhibit higher social capital in the forms of networks, a common set of norms, camaraderie and collective identity. In this context, the Grameen-model microfinance is considered a preferred way of fostering social capital among women at the Iocalleve!. This is because

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they make the provision of small amounts of financial capital to poor women by forming small group of borrowers from the same locality to serve as a collective source of collateral to compensate for any individual borrower's lack of physical capital. Regular presence in weekly installment meetings is seen as an appropriate place for discussions, to build networks, and create new opportunities. Ostrom (1994, p. 532) has noted that routine meetings, frequent interaction, and collective credit goals can assist communication, understanding about fellow members and trust as a precondition to collective action. Based on the findings of her study on GB members, Larance (1998) suggests that women microcredit borrowers can establish new networks and strengthen existing social ties that reach beyond their living quarters and fiunilial networks, by attending weekly centre meetings. In rhetoric, poor women who participate in group lending technique will identify collectively to solve their problems and defend against their common oppression. Policy makers and practitioners enthusiastically consider group-based micro credit as "win-win" approach to development because, micro-lenders can facilitate bonding and creation of social capital to boost the financial sustain ability of banking with poor women on the one hand, while poor women in return gain access to both social and fmancial capital that allow them to help themselves through income generating activities, on the other (Rankin, 2001; Mayoux, 1995; Fernando, 1997). The five to eight-member group is the central unit ofGB which is formed by women selected from the same locality. Uddin (2013) in his study noted that many respondents and the branch manager of GB informed him that women joining the credit program, which involved movement outside the home, in the initial years sparked huge criticism from all quarters. The author cited a statement by a woman borrower: People from the village often said that it is not a good decision to join microcredit or take a loan with interest. Many argued that we would be forced to leave our homes and would thereby loose our connection to religion. When we pass away a piece of black cloth would be wrapped around our body.

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According to Uddin (2013,2014), the formation of a new group or self-selected solidarity group is no longer a requirement for taking credit from micro-lending organizations. The practice of the borrower being present at weekly instalment meetings has now been discontinued. At present, to be eligible, an applicant for credit has to have high individual collateral or economic rationale and the capacity to pay back loans, and is only asked to collect two signatures from two female members and the centre chief to be accepted as a member of the group. In other words, microfinance has shifted from group to individual lending. The group leaders play dedsive roles in membership arrangements. Based on the findings of his study on GB and BRAe members, Uddin's study (20 IS) has contested the romanticized notions of social capital, solidarity and participatory emancipation involved in the concept of microcredit membership. Group membership or jointliability is more about conflicts and contradictions rather than a panacea for benign and harmonious socialization. It contributes to breaking down the natural solidarity that prevails among the households at the local level (see also, Bateman, 2010) . Uddin (2013, p. 40) cited the following statement given by a woman to e."l'licate why credit is given through joint-liability: It is a process of frying fish in its own oil. "''hen anyone wants to take

credit the NGO official compels her to collect two other women's signatures and the signature of the group leader. As a result, three persons, including their own family members, are involved in that woman's loan. Now if a woman fails to pal' weekly installments, at least five people at a time press that woman to pal' the installment That can cause brawls and conflicts that require arbitration among the members. The NGO officer does not have to face any problems. The systems, structures and cultures of micro-lending organizations (limited staff training, zero-delay and zero-default policy and demanding branch managers be focused purely on financial performance) builds a chain of pressures not only on clients but also on the staff (Maitrot, 2013; Uddin, 2013, 2015). Although

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social capital plays a significant role in the formation of borrowing groups, collective behaviour, mutual support and economic exchange among borrowers are, overall, very scarce. The social capital works as an entry route to a credit program for borrowers, but for NGOs it is a mechanism for promoting their governance over borrowers and a furtherance of capitalist gains through the collection of instalments when they are due (Uddin, 2014). In other words, the capital (credit) in social capital is not innocent (Rankin, 2002, p. 99). Roy also suggests that the transformation of social capital into economic capital and ultimately into global financial capital is underpinned by practices of discipline and punishment (Roy, 2010, p. 68). In sum, social capital within the framework of microcredit programs can be seen as a modern mode of govern mentality, which is related to the creation of a set of rules and procedures that help to regulate micro credit borrowers' conduct to achieve specific goals. Unlike the disciplinary or regulatory power of the state (i.e. repressive power), in neoliberal governmentality, microfinance organizations and other NGOs gradually have taken the role of the state, allowing the state to move at a distance or take indirect control over its subjects.

Conclusion Microfinance, as a grassroots development strategy, is perhaps the most exciting concept in development paradigm over the last four decades. This chapter has provided a fact-finding review of the impact that micro finance programs have had on the rural developing world, particularly in Bangladesh. I looked at the theoretical neoliberal framework, and argued that microfinancing runs on the principles of neoliberal orthodoxy and fits perfectly with the capitalist world order. Under the neoliberal regime, MFIs gradually transform into for-profit financial enterprizes and undergoes moral drift and diffusion at the local level. From the hands of traditional local moneylenders at the grassroots level, it is formally and silently shifting to become a new type of structured moneylender, who are pushing the local women to the credit

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markets without providing training in marketable skills and, luring them deeper and deeper into debt. Microfinance has become a form of govern mentality that is implemented via a generalized control over people's behavior and over their beliefs, and by spreading the values of entrepreneurship with the market as the solver of all ills. MFI is concerned with the application of market forces and private individual entrepreneurship rather that redistribution, with opportunity rather than equality (Bateman & Chang, 2008; Roy, 2010, p. 24). Possibly the most important aspect of micro-lending is that it brings financial capital directly to the local people. It has emerged as a lucrative commercial business, operated by different organizations pursuing a diversity of techniques, each exhibiting its power to create its own "economic habitus" in the rural credit market.

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Bernasek, A. (2003). Banking on Social Change: Grameen Bank Lending to Women. Illtematiollal !oumal of Politics, Culture alld Society, 16(3), 369-385. Bond, P. (2007). Microcredit Evangelism, Health, and Social Policy. Illternational !oumal ofHealth Sen·ices, 37(2), 229-249. Bourdieu, P., & Wacquant, L. (2001, Jan/Feb). NewLiberalSpeak: Notes on the New Planetary Vulgate. Radical Philosophy, 105,2-5. Chang, H., & Bateman, M. (2008). The Microfinance Illusion [Mimeo]. Croatia: University of Juraj Dobrila Pula, & UK: University of Cambridge. Chavan, P. (2011, July-December). Microfinance under Neoliberalism. Review ofAgrariall Studies, 1(2),227 -236. Christen, R.P., Lyman, T.R., & Rosenberg, R. (2003). MicrojrllQ/lce COllsellsus

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Dichter. T.W. (2007). Can Microcredit Make an Already Slippery Slope More Slippery? Some Lessons from the Social Meaning of Debt. In T. W. Dichter. & M. Harper (Eds.). What's Wrong with Microfinance (pp. 717). Essex: Practical Action Publishing. Dickson. A.K. (1997). Development and International Relations. Malden. MA: Polity Press. Dimitrova. S.S. (2016). Neoliberalism and International Development Volunteering i'l a Post-Socialist Context (Doctoral dissertation). Michigan State University. Michigan. Fernando. J.L. (2006). Microftnance: PeriIs and Prospects. New York: Routledge. Fernando. J.L. (1997). Nongovernmental Organizations. Microcredit. and Empowerment of Women. Annals of the American Academy ofPolitical and Social Science. 554.150-177. Foucault. M. (1988). The Ethic of Care for the Self as a Practice of Freedom. In J. Bernauer. & D. Rasmussen (Eds.). The Final Foucault. Cambridge, MA: MIT Press. Foucault. M. (1977). Discipline and Punish: The Birth of the Prison. London: Penguin Books. Goetz. A.M .• & Gupta. R.S. (1996). Who Takes Credit? Power. and Control over Loan Use in Rural Credit Programs in Bangladesh. World Development. 24(1).45-63. Harford. T. (2008. December 6). The Battle for the Soul of Micro finance. The

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Hashemi. M .• & Riley. A.P. (1996). Rural Credit Programs and Women's Empowerment in Bangladesh. World Development. 24(4).635-653. Hayek. F.A. (1973). Law. Legislatioll and Liberty: A New Statement of the

Liberal Prillciples alld Political Economy - Volume I: Rules alld Order. London: Routledge. Helms. B. (2006). Access for All: Building Illclusive Financial Systems. Washington. DC: World Bank. Hoffman. L.. DeHart. M .• & Collier. S. (2006). Notes on the Anthropology of Neoliberalism. Anthropology News. 47( 6).9-10. Hulme. D.• & Maitrot. M. (2014). Has Microfinance Lost its Moral Compass (BWPI Working Paper 205). Washington. DC: Brooks World Poverty Institute. Hulme. D.•& Mosley. P. (1996). Finance Against Poverty. London: Routledge. Kabeer. N. (2001). Conflicts over Credit: Re-evaluating the Empowerment Potential of Loans to Women in Rural Bangladesh. World Developmellt. 29(1). 63-S4. Karnani. A. (2009) . Regulate Microcredit to Protect Borrowers (Working Paper No. 1133). Michigan: Ross School of Business University of Michigan. Karim. L. (2011). Microfinance and its Discontents: Warnell in Debt in Bangladesh. Minneapolis & London: UniverSity of Minnesota Press. Karim. L. (200S). Demystifying Micro-credit: The Grameen Bank. NGOs. and Neoliberalism in Bangladesh. Cultural Dynamics. 20(1).5-29.

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Lamer. W. (2000). Nco-Liberalism: Policy. Ideology. Governmentality. Studies in Political Economy, 63. 5-25. Lerner. D. (l972). Modernization Social Aspects. In D. Sills (Ed.). lntemational Encyclopedia of the Social Sciences (Vol. 10) (pp. 386-395). New York: Collier Macmillan. Maitrot. M. (2013). Th e Social Performance of Microftnance Institutions in Rural BmJglades!J. Washington. DC: Brooks World Poverty Institute. Mayoux. L. (1995). From Vicious to Vicious to Virtuous Circles? Gender and Microenterprise Developmmt (Occasional Paper. 30). Geneva: UNRISD. Mayoux. L. (2001). Women's Empowerment Versus Sustainability? Towards a New Paradigm in Micro-finance Programmes. In G.G. Campbell. R. Pearson. & B. Lemire (Eds.). Women and Credit. Researching the Past. Refiguring theFuture(pp. 245-269}. New York: Berg. McDermott. P. (2001). Globalization. Women and Development: Microfinance and Factory Work in Perspective. Journal ofPublic Affairs. 13(1}.65-79. Montgomery. H .• & Weiss, J. (2005). Great Expectations: Microfinance and Poverty Reduction in Asia and Latin America. Oxford Development Studies. 33(3-4}. 391-416. Montgomery. H .• & Weiss. ). (2011). Can Commercially-oriented Microfinance Help Meet the Millennium Development Goals? Evidence from Pakistan. World Development. 39(1}. 87-109. Morduch. J. (1998. July). Does Microfinance Really Help the Poor? New Evidence from Flagship Programmes in Bangladesh (Draft paper). Department of Economics and HIID. Han'ard University and Hoover Institution. Stanford University. Morduch. J. (1999a). Does Microftnance Really Help tile Poor? New Evidence from Flagship Programs in Batlgladcsh. Cambridge. MA: Harvard University Institute for International Development. Morduch. J. (l999b). The Microfinance Promise. JOllnlal of Economic Literature. 37(4}. 1569-1614.

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Morduch. ). (2000). The Microtinance Schism. World Developmellt. 28(4). 617-629. Ong. A. (2006). Neoliberalism as Exception: Mlltatiolls ill Citizellship alld Sovereignty. Durham: Duke University Press. Ostrom. E. (1994). Constructing Social Capital and Collective Action. Journal of Theoretical Politics, 6(4). 527-562. Otero, M., & Rhyne, E. (Eds.). (1994). The New World of Microellterprise

jillallce: Building Healthy jinancial Illstitlitions for the Poor. West Hartford, CT: Kuruarian Press. Payne, A.• & Philips, N. (2010). Development. London: Polity Press. Peck, J., &Tickell, A. (2002). NeoliberalizingSpace.Antipode, 34(3), 380-401. Peet, R., & Hartwick. E. (2009). Theories of Development. London: The Gildford Press. Putnam, R (1998). Foreword. Housing Policy Debate, 9(1). v-viii. Rahman, A. (1999). Women and Microcredit in Rural Bangladesh: An Anthropological Study of Grameen Bank Lending. Oxford: Westview Press. Rankin, K.N. (2001). Governing Development: Neo-liberalism, Microcredit, and Rational Economic Women. Economy and Sociely, 30(1),18-37. Rankin, K.N. (2002). Social Capital, Microtinance, and the Politics of Development. Feminisl Economics, 8(1), 1-24. Robinson, S. (2001). The Microfinance Revolulion. Washington, DC: The World Bank. Roodman, D., & Morduch, J. (2009). The Impacl ofMicrocredil on Ihe Poor in Bangladesh: Revisiting the Evidence (CGD Working Paper No.174). Washington, DC: Center for Global Development.

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75. Saad-Filho. A., & johnston, D. (2005). Neoliberalism: A Critical Reader. London: Pluto Press. Sen, A. (2000). Development as Freedom. Oxford: Oxford University Press. Steger, M.B., & Roy, R.K. (2010). Neoliberalism: A Very Short Introduction. Oxford, New York: Oxford University Press. Uddin, M.j. (2013). Microcredit, Gender and Neo-liberal Development in Bangladesh. Helsinki: Helsinki University Press. Uddin, M.j. (2014). Microcredit and Building Social Capital in Rural Bangladesh: Drawing the Uneasy Link. Contemporary South Asia, 22(2),143-156. Uddin, M.j. (2015). The Micro-politics ofMicro credit. London: Routledge. Weber, H. (2004). The New Economy and Social Risk: Banking on the Poor? RevieIVofIntemational Political Economy, 11 (3), 356-386. Yunus, M. (1989). Credit for Self-Employment: A Fundamental Human Right. In D.S. Gibbons (Ed.),The Grameen Reader (Rev. ed., 1994) (pp. 41-48). Dhaka: Grameen Bank. Yunus, M. (2003). Banker to the Poor: Micro-Lending and the Battle Against World Poverty. New York: Public Affairs. (Original work published in 1999).

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Chapter 3

INTERROGATING THE "PEASANT QUESTION" IN POST-REFORM BANGLADESH" Manoj Misra An estimated 15.18 million farm holdings in Bangladesh are engaged in agricultural production, and 84.38 percent of them are small peasant farms (BBS, 2008). In the 1980s, the country Signed on to the Structural Adjustment Programs (SAPs) and attendant agrarian reforms to promote industrialization and to reduce the dependence on agriculture for economic growth (Adnan, 2013). When Bangladesh received the first instalment of a Structural Adjustment Facility (SAF) loan from the International Monetary Fund (IMF) in 1986-1987, agriculture's contribution to Gross Domestic Product (GDP) was 41.77 percent, which has come down to 15.59 percent in 2015-16 (GoB, 1998, 2015). The reforms dispossessed a vast number of small peasants from the land and transformed many of them into agricultural laborers (See Misra, 2017a for detail). This development is consistent with the argument advanced by some agrarian reform theorists that capitalist advances in agriculture will resolve the "peasant question" in favor of proletarianization of subsistence farmers (see Araghi, 2009; Kautsky, 1988; Lenin, 1967; Marx, 1977). Ironically, the reforms also coincided with an increasing number of households taking up smallholder farming for their survival. Three decades of neoliberal economic reforms have failed to open up enough gainful " This chapter is a revised and abridged version of 'Is Peasantry Dead? NeoliberaI Reforms. the State and Agrarian Change in Bangladesh: which appeared in 2017 in thelol/rnal ofAgrarian Change, 17(3).594·611.

