Bangabandhu Sheikh Mujibur Rahman’s economic policies were guided by his vision of establishing a democratic state with a just and equitable social order. He perceived the Bengali nationalist movement as a struggle not only for independence from the rule of an external colonial power but also for the economic and political emancipation of the downtrodden masses from oppression. On 7 March 1971, he called on the people to launch simultaneously the struggle for independence and liberation: ‘Ebarer sangram amader muktir sangram, ebarer sangram shadhinatar sangram’.

Sheikh Mujibur Rahman (1920 – 1975), the founding leader of Bangladesh, circa April 1971. Mujib became the first President of Bangladesh on 11th April 1971. | Photo: Ian Brodie/Daily Express/ Hulton Archive.

In his diaries, which were later published as books – The Unfinished Memoirs and The Prison Diaries – Mujib repeatedly highlights two ideals that inspired him to get involved in politics: to liberate the peasants and workers from exploitation and to eliminate inequality between the rich and the poor. He argued that these objectives could be best realised through socialism. He writes in The Unfinished Memoirs:

‘I myself am no communist, but I believe in socialism and not in capitalism. I believe capital is a tool of the oppressor. As long as capitalism is the mainspring of the economic order people all over the world will continue to be oppressed.’

In the 1940s, Mujib joined the Muslim League and the Pakistan movement in the hope that poor Muslim peasants would be liberated from the exploitation of the landlords and moneylenders. But, as he himself writes, after Pakistan was created, wealth became concentrated in the hands of a few, which alienated the ordinary people. After visiting China in 1952 Mujib compared Pakistan and China in the following way:

‘The big difference between us and them was that people in China knew and were made to feel that the country and its resources were their own. On the other hand, our people had begun to comprehend that the resources of the nation were being enjoyed by a coterie while they themselves were getting no share of them.’

Mujib believed the government had a role to play in removing inequality and freeing people from exploitation. He admired the Chinese government’s policies of land redistribution and public provisioning of education and health care. He writes:

‘The communist government had confiscated the land owned by landlords and had distributed it among all farmers. Thus, landless peasants had become landowners. China now belonged to peasants and workers and the class that used to dominate and exploit had had their day… Everywhere we could see new schools and colleges coming up. The government has taken charge of education.’ 

Sheikh Mujibur Rahman, the President, makes his first visit to New Delhi, India, after Bangladesh got liberated, January 1972. Laying foundations for Indo-Bangladesh friendship to revamp the war-torn economy was one of the five policy pillars of the first Planning Commission of Bangladesh. | Photo: Bangladesh National Archives.

In the historic 1970 elections, the Awami League’s election manifesto was based on the party’s six points as well as the students’ Eleven Points Programme, which committed the party to the ideals of democracy, secularism and socialism. In his speech to the nation on the first anniversary of independence on 26 March 1972, Mujib promised to promote equality in the distribution of resources and eliminate the wide gap that existed between the higher- and lower-income groups.

In the first council session of the Awami League held after the liberation of Bangladesh, on 7–8 April 1972, Mujib reiterated his commitment to promoting an exploitation-free socio-economic system, with socialism formally adopted as one of the ideals of the party. Later in 1972, the Bangladesh Constitution also adopted socialism as one of its four guiding principles.

We should however note that Mujib was not an ideologue. He was a pragmatic politician driven mainly by his desire to uplift the conditions of the ordinary people. His goal, as he often repeated, was to build ‘Sonar Bangla’ (‘Golden Bengal’) and to put a ‘smile on the faces of the poor and unhappy people’. Socialism to him was not an end in itself but an instrument to realise a goal; if he could find another way of improving people’s socio-economic conditions, he was quite willing to follow such a path.

Translating vision into policy

Responding to the economic challenges

Mujib’s post-liberation policy agenda was influenced by his own vision for an independent Bangladesh. However, his policy options were inevitably circumscribed by the conditions he inherited at the time of liberation.

Tajuddin Ahmad, the Finance Minister of Bangladesh, giving speech at the annual meeting of the World Bank and the IMF in Washington in September 1972. Robert McNamara, the President of the World Bank sits behind him. In a career spanning over three decades, Tajuddin spearheaded the movement for Bengali nationhood, first as a student leader, and then as Bangladesh’s first head of government and one of its most prominent statesmen. The colossal mandate of ensuring that a war-torn nation of nearly 75 million people was recognized and respected by the world as a sovereign country fell largely on the shoulders of Tajuddin and Sheikh Mujibur Rahman. Mujib and Tajuddin are popularly called the “winnng combo,” because of the synergetic work they did to build the foundations of Bangladesh. Tajuddin was imprisoned and assassinated shortly after Mujib’s assignation.

