'Invisible hand' in the political economy
Md Saiful Islam (Article from The Daily Observer)
Having a number of political and non-political challenges, Bangladesh's national economy as well as global economic relations has been growing firstly since the last decade. Surely, political and economic actors have been both working together very significantly to develop the conditions. Hence, the invisible hand in the political economy has become distinctly significant in exploring the economic growth as well as political assimilations.
Adam Smith in his book the Wealth of Nations mentions that Political Economy refers to the relationship between economics and politics. It is the combined forces of the political environment, political institutions such as governments and the interactions of the economic systems and actors in the national as well as international levels.
In a broad sense, political economy is the relation and balance of politics and economics, the political as well as governmental policies and arrangements for the national and global economic ties. The limited government on the economic spear by the political actors and free market economy have been the core arguments of the outcome of today's capitalist economic system.
By arguing the relations between politics and economics, Smith argues that the objectives of government should take care of economy, not to control it. The government should keep the market economy open and free to its entire beneficiary.
Political Economy scholars argue that the 'invisible hand' is a frequently referred theme in the classical economic thought. It refers every individual endeavours and capital in supporting of domestic industry as well as the economy. Though individual's intention is always to gain the highest personal advantages, by supporting the domestic industry de facto they participate to the greatest value of national as well as foreign productions and investment in the country's economy.
['Invisible hand' in the political economy] There has been the scarcity of the economic resources in the world. The economic goods are limited, and it is not possible to fulfil the needs and desires of all humans. Thus, there has always been competency among the economic actors.
Political economy allocates the resources in different ways among the people. In the capitalist system, each individual is allowed to choose freely what to buy and when to do so. Each and every economic actor, in pursuing the highest benefit and interest, collectively reach to the most efficient outcome in an economy. On the contrary, the producers are allowed to choose freely what to sell and how to produce goods. Hence, investors invest in those sectors which are capable to returns the maximum benefit within a short period. They also withdraw capital from the areas that are less efficient in creating maximum value. All these effects take place dynamically and automatically which are determined by each and every individual engagement under the infinite invisible hand of political economy.
The invisible hand settles the market on a product distribution and price based system that is beneficial to all the individual members of a community. Neoclassical economic thinkers have expanded the idea beyond national economy to the global political economy.
The invisible hand rewarded business that is most efficient and responsible for balanced supply and demand. Smith suggests that expanding self-interest in trade; every country should do what, how and where they are best at and exchange their surpluses. In total, the invisible hand is the each and every ones distinct enrolment in the economic spear through direct and indirect participations.
There is almost an average seven per cent annual GDP growth rate in Bangladesh. Consumer Price Index (CPI) averaged 117.3 Index Points from 1993 until 2017, reaching an all-time high of 234.4 Index Points in February of 2017. Remittances flow averaged USD 1194.20 million from 2012 until 2017, reaching an all-time high of USD 1491.36 million in July of 2014. Foreign Direct Investment (FDI) increased from USD 2003.53 million in 2016, which has been averaged USD 1001.57 million from 2002 until 2016. At present Bangladesh is the model of economic growth in the global economy and regarded as the Asian tiger.
The above mentioned economic figures, as well as the overall national economy of Bangladesh, vastly depends on the individuals and small endeavours particularly the remittance sender, private investments, readymade garments and informal sectors. For the smooth continuation of the present economic growth, political assimilation in the economic spear and to explore the highest potentials, it is unconditionally necessary to explore the invisible hand in the political economy.
In the capitalist system, the allocation of resources must be taken place through a decentralized manner. The private investments needs to be empowered who exchange goods on private terms and conditions as well as the centralization of resources in some particular hands must be checked out.
Globalization has been expanding the opportunities to all individual in exploring their potentials worldwide. Hence, without taking care of every single economic actor, it would be difficult to continue the national economic growth. The political spear has been more akin to the large sectors of the economy.
There has been little attention paid to the small industries as well as the individual economic actors. The informal sector generates 89 per cent of the country's total employment and accounted for more than 40 per cent of the total gross value added. Hence, the gross value is very low following the percentage of employment.
Political initiatives and such formal and informal arrangement are required, which can be generated the ever-growing engagement and potentials of informal sectors in the national economy.
Foreign remittance flow could be more in the coming decade if the possible potentials could be proper utilized. Therefore, not only in domestic domain but also the global economic relations political economy should take care of the invisible hand distinctly.
International financial groups and organizations must be introduced to the local spear as well. It is to remember that end of the day, economic development lead the political development in the local as well as the global relationship.
To spill over the highest sustainable development in the national economic spear and global economic relations, Bangladesh needs comprehensive development of the invisible hand in the political economy.
Md Saiful Islam is pursuing MA (International Relations) at South Asian University, New Delhi, India