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employment opportunities to absorb the surplus rural population. despite being successful in carving out a vibrant space for the expansion of a market economy in the upstream and downstream of farming. How do we explain the ostensibly contradictory trends of simultaneous capitalist transformation and the persistence of small peasantry that seem to have deferred the intended course of the agrarian transformation process? Admittedly. the question is too big to answer in its entirety in the limited scope of this chapter. Instead. I aim to highlight the peculiarity of the present trajectories of development in Bangladesh where the state is caught up in a double bind. I argue that agrarian reform policies in Bangladesh have not merely polarized peasant classes. but also paradoxically deferred the absolute dispossession of the small peasant sector while promoting a market-based economy. I contend that the particular positioning of the state is central to understanding this development of what Byres (1981) calls "partial proletarianization". As Byres observed. the use of Green Revolution (GR) technologies and the spread of market capitalism around agriculture did not necessitate a complete transformation of agrarian classes in India. He noted that the Indian agrarian transformation was only "partial". arguing that "rural proletarianization" is not simply a matter of depeasantization or "proletarianization of the peasantry". This is because peasants might fiercely resist any attempt to dispossess them from their land in so far as they remained convinced that no "substantial employment opportunities in agriculture itself or outside of agriculture" were available for their material reproduction (Byres. 1981. pp. 428-32). Taking clue from Byres. I demonstrate that while the state apparatus actively sides with capitalist classes in negotiating the advancement of market principles in the predominantly peasant agrarian landscape of Bangladesh. it nevertheless has saved peasants from mass dispossession by maintaining some form of protectionist policies.

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Outline of the Chapter This chapter begins with a discussion on the state-initiated agricultural reforms in Bangladesh, and the ways in which these reforms pauperize small peasants by expanding the capitalist market system. Drawing on the recent agricultural census (BBS, 20 lOa) data, I show that the reforms coincide with a rise in both agricultural labor and small peasant households. I then demonstrate that the process of partial proletarianization in Bangladesh can be attributed to the mediating acts of the state.

State Policies, Agrarian Change and the Peasantry After its independence in 1971, Bangladesh immediately adopted a state-managed, planned economic development model. I It nationalized several key industries and established a central Planning Commission with a mandate to formulate short-, medium-, and long-term economic development plans. The Commission introduced the first Five Year Plan in July 1973 (Misra, 2012) with a special emphasis on the rehabilitation of the warravaged country and an increase in food grain production to ensure food security for a rapidly growing population. It followed import substitution policies to protect the domestic agriculture and industrial sectors. In 1986-1987, the subsequent junta government implemented a three-year medium-term adjustment program under a SAF loan established by the IMF, followed by another tranche of a three-year loan in 1990 under the Enhanced SAF loan initiative (SAPRIN, 2002). These loans came with stringent conditionalities including liberalization of "foreign trade and exchange rate regimes, restructuring the industrial sector,

t In fact. the first constitution of Bangladesh adopted in 1972 declared "socialism" as one of the four mnin pillars of the state. The Fifih Amendment to the constitution in 1979. however. watered down the original tone of the declaration and confined socialism to mean "economic and social justice".

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strengthening fiscal and monetary management, encouraging private sector participation in development and privatising the State-Owned Enterprises (SOEs)" (GoB, 1998, p. 36). The country began to liberalize and deregulate the agriculture sector, gradually downsized the operations of a number of SOEs devoted to delivering agricultural inputs to farmers and, started reducing agricultural subsidies in pursuit of these structural adjustment loans. The ultimate goals of the adjustment programs were to alter the historical trajectory of the country and move it towards industrialization and, generate an impetus for pro-market reforms led by the private sector. The inauguration of GR technologies in the 1960s and 1970s and their massive e>.:pansion in the subsequent decades under the patronage of the state first planted the seeds of such reforms in Bangladesh. GR technologies paved the way for market integration of peasant producers, as the adoption of these technologies forced them to sell their surpluses in the market to meet the increased cost of chemical-intensive and irrigation-based farming. These new technologies facilitated the intensive cultivation of rice up to three times a year (Misra, 2017b). With such active government patronage and financial incentives, many peasants gradually adopted modern rice farming and moved away from their traditional farming practices. Since the maturity period for GR rice varieties is considerably shorter than that for traditional varieties, farmers needed to expedite the production process to reap the full benefit of this new farming method. However, the inability of many cash-strapped small peasants to mechanize their farm and their continued dependence on animal draft powers for soil preparation and other production related activities in the early periods slowed down the growth rate of GR varieties. Moreover, the private import of machinery was also strictly regulated to allow for the import of only a limited variety of approved makes and models (Ahmed, 1995). On the other hand, as

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the GR varieties and irrigation facilitie s revolutionized the production regime, more peasants brought erstwhile fallow and pastureland under rice cultivation in an effort to increase their income. With shrinking pastureland, the supply of draft animals declined, once again impeding the optimization of production (Alauddin & Hossain, 200 I). In the pre-adjustment years, the market was still under the control of the state to a certain extent. The state-owned Bangladesh Agricultural Development Corporation (BADC) had the mandate to supply agro-machinery and other inputs to farmers at subsidized prices. At that time, the BADC sold agricultural inputs at fixed rates through Thana Sales Centers (TSCs) and Thana Central Cooperative Associations (TCCAs). In addition, 43,000 private dealers were issued licence to sale inputs at fixed rates in their specified areas (Renfro, 1992). In 1978, the then-junta government initiated the gradual liberalization and privatization of the agricultural input and machinery market under a policy regime called the New Marketing System (iFDC, 1980). The deregulation of the market under this new system slowly abolished the TSCs and TCCAs, and gradually transferred the job of importing and distributing machinery and other inputs (including seeds, fertilizer, pesticides, and irrigation equipment) from the BADC to the private sector. The whole reform process took several years, and by the mid1990s, the privatization of the input distribution system was largely completed. As the government began to downsize the volume of subsidies, input prices correspondingly increased, while rice prices at the producer level remained depressed. This posed few problems for wealthy farmers. However, the unfavorable terms of trade squeezed small peasants financially, and they found it tough to invest in the purchase of expensive machinery and other necessary inputs. The result of this restructuring was that, on the one hand, small peasants came under tremendolls pressure to produce surplus to meet the increasing cost of production, and on the other hand, the retreat of the

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state put a strain on them to a greater degree of market dependence and indebtedness. Against this backdrop, the country formulated its first-ever agriculture policy in 1999, titled the National Agriculture Policy (NAP). The primary goal of tlle policy is: "[T]o modernize and diversify the crop sector, in other words the entire agricultural system, through initiation and implementation of a well-organized and well-coordinated development plan". It aims to implement free market principles and reorganize the agriculture sector "in the light of the Agreement on Agriculture under the WTO [World Trade Organization], SAFTA [South Asian Free Trade Agreement] and other international treaties" (GoB, 1999, pp. 1-3). The NAP took up the issue of farm-level mechanization with some intent and proposed new measures in addition to the old ones to complete the privatization of the agro-machinery market. These measures included the extension of easy credit facilities, the withdrawal of restrictions on standardization and testing ofinlported and domestically manufactured machinery, tax exemptions for inlported machineries, and using mass media to promote and enhance private sector participation. These measures were largely successful in engaging the private sector in the marketing of agromachinery and equipment to farmers. From zero private sector participation in the late 1970s, the market share of privately sold agromachinery rose to BOT 13.08 billion in 2004, and then further increased to BOT 35.29 billion in 2007, suggesting a tremendous boom in the market (Matin et a!., 2008). As such, Bangladesh has emerged as "one of the most mechanized agricultures in Asia" with 80 percent of the tillage operations done with the help of mechanized tractors (Biggset a!., 2011, pp. 79-80). While years of SAPs had mostly transferred the supply and marketing of agricultural inputs - e.g., seeds, chemicals, pesticides, fertilizers, irrigation equipment and other machinery - to the private sector, prevailing market realities prevented the NAP from proposing

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a complete withdrawal of the state from the agricultural output market. The state intervenes in the output market mainly through its Public Food Distribution System (PFDS). a common strategy in the Indian subcontinent to stabilize domestic grain markets to supposedly protect both the producers and consumers. The wave of deregulation. however. saw the scope of PFDS greatly reduced from handling an average of2.S Million Metric Tons (MMTs) in the 1980s to about 1.4 MMTs in the early 2000s (Ahmed et al .• 2010; Chowdhury & Haggblade. 2000). By May 1992. the government successfully abolished both statutory and rural rationing programs. two of the largest PFDS channels in the country. to encourage private sector participation in food grain procurement and distribution (ibid). This scale-down of the PFDS gave private traders enormous control over the grain market. and their excessive profit-seeking behaviour often resulted in artificial grain price fluctuations. putting the livelihoods of both small peasants and urban consumers at risk (Misra. 2012). However. the severe food crisis of2007-200S. which continued into the following years amid bumper rice production. forced the government to reconsider its stance on the PFDS and agricultural subsidies against the wishes of the World Bank and other donor agencies. I return to this point later. While the 1999 NAP retained traces of protectionist policies. the 2013 NAP (GoB. 2013) signals a significant shift in thinking in terms of the future course of agriculture and its bearings on smallholder peasants. The key difference between the 1999 and 2013 policies is the reorientation of focus from promoting selfsufficiency in food production to achieving 4-4.5 percent growth in agriculture. in order to attain the targeted i percent overall GDP growth. Moreover. the 20 13 policy proposes to extensively promote modern and postproduction technologies. and to create agribusiness opportunities wherever possible in order to accelerate agricultural capitalization. The language of the 2013 policy adopts the vocabularies of Post-Washington Consensus such as, "pro-poor

•

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growth", "informatics", "market regulation", "human resource development", and "equity". Unsurprisingly, it draws heavily on the policy prescriptions of the 2008 World Development Report (WDR) published by the World Bank (2007, p. 1), which advocates for a "productivity revolution in smallholder farming" to supposedly eradicate poverty. In keeping with the 2008 WDR, the 2013 agriculture policy places enormous importance on further increases in agricultural productivity. It notes that since agricultural land is declining by approximately one percent every year due to urbanization and industrialization, the country must focus on productivity increases to meet the demands of a growing population. This Malthusian narrative belies reality. As per a projection of the Bangladesh Ministry of Agriculture, by 2020 the country will require about 28 MMTs of food grains per year (net production of 31 MMTs) to meet the dietary needs of an estimated 170 million people. Against this projection, the country produced 34.5 MMTs of food grains in 2013-2014 fiscal year (GoB, 2014). As may be obvious, the current level of food grain production is much higher than the projected 2020 consumption needs of the population. For the past four decades, Bangladesh's population growth rate has steadily declined from as high as 2.3 in the 1970s to 1.4 percent in recent times, but the average annual growth of aggregate food grain production over the same period is about 3.7 percent.2 The Sixth Five Year Plan (GoB, 2012b), however, clarifies that more than ensuring food security, the emphasis on land productivity growth is aimed at augmenting the prospect of exporting food grains to boost the agriculture sector's growth potential and expedite its modernization. In fact, the country has already started exporting modest amounts of rice, including a 12,500 MT shipment to Sri Lanka in 2015. It is also 2

Author's own calculation based on BSS annual rice production data.

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considering exporting rice to India in a historical role reversal (Bhuiyan, 2015). This export and commercial bias and the promotion of highvalue cash crops are slowly diverting scarce agricultural lands from food production for the masses to commercial production for industries and the urban wealthy consumers. Further investments in modern farming technologies may indeed unlock the agriculture sector's growth potential. Nonetheless, the effects of such a development at the small producer level require attention. Admittedly, the shift towards a liberalized, mechanized and modern agricultural system has increased the per unit rice productivity from 1.22 metric tons per hectare in 1975-1976 to nearly 2.52 metric tons' in recent times (Misra, 2017b). Along with this, the annual aggregate rice production has more than doubled from 17.6 MMTs in 1975-1976 to 34.5 MMTs in 2013-2014, while the area under cultivation increased by 22 percent during the same period, from 9.3 million to 11.36 million hectares (GoB, 2012b, 2014). For small and landless peasants, an "absolute decline" of income from rice farming (Hossain et al., 2003) neutralized most of these macroeconomic gains. Several factors arising out of the deregulation and modernization of the agricultural sector, including small plot sizes, high costs of agricultural wage labor, higher fertilizer and irrigation prices, and unfavorable agricultural terms of trade contributed to tills declining income and thereby to the profitability of small peasant producers (Ahmed et al., 2007; Hossain et ai., 2003; Zohir, 2001). A rough estimate by this author found that if a small peasant sells her entire annual paddy production in the market at the current rate, the profit she may be able to generate from rice farming is approxinlately BDT II ,214 a year' 3

-4

The figures represent the averoge combined productivity of both troditianal and modem varieties for both yean. A full breakdown of annual variety·wise productivity data is available at http://www.moa.gav.bdlstatisticsrrable3.01CY.htm Author's own estimate based on data available from various government and private sources. Profit is defined as the hypothetical difference between the averoge aggregate

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(BBS, 201 Oa), which is way below the national rural poverty line income.s The increased incidence of rural wage dependency over the last few decades is therefore hardly surprising. The 2008 agriculture census data (ibid) indicate that the number of agricultural labor households increased from 5.4 million in 1983-1984 to 6.4 million in 1996, and then to 8.7 million in 2008. Moreover, rural landlessness also increased during the same period, from 8.67 percent in 19831984 to 10.18 percent in 1996, and 9.58 percent in 2008. There is, however, a discrepancy in reporting the percentage of landless households in the web version and the published report of the 2008 Census of Agriculture. The website reports that the percentage of landless households in rural areas was 12.85 percent in 2008, whereas the published report has it at 9.58 percent for the same year. The 2005 Agricultural Sample Survey estimated rural landlessness at 10.65 . percent. The figure in the published report seems to be an anomaly. incomes from selling rice minus the average total cost of production in a given year. The calculation of in corne is done by multiplying the national average yield of a small rice farm by the 2012 government procurement price for Boro paddy. The reason for adopting government procurement price as the base is its ability to set the benchmark price for the market. The average annual rice yield is2.52 metric tons per hectare. The government defines a small farm as an operating area of 0.05-2.49 acres, or about a hectare. The government procurement price for Boro paddy (Boro is the single largest rice variety in the country) from the domestic market for the year 2012 (May to September) is BDT 18.00 per kilogram. Thus. a small fann can earn a maximum of(2.52 metric tons or 2520 kilograms x BDT 18) BDT 45.360 a year. The cost ofBoro production as per an independent estimate is BDT 13,550.00 per metric ton (the cost of producingAman. the second largest variety is little less at BDT 13,220 per ton). Therefore. the total cost of producing 2.52 metric tons of rice is about BDT 34.146.00. which means a profit of BDT 11.214.00 per year (45.360·34.146). However. one must note that the average sir..e of a farm in Bangladesh. as perthe 2008 census, is only 1.26 acres. This means that the actual average income from rice farming for a small farmer is half of what 1 estimated. For marginal and landless farmers, the scenario is even worse. 5

The 2010 Household Income and Expenditure Survey. conducted by the BBS (2011).

estimates the lower poverty line income at BOT 13,004.69 per year, and the upper poverty line income at BDT 14,538.~ per year for the rural areas.

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However. even if we take the published report as correct and assume that there has been a real decline in the proportion of landless households compared to 1996. we may not interpret it as a reversal of the trend. If we look at the overall landlessness data in the country. we shall see that in 2008. the census reported a disproportionately higher incidence of landlessness in urban areas. compared to the 1996 census. Given that there has been a huge migration of people from rural to urban areas during this period. it is logical to assume that a majority of the migrants were rural landless. which may have contributed to the declining proportion oflandlessness in rural areas. What is intriguing. however. is the concurrent proliferation of small peasant holdings that outnumber the growth of labor and landless households. During this same period. small farm holdings cultivating less than a hectare of land increased from 7.6 million (70.34 percent of all rural farm households) in 1983-1984 to 9.4 million (79.87 percent) in 1996. and 12.53 million (84.27 percent) in 2008. This 64 percent growth of small farms over the 1983-1984 level is higher than the 61 and 45 percent growth of agricultural labor and landless holdings. respectively. Consequently. both middle and large farm holding numbers have experienced sharp declines.6 It is worth mentioning here that the absolute number of farm holdings has also increased. although its proportion to non-farm holdings has declined. As the data demonstrate. the number of farming households has steadily increased from 10 million in 1983-1984 to 14.87 million in 2008. indicating a 49 percent overall growth in just 25 years. This higher incidence of small farms may indicate a temporary postponement of an outright dispossession of smallholder peasants from their land. 6

Medium farm holdings (2.50·7.49 acres) declined by 42 percent and large farms (over 7.50 acres) by 68 percent between 1983-1984 and 2008. In 1983-1984. medium farms were 24.72 percent of all farm holdings. which came down to 17.6 1 percent in 1996 and then further declined to 14.19 percent in 2008. For large farms. the respeclive percentages are 4.94. 2.52 and 1.54 for the three agricultural census years.