When Mujib assumed the office of prime minister of a liberated Bangladesh on 12 January 1972, he confronted challenges greater than those facing most leaders at the dawn of independence in the post-colonial era. Bangladesh had been born through blood and fire, which had left countless dead, dislocated lives and livelihoods, its infrastructure devastated by war leaving the country with zero foreign exchange reserves and not even a serviceable currency. Many of the institutions essential to the functioning of a modern state and the sustainability of public life and well-being, such as a working administration, effective machinery of law enforcement, institutions for the direction and management of the economy, were either non-existent or dysfunctional.

Under Pakistani rule, the formulation and direction of economic policy had been located in the central government based in Islamabad, monopolised by policy-makers drawn from the West Pakistani elite classes. Bengalis were totally excluded, so neither institutions nor experienced personnel were available to give policy direction in a liberated Bangladesh. One of Mujib’s immediate responses was to fill the policy-making vacuum by setting up a National Planning Commission and the Bangladesh Bank within two days of his return to Bangladesh on 10 January 1972. He put together a team of economists. He informed Nurul Islam that he was appointing him Deputy Chair of the Planning Commission, with Rehman Sobhan and Anisur Rahman as members.

Mujib informed the newly appointed members of the Planning Commission on that very first day that he was determined to have a socialist economic policy. This nebulous goal was to be translated into concrete policy objectives by the Planning Commission. The Commission was also expected to review the policies emanating from the ministries within this perspective and try and eliminate the overlap and contradictions between these policies.

Destroyed and sunk ships at Chittagong Port, 1972. The Chittagong Port was the main trading lifeline of the country. Virtually all international trading and shipments of aid were done through this port. Chittagong port remains the main trading hub of Bangladesh till today. It was completely destroyed by the Pakistani forces during the War of Liberation. One of Mujib’s early reconstruction projects to revive the economy was to mandate the swift reconstruction of this Port. | Photo by Jean-Jacques Kurz.

Mujib’s economic philosophy as an inspiration for policy-making

When the Planning Commission set out to give direction to Bangladesh’s economic policies, it did not have to look much beyond Mujib’s own philosophy and political experience for guidance. Members of the Commission had already had exposure to his views through extensive consultations with him and Tajuddin Ahmad, who had been Finance Minister when the Awami League manifesto for the 1970 election was being prepared. The manifesto proclaimed a vision of a socialist economic order in which economic injustice would be removed, economic growth would be promoted and provision would be made for the just distribution of the fruits of such growth among all sections of the people and the different regions of the country. To realise these objectives, it proposed certain measures of:
‘… nationalisation and the extension of the public sector by the development of cooperative enterprises and by the evolution of new institutional arrangements such as worker participation in the equity and management of industrial enterprises.’

The manifesto also contained provisions for agrarian reforms backed by a massive programme for multipurpose cooperatives.

Mujib’s declarations and the Awami League’s own 1970 election manifesto became the inspiration for policy direction for the post-liberation economy. Here, we look at how Mujib’s vision influenced the Planning Commission in the formulation of policies in five different areas:

  1. Promoting agrarian reforms;
  2. Reviving the industrial economy;
  3. Preparing the First Five Year Plan (FFYP);
  4. Establishing independence in relation with external partners;
  5. Laying the foundations for a more independent Indo-Bangladesh relationship.

Promoting agrarian reforms

The Commission, inspired by the Awami League’s election manifesto, prepared a strategy for agrarian reform based on the report of a Land Reform Committee appointed in mid-1972 to discuss the need for, and the scope and nature of, land reforms in Bangladesh. In discussions on the draft of the report, Mujib informed the Commission that it was not politically propitious at that stage to carry through such a reform. However, he promised that, at a more appropriate time, he would himself take the lead in initiating a far more radical reform than the planners could even contemplate.

Mujib eventually stood by his commitment. He initiated the policy for compulsory multipurpose cooperatives as part of his reform agenda under Bangladesh Krishak Sramik Awami League (BaKSAL). The proposal for the collective cultivation of land and for the socialisation of the distribution of its produce under the Tebaghaprinciple – that is, between landowners, tillers and state – was more radical than the policy agenda the Planning Commission suggested initially in its report on land reform and subsequently in the FFYP.