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The State as the Mediator between Capitalist Expansion and Agrarian Transformation It is difficult to explain these apparent contradictory trends of simultaneous expansion of small peasant and agricultural labor holdings amid a capitalist restructuring, the very purpose of which is to depeasantize the economy. The popular belief that population growth leads to fragmented farm sizes and thereby the growth of small peasantry only offers a partial account. It is true that population growth accounts for some of the subdivision of agricultural holdings. Nonetheless, theoretically, it fails to explain why the numbers of both peasant and overall farm households have gone up considering that the reforms promised to reduce the size of the agrarian population by creating employment opportunities in the formal sector and absorbing them there. More importantly, had population growth truly been the main cause, we would not have seen the heightened state of inequality in landownership over the years. Many researchers as well as the World Bank report a higher concentration of land ownership among big landowners in rural areas of Bangladesh, which they argue has led to a polarization within the landholding agrarian classes (jannuzi & Peach, 1979; Rahman, 1986; Rahman, 1988; The World Bank, 2007). These researchers attribute the fragmentation of farm sizes to this polarization of landownership. Interestingly, Bhaduri, Rahman and Am (i 986, 1988), using a survey data offour villages in the Noakhali district of Bangladesh, argue that this very process of polarization "itself generates a contradictory process of stabilization of the small peasantry through the creation of supplementary income opportunities ... in the form of wage employment or leasing ofland for the remaining [emphasis original] smaller land owning households" (1986, pp. 82-87). I agree with the authors' contention that small peasants do diverSify their income sources by doubling up as agricultural laborers. Nonetheless, from a political economy perspective, Bhaduri, Rahman and Am's (1986,

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1988) explanation of the persistence of small peasantry completely misses the role of an important actor - the state. As I mention above, the deleterious effects of neoliberal economic reforms have left smallholder peasants pauperized7 and malnourished (Misra, 2018); nevertheless, the various direct and indirect ways that the state subsidizes agricultural production and extends welfare supports have prevented an outright dispossession of small peasants. Contrary to the theoretical postulation that peasants in the Global South have lost their "non-market access to the means of subsistence" due to the retreat of the developmental state (Araghi, 2009, p.134), empirical evidence in Bangladesh suggests the existence of a "relatively autonomous" state (Alavi, 1972) that oscillates between minimalist and protectionist roles. The state has created a dual economy in which market imperatives dominate the upstream and

7

It is worth noting that the official poverty data show a gradual improvement in rural poverty. For example, according to th e Household Income and Expenditures Surveys by the BBS (the official poverty data source), in 1991 -1992, the incidence of rural poverty was 58.8 percent which. the survey shows, decreased to 35.2 percent in 2010. The reliability and validity of this poverty data is highly questionable. The constant adjustment of methodologies and indicators between surveys makes longitudinal comparison of poverty reduction rates problematic. Moreover. poverty rates fluctuate highly within the same survey dataset when measured in different methods - food energy intake and cost of basic needs methods. For an authoritative analysis on the methodological problems of Bangladesh povert), data, please see Ravallion and Sen (1996). and Khan (2005). Moreover. the poverty data is an aggregate measure of poverty. which includes both farming and non-farming groups. A more reliable measure of rural poverty in this context would be income inequality data. Bern'een 1991-1992 and 2010, the Gini Coefficient (an index of'zero' means no inequality at all, while "one" denotes absolute inequality) for income inequality in rural areas increased from 0.243 to 0.431 . indicating a sharp 77 percent increase in income inequality as opposed to a 47 percent increase for urban areas during this period. The same trend can be noticed in terms of the percentage sha~ of income accruing to rural households belonging to the bottom five deciles. which has steadily declined over these two decades (GoB, 2005, 2012h). Moreoyer, the per capita income from farming .ccruing to rural households between 1991 -1992 and 2005 has declined from 41.44 to 22.17 percent indicating a general slump in agricultural income (Khan, 2005). All these dat•• except the poverty d.ta, indicate a pauperization of smalt

peasants in rural areas.

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downstream of farming. while the actual act of production is carried out predominantly by small peasant producers under the compulsion of meeting their subsistence needs. The contradiction that resides in the state's reluctance to do away with peasant agriculture has a lot to do with Bangladesh's past memories of famine and starvation. which continue to haunt and shape its policy regime (Pinstrup-Andersen. 2000). As Sen's (1981a. 1981b) seminal analysis of the 1943 and 1974 Bengal Famines shows. on both occasions. the spectacular failures of the respective colonial administrations and the post-independence state to redistribute food among the rural populace on the eve of their loss of "entitlements" amid a market failure led to the death and stan'ation of several million people. In both instances, the ruling regimes were subsequently overthrown as the deaths seriously undermined the legitimacy of the respective regimes. The fear of a recurrence of popular revolts resulting from a malfunctioning market underlies the state's steadfast refusal to relinquish its power to control the economy. At no time did the state's distrust for the market become as evident as it did during the 2007-2008 food crisis, when the state dispatched the army to indiscriminately round up rice traders on illegal hoarding and syndication charges without the necessary approval of the courts. sending shockwaves through the market. Another factor that compels the state to protect the subsistence sector is the inability of the formal sector (industrial and service) to absorb the massively surplus labor force that will be released following the agrarian reforms. Before the first SAF loan. agriculture employed 58.79 percent of the total labor force. which has recently come down to 52 percent (GoB. 1992.2010). On the other hand. the industrial' sector's share of contributions to the GDP has almost tripled from 9.86 to 29.93 percent during the same period. whereas employment in this sector has increased by only 6 percent (BBS, 1983.

8 The industrial sector is comprised of small and large manufacturing. power. gas and water suppJies, mining. and construction subsectors.

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20IOb; GoB. 1998. 2012a). Despite GDP growth rates hovering in the 4 to 6 percent range over the past two decades. the formal sector employs only 22 percent of the total labor force - II percent in manufacturing and the rest in organized services. Of these manufacturing jobs. most are concentrated in the export-oriented ready-made garment industry. which predominantly employs young women and pays below poverty line wages. As in many other Global South countries. the process of capitalist development in Bangladesh has shown a remarkable tendency to eschew accumulation through expanded reproduction. The unwillingness of capitalist classes in the productive investment of capital has led to an investment boom in unproductive sectors such as the real estate and stock markets. The phenomenal rise of the informal sector partly solved the unemployment problem by absorbing the surplus labor force (GoB. 2012b). However. these informal jobs are extremely low paying and provide no job security. This "informalization" of the economy. the subsequent proliferation of urban slums. and the near breakdown of social order forced the state to initiate a range of poverty reduction. rural development. and Social Safety Net Programs (SSNP) to support the subsistence sector in order to stop the ever-increasing deluge of rural migrants into the cities. One may argue that the reforms have diminished the state's capacities to the eJ.."tent that it is now unable to make any meaningful development intervention even if it so wished. To a certain extent. this argument holds merit. Yet the state continues to retain ways and means. however diminished. to intervene in the market. These interventions may appear to be antimarket. but the eventual benefit belongs to the capitalist classes since the goal is to maintain the socio-political status quo. Let me present the cases ofPFDS and SSNPs to elaborate this pOint further. Even though the scope of the PFDS program underwent restructuring in the 1990s and early 2000s. the program still plays a crucial role in distributing subsidized food grains among the rural

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poor and, setting the benchmark for grain prices to keep domestic producers interested. In the 1980s, as the government was implementing the reform agenda, it made a conscious decision to move away from foreign grain imports and food aid dependence and, rely on the domestic market for PFDS stock building, especially for rice stock. The objective to switch to domestic procurement was to ensure minimum but stable domestic rice prices (Goletti, 2000) along with ensuring a steady market for domestic producers. It is worth mentioning here that millers, traders and large farmers benefit more from the PFDS procurement than small peasants, as the government relies on the former group for procurement purposes. Once procured, the government releases the stock through various distribution channels including the Open Market Sale program and SSNPs at subsidized rates when market prices are higher than average levels. Often, this release of subsidized grains leaves a moderating effect on prices. One positive aspect of this intervention is that since PFDS keeps domestic prices below the international market rates, it discourages cheap foreign imports, except during extreme supply shortages. Without the PFDS and periodic tariff bars on rice imports, the domestic market risked being flooded by subsidized rice exports from India, as the government had already permitted private imports in 1993 (Ahmed et aI., 2007). Such a scenario could have forced small peasant producers out of agriculture-as has happened in many other countries-since they would be in no position to compete against cheap foreign imports. The important thing to note here is that although the government has protected small peasants through this market intervention, it did not go beyond saving their mere existence. Ever since the 2007-2008 food crisis, the state has gradually increased budgetary allocations to expand the coverage of the PFDS to stabilize the spiralling food commodity prices on the one hand, and to bring an increased number of vulnerable people under the umbrella of subsidized food grain distribution, on the other. Recent data show that since the crisis, the average annual distribution of food

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grains through PFDS channels has risen to 2.11 MMTs; a sharp rebound from the pre-crisis average of 1.4 MMTs. In 2010-201 I, the government distributed as much as 2.29 MMTs of food grains through PFDS channels, which is almost at par with the program's peak handling of 2.5 MMTs during the pre-reform years (Ahmed et aI., 2010; Chowdhury & Haggblade, 2000). Besides the PFDS, the government, in collaboration with various national and international non-government organizations, administers around 58 SSNPs comprising both food and cash transfer programs (Ahmed et aI., 2010). Many of these programs directly and indirectly benefit members of small peasant households. Over the last two decades, budgetary allocations in SSNPs have steadily increased and have more than doubled in tandem with the economic liberalization program (Shahabuddin, 2010). For instance, the percentage of rural households benefitting from SSNPs increased from 15.64 percent in 2005 to 29.16 percent in 2010 (BBS, 201l). Similarly, budgetary allocations in SSNPs have seen a considerable rise. The budget for the 2009-2010 fiscal year allocated BDT 160 billion, about 2.8 percent of the national GDP, benefiting approximately 20 million people (Ahmed et al. , 2010; GoB, 2009). These recent expansions of the PFDS and SSNPs coverage may well be a temporary trend. Nonetheless, they attest to the state's discomfiture with the fallout of market failures, and its willingness to intervene. Admittedly, these miniscule supports did little to improve the economic solvency of small peasant producers. However, there is little doubt that these transfers of resources from the state play an important role in supporting small peasant livelihoods to a certain extent. In the absence of any viable gainful employment opportunities available for the rural poor in the non-farm or formal sectors, these

9

Author's own calculation based on data obtained from various issues of the

Bangladesh Food Situation Report published by the National Food Policy Capacity Strengthening Program website at http://''''~v.nfpcsp.orglagridrupaUbangladesh· food-situation -report

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I Neoliberal Development in Bangladesh

supports help prolong their farming engagements. albeit impoverished condition.

to

an

Conclusion To be clear. the narrative of reform and the nature of state intervention that I discuss in this chapter are only a snapshot and. are by no means exhaustive. Due to the paucity of space. I have deliberately omitted the discussion on the various legal and financial arrangements through which the state has kept the peasantry alive. The intention of this chapter is not to convey the feeling that state interventions have improved the livelihoods of small peasants. instead. I view these interventions as a deliberate ploy by the state apparatus to keep small peasants on life support so as to forestall the possibility of any rupture in the process of capital accumulation. I must also clarify that my argument in no way attempts to deny small peasants their agency. Small peasants have repeatedly proven their capacity to subvert the process and enforce their demand on the state by 'overt' and 'covert' acts of resistance (see Adnan. 2013; Mookerjea & Misra. 2017). Historically. they have often violently revolted against the liberalization agenda of the state. and they have occasionally been able to disrupt the accumulation process by organized actions. Nevertheless. Veltmeyer (2009. p. 40 I) is right in noting that "capitalist development of agriculture ... is predicated on a process of primitive accumulation - dispossession of the direct producers from the land ... [and al source of poverty in rural society". That being said. this development does not always necessarily lead to an outright dispossession of peasant producers. especially if the accumulation process occurs without extending gainful employment opportunities to the surplus population (see Araghi. 2009; Byres. 1981). The classical agrarian reform theorists' preoccupation with the inevitable demise of small peasantries through the spread of capitalism in agriculture and the corollary growth of expanded reproduction fails to pay adequate attention to the particular trajectories of national development. the specific role and type of the state. and the markedly

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different socio-economic global realities encountered by the Global South. Although globalization has largely eroded the economic and political sovereignty of Global South countries, the state apparatus there still enjoys certain decision-making powers that allow it to negotiate the conflicting demands placed by the national and international bourgeoisie and its other constituent subjects. It is true that the ruling classes in the newly independent postcolonial states are all for keeping the cycle of accumulation moving, yet the specific form of the accumulation process and its outcome depends on how these states resolve the contradictory demands placed on them without undermining their own legitimacy. Given this complex socio-political reality, the rejection ofthe "peasant question" in favor of an "agrarian question of labor" at this historical juncture may be a tad premature, at least in Bangladesh's context (if not elsewhere) (McMichael, 2008, 2009; Bernstein, 2010). The partial nature of agrarian transformation that we now experience in Bangladesh may not be resolved in favor of a complete proletarianization of small peasants in the foreseeable future. Having said that, the social condition of living for small peasants will continue to be highly embedded in capitalist market relations, which differs Significantly from what their predecessors ever experienced.

References Adnan, S. (2013). Land Grabs and Primitive Accumulation in Deltaic Bangladesh: Interactions between Neoliberal Globalization, State Interventions, Power Relations and Peasant Resistance. Tile JOllrnal of Peasant Stlldies, 40( 1),87 -128. Ahmed, A.U., Dorosh, P., Shahabuddin, Q., & Talukder, R.A. (2010). Income Growtll, Safety Nets, and Public Food Distriblltio,1. Dhaka: Bangladesh Food Security Investment Forum. Ahmed, R. (1995). Liberalization of Agricultural Input Markets in Bangladesh: Process, Impact, and Lessons. Agricultllral Economics, 12(2), 115-128.

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Ahmed, N., Bakht, Z., Dorosh, P.A., & Shahabuddin, Q. (2007). Distortions to Agricultural Incentives in Bangladesh (Vol. 2), National Spreadsheet for Agricultural Distortions (Working Paper No. 32). Washington, DC: The World Bank. Alauddin, M., & Hossain, M. (2001). Environment and AgriCllitllre in a

Developing Economy: Problems and Prospects for Bangladesh. Cheltenham: Edward Elgar Publishing Limited. Alavi, H. (1972). The State in Post-Colonial Societies: Pakistan and Bangladesh. New Left Review, 74(1), 59-8!. Araghi, F. (2009). The Invisible Hand and the Visible Foot: Peasants, Dispossession and Globalization. In H. Akram-Lodhi, & c. Kay (Eds.),

Peasants and Globalization: Political Economy, Rural Transformation and the Agrarian Question (pp. 111-147). New York: Routledge. Bangladesh Bureau of Statistics (BBS). (2013). District Statistics 20ll, Panchagarh. Dhaka: BBS, Ministry of Planning, The Government of the People's Republic ofBangladesh. BBS. (2011). Report of the Household Income and Expenditure Survey 2010. Dhaka: BBS, Ministry of Planning, The Government of the People's Republic of Bangladesh. BBS. (2010a). Census of Agriculture 2008: Structure of Agricultural Holdings and Livestock Population. Dhaka: Ministry of Planning, The Government of the People's Republic of Bangladesh. BBS. (20IOb). Key Findings ofLabour Force Survey 2010. Dhaka: Ministry of Planning, The Government of the People's Republic of Bangladesh. BBS. (2008). Agriculture Census. Dhaka: Ministry of Planning, The Government of the People's Republic ofBangladesh. BBS. (1983). Final Report, Labour Force Survey. Dhaka: MinistryofPlanning, The Government of the People's Republic of Bangladesh. Bernstein, H. (2010). Class Dynamics of Agrarian Change: Agrarian Change 6- Peasant Studies. Canada: Fernwood Publishing Company Limited. Bhaduri, A., Rahman, H.Z., & Arn, A. (1988). Persistence and Polarisation in Rural Bangladesh: Response to a Debate. The Journal ofPeasant Studies, 16(1),121-123.

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Bhaduri. A.. Rahman. H.Z .• & Arn. A. (1986). Persistence and Polarisation: A Study in the Dynamics of Agrarian Contradiction. The Journal of Peasant Studies. 13(3).82-89. Bhuyian. A.I. (2015. January 2). Bangladesh from 'Basket Case' to Rice Exporting Nation. The Daily Observer. Biggs. S.• Justice. S.• & Lewis. D. (201 I). Patterns of Rural Mechanisation. Energy and Employment in South Asia: Reopening the Debate. Economicand Political Weekly. 46(09). 78-82. Byres. T.J. (1981). The New Technology. Class Formation and Class Action in the Indian Countryside. The Journal of Peasant Studies. 8(4).405-454. Chowdhury. T.• & Haggblade. S. (2000). Dynamics and Politics of Policy Change. In R. Ahmed. S. Haggblade. & T. Chowdhury (Eds.). Out of the Shadows of Famine: Evolving Food Markets and Food Policy in Bangladesh (pp. 165-185). Baltimore: The Johns Hopkins UniverSity Press. Goletti. F. (2000). Price Stabilization and the Management of Public Foodgrain Stocks in Bangladesh. In R. Ahmed. S. Haggblade. & T. Chowdhury (Eds.). Out of the Shadows of Famine: Evolving Food Markets and Food Policy ill Bangladesh (pp. 189-212). Baltimore and London: The Johns Hopkins University Press. Government of Bangladesh (GoB). (2015). Seventh Five Year Plan (2016 2020): Accelerating Growth. Empowering Citizens. Dhaka: Planning Commission. Ministry of Planning. GoB. (2014). Ballgladesh Ecollomic Review 2014. Dhaka: Finance Division. Ministry of Finance. GoB. (2013). National Agriw/ture Policy. Dhaka: MinistryofAgriculture. GoB. (2012a). Bangladesh Economic Review 2011 . Dhaka: Finance Division. Ministry of Finance. GoB. (20 12b). The Sixth Five Year Plan (2011-2015): Accelerating Growth alld Reducing Poverty (Part one). Dhaka: Planning Commission. Ministryof Planning.

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GoB. (2009). Budget Speech 2009-10. Dhaka: Ministry of Finance. GoB. (2005). Ulllockillg the Potential: Natiollal Strategy for Accelerated Poverty Reductioll. Dhaka: General Economic Di,;sion (GED). Planning Commission. GoB. (1999). Natiollal Agriwlture Policy. Dhaka: Ministryof Agricul ture. GoB. (1998). The Fifth Five Year Plan (1997-2002). Dhaka: Planning Commission. MinistryofPlanning. GoB. (1992). Labor Force Survey. Dhaka: BBS. Ministry of Planning. Goletti. E (2000). Price Stabilization and the Management of Public Food Grain Stocks in Bangladesh. In R. Ahmed. S. Haggblade. & T. Chowdhury (Eds.). Out of the Shadows of Famine: Evolvillg Food Markets alld Food Policy ill Ballgladesh (pp. 189-212). Baltimore & London: The johns Hopkins University Press. Hossain, M .• Lewis, D .• Bose, M.L., & Chowdhury, A. (2003). Rice Research,

TechnolOgical Progress. and Impacts

Oil

the Poor: The Bangladesh Case

(Summary Report). EPTD Discussion Paper (No. 110). Washington. DC: International Food Policy Research Institute. International Fertilizer Development Center (IFDC). (1980. july). Second Evaluation ofthe Bangladesh New Marketing System. Dacca: Author. Jannuzi. ET.. & Peach. j.T. (1979). Note on Land Reform in Bangladesh: The Efficacy of Ceilings. The Journal ofPeasant Studies. 6(3).342-347. Kautsl...y, K (1988). The Agrarian Question. London, England: Zwan. Khan. A.R. (2005). Measuring Inequality and Poverty in Bangladesh: An Assessment of the Survey Data. The Bangladesh Development Studies, 31(3/4),1-34.

Lenin. V.l. (1967). The Development of Capitalism in Russia. Moscow: Progress Publishers. Marx. K (1977). Capital: A Critique ofPolitical Economy. New York: Vintage Books. Matin; M.A .• A1am. M.M .• Khan. E.N .• Khan. M.H.. & Khan. M.N. (2008).

Problem and Prospect ofProduction of Agricultural Machinery in Bogra: A Research Report. Bogra: Rural Development Academy.

Interrogating the Peasant Question

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McMichael, P. (2009). Food Sovereignty, Social Reproduction and the Agrarian Question. In H. Akram-Lodhi, & c. Kay (Eds.), Peasants and Globalization: Political Economy, Rural Transformation and the Agrarian Question (pp. 288-312). London: Routledge. McMichael, P. (2008). Peasants Make Their Own History, But Not Just as They Please .... journal ofAgrarian Change, 8(2), 205-228. Misra, M. (2018). Moving a way from Technocratic Framing: Agroecology and Food Sovereignty as Possible Alternatives to Alleviate Rural Malnutrition in Bangladesh. Agriculture and Human Values, 35(2),473487. Misra, M. (2017a). Is Peasantry Dead? Neoliberal Refonns, the State and Agrarian Change in Bangladesh. journal of Agrarian Change, 17(3), 594-611. Misra, M. (2017b). Smallholder Agriculture and Climate Change Adaptation in Bangladesh: Questioning the Technological Optimism. Climate and Development, 9(4), 337-47. Misra, M. (2012). Does Government Intervention Matter? Revisiting Recent Rice Price Increases in Bangladesh. Perspectives on Global Development and Technology, 11 (I), 112-130. Mookerjea, S., & Misra, M. (20 17). Coal Power and the Sundarbans in Bangladesh: Subaltern Resistance and Convergent Crises. In D. Kapoor (Ed.), Against Colonization and Rural Dispossession: Local Resistance in South and East Asia, the Pacific and Africa (pp. 164-186). London: Zed Books. Pinstrup-Andersen, P. (2000). Foreword. In R. Ahmed. S. Haggblade, & T. Chowdhury (Eds.), Out of the ShadolVs of Famine: Evolving Food Markets and Food Policy in Bangladesh (p. ,,·v). Baltimore: The Johns Hopkins University Press. Rahman, A. (1988). Small Farmers are Being Proletarianised-A Note on Persistence and Polarization. The journal of Peasant Studies, 15(2), 283-287. Rahman, A. (1986). Peasants mId Classes: A Study ill Differelltiatioll in Ballgladesh. Delhi: Oxford University Press.

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Ravallion, M., & Sen, B. (1996). When Method Matters: Monitoring Poverty in Bangladesh. Economic Development and Cultural Change, 44( 4),761792. Renfro, R.Z. (1992). Fertilizer Price and Subsidy Policies in Bangladesh. World Development, 20(3), 437 -55. Sen, A. (1981a). Ingredients of Famine Analysis: Availability and Entitlements. The Quarterly Journal ofEconomics, 96(3),433-464. Sen, A. (1981 b). Poverty and Famines: An Essay on Entitlement and Deprivation. Oxford: Clarendon Press. Shahabuddin, Q. (2010). The Right to Food: Bangladesh Perspectives. The Bangladesh Development Studies, 33( 112), 91-134. Structural Adjustment Participatory Review International Network (SAPRIN). (2002). The Policy Roots of Economic Crisis and Poverty: A

Multi-Country Participatory Assessment of Structural Adjustment. Washington, DC: SAPRIN. The World Bank (2007). World Development Report 2008: Agriculture for Development. Washington, DC: The World Bank; London: Eurospan Distributor. Veltmeyer, H. (2009). The World Bank on 'Agriculture for Development': A Failure ofImagination or the Power ofIdeology? The Journal ofPeasant Studies, 36(2), 393-410. Zohir, S. (2001). Impact of Reforms in Agricultural Input Markets on Crop Sector Profitability in Bangladesh. Dhaka: SAPRI/BIDS.

Chapter 4

NEOLIBERALISM, STATE, AND LABOR: REFLECTIONS ON THE GARMENT INDUSTRY Shahidur Rahman Initially, Bangladesh implemented a socialist economy, as had been promised during the independence struggle (Stepanek, 1979). As a first step, the government nationalized all the key industries, including the jute, cotton textile, and sugar industries and the scope of the private sector was limited to small and cottage industries (Karim, 1996). To protect native industry, quantitative restrictions such as duties and quotas were employed on imports (Rahman & Bakht, 1997). However, the nationalization of the economy ended in the late 1970s, when Bangladesh shifted towards a market -oriented policy. Since then, the goal has been to achieve higher growth through the development of the private sector by privatization-a transition from a strategy ofimport -substitution to an export -led one. As a result of trade liberalization, Bangladesh's GDP growth rate increased from 2.8 percent in the 1970s to 7.86 percent in the 20172018 fiscal year. The economic records indicate that the GDP share of agriculture declined from 33.7 percent in 1980-81 to 13.82 percent in 2017-18, while the share ofindustry increased from 17.31 percent to 33.66 percent over the same period (Titumir, 2016; The Dhaka Tribune, 2018). Adopting neoliberalism through an e>..l'ort-led growth strategy has led to significant development of Bangladeshi garment industry. In 2018, the apparel industry contributed 83.49% to Bangladesh's total exports of USD 36.66 billion. Over the decades, there have been massive changes in the labor force also, especially in terms of the male to female ratio. It is estimated that 60.8 percent of

90

I Neoliberal Development in Bangladesh

the 3.5 million readymade garments employees are female (CPD, 2018; Ovi, 2018). Although the garment industry has had enormous socioeconomic impact on the country, issues regarding labor rights and safety have not been addressed properly. For instance, on 24 April 20l3, a nine-story building in Savar that housed five garment factories collapsed, killing 1, l38 workers. After a crack was detected the day before the tragedy, the factory owners ignored a warning to not allow workers into the building. Although the workers did not want to enter the unsafe building, they returned to the factories in fear oflosingtheir jobs. Against this backdrop, a key question arises: in a lower middle-income country like Bangladesh, how does the state deal with labor issues? To answer this question, I shall focus on the role the Bangladeshi government has played in terms of the country's garment industry and the broader context of neoliberalism. It appears that the government's responses to the challenges of neoliberalism are linked to the issues of capability and politics. By capability, I mean the capability of the government to supply sufficient resources to ensure secure working conditions with a standard wage structure for workers and to create a competitive infrastructure. The question of capability also asks whether the Bangladeshi government receives fair treatment in the global market from developed countries and global institutions. In the discussion of politiCS, I focus on the power of the government to deal with both domestic and external pressures, including the adoption and implementation of policies such as labor laws, government incentives, and import and export regulations, and the ·influences of donor agencies. In this chapter, I analyze the responses of the Bangladeshi government to the challenges of neoliberalism from the perspective oflabor rights. Before discussing how the government has dealt with labor rights issues, it is first essential to shed light on the nature of the Bangladeshi state. The second section shows how the garment entrepreneur class

Neoliberalism, State, and Labor

I 91

has strengthened its relationship with the state and exercised its power over state resources. However, in the third section, I argue that such a patron-client relationship has not developed between the workers and the state. This argument is further expanded in the remaining sections by analyzing the minimum wage, legal actions, and the implication oflabor laws.

The Nature of the Bangladeshi State The Marxist view of the state focuses on the oppression of one class over others, in which the state serves the interests of the capitalist class (Miliband, 1965). Within the heterogeneous group of theorists clustered under the Neo-Marxist category, a number of analysts see the state as an instrument of class rule, while others see it as a ground for political class struggles. Some, particularly Skocpol (1985), recognize the possibility of the state's relative autonomy. In contrast to Marxists, scholars in the Weberian tradition argue that "states are potentially autonomous and that the controllers of the means of coercion and administration may pursue goals at variance with dominant classes or any other social group" (Evans, Rueschemeyer, & Skocpol, 1985, p. 350). In other words, the state is defined by its control over a given territory and the people within that territory. These arguments about the state, whether Marxist, Neo-Marxist, or Weberian, generally apply to Western and, in particular, to European societies, and are based on the historical development.of European and other Western societies. In other words, they are Eurocentric. As the historical background of postcolonial societies is different from that of Western societies; Marxist, Neo-Marxist, and Weberian theories have questionable applicability to understanding postcolonial states . . Alavi (1972) evaluated the differences between postcolonial states and Western societies upon which classical theories of states were developed. In Western societies, Alavi argues, a strong indigenous bourgeoisie created the nation-state and also developed

92

I Ncoliberill D""ciormenl in Bangladesh

the institutions that were essential for a capitali st mode of produ cti on . In postcolonial societies. in contrast. the native bourgeoisie did not shape the structure of the state: they in herited an established state structure from th e colonial ruler. Stat e institutions are therefore based on the home country of the colonial ruler. All government institutions. whether based on traditional landowners, emerging capitalists, or th e admini strative and military elite, were made to serve the interests of the colon ial power. According to Alavi (1972, p. 61): The COIOlli,,1 state is therefore equipped with a powerful bureaucratic-military apparatus and mechani sm of government which enable it through its routine operations to subordinate the native social classes. The post -colonial society inherits that overdeveloped apparatus of state and its institutionalized practices through which the operations of the indigenous social classes arc regulated and con trolled. At th e moment of independence weak indigenous bourgeoisie find themselves enmeshed in bureaucratic control s by whi ch th ose at the top of the hierarchy of the bureaucratic-military appar"tu s of the state arc able to maintain and even extend their dominant power in society. being freed from direct metropolitan control. Alavi also argues that the state in postcolonial societies is not the instrument of a single class. After independence, the state apparatus mainly consists of nalive bourgeoisie, metropolitan bourgeoisie (e.g. foreign companies doing business in Bangladesh), members of the military, landowners, mcrcllants, and polilicalleaders. Although the role of the feudal dass in Western societies disappeared after lhe revolution of the bourgeoisie, landowners continue to playa ke), role ill postcolonial societies. Even after independence, national political leaders maintain 3 strong relationship with rich landowners in order to control the rural areas. To ensure the stability of the newly independent slates, Ilationallcaders choose not to take any steps that would c1lallengc the interests of the bureaucratic -military oligarch)1 that worked for the colonial rulers. Given these historic constraints,

the postcolonial tate emerges no onl ' a5 an instrumen of a ruling class, but also as a mediator of the competing interests of different classes in the postcolonial society, Alavi's theory about postcolonial states (;m be applied to understand the C\'olution of the Bangladeshi Sldle. B.mgJadesh, as part of the Indian subcontinent. C>.llcrienced British coloni;:!1 rule for almo t two hundred 'ears, The British coloniLers created a sldte apparatus that was primarily meant to protect British int r ts and therefore ignored the interests of the nath'e ocial cJ ,es-apart from those, such as landowners, the militar " , nd th bourg o·'ie. wh were incorporated in to the governi ng st ructure, At independence. the nati onal political leaders of India and Pakistan inh 'rited this colonial state structure and continued to build the state using the "i nefficient" indigenous bourgeoisie. To do Ihi s. th e polil ical leaders formed a reciprocal relationship with Ihe bourgeoisie. the mllila rv. and nch landowners. continuin g the influe nce of the groups thaI were originally incorporated int o Ihe British governing sYstem. The 'ame process continued when Banglad esh achieved indcpcndcncc from Pakistan in 197 1. The Bangladeshi state therefore conlllluc, 10 serve the interests of these dominant classes rather than those of other social classes. Colonial admini st rative and political practice continue to be entrenched in the postcolonial period. Bangladesh has been criticized for being a weak state (ZafuruUah. 2003). This weakness has roots in the colonial period. Zafarullah (ibid) argues that one reason for the wea.kne,s of Ihe Bangladc hi tate is the absence of a d.e mocratic culture and p liti al comm itment within the major political parties. Because of th L~ absence of a democratic culture. governments do nOI have any interc t in pur,uinlt strong state policies. The Banglade,hi g(w~rntn ent on tinu", to be dependent on the economically elite class. Thi ret1.-c h n gCtlt"rnl paltem in Third World stales wh .. r~b y. according to CI~pha.m ( 1'.1 :.. p, 41). "the state as a si mpl .. agen y for ext ract ion and control" is lhe ultimate "prize i.ll political ,·oOlpetition. and [isl a means b~' ""hicb

94

I Neoliberal Development in Bangladesh

those who win that competition can serve their ambitions and suppress their opponents" (Zafarullah, 2003, p. 288). In a democratic parliamentary system, the executive branch of the government is expected to be accountable to the country's citizens. But the Bangladeshi parliament has become dysfunctional because of the absence of active and meaningful participation by the oppositional party and there had been limited debate on national interests among the members of parliament. A democratic parliamentary political system began in Bangladesh in 1991 after the domination of a presidential political system by Sheikh MUjibur Rahman in 1972-1975 and two military regimes (the Zia regime in 1975-1981 and the Ershad regime in 1982-1990). ""hilst Bangladesh has had six successive parliamentary elections after the fall ofErshad regime-the country was subsequently governed by the Bangladesh Nationalist Party (BNP) from 1991-1995, the Awami League (AL) from 1996-200 1, the BNP from 2001-2006, and the AL from 20082014 and from 2018 to the present-these parliaments have become excessively dysfunctional due to the absence of the main opposition party during the major parliamentary sessions (Sobhan, 2004). However, despite over 25 years of democratic rule, the Bangladeshi parliament continues to be ineffective due to the confrontational politics between the two major political parties, the BNP and the AL. According to Zafarullah (2003, pp. 286-287), "the absence of both democratic culture and genuine political commitment within the country's two major parties has eroded the capacity of the Bangladesh state to effectively respond to social and economic imperatives in an era of globalisation."