Reviving the industrial economy

One of the more complex challenges confronting Mujib – one facing very few post-colonial regimes – lay in reviving economic activity in a vast swathe of the Bangladesh economy abandoned by the departing Pakistanis at the time of liberation. The Pakistani commercial bourgeoisie had dominated most of Bangladesh’s private sector in manufacturing, international trade and domestic commerce, including most urban retail trade, banking, insurance and inland water transport. Owners, managers and mid-level technical expertise had departed, leaving enterprises closed, without working capital or raw material inventories and with poorly maintained equipment. The revival of activity in these abandoned enterprises was critical to the sustainability of the economy.

Mujib decided that these enterprises, which were mostly idle, some being plundered by their interim administrators, should immediately be brought within a policy framework. It was decided to nationalise the large abandoned enterprises and privatise most of the remainder. The nationalisation decision was predicated on the then-underdeveloped state of the Bengali entrepreneurial class and Mujib’s unwillingness to follow the policies of the Ayub regime of building up this class through massive state patronage. He believed that such a policy would contradict his commitment to build a more egalitarian, exploitation-free society, as spelt out in the 1970 election manifesto.

Finance Minister Tajuddin Ahmed with PM Sheikh Mujibur Rahman 1973. Mujib and Tajuddin are popularly called the “winnng combo,” because of the synergetic work they did to build the foundations of Bangladesh. | Photo: Simeen Hussain.

In the policy proposals presented to Mujib, the Planning Commission advised that all nationalised industrial and financial enterprises be managed by professionals, who should be given complete autonomy to operate them as competitive commercial enterprises, free from bureaucratic restraint. Mujib strongly supported such an approach and approved the appointment of some of the top professionals in the country to serve as CEOs and directors of the nationalised industries, as well as the financial, trade and transport enterprises. He was the first and eventually the only national leader to break away from the tradition of appointing senior bureaucrats to important executive positions in the public sector.

Notwithstanding the difficulties facing the CEOs of the public enterprises, most of them worked tirelessly and to the best of their capacity, at low salaries, to revive industrial activity to pre-liberation levels, thereby improving efficiency and profitability. The top financial professionals appointed to manage the nationalised banks and insurance companies reactivated the financial sector and initiated an agenda for financial inclusion through rapidly expanding banking services in rural areas.

Preparing the First Five Year Plan[1]

Initially, economic policy-making was mostly reactive, designed to cope with the vast and unique array of problems the government had inherited as a consequence of the Liberation War. There was a clear need to establish coherence in the design of policy within a clearly articulated philosophical premise that could give a sense of direction to the nation. Mujib advised the Planning Commission to prepare a longer-term vision for the economy that could give expression to his commitment to building a more egalitarian, self-reliant economy on socialistic lines whereby poverty would be eliminated.

The Plan attempted, within the limitations of time and resources, to spell out a vision for social transformation consistent with Mujib’s vision and the aspirations of the people. It took its inspiration from the Constitution, which was drafted and adopted by the parliament within a year, as yet another landmark achievement of theMujib regime. The Constitution adopted four fundamental principles: democracy, nationalism, secularism and socialism –which had served as the guiding principles of Mujib’s political odyssey.

Establishing independence in relations with external partners

Mujib and his close colleague, Tajuddin Ahmad, held strong views that aid should not be accepted with conditionality and that aid dependence should not be at the cost of donors imposing policy preferences on the new nation. He invested his full political authority behind the Planning Commission to assert independence over the management of external economic relations. The World Bank and the US were unhappy at such gestures of independence by an impoverished state, in marked contrast with the hegemonic influence the Pakistani policy-makers had conceded to them in the 1960s.[2]

Laying the foundations for a more independent Indo-Bangladesh economic relationship[3]

In response to Mujib’s political decision to establish a relationship of independence and dignity with India, the Planning Commission was encouraged to work towards establishing a balanced and equitable pattern of relations with its large neighbour. Mujib’s excellent relationship with Indira Gandhi made her receptive to constructing a relationship of equality with a weaker partner. The Planning Commission took the view that Bangladesh must expand and diversify its export capacity to India if it was not to remain a perennial market for exports from the stronger and more diversified Indian economy.

The Planning Commission worked out a strategy with its counterparts in India to enhance and diversify Bangladesh’s export capacity to India. It identified a number of major projects, such as urea fertiliser, sponge iron and cement, drawing on natural gas reserves and adding value to this through imported raw materials from India, to be set up in Bangladesh as joint ventures based on export to India. Mujib was highly supportive of the Planning Commission’s efforts to develop these proposals and eventually signed agreements with Indira Gandhi at their summit meeting in Delhi in May 1974 for three projects to go ahead.