The BGMEA and the State Bangladesh Garments Manufacturers and Exporters Association (BGMEA) is the oldest and largest non-profit institution associated with Bangladesh's garments sector, representing the woven, knitwear, and sweater subsectors. BGMEA has had extensive experience in the

Neoliberalism, State, and Labor

I 95

readymade garments industries since its formation in the early 1980s, but many questions have been raised about its authority and regulatory power. Export clearances, known as Utilization Declaration or UD, are provided to the garments' industry by BGMEA , but are usually issued by state agencies for other industries. For example, in the pharmaceutical industry, export clearances are issued through Department of Narcotics Control and require applications to get permission. The ability to receive UD clearance is essential, in the sense that it gives a factory permission to import or export. However, this begs the question of how much authority a business organization that is legally not a regulatory entity, should have (TIB, 2013). The entry of businessmen into politics violates a few laws, especially in the parliament. An MP who has private interests in a certain sector cannot sit in the parliament's standing committee for that sector. This is outlined by the Rules of Procedure (ROP) of the Bangladesh Parliament in Section 188: "No member shall be appointed to a Committee who has a personal, pecuniary or direct interest in any matter which may be considered by that Committee". However, other MPs can be indirectly involved in the sector through having interests of owning a garments factory, or by having associates or family members within the industry. It has been observed that BGMEA's internal leadership changes correspond to changes in the national ruling party; no matter which political party is in power, individuals connected with that party move into the spotlight and exert influence within the BGMEA leadership. Factories closely associated with the political leaders rarely face penalties for non-compliance. In 2010, a factory owned by Hameem Group caught fire and killed more than 26 people (Sarkar & Mollah, 2010). The Managing Director of the Group, A. K. Azad, was also the president of FBCCI at the time. The factory was reportedly prodUCing for well-known retail brands such as GAP. The Clean Clothes Campaign frequently contacted the Hameem Group about "violations of freedom of association and other labour standards at the company's

96

I Neoliberal Development in Bangladesh

factories. At the same time, eyewitnesses mentioned that at least 2 of the 6 exits were locked and this was a common occurrence for the building" (Clean Clothes Campaign, 2010). The factory never addressed these violations until the accident. BGMEA compensated the families of the victims with BDT 100,000 for each death, while the injured received BDT 25,000 each. Despite the accident, Mr. Azad was focused on fulfilling contract commitments instead of safety and compliance; shortly after the accident, he was quoted as saying, "there might be some problems in meeting buyer orders" (ibid). Another example ofBGMEA's power is its headquarters, a large office tower that is deemed to be illegally built. The Bangladesh High Court has ruled that not only was the land illegally obtained, but the tower itself was also built without proper authorization and has blocked drainage systems. The building complex also takes up additional space that was not mentioned in earlier plans. Even the Rajdhani Unnayan Kartripakkha (RAJUK), the Capital Development Authority, objected to the construction of the building on the part of the land on which it now stands. While the court on April 2011 gave 90 days for it to be demolished, the building remained untouched for several more years - a symbolic gesture of the power of the organization. When asked about the legitimacy of the building, the then mayor of North Dhaka Annisul Huq claimed: "It is not illegal ... we have applied to the government for the land. The government has given us the land. Two prime ministers have opened it. What validation do you want?" (Yardley, 2013). This statement is true: Prime Minister Sheikh Hasina laid the building's foundation stone in 1998, and Prime Minister Khaleda Zia inaugurated it in 2006. Thus, the legitimacy of the building is informed by political power, rather than by any legal authority. Rizwana Hasan, an environmental lawyer, has stated, "BGMEA has no regulatory authority under the laws of the country. It's a clubhouse of the garment industry" (ibid). Only recently, RAJUK has sealed-off the 16-storey establishment and, it is now expected

Neoliberalism, State, and Labor

I 97

that the building will get demolished within this year (The Daily Star,2019a).

Labor Rights and the State One way to understand Bangladesh's approach towards labor activism is to probe into the case of Aminul Islam who was the president of the local committee of the Bangladesh Garment and Industrial Workers' Federation (BGIWF) in 2012 in the areas of Ashulia and Savar, as well as the senior organizer of Bangladesh Center for Worker Solidarity (BCWS), a well-known labor rights group. During his tenure as president of the group, he received several threats and was harassed by the police and security forces. Much of the discontent surrounding Aminullslam came from his work with labor rights; he was framed as a key person who could incite "labor uprisings and unrest", and as such, several cases were filed against him. Aminul was largely involved in improving the working conditions of some 8,000 workers under the Shanta Group, and his main job was resolving ongoing disputes and strikes. Because of his work, BCWS became a target of intimidation by the Bangladeshi police, factory owners, and security forces. Not only was BCWS's legal registration revoked, but its bank account was also frozen, its leaders detained, beaten, and subjected to fabricated criminal charges in June 2010. On 16 June 2010, Aminul was detained by members of the NSI and was forced to sign letters falsely stating that two of his colleagues had instigated workers unrest. He managed to flee while being transported. He -was again captured on 22 August 2010 and charged in connection with large garment worker protests for wages. He was imprisoned with both of his colleagues. All three were released on 10 September 2010 following mounting international pressure, including letters from the members of the US congress to the prime minister of Bangladesh. As a well-known union leader, Aminul was continuously engaged in different

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I Neoliberal Development in Bangladesh

worker-management disputes in Ashulia. A few weeks before his death, Aminul registered the complaints of workers at Shanta group and stated that managers were beating workers and sexually harassing female workers (ILRF, 2012). On 5 April 2012, Aminul's body was found dumped on the side of a road, almost a hundred kilometers from where he was last seen. His body showed evidence of severe torture. When this news was reported in the media, the ambassadors of nine European countries, US Ambassador to Bangladesh, the then US Secretary of State, members of the United States Congress, and several NGOs and other organizations condemned the murder and called for an investigation. At the same time, many apparel and textile industry associations also condemned the murder. Despite this international pressure, the case remains in limbo, with almost no progress in pinpointing the identities of the murderers. While the government formed a high-level committee to investigate the murder, after only one month, they stated that they had "failed to investigate the murder" and termed the incident "mysterious" because there was actually no real investigation by the state (ibid). Interestingly, in an interview with BBC, the then prime minister cast doubt on whether Aminul Islam was ever a labor rights' activist and, claimed that no one had heard of him before his death (!TUC, 2013). While security forces are suspected of being responsible for his death, the prime minister spoke in defence of them, stating, "it is unfair to blame the agencies who traced the body of Aminul". She also made a distinction between a worker and an NGO worker, saying he was the latter and not the former (ILRF, 2012). But why was Aminul labelled an NGO worker by the ruling government? Aminul's wife told that on 12 March 2012, the Detective Branch of Police had information that Aminul was sending 10,000 people from that locality to participate in the major political meeting organized by the Bangladesh Nationalist

Neoli bcrali sm. State. and Lab or

I

99

Party (BNP), the main opposition party. She believes that for this reason, police from Sripur Polic e Station of Gazipur tortured Aminul after arresting him and then released him. Aminul's case demonstrates that ensuring compliance with workers' rights and safety has become the key challenge for the sector. The question must now be posed: who will ensure compliance with workers' rights and safety regulations? Employers may or may not voluntarily follow and implement labor laws, but it is the responsibility of the government to press employers and make it compulsory to comply \\~th standards for workers' rights. There are other associations, such as employee organizations or trade unions, who can advocate for workers, but the government is the central actor in ensuring workers' rights. In the follo\\~ng section, I examine the role that the government has played in ensuring the rights of garment workers, specifically in terms ofwages and the effectiveness oflabor laws.

Minimum Wage: Before and After the Rana Plaza Collapse The Minimum Wages Board was formed in 1961 under the Minimum Wages Ordinance in then-East Pakistan (present-day Bangladesh), and was given the responsibility of setting minimum wages for different sectors. In 1994, the minimum wage for garment workers was set at BOT 930 per month, including a medical allowance and house rent. This was increased to BOT 1,662 in 2006. However, examining the price hikes for important commodities between 2006 and 2016, it appears that garment workers did not have enough to cover their daily needs. The price of rice increased by 73 percent from 2006 to 2016, salt by 166 percent, onion by 90 percent, egg by 101 percent, beef by 206 percent (The Dhaka Tribune, 201 7b) . These findings indicate that low-income families usually cut their consumption to cope with the price increases of basic daily cons urn abies. There is a widening gap between the minimum wage and the rising price of essential commodities, which has made it quite impossible for workers to meet their daily

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needs. Furthermore. there is a 3 percent gap between male and female wage (CPD. 2018. p. 15). What has the Bangladeshi government done to offer a liveable standard minimum wage? While minimum wages are increasing in several other countries. Bangladesh continues to have the lowest minimum wage among the countries competing for readymade garment markets-thereby attracting the attention of more buyers. The Bangladeshi government has failed to offer a standard minimum wage to garment workers. a most unfair trade conSidering the workforce's contribution to the garment industry and the importance of ensuring quality products. Although the country earns billions of US dollars from garment exports every year. the present minimum wage is far from being able to fulfil a citizen's basic needs and the government is well aware of it. Why has the government not responded adequately to employees' demands? Despite the government's protests about lack of resources. politics is a crucial factor. Because Bangladesh's business elites provide power (i.e. money and influence. especially during the election campaigns). close ties between the government and the business community has • created a space to ignore the legitimate demands of the workers. Table4.1: Changing Wage Structure. 2006-2018 Percent

. _Percent

Percent

,.

2006 2010 2013 2018 Changes from Grade Changes from Changes from (Taka) (Taka) (Taka) (Taka) 2013 to 2018' 2006 to 2010 2010 to 2013 Grade I 5.140

9,300

80.93

13,000

39.87

18,25 7

40.44

Grade 2 3,840

7,200

87.50

10,900

51.38

15,416

41.43

Grade 3 2,449

4,120

68.23

6,805

65.16

9,875

44.67

Grade 4 2,250

3,763

67.24

6,420

70.60

9,347

45.59

Grade 5 2,046

3,455

68.87

6.D42

74.87

8,875

46.89

Grade 6 1,851

3,210

73.42

5,678

76.88

8,420

48.29

Grade 7 1,662

3,000

80.45

5,300

76.66

8,000

50.49

Source: Fair Wear Foundation (20IS). The DailyStar(2019b).

Neoliberalism, State, and Labor

I 101

In 2010, the government increased the minimum wage - to only BDT 3000 (USD 43). Thousands of workers took to the streets in July 2010, burning cars and blocking traffi c to protest against this decision, which fell far short of thei r demands. Whereas the increase in the minimum wage was supposed to please garment workers, the increased wage still did not meet their daily consumption needs in the city. After monumental pressure from trade unions, the garment factory owners accepted a new minimum wage proposed by the government: BDT 5,300 (USD 68) after the Rana Plaza incident. In its response to demands for an increase in the minimum wage, the government considered the contributions of the workers as well as the dependency of the country on this industry. In response to continuous labor unrest, the government finallydedared a new pay structure in 2018 and the minimum wage is set at BDT 8,000 (The Daily Star, 201 9b; see Table 4. 1 for details.). The increase is perhaps best attributed to international pressure and business interests, rather than the efforts of the labor wing. Bangladesh still offers the lowest minimum wage in the industry; from the perspective of BGMEA, increasing wages affects profit margins. Regrettably, most labor uprisings are perceived within the country as "local and foreign conspirators against the garment industry" seeking to "ignite the workers" and harm the image and reputation of the industry (Claeson, 2015). In 2010, labor leaders were even called "enemies of the nation" after the minimum wage protests. Similarly, in 2014, the BGMEA's President Atiqul Islam demanded that the leaders of the National Garment Workers Federation (NGWF) be punished for "tarnishing the country's image" (The Dhaka Tribune, 2014). During attempts to organize unions, labor leaders were allegedly assaulted by goons, after which they sent a letter to the then US Senator. The BGMEA President criticized the workers for sending a letter to the US Senator on the absence of workers' rights in Bangladesh. All the allegations made

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in the letter were described as "conspiracy" or "lies", an example of the hardline stand towards labor regulations taken by the BGMEA.

Changing Role of the State Approximately 1,800 garment employees died in workplace accidents between 2000 and 2017 (Table 4.2). Despite this appalling state of affairs, the government has done very little to prevent similar incidents in the future. According to the Bangladesh Labour Act 2006, it is the legal responsibility of the government to investigate worJ..l'lace accidents, cancel offending companies' licences and impose huge penalties on them, and inspect other garment factories to ensure safety and security. However, no effective action had been taken by either any company or the government until the tragic incident at Rana Plaza. In this section, I examine a similar incident to understand the role of the Bangladeshi state in the aftermath of an accident such as Rana Plaza. The Spectrum sweater factory, a nine-story building, collapsed at I am on 11 April 2005, killing 64 garment employees, injuring 84, and leaving hundreds of workers jobless. The employees were working the night shift in a building constructed three years before without approval from RAJUK. According to the chairman of RAJUK, the construction materials of the Spectrum building did not fulfil the requirements of a nine-story building and the builders had failed to provide the right foundation for a low-lying area. This firm was working for a number of European companies, including a Spanish business called Inditex; the French companies Carrefour, Solo Invest, and CMT Winfield; the Cotton Group from Belgium; the German firms Karstadtquelle, New Yorker, and Bluhmod; Scapino from the Netherlands; and the Swedish company New Wave Group (Clean Clothes Campaign, 2006). The Table 4.3 summarises the demands of the workers and unions, as well as any responses or failures to respond.

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I 103

Table 4.2: List of Accidents in the Garment Industry since 2000 Date

Accidents in garment factory

August 2000

Fire in Globe Knitting Company

Number of Action by the workers died Government 12

INo.effective action •

November Fire in Choudhury Knitwear due to electric short circuit 2000 August

2001

Stampede in Mica Sweater after fire alarm

53 24

No effective action No effective action

Transformer blast spread fear among

May 2004

workers in Misco Complex, who tried to leave the factory quickly, but the exit gate

9

was locked. (5 garment factories in one

No effective action

building) January 2005

April 2005 February 2006

Fire in Shaan knitwear due to electric short circuit

Collapse of Spectrum factory due to faulty foundation

Fire in ...."TS factory due to electric short circuit

22 64

54

2006·2009 Fires broke out in 213 factories

295

November Fire in Tazreen Fashion factory 2012

120

April 2013 Rana Plaza collapse (5 garment factories)

1136

No effective action No effective action

No effective action

No effective

action No effective action Owners were

arrested !m·estigation committee

July 2017

Multifabs Limited

I3

formed and compensation

prmided Source: Prepared by the author on the basis of different reports.

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I Neoliberal Development in Bangladesh

Table4.3: The Spectrum Collapse-Demands and Non-/Responses Demands

Results and Failures

I. Appropriate • 64 families of dead workers received BDT 79,000 (USO 1,175) from compensation BGMEA • BOT 21,000 (USO 312) from the Labour Court • Inditex paid Euro 35,000 (USD 44,221) • 21 injured employees each received BOT 5.000 (USO 74) • 600 workers who lost jobs received BOT 2.000 (USD 29.75)

• Carrefour paid Euro 15.000 (USD 18,945) • The government provided no compensation • Severance payment is still due 40 percent of workers are still jobless 2. Independent

and transparent investigation 3. Sustainable

structural measures to

• No investigation reports have been made public • No investigations undertaken into failures of the government

and/or companies souTting from Spectrum • Legal punishment farthose responsible still a remote possibility • The government established a National Forum on Social Compliance containing two task forces: labor; and health and

safety; the Forum prepared a list of required improvements, but they

have not been implemented prevent future incidents • Carrefourrequestcd auditsofits suppliers

• Inditex disclosed its list of suppliers

• Up to March 2006, BGMEA inspected 169 factories which were found to be insuffident • The government's inspection office filed cases against 92 garment factories in civil court Source: Prepared by the author based on the Clean Clothes Campaign and local newspapers.

The above-mentioned case shows that the government did not force employers to provide the legally sanctioned amount of compensation to the workers. However, a different role by the state was observed after the Rana Plaza tragedy as the government assumed that the incident might lead to the buyers withdrawing their investment from Bangladesh. The Rana Plaza disaster sent shockwaves not only throughout the country, but globally. In the aftermath of the disaster, international brands such as Walmart and Gap faced immense pressure from labor activists. As the Clean

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Clothes Campaign noted, "Gap and Walmart have known for years about the danger to workers in the Bangladesh garment industry, yet they have done nothing meaningful to fIX the problem" (Clean Clothes Campaign, 2013). Not only were the retailers held responsible for the accident, but so was the local context in which the accident took place - namely, the inability of Bangladesh's legislative framework to uphold labor and industrial laws. Within a few days of the incident, NGOs and labor unions assembled to troubleshoot and improve worker safety in the readymade garments sector. In September 2013, representatives from the government, the local and international garment industry, trade unions, and non -governmental organizations formed the Rana Plaza Coordination Committee. The main responsibility of this committee was to ensure that the victims, their families and dependents do not have to endure ill health or financial hardship as a result of the tragedy. A total amount of BOT 231 crore was distributed to victims of Ran a Plaza by the government along with other stakeholders. From the Government side each family of976 deceased persons was provided BOT I-Slakh from the prime minister's Relief and Welfare Fund. In addition to that, each of the 38 workers who lost their limbs received BOT 10-ISlakh as grant. In total more than BOT 29 crore 391akh had been disbursed from the prime minister's Fund as financial assistance. From the legislative point of view, it became difficult to accommodate the existing labor law with the challenges created in the industry by 2006 - a concrete labor law was essential to overcome different confusions. The Bangladesh labor laws prior to the Labour Act of 2006 were inconsistent and contradictory. With the large development in the industries, especially garments, it became imperative to consolidate all these laws into a unified one. The Bangladesh Labour Act 2006 was passed by the parliament with effect from 11 October 2006. This act repealed 27 existing labor laws. The scope of the Labour Act was huge, and has been made applicable to all establishments with few exceptions. While the Labor Act 2006 was an ambitious project to consolidate the existing labor laws into a singular,

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comprehensive form, was it effective in combating the everyday problems of workers? There have been several worker riots since 2006, which escalated in 2008. According to Odhikar, a human rights NGO, nearly 300 garment factories, including 21 factories in the Savar E>.-port Processing Zone (EPZ), were damaged in a massive burst of labor unrest in 2008. The total losses to the garment industry stood at nearly 70 million US dollars (Odhikar, 2009). There were also other damages, inclUding private property and vehicles, as well as deaths and several injuries. Kamal et al. (2010) argues that the root of the labor unrest lies in the lack of implementation of the 2006 Labor Act. Despite promises, the law has failed to act when needed the most. In a study of70 garment factory workers in the Gazipur area in 20 I 0, it was found that the most significant factors behind labor unrest were wages and payments (ibid). Many workers felt that they were both not paid properly or on time. The second most important issue was industrial relations: workers felt that employers did not listen to their problems, and that there were few, or no, active trade unions. Third, workers often had to work more than the regular hours, but did not receive payment for their overtime work. However, while minor amendments were made after the Labour Act 2006, the Bangladesh government adopted 87 amendments to the original Labour Act of 2006 after Rana Plaza disaster. Because of the new amendments, there has been a sharp rise in trade unions after the Rana Plaza collapse due to international pressures. According to the Labour Ministry, after the amendment ofBangladesh Labor Act 2006, a total of351 trade unions have been registered with the Directorate of Labour (Shipar, 2017). Another issue of compliance concerns the overseers involved in the legal process. The government formed the National Social Compliance Forum (NSCF) in 2005, headed by the Ministry of Commerce and co-chaired by the Ministry of Labour. It also coordinates with BGMEA, BKMEA, and NGOs to share stakeholders' views with the authority on policy and compliance related issues. In 2008, the government formed an industrial police unit for the readymade garments sector, headed bya deputy inspector general, which can be deployed to maintain law and order in the factory areas. This force is responsible for investigating any

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formally flied complaint or case. However, trade union leaders believe that the industrial police might be used to oppress workers and stop any legitimate protests. At the same time, the Ministry of Commerce has a tendency to protect the interests of owners by using the industrial police to prevent unrest and sometimes that might go against the workers (Odhikar,2009). There has been a change in the governance of garment factories in Bangladesh after the Rana Plaza incident. The collapse led to an urgent reassessment of the Plan of Action to address structural issues. This revised document, now entitled the National Tripartite Plan of Action (NTPA) on Fire Safety and Structural Integrity for the RMG sector in Bangladesh, was subsequently adopted on 25 July 2013, As per NTPA, the Department of Inspection for Factories and Establishment (DIFE) has been strengthened. The budget allocation for this department has increased Significantly, which is shown in the follmving graph. According the graph, the budget allocation was BOT 6.29 crore (USD 0.97 million) in 2013-2014 but it increased to BDT 31.50 crore (USD 4.10 million) in 2015-2016. '2

•• ~

4.50 4.00

'":> ~

3.50

:§.

3.00

~

0

2.50

N

~

N

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i::

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."' Ci

• •• •

2006·2007 2007-2008 2008·2009 2009-2010 201()..2011 2011·2012 2012·2013 2013-20 14 201·4-1'015 2015-2016

Source: Shipar, 20!7.

Figure 4.1: Budget Allocatioll for DIFE The loss of 1,136 lives hit home the fact that safety compliances and worker safety need to be upgraded. The tragedy caused the government of Bangladesh, workers, buyers, international organizations, the US and the EU to invest in public-private partnerships to address safety issues in the garments industry. While

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several programs were initiated for the rehabilitation of Rana Plaza survivors by ILO, implemented by root level institutions such as NGOs and associations like BGMEA, the most significant initiaHves were perhaps the Accord on Fire and Build Safety ("Accord") and the Alliance for Bangladesh Worker Safety ("Alliance"). The Accord is significant in the sense that most buyers are located from the EU, and as such the Accord works as an independent, legally binding agreement between brands and trade unions designated to work towards a safe and healthy Bangladeshi ready-made garments industry (Accord, 2016). This Accord agreement was signed for five years (until 2018) and include retailers, trade unions and NGOs as signatory and a neutral ILO Chair. The inspection program of Accord idenHfied structural and safety weaknesses among its 1,677 factory members. The Alliance is also very similar in this aspect, except the stakeholders involved. It also is a five year commitment to improve safety in the Bangladesh ready-made garments industry. The Alliance was organized through the Bipartisan Policy Center and convened by former US Senate Majority Leader George Mitchell and former US Senator Olympia Snowe. Trade unions and NGOs were also similarly involved within the signatory process. Inspection involved assessing 658 factories for fue, electrical and structural safety similar to that of Accord. In addiHon to the Accord and the Alliance, the government initiated another program named "National Initiative" for inspecting 1,549 factories. A cell known as Remediation CoordinaHon Cell (RCC) was formed by the DIFE in collaboration with the ILO to provide technical assistance to factory remediation. The ILO has been working closely with the Bangladesh government since to improve its labor standards. The "Better Work Programme" was launched in Bangladesh in 2014 in partnership with International Finance Corporation (IFC). The roles of the program includes: i) continuous assessment activities during which auditors evaluate whether factories are adhering to ILO core labor standards and national labor laws; ii) a process of continuous improvement whereby Better Work staff facilitate dialogues between managers and workers; and iii) stakeholders' engagement, involving government, employers, unions, and workers.

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Conclusion Tragedies like Rana Plaza convey the unfortunate message that garment workers have compromised their wellbeing to work in adverse working conditions in search of socio-economic empowerment. But can't the garment factories be made safe for the workers? One way to do this, as some have advised, is to put pressure on the entrepreneurs by decreasing the number of orders - but that will make conditions worse, because more than three million women workers' lives depend on the garment industry. The entrepreneurs often argue that complying with labor codes may make it difficult to offer low prices, resulting in orders being moved to other countries. It is therefore important that buyers show their willingness to pay for safety standards. After the Rana Plaza tragedy, retailers importing garments from Bangladesh came under pressure from activists and unions all over the world. However, the deeper problem is the absence ofa responsible and inclusive state.

References Alavi, H. {I 972). The State in Post-Colonial Societies: Pakistan and Bangladesh. New Left Review, 74,59-81 . Bangladesh Bureau of Statistics (BBS), & Statistics and Informatics Division (SID). (2017). Bangladesh Statistics. Dhaka: Ministry of Planning, The Government ofthe People's Republic ofBangladesh. Centre for Policy Dialogue (CPD). (2018). On-going Upgradation in RMG Enterprises: Preliminary Results from a Survey. Dhaka: Author. Clapham, C. (I985) . Third World Politics: An Introduction. London: Routledge. Clean Clothes Campaign. (2006). International Action Day for Workers Health & Safety in Bangladesh . Retrieved, June 10, 2019 from hUps:11 cleanclothes.orgl news/2006/04/0 II international-actionday-for-workers-health-safety-in-bangladesh Clean Clothes Campaign. (2010,14 December). At Least 28 More Garment Workers Die in Bangladeshi Factory Fire. Retrieved, June 12, 2019

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Claeson. B. (2015. June 19). What is Bangladesh's Position on Freedom of Association? ILRF News Blog. Retrieved. June 10. 2019 from h ttps:1 !laborrigh ts.org/blog/20 1506/w hat -bangladeshs-posi tionfreedom-association Evans. P.B.. Rueschemeyer. D.• & Skocpol. T. (Eds.). (I 985). Bringillg the State Back III. Cambridge: Cambridge University Press. Fair Wear Foundation. (2015). Bangladesh Coulltry Study 2015. Retrieved. January II. 2017 from https:llwww.fairwear.org/wpcontent/ uploads/20 16/06/BangiadeshCountryStudy20 16. pdf International Labor Rights Forum (ILRF). (2012. August 6). A Chrollologyof

the Illvestigatioll of the Murder of Labor Activist Amillul Islam. Retrieved. May 17.2019 from https:/!laborrights.orgipublications/ chronology-investigation -murder-labor-acth1st -aminul-islam International Trade Union Confederation (ITUC). (2013. April 15). Bangladesh: Murder ofAminul Islam. Retrieved. December 25. 2018 from http://www.ituc-csi.org/bangladesh-murder-of-aminulislam-13082?lang=en Kamal. M .• Billah. M.B .• & Hossain. S. (2010. July-December). Labor Unrest and Bangladesh Labor Act 2006: A Study on Ready Made Garment Factories in Gazipur. Journal ofBusiness and Technology. V(2).I-IS.

Karim. A. (I996). An Analysis of Privatisation Initiative in Bangladesh. In A.N.M. Wahid & C.E. Weis (Eds.). The Economy of Bangladesh: Problems and Prospects (pp. 1-16). Westport. CT. & London: Praeger Publishers. Liton. S.• & Molla. M.M. (20 IS. 13 December). It's Businessmen's Parliament Again. The Daily Star. Retrieved. 12 June 2019 from https:/Iwww. thedailystar.net/bangladesh-national-election -20 IS/news/itsbusinessmens-parliament -again -1672930 Miliband. R. (1965). Marx and the State. Socialist Register. 2. 278-296. Retrieved. December 25. 2018 from https:/Isocialistregister.com/ index.php/srv/article/view/5961

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Odhikar (2009). Human Rights Report 2008: Odllikar Report on Bangladesh. Dhaka: Author. Ovi, I.H. (2018, March 3). Women's Participation in RMG Workforce Declines. The Dhaka Tribune. Retrieved, December 25, 2018 from https:llwww.dhakatribune.com/business/20 18/03 /03/womensparticipation-rmg-workforce-declinesl Rahman, M., & Bakht, Z. (1997). Constraints to Industrial Development: Recent Reforms and Future Directions. In M.G. Quibria (Ed.), The Bangladesh Economy in Transition (pp. 77-1 \3). New York: Oxford University Press. Sarkar, K., & Mollah, S. (2010, December IS). 26 Killed in Factory Fire. The Daily Star. Retrieved, June II, 2017 from https:11 www.thedailystar. net/news-detail-166145 Shipar, M. (2017). Steps Taken by Ministry of Labor and Employment and Other Related Stakeholders after Rana Plaza Collapse at Savar. Retrieved, January 12, 2018 from https:llcpd.org.bdlwp-contentl uploads/20 16/04/Presentation -of- Mr-M ikail- Shipar-SecretaryMinistry-of-Labour-and-Employment.pdf Skocpol, T. (1985). Bringing the State Back in: Strategies of Analysis in Current Research. In P.B. Evans, D. Rueschemeyer, & T. Skocpol (Eds.), Bringing the State Back in (pp. 3-43). Cambridge: Cambridge University Press. Sobhan, R. (2004). Structural Dimensions of Malgovernance in Bangladesh. Economic and Political Weekly, 39(36), 410 1-4108. Stepanek, J.F. (1979). Bangladesh: Equitable Growth? New York: Pergamon Press. The Daily Star. (2019a, April 18). BGMEA Building: 1t1l be Tom Down in Three Months. Retrieved, May 5, 2019 from https:llwww.thedaily st ar.net/backpagel news/bg mea -bu ild i n g -i tll- be- lorn -down -3monlhs-173ll69 The Daily Star. (2019b, January 14). Workers' Wages Rise in 6 Grades. Relrieved, February 16, 2018 from https:llwww.thedailyslar.netl bus i n ess/b a n g ladesh -ga r men I -wo rkers- salary -s I ructu re -berevised-1686979

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The Daily Star. (2016. June 3). BGMEA BuUding Must Come Down. Retrieved. March 3. 2018 from https://www.thedailystar.net/ bad:pagelbgmea-building-has-be-demolished-1233724 The Dhaka Tribune. (2014). BGMEA Boss Seeks Punishment for Spreadillg Falsehood. Retrieved. January 2. 2019 from https://www.dhaka tribu ne.com/uncategorized/20 14/06/23/bgmea- boss-seekspunishment-for-spreading-falsehood The Dhaka Tribune. (2018). Bangladesh Hits Record 7.86% GDP growth. Retrieved. January 2. 2019 from https://www.dhakatribune.com/ bangladeshl development/20 18/09/18/bangladesh -hits-record -786-gdp-growth The Dhaka Tribune. (2017a). Annisul Huq: A Man of Many Talents. Retrieved. April 14. 2018 from https://www.dhakatribune.com/ feature/people- feature/20 17/12/0 I/annisul- huq-many-talents The Dhaka Tribune. (2017b). Middle Class Feels the Squeeze as the Rising Cost ofLiving. Retrieved. April 4. 2018 from https://www.dhakatribune. com/business/economy/20 17/11/28!living-cost-middle-classinflation Titumir. RAM. (2016). Industrialization. In A. Riaz, & M.S. Ralunan (Eds.). Routledge Handbook of Contemporary Bangladesh (pp. 159-172). London: Routledge. Transparancy International Bangladesh (TIB). (2013). ~ (~ ~: "l"II>,,,, • .,,-.pm 'S 156l1C'''' ~ (in Bangia) [The Readymade Garment Sector: Challenges to Good Governance and the Way Forward]. Dhaka: Author. Yardley. J. (2013. July 24). Garment Trade Wields Power in Bangladesh. The New York TImes. Retrieved. December 25. 2018 from http://www. nytimes.com/20 13/07125/world/asial garment -trade-wieldspower-in -bangladesh.html Zafarullah. H. (2003). Globalisation. State and Politics in Bangladesh: Implications for Democratic Governance. South Asia Journal of South Asian Studies, 26(3). 283-296.