Contemporary relevance of economic policies

Bangladesh, as it has evolved over a span of 49 years, is a very different place from where Mujib held office. It has, over the years, experienced significant economic growth, particularly in recent years, which has enabled the economy to graduate from the ghetto of the least developed countries and to attain lower middle-income status. Economic growth has contributed to robust revenue growth which has enabled the government to invest in significant expansion of infrastructure as well as in human development and the widening of the social safety net. Public action, private sector-led growth, diversification of the economy and the extensive activity of non-government organisations have significantly reduced income poverty.

The growth of a dynamic entrepreneurial class along with emergence of a no less dynamic class of small farmers and women wage workers have contributed to economic growth. Investments and policy support in the information technology sector have opened up extraordinary opportunities for economic diversification and modernisation, in both the economy and the administration.

Nurul Islam in his office as Deputy Chairman of the Bangladesh Planning Commission, February, 1973. Nurul Islam is an economist, who was instrumental in designing Bangladesh’s current economic system. He was one of the closest advisors to, and confidants of, Sheikh Mujibur Rahman, the first Prime Minister of Bangladesh. He served as the Deputy Chairman of the first Planning Commission of Bangladesh formed in 1972. He is a primary contributor of Mujib’s 6-Point Programme presented to the Pakistan government during the struggle for independence. | Photo: PROTHOMA.

However, such positive developments have come at a price. Household poverty has reduced but economic inequality and social disparities have widened. It is important to note that, while income inequalities are a common feature of market economies, a government’s economic policy can play an important role in influencing the distribution of economic opportunities and income.

The post-Mujib regimes, under cantonment rule, followed the advice of the World Bank and the International Monetary Fund to move away from the socialistic direction of the post-liberation regime and to build up the private sector. This change in policy direction has been perpetuated over successive regimes down to the present. Policies to transform a class of first-generation entrepreneurs into a strong private sector required massive public support through channelling credit, initially from public development finance institutions and then from public and private commercial banks, into the hands of selected and initially politically privileged businessmen. This approach of state-sponsored entrepreneurship without strong regulation by an independent central bank encouraged large scale-bank default.

The culture of bank default, put in place during the tenure of General Ziaur Rahman, was carried on under the Ershad regime and perpetuated over the successive democratic regimes. Estimates of the past four decades of accumulated debt default, compounded by extensive rescheduled and written-off loans along with investments from the public exchequer to recapitalise debt-ridden public banks, run into several hundred thousand crores. These unrequited resource transfers from the financial system have gone into the hands of a relatively small class of private entrepreneurs, who have eventually mutated into a self-perpetuating elite. Today, much of this borrowing from commercial banks is undertaken from the deposits of millions of ordinary citizens of modest means.

US Secretary of State Henry Kissinger received by Prime Minister Sheikh Mujibur Rahman in Dhaka, Bangladesh, 30 October, 1974. Kissinger came to Dhaka to outline America’s economic assistance provisions, soon after Mujib’s charismatic visit to the White House where he met US President Gerald Ford. | Photo by Michel Laurent / Gamma-Rapho.

Apart from such massive injections of bank credit, entrepreneurial elites have also benefited from extensive cash subsidies to selected sectors as well as generous tax concessions that are far and away in excess of budgetary transfers into social safety net programmes directed to the poor. Such policies have encouraged economic growth but also resulted in a significant growth in income inequality. This has served to widen social disparities and consolidate an elite class, which is now also becoming a major factor in influencing political processes.

In this day and age, reverting to some of the policy options of the 1970s no longer appears to be a practical option. The option of building up a strong public sector is less feasible, unless the government initiates massive governance reforms, including in the management of public sector enterprises. Moreover, we now have a strong and dynamic private sector, which needs to be encouraged but also exposed to strong financial and regulatory discipline administered without fear or favour.