Chapter 5 STATE-BUSINESS NEXUS IN BANGLADESH: QUICK RENTAL POWER PLANTS IN PERSPECTIVE MahaMirza By the 1990s, it was becoming clear that in most of the industrialized world, there exists a consistent pressure on the state-regardless of the ideology of the party in government-to favor the interest of the wealthy class. This same wealthy class was also benefitting from the unrestricted operation of the capitalist economy (Crouch, 2004, p. vii). The decline of the manual working classes in Europe and America in the 1980s, along with the rise of global capitalism and the growing influence of corporate lobbying in policymaking, has led to a rise in a particular set of policies that protect business interests and the emergence of a political class-strongly associated with wealthy business interests-who thereby no longer pursue political agenda that concern the welfare of the larger populace (Crouch, 2004). Meanwhile, under the Structural Adjustment Program (SAP) prescribed by the World Bank (WB) and the International Monetary Fund (IMF) during the 1980s and 1990s, a good number of countries in Asia, Latin America and Africa were forced to adopt a range of policy programs that involve denationalization, privatization, trade liberalization, and drastic withdrawal of government expenditure from the crucial public welfare sectors which mainly include health, education, transportation, and utility. Widespread privatization of these public sectors eventually led to the emergence of an influential business class who worked in connivance with the political ruling elite. As a result, the policy making mechanism of states has become subject to manipulation of business agenda, rather than that of public interest.

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Consistent with the global situation described above, Bangladesh began implementing its pro-market economic reforms as early as in the mid-1970s under the insistence ofthe World Bank and the IMF (NuTUzzaman, 2004, p. 34). The implementation of pro-market policies in Bangladesh, including trade liberalization, privatization of public services, and ,,~thdrawal of state investment, has failed to distribute the benefits among different societal groups. Rather, since the 1980s, the emergence of a pro-investment, pro-business environment, with no effective state regulatory mechanism, led to the formation of a highly influential business and industrial class in the country, in which a small group of 40 to 50 families appear to control the industrial and financial assets of Bangladesh (Nuruzzaman, 2004, p. 33). It is in this context that Bangladesh was pressurized by the World Bank to privatize and outsource a substantial portion of the stateowned energy sector. In 1996, the power sector was opened up to multinational investment (Muhammad 2014, p. 63). Consequently, on the excuse of addressing the power crisis, the Awami League government in 2009 entered into a series of contractual deals with a range of private companies to produce electricity. The massive amount of state subsidy provided to these privately-owned power production companies, described as "rental" and "quick rental" power plants, pushed the country into severe fiscal disarray. The embracement of the idea of quick rentals at the policy level is an evidence of a strong slale-business nexus in the power sector of Bangladesh. To understand the nature of this nexus between the state and business in terms of quick rental power plants - both theoretically and practically - it is important to answer the following set of questions: What is the role of the state in a market economy? To what extent and when does the interest of the state and the interest of the business class merge? In a capitalist market economy, does the state work as a sovereign actor? Or, is it natural for a neoliberal state to promote business interests? The following sections will address these questions in the context of the existing theories of state and the

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liS

theories of structural constraints of the state, and in light of a case study on the power sector of Bangladesh.

The Context: The Theories of State and Structural Constraints In the 1960s, Marxist scholars began to make a substantial effort to

develop a theory of state. The British political scientist Ralph Miliband (1969) attempted to show that the capitalist class played a dominant role in society through its domination of the state. According to Miliband, those in significant positions in government were disproportionately from elite social backgrounds, thus biasing state actions toward the interests of the capitalist class (see Miliband, 1969). Miliband's argument was instrumental in contributing to a serious debate among Marxist political theorists (Mizruchi, 2007, p. 6). Towards the middle of the 1970s and throughout the 1980s, other Marxist theorists began to develop a more "structuralist" Marxist account of the state. The best known structuralist critique ofMiliband was provided by Nicos Poulantzas (Poulantzas & Miliband, 1972), who argued that Miliband's focus on the social origins of government officials was problematic. The structuralist notion suggests that the social background, level of education, past career choices, individual motivation or capacity of policy actors play little part in the policy making process of the state (Mizruchi, 2007). Structuralists argue that the state operates within a capitalist mode of production, and plays a critical role in the construction, organization and circulation of economic forms of capital (Harvey, 2007). The reason for this does not lie in the fact that elite individuals are in powerful positions, but because the institutions of the state are structured to function in such a way as to ensure the continuous viability of capitalism and thereby reproduces the logic of capitalist structure in its economic, legal, and political institutions (see Poulantzas & Miliband, 1972). Hence, structuralists would argue that the institutions of the state function in the long-term interests of

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capital holders, rather than in the short-term interests of the individual elite members of the capitalist class. Poulantzas' argument was pushed even further by Claus Offe (1974), the leading contemporary German political sociologist. Offe (ibid) has long argued that the state in a capitalist system has serious structural and functional limitations. According to him, the state is an independent entity with its own set of interests and imperatives, which functions in the interests of the capitalist class as a whole, not because it is controlled by the capitalist class, but because it depends on corporate investment activity for its revenue. Offe argues, in case of state's prioritization of the interests of the working class or other opponents of business, a "capital strike" may occur which would lead to an economic downturn, and deprive the state ofits customary level of tax revenue (Mizruchi, 2006, p. 6-7). American political philosopher Charles Lindblom (2001, p. 247) described it as a governing process which delivers constant attention to the needs of the market elites in the fear that disappointed members of the market elites may almost immediately reduce production, cut the workforce. shut down and move abroad in case of noncooperation from the part of the government. Lindblom (1977, p. 172) observed: because public functions in the market system rest in the hand of businessmen, it follows that jobs, prices, production. growth, the standard of living, and the economic security of everyone, rest in their hands .... In the eyes of government officials, therefore. businessmen do not appear simply as representatives of a special interest ... they appear as functionaries performing functions that government officials regard as indispensable. The theory of structural power of business also asserts that any public policy involving redistributive mechanism over capitalists profit and revenue leads to "disincentives for investment" followed by negative effects on "growth", "employment" and "tax revenues" (Bernhagen, 2007, p. 45). As business groups have power over society's capital, policymakers tend to consider the electoral and fiscal consequences of any public policy that might affect the revenue

State-Busin ess Nexus

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and profit potential of business. Unl ess the government has a plan to counter the consequences of di sinvestment, negative growth and employment, it automatically prioriti zes business confidence and reftrains from "redistributive reform" (Bernhagen, 2007, p. 45). In addition, the fact that governments do not heavily depend on the performance of other competing groups such as farm ers or labor unions makes it possible for business elites to push their demands over the other public policy choices of the state (Lindblom, 2001, p.248). Block (1977, p. 15) maintained that capitalists in their "collective role as investors" enjoy the power of vetoing policy decisions of the state. Parallelly, their failure to invest can create major political problems for the state managers. Similarly, A model, developed by Przeworski and Wallerstein's (1988, p. 15-16), also predicts that an "egalitarian" transfer of resources is not possible without risking the level of capitalist investment. Kurtz (1994, p. 268), on the other hand, pointed out that, though business does not always succeed in lobbying or influenCing the political process, its range of interests is seriously considered by the governments in the making of policy decisions. Another argument prevails that even if the capitalist class does not mobilize politically or engage in any political action at all, public policy would nevertheless be "systematically biased" in favor of their interests (Schimitter & Streeck 1999, p. 12). Bernhagen (2007, p. 47) draws similar conclusions that state policies are by nature "functionally beneficial" to the interests of the capitalist class. From a different ontological position, Crouch (2004, p. 23) argues that with outsourcing and sub-contracting more of the state's activities, business groups begin to acquire privileged access to politicians and civil servants. Through this process, politicians respond primarily to the concerns of a handful of business leaders whose special interests are allowed to be translated into public policy. Crouch points out how this process of outsourcing, sub-contracting, or partial privatization ultimately leads to a "self-justifying" process in

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which public services suffer from "extreme lack of confidence", believing that any job has to be done under the guidance of the corporate sector. As more and more state functions are subcontracted to the private sector, according to him (2004, p. 41), "the state begins to lose competence to do things which once it managed very well", and gradually it even loses touch with the knowledge necessary to understand certain activities. It is therefore forced to sub-contract further and buy consultancy services to tell it how to do its own job. Crouch (ibid) specifically opines: Government becomes a kind of institutional idiot, its every illinformed move being anticipated in advance and therefore discounted by smart market actors. From this follows the core policy recommendation of contemporary economic orthodoxy, the state had best do nothing at all, beyond guaranteeing the freedom of the markets. It is important to note that in the case of the power sector of Bangladesh, we have observed a similar process through which the government has been forced to gradually privatize significant portions ofits power production. This in the longer term has not only created a privatization-friendly environment but also compelled the government to search for private solutions to the power crisis, instead of strengthening the state's own technical capacity and technology base. Accordingly, the follOWing section examines the prevailing state-business nexus in the power sector of Bangladesh in detail.

State-Business Nexus and the Power Sector in Bangladesh The Evolution a/State-Business Nexus To describe the growing influence of business actors in Bangladesh in the early 1990s, South Asian expert Stanley Kochanek (1993, p. 225) mentioned: Although politics and business in Bangladesh are closely intertwined, the business community is simply too small to cover the enormous costs of election in the country. Money was not the

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dominant fact or in Bangladesh politics. Since liberation, business contributions have never been abl e to match the political and economic advantages ofincumbency. The situation has certainly changed in the last few decades. Factory owners and business houses have now become an increasingly important source of electoral fund and an appealing source of party fund as well. Various large business groups have benefited from the government's import policies, import/export licenses, loan sanctions and tax waivers, and in exchange have spent large amounts of surplus cash during election times. The fallout from such phenomenon is now reflected in the proportional representation of professionals at the Parliament and party-level. Kochanek (l993, pp. 222-223) noted, in 1973, the number of businessmen elected to parliament was 23.7 percent In the 1979 national elections, representation of businesses increased to 26 percent. In 1981, 33.5 percent of the members of the BNP (Bangladesh Nationalist Party) Executive Committee were businessmen,4 out of 24 of General Zia's cabinet ministers (l9751979) were businessmen, and some 28 percent of the BNP members of parliament were businessmen. Kochanek (ibid) also observes that ministers with business background were much more prominent and played an important role in the governments ofZia and Ershad in the late 1970s and 1980s. He makes this further observation that: "as Zia began to 'civiliaruze' his regime, top businessmen and profeSSionals with close ties to landed interests, along with the military and the bureaucracy, began to move into positions of power" ibid)_ Businessmen continued to dominate the circle of legislators in the parliament throughout the last two decades also. In 1991, the number of businessmen elected to parliament was estimated to be at 54 percent (Kochanek, 1993, p. 222)_ According to SUJON's 2014 estimate, out of 350 parliament members in the last Awami Leagueled government, around 175 happened to be businessmen, which accounts for about 50 percent of the total elected representatives (cited in The Daily Prothom A/o, 20 April 20 14). It has now reached 61

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percent after the 2018 elections (Uton & Molla, 2018). In recent decades, owners of different business entities have served not only as ministers and members of parliament but also as members of important governmental bodies that make allocation decisions and design economic policies.

State-Busilless Nexus ill the Power Sector In the 1980s, the World Bank and the Asian Development Bank pushed the Bangladesh government to gradually withdraw state support from electricity production. In October 1996, the Government of Bangladesh approved a Private Sector Power Generation Policy (PPGP) through multinational investment, which is commonly termed as Independent Power Producer (IPP) (Muhammad, 2014, p. 63). Four public sector power generation projects (coal based Barapukuria and gas turbine based Shahjib=, Baghabari, Sylhet) were okayed through IPPs (ibid). It is clear that the aim was to open up the energy sector to various multinational companies. Also, in 2011, the government of Bangladesh applied to the World Bank for loan to repair and maintain a number of stateowned power plants. The application was eventually declined by the bank, indicating to their lack of cooperation in the attempt to revive and strengthen the state-owned power sector in Bangladesh (Muhammad, Interview, 2014). The years 2009 and 2010 were a time of nagging power crisis. The country was producing only 3,200 MW of electricity at a time when the demand was nearly 5,000 MW (Committee Briefing Book, 2011, p. 26). The current Awami League government has long claimed that such severe power crisis had compelled them to outsource a part of power production. The government ultimately entered into contracts with 32 rental companies, among which 18 were quick rentals (Ahsan, 2016). The government was insistent that outsourcing . electricity production to the private rental companies was a necessity at the time with no other viable alternative available.

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However, experts say that the power crisis still persists mainly due to problems associated with improper privatization policy, lack of initiative from the government to implement renewable energy projects, delays in completion of new state-owned plants, inefficiencies in the management of the state owned plants, electricity theft, and shortage of state funds for power plant maintenance (Rahman, 2011, p. 6). To understand the extent and mechanism of the state-business nexus in the power sector of Bangladesh the following questions needed to be asked: Is there any evidence that the business groups lobbied collectively for privatizing a portion of the power sector? To what extent did the business groups create pressure on the state to adopt a quick rental solution? To what extent is this nexus visible? How pro-active was the Bangladesh government in implementing a "rental" system for electricity production? Can the state act as a sovereign actor or did it find itself structurally constrained to represent the interest of big capital? How lOgical was it to address the power crisis of the country through a rental plant system? Was there no viable alternative after all? In the case of the power sector of Bangladesh, the very process of allocation of quick rental deals was based on mere individual connections, bilateral understanding, and personal contacts between members of the government and different business groups. According to Rahmatullah, the ex-Director of the Power Cell, Bangladesh, the Prime Minister's Power and Energy related Committee during the tenure of BNP-led government in 2004 prepared a plan to out source a portion of state-owned power production to at least 10 private companies. However, the then parliament members of the ruling party began to show a huge interest in getting the rental deals.I Eventually, the commitee awarded as I

B.D. Rahmatullah, Former Director of Power Cell. and a member of "PrimeMinster's Power and Energy related Committee" confirmed that prominent BNP leader Salahuddin Quader Chowdhury and Mirza Abbas applied for the rental deals in 2005.

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many as 50 rental power plant deals. mostly to comapnies which were directly associated with the parliament members themselves. or partially owned by the same group of people (Rahmatullah. Interview. 5 September 2014). However. the committee failed to set up a proper list of criteria that required prior experience in electricity production or at least a technical know-how of the task at hand. Instead. it became obvious that the ultimate goal of the committee was to outsource a substantial portion of electricity production to business groups which are directly connected to the ruling party members (ibid). The senario did not change even when Awami League government took over power. In 2009. the government awarded more than 30 rental! quick rental power plant deals to companies. mostly based on political considerations. A large number of owners of the rental companies at present are somehow directly or indirectly related to the ruling political party itself (see Table 5.1).2 To understand the pro-active role played by the state in outsourcing its electricity production to private companies. it is important to list the range of subsidies and other patronages provided by the state to the quick rental owners. The following section discusses in detail the various subsidies that have been provided to the quick rental power plants in the last decade. It also look .at the provision of the Special Power Supply Act 2010 under which the quick rental deals were

2 The Summit group (owned by former Awami League Minister of Commerce Faruk Khan) received around six different rental contracts for an overall 2,000 MW of electricity. Northern Power Solution Limited. owned by Mr. Enamul Huq. an

Awami League Parliament Member from Rajshahi-4. has recieved a deal for a 50 MW power plant in Katakhali (Ali. 2012). Similarly. former Minister of Communication (Awami League) Abul Hossain is the formal local representative of ISOLACK Samsung, a Spain based company. which is under contract to produce a 450 MW power plant in Shidhdhirganj. Desh Energy Limited (owned by industrialist Anisul Huq. the late Mayor of Dhaka city (North). nominated by the Awami League government) was awarded a deal to produce 100 MW of electricity. Power Pack Holdings. a branch of Sikder Group (known to be a close ally of the Awami league government) also received a contract to produce 100 MW of electricity.

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made, without going through the official process of open tender and competitive bidding.

State Subsidy and Other Patronages for Quick Rental Power Plants Land and Infrastructure According to the quick rental deals, the rental companies themselves do not have to buy land for the establishment of the power plants. Instead, the state has agreed to provide the companies with sufficient land. Necessary infrastructure, including transmission lines, are also built and maintained by the state in order to supply privatelyproduced electricity to the national grid (Tuhin, 2014).3

Direct and Indirect Financial Subsidy It has already been mentioned that a significant amount of financial subsidy is paid to the quick rental companies, by the state, to produce electricity. The state subsidies to the qUick rental plants are paid in two forms: (a) Bangladesh Petroleum Corporation (BPC) buys petroleum from the international market and sells it to the quick rental power plants at a subsidized price; (b) Bangladesh Power Development Board (BPDB) buys electricity at a higher price from the quick rental power plants (in comparison to the state produced electricity). Details of how these two forms of subsidy are offered by the state are discussed below. Subsidy for Supplying Petroleum BPC, a statutory organization of the government under the Ministry of Power, Energy and Mineral Resources (MPEMR), is responsible for supervising, coordinating, and regulating activities relating to import, storage, marketing, and distribution of petroleum products in the country. It purchases petroleum from the international market

3

The official agreements with the rental companies were not publicly accessible. The terms and conditions of the deals were mostly published in various news reports:

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and supplies it to privately owned rental power plants at a subsidized rate. Till 2014, due to high price of oil in the international market, BPC made massive losses in supplying oil at a subsidized rate to the rental companies.' It is important to note that following import of petroleum/oil from the international market, BPC generally determines a fixed price (near to the market rate) for different kinds of refined oil used in the local market. s Between the financial year 2009-2010 and 20132014, BPC had sold both diesel and furnace oil to quick rental power plants at a much lower price compared to its price set for the local market.6 According to a BPC source, it made consistent losses in those five years, which forced the government to set aside a massive amount of taxpayers' money as subsidies in its budget. Based on official figures, it is estimated that BPC paid around USD 774 million of subsidy to the qUick rental power plant owners ben",een the years 2008-2009 and 2013-2014.' A number of energy experts, along with left-leaning political parties, have conSistently opposed the use of 4 In 2014, following a significant drop in the international oil price, most quick rental power plants gradually began to import fuel directly from the international market (instead ofhuying from BPC). Hence. BPC was spared from selling refined oil to the rental companies at a subsidized price. BPC stopped being in the red in 2015. 5 This price is determined for the local market after adjusting a number of factors

including transportation, local delivery, refining, and employee salary. 6 In 2014·2015, BPC set the price of furnace oil (for the local market) at BOT 72 (nearl)' a US dollar). In the same financial year, BPC sold furnace oil to quick rental plants at a rate of BDT 61 per liter. This indicates that BPC paid a direct subsidy (to the quick rental plants) ofBDT II per liter on furnace oil. Similarly, in 2014·2015, BPC set the price of diesel (for the local market) at BDT 86 (more than USD I). However, BPC supplied diesel to the quick rental power plants at BOT 68 per liter confirming that it paid a direct subsidy of BOT 18 for each liter of diesel to the quick rental plants. 7

A 2015 report confirmed that BPC had to pay a total of around USD 3.87 billion between fiscal year 2008·2009 to 2013·2014 as subsidies to the local market. Other reports confirmed that BPC on average supplies around 20% of its oil to the rental and quick rental power plants (IEEFA, 2016, p. 16). The estimated figure (US $774 to rentaUqukk rental owners) is derived from the understanding that around 20 percent ofUSD 3.87 billion (the total subsidy paid by BPC) is paid to the qUick rental power plants.

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state money in accommodating such hugely expensive privately owned power production schemes. Higher Prices for Purchasing Electricity BPDB is also a statutory body of the state, created under the Power Division of the Ministry of Power, Energy and Mineral Resources. They are responsible for a major portion of generation and distribution of electricity, mainly in urban areas of Bangladesh. The BPDB buys electricity from both state-owned power plants and privately-owned rental power plants to sell to electricity distribution companies in Bangladesh. It is important to note that a state-owned gas-based power plant in Bangladesh produces per unit of electricity at an average price of only 2.10 Taka. On the other hand, BPDB has to pay around BOT 15.62 (nearly USD 0.20) on average for each unit of furnace oil-based electricity produced at quick rental power plants (Mujeri & Chowdhury, 2013, p. 24). The extra payment (or subsidy) undertaken by BPDB is at around BOT 13.52 (nearly USD 0.15) for each unit (BPDB, 2017, p. 9). Taking into account the large amount of electricity purchased from the rental/quick rental power plants (around 45 percent of the total electricity production) the total loss incurred by the state is perceived to be one of the largest amount of indirect subsidies ever paid by the government to a private group of industries in Bangladesh (Muhammad, Interview, 25 July 2015). However, due to a serious lack of transparency in the system, authentic information on the exact amount of "extra money" (spent by BPDB to purchase the comparatively high priced rental-based electricity) is not publicly available.

Speedy Supply ofPower and Energy (Special Provision) Act 2010 In 2010, the government of Bangladesh passed a bill termed The Speedy Supply of Power and Energy (Special Provision) Act 2010. The special provision acts allows the government to enter into contracts

8 Also frequently termed as Special Power Supply Act.

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with companies without going through the official process of open tender and competitive bidding. The act also blocks the jurisdiction of the court from taking appropriate action against measures involving unlawful practices in dealing with projects in the power and energy sector. The quick rental power plant projects were undertaken by Bangladesh Power Development Board under this act. Initially, in 2010, amid heavy criticism, the government enacted the Special Provision Act for two years only. But the cabinet approved the extension of the Special Provision Act on two occasions: one in 20 I 4 for four years, till October 20 I 8; and another in 2018 for three more years, till October 2021 (The Daily New Age, 3 July 20 18). The special provision act has been heavily criticized on the grounds that it expedites a system which fails to ensure competency, transparency, and accountability in the process. It has also been argued that such short term "emergency" laws should not be operating for a long term. One of the major features of the special proviSion act is that it allows the government agencies to award projects/contracts in the power and energy sector without going through the official tender and procurement process or the competitive bidding process. The Public Procurement Rule 2008 of Bangladesh specifies a large number of general guidelines, terms, and conditions for public tenders (Ministry of Planning, 2008, pp. 22 -25, 62-70).9 However, the government has consistently claimed that the current official procedure for public tenders is highly complex and time-consuming, and thus it was necessary to enact a special law which would allow the government to bypass official procedures to obtain power production capability in a fastest possible time. The special provision act allows formation of a special committee to take over projects by signing contracts with interested business entities based on mere mutual discussion and negotiation. To allow it to happen at the quickest 9

In general the procurement act involves competitive bidding. determination of tender price, andfonnation of tender evaluation committees.

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possible time, the Ministry has been noted to use advertising in newspapers, government websites, and em ails. It has already been mentioned that the government has recently taken up a number of projects for "speedy" production and supply of electricity without going through the open bidding process. Such process under the special provision act (with no official obligation of open tender or competitive bidding) has not only led to a complete lack of transparency in the system, but also to serious favoritism and preferential treatment of incompetent companies or business groups (Rahmatullah, Interview, II August 2015). The 20 I 0 Act has also been frequently referred by newspapers as an "Indemnity Act", as it provides immunity to state agencies for the quick initiation and implementation of power projects. According to Rahmatullah, Clause 9, 10, and 11 of the act could be described as equivalent to an indemnity act as these are designed to shield any unlawful operations in the power and energy sector (ibid). For instance, Clause II has allowed the Ministry of Power and Energy to take any action merely by submitting a legal notice. Clause 9 ensures that no petition can be filed in the court opposing to any activity or action taken under the special .provision act. Clause 10 ensures indemnity for all actions (made under the act) based on the ground that "all actions are taken with good intention". The above-mentioned clauses have ensured that no petition could be filed (either civil or criminal) against any employee or official of the state for operating under this act. In case of any legal or operational fault, the court will no longer remain legally entitled to intervene or take action. It is also specified in the law that officials would be waived from any charges under this act, as such actions should be identified as "based on good intent". Critics say this act is specifically designed to provide legal protection to officials of the power and energy sector involved in awarding contracts to vested interest groups in a non-transparent way (Rahmatullah, Interview, II August 20 IS; Khan, Interview, 30 May 20 17). .

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The case of rental power plants shows how the state has played a pro-active role in sustaining the mechanism of expensive pawer productian thraugh the private sectar. The state pro-actively entered inta deals with campanies with no prior experience .of productian. The very fact that the members .of the gavernment themselves were in cahoots with vested business interests led ta the state mechanism becaming an instrument in representing private business interests directly. through legal means.

Was There Not a Viable Alternative? As mentianed elsewhere in this chapter. the year 2007-2008 was a time .of severe pawer crisis. As the demand far electricity .outpaced generatian capacity. the state insisted that autsaurcing electricity production ta private rental campanies was a necessity at the time and na ather alternative was viable at that paint. However. energy experts .of the cauntry have long painted ta variaus viable alternatives in addressing the pawer crisis. Thaugh the discuss ian an alternatives salutians to quick rental power plants is nat within the scope .of this research. a brief overview .of the existing alternative salutians is necessary in order ta understand the extent of the state's interest in pursuing privately-praduced electricity despite the presence of ather camparatively law-cast solutians. A summary .of the range of optians as painted out by the experts are listed belaw: lO a. The gas-based pawer plants under the public sector of Bangladesh remain mast prafitable in terms .of cast efficiency. whereas .oil based quick rental plants are highly energy inefficient. highly expensive. and require substantial amaunt .of state subsidy ta operate. In shart. to purchase every unit .of ail-based rental electricity. the state has to caunt substantial amaunts in lasses. 10

This section is prepared based on personal communications with a number of energy experts of the country. including Professor Nurul Islam. Professor Badrul Imam. Professor Anu Muhammad, and Pro(essorShamsul Alam.

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b. It was possible to generate additional electricity at the very beginning of the power crisis by converting the state owned gas-turbine based power plants to more fuel-efficient combined cycle power plants." This way, it would not have been necessary to adopt an oil-run rental plant based energy solution in the first place. c. Instead of rental/quick rental plants, if the state decided to build more gas based power plants under state ownership, the comparatively lower production cost of gas based e1ectricity'2 would keep electricity prices low. 13 According to Rahmatullah (2011, p. 23), it would have been possible to add an additional 5,250 MW /hour of electricity into the system within two years, which would cost around USO 4.25 billion (see Table 5.2). Though the government has consistently claimed that the state lacks the financial capacity to build its own power plants and (thereby there was no other option left but to go for rental private power plants), it has already been pointed out in this study that both BPC and POB has already paid a total subsidy of around USO 4 to 4.5 billion to the privately owned quick rental plants. If necessary, measures were taken in the year of2007-2008 (as shown in Table 5.2), the POB would not have had to incur its subsidy-driven losses (Muhammad, Interview, 25 July 2015; RahmatulJah, Interview, S September 2014). It is clear that the amount of subsidy already paid II

A combined cycle power plant uses both a gas and a steam turbine together to produce up to 50 percent more electricity from the same fuel than a traditional simple-cycle plant.

t2 The current cost of gas based production of electricity stands at BOT 2.50 whereas the cost of imported oil based electricity stands at BOT 15-20 (see BPOB Annual Report, 2015-2016). 13 According to government report, the amount of gas reserye stands a113 TCF which is capable of meeting the countries demand for next about 10 years. However. surveys conducted by US Geological Surveys confirmed the presence of Significant gas reserves in both shallow and deep sea blocks located in the Bay of Bengal which is expected to be capable ofsupplying the required natural gas for power production fora longer time period (see Filipov. 2014).

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to the quick rental plants was sufficient to build new gas-based power plants under the ownership of the state.

Concluding Analysis It is important to point out that quick rentals for power production in Bangladesh was not directly proposed or implemented by any international organization. Instead it was the state mechani sm that opted for such costly and unsustatainable way of producing electricity. However, it is fair to argue that international organi zations like World Bank and the Asian Deveolpmcnt Bank, based on their market -oriented beliefs, often depict and label the state-owned power sector of Bangladesh as inefficient, costly and short on "technical know-how". It is also fair to argue that these organizations, at the least, helped design the enabling environment for the gradual privatization of the energy sector of the country. This in the longer term has also compelled the government to search for more and more private solutions to the power crisis, instead of strengthening the state's own technical capacity and technology base. l! was discussed earlier, within the framework of the state's "structural constraint" theory, that any state policy negatively impacting the profit interest of business groups appears to send negative signals to the market and thereby negatively impact the national economy. However, quick rental business groups with no prior experience in electricity production did not appear to have substantial negotiation capacity or bargaining power in order to be able to jeopardize the economy of Bangladesh. Neither was there any possibility of withdrawal ofinvestment, closure of production base or laying-off of workers. Nevertheless, the state opted for a quick rental solution, which in turn created an extremely costly and unsustainable mechanism of energy production, draining the state coffers. The proactive policy actions of the state clearly indicated to the possibility of a nexus between the state and the business groups. The recent renewal of a large number of rental deals with private power companies, despite the excessive cost associated with it, shows the expanding

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influence of the business groups at the highest level of policy making domains in Bangladesh. Table 5.1: List of Companies and Production Capacity of Quick Rental Plants Plant Location

Production Capacity (MW)

Managerial Company/Owner

IAggreko International Project Limited (Asia)

Ghorashal

145

Khuln a

55

Aggreko International Project Limited

Khuln.

115

Khulna Power Company Limited (Summit Center)

Madanganj

102

Summit Narayanganj Power Limited

Meghnaghat

100

MIS l.E.L Consortium and Associates Limited

Siddhirganj

100

Dutch Bangia Power and Associates Limited

Pagla

50

DPA Power Generation International Limited

Siddhirganj

100

Desh Energy Limited

Keraniganj

100

Power Pack Mutiara, Keraniganj Power Plant Limited

Jalda

100

Chittagong Acorn In frastructure Services Limited

Amnura

50

J. V. of Sinha Power Gen eration Company Limited

Katakhali

50

Rajshahi Northern Power Solution limited

NayaParn

40

Khulna MIS Khan Jahan Ali Power Company Limited

Ghorashal

78.5 (Gas based) Ma.x power limited

Brahmanbaria

70 (Gas based) Aggreko International Project limited (Asia)

Ashuganj

80 (Gas based) Aggreko International Project limited (Asia)

Ashuganj

53

United Ashuganj Power limited

Meghnaghat

100

MIS Hyperion Power Generation Limited.

Source: Compiled by the Ruthor from different news reports.

I

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I Neoliberal Development in Bangladesh

Table5.2: Different Methods for Increasing Electricity Supply in the System Possible Approximate Costing Approx. production! saving (In billion USD) time of electricity

Type of Work

2,OOOMW

2 years

USD 3 bn"

Installing energy conserving intelligent molor controll ers (IMC). and LED lighting to increase industrial and domestic energy efficiency

1,500 MW (will reduce demand/waste)

1 year

USD 250 mn

Sending back industry's unused

700MW

1 year

No cost Win win

I year

''''in Win

1 year

USD 1 bn

Transforming the normal gas turbine power plants to combined cycle power plants

electricity (produced by captive

power) to the national grid. Power factor improvement

250MW

Managing/reducing system loss (leadig to less demand)

800MW

I

Total

5,250MW

I

USD4.25 bn

Source: Rahmatullah, 2011, p. 23.

References Ahsan, M. (2016, December 4). Celebrating 15,000 MW Generation Capacity: Govt Takes Captive, Rental Power Plants into Account. The Daily New Age. Retrieved, June 10,2019 from http://www.newagebd. net/articlel 40891 celebrating-I 5000-mw-generation -capacity-govttakes-captive-rental-power-plants-into-account

Ali, A. (2012, April 30). Rajshahi Rental Power Plant Misses Deadline. The Daily Star. Retireved, June 10,2019 from https:llwww.thedailystar.net/ news-detail-232226

14

A t,ooo MW capacity power plant requires 1.5 billion in USD of capital cost (including sourcing cost, consultancy cost, and mismanagement.

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Bernhagen, P. (2007). Political Power of Business: Structure and Information ill Public Policy. London: Routledge. Block, F. (1977). The Ruling Class Does Not Rule. Socialist Revolutioll, 33, 6-28. Bangladesh Power Development Board (BPDB). (2015). BPDB Annual ReporI2014-2015. Dhaka: The Government of the People's Republic of Bangladesh. BPDB. (2017). BPDBAnnual Report 2015-2016. Dhaka: The Government of the People's Republic of Bangladesh. Committee Briefing Book. (2011, August) . ;y.rq ~ ~>f