What then remains of Mujib’s vision for a more egalitarian Bangladesh that can be applied to the direction of the economy of today? Seven possible policy interventions to reconstruct the economy on lines more consistent with Mujib’s vision are as follows:

  1. Regulatory discipline over the financial sector should be greatly strengthened. Debt defaulters should be exposed to the same sanctions applied by any well-governed country, so we can move away from using default and rescheduling as a standard business practice.
  2. There should be a substantial redirection of credit along with policy support towards both small/medium entrepreneurs and micro-entrepreneurs, based on both social justice and market efficiency. These smaller borrowers have established a much better debt servicing record than the elite-based defaulter class.
  3. Workers, particularly in our lead industry, readymade garments (RMG), should be supported, initially through public funds, to become equity partners in the enterprises where they work. Such a vision was very dear to Mujib, and found a place in his election manifestos and policy statements. This approach would recognise the critical contributions workers make in a labour-intensive industry such as RMG. It is the workers, mostly women, whose hard work, at relatively low wages, has played a crucial role in keeping the industry globally competitive.
  4. Mujib’s Tebhaga vision should be revisited at least on an experimental basis. Today, landlessness in rural Bangladesh is much higher than in Mujib’s time, while wage workers and tenant farmers till a larger share of the crop land. The Tebhaga model could therefore serve as a strong productivity-enhancing incentive for those who actually till the land.
  5. The above Tebhaga initiative should be backed up by drawing on yet another of Mujib’s favoured ideas, the resort to cooperatives. In his BKSAL programme, Mujib proposed compulsory cooperatives, initially to be introduced in a selected number of areas. Today, with policy-makers and even farmers having long forgotten the cooperative model, such a project could initially be kept voluntary. However, if it works well, it could eventually be made compulsory as part of public policy.

The cooperative would aggregate enterprising and productive small farmers into larger combines for purposes of:

  • Owning and managing equipment and farm machinery, which farmers now use more and more;
  • Collectively marketing produce to reach higher tiers of the market;
  • Empowering the cooperative, whether as full owner or partner, to add value to the primary product. Thus, for example, a rice grower’s cooperative could be funded to set up an automatic rice mill or at least be made a partner of a large rice mill that is processing the paddy in a particular area.
  1. Mujib would have encouraged much larger investment as well as better governance of public educational institutions and health care facilities. Today. both education and health care have emerged as major contributors to the growth of inequality of opportunity. Wide disparities in the quality of education and health care differentiate the private institutions serving those with wealth from the lower-income households, which remain dependent on poor-quality public services.
  2. Mujib would have been deeply concerned at the role that wealth is playing in democratic politics, with elective bodies from the Jatiya Sangshad (National Parliament) to local government institutionsincreasingly captured by those who can invest large sums of money to contest elections. Mujib fought against this elite capture of the political process throughout his political life so that people of modest means such as himself, Tajuddin Ahmad and others could contest and win elections against their much wealthier opponents.

Mujib’s egalitarian philosophy could be applied in redirecting the economy and politics in other areas too. Introduction of such a redirection of policy today could be kept consistent with the continuity of a market-driven, largely private sector-owned system. Such policy changes would ensure that the system works more fairly, with rule of law visibly and equitably applicable. Such an approach would more fully unleash the entrepreneurial skills of a much larger segment of the population through the democratisation of economic and political opportunity. Such a policy agenda could both enhance growth and provide more equitable outcomes. In this centenary year, when we are commemorating Mujib’s life and vision, it would do an injustice to his memory if we did not aspire to give substance to his dreams for a nation built on truly just and democratic principles.

[1] Islam, Nurul (2003) Making of a Nation, Bangladesh: An Economist’s Tale. Dhaka: The University Press Ltd.
[2] Rahman, Md. Anisur (2007) Through Moments in History: Memories of Two Decades of Intellectual and Social Life (1970-1990). Dhaka: Pathak Shamabesh.

[3] Sobhan, Rehman (1987) ‘The Political Economy of Indo-Bangladesh Relations’. P.C. Joshi Memorial Lecture.

Rounaq Jahan
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Rounaq Jahan is Distinguished Fellow at the Centre for Policy Dialogue (CPD). She is a political scientist. She was a Senior Research Scholar at the School of International and Public Affairs, Columbia University. She was a Research Fellow at Harvard University, University of Chicago and Boston University. Her publications include: Bangladesh Politics (2005), Bangladesh Politics: Problems and Issues (1980) and Pakistan: Failure in National Integration (1972). She pursued her doctoral studies in political science from Harvard University.
Rehman Sobhan
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Rehman Sobhan is the Chairman of Centre for Policy Dialogue (CPD). He is an economist and an academician. He was a Visiting Fellow at University of Oxford, a Visiting Scholar at Columbia University and a Senior Research Fellow at the Ash Institute for Democratic Governance, Harvard University. He was a member of the first Planning Commission in Bangladesh. He pursued his graduate studies from Cambridge University.