My next-door neighbour in upstate New York was an old woman named June. Her husband Herbert was housed in a care centre for the elderly. They had grown-up kids living in different states of the US from where they made rare visits to their parents. June was more attached to my wife and kids. She loved us very much. We used to invite her anytime we had some kind of festivities. As I came to know later, one midnight June had chest pain but did not want to disturb anyone. She braved to drive the car to the nearby hospital, where she breathed her last. My family could not resist a tearful outburst when we came to know that June left us silently. How happy was June living in a country like the US that ranked 14th in the latest Happiness Index 2017?

The death of June was akin to that of Sharatchandra’s Devdas, who had no one at his side to shed tears for him when he was departing the world. Poor Devdas was unfortunate because he was deprived of Parvati’s love. Poignant isolation and dry individualism — common features in Western societies — deprived June of love. We will see many Junes in countries like Norway, Denmark, and Iceland that ranked number 1, 2, and 3, in that so-called happiness index. Bond and love are the main ingredients of happiness — a subject area of literary thinkers, psychologists, and philosophers — but suddenly hijacked by some economists like Richard Easterlin some 40 years ago and later on, mishandled terribly by his disciples.

The concept of ‘happiness’ in economics has drawn little attention in the years since, and probably no curiosity from mainstream economics because defining the richer as happier violates some principles of diminishing marginal utility. However, the recent happiness ranking by the Sustainable Development Solutions Network and surprisingly by the United Nations has added some fun to an otherwise dry world of economics. It is hardly different from the UNDP’s human development index (HDI), which is much superior in its treatment to the word, ‘development.’ The ranking in the HDI has a consistent pattern of evolution for countries without adding any sarcastic rise and fall of countries. Seeing Pakistan as a much happier country than Bangladesh, Sri Lanka, and even India is nothing but a joke.

In economics, utility or satisfaction cannot be measured like money, rather it can be ordered. Although happiness is linked to satisfaction, the properties to measure utility do not necessarily apply for happiness. One property of utility says that more of two goods, say, x and y, will deliver a higher level of utility. This is not necessarily true for happiness, which is based on subjective perception and thus is quite individualistic. Therefore, measuring a country’s happiness is a silly desperation. The index makers are trying to sell the concept of economic prosperity in the name of happiness. While austerity may be a preference for happiness in many superscripts, India’s Charvaka philosophy advises to be happy at any cost even by borrowing from others to purchase ghee — a tilt toward consumerism.

What the happiness index-makers could do is to rely on perception through surveys instead of adding a bunch of prosperity criteria: income, life expectancy, having someone to count on, generosity, freedom, trust, health, and good governance. Happiness resides in simplicity. A complicated array of variables may show their econometric acumen, but they fail to capture the real flavour of happiness. In our school life, we read the poem of Alexander Pope who said ‘Happy the man’ who treasures simplicity with peace of mind. Some five thousand years ago as mentioned in Mahabharata, Yudhishira defined a happy man as the one who has no loan or indebtedness and who is not a migrant — lives in his/her motherland. Pope echoed the same note by saying, “Content to breathe his native air in his own ground.” Bengali poet D. L. Roy defines the happy feeling of a patriotic man who desires to die in the same land he/she was once born.

Rabindranath Tagore warns that your happiness may evaporate if you are venturing for love with the craving for happiness. In the story, “How much land does a man need?” Leo Tolstoy showed how hankering after too much wealth not only damages happiness, but also ruins someone’s life. Let happiness be there in the lap of literature or in the sublime domain of human psyche. Economists need not encroach on all areas like Dhaka’s land grabbers. My American neighbour June had a high per capita income, but did not have anyone to count on in time of troubles. Rather, the poor girl Durga of Pather Panchali had at least her mother beside her bed while dying from high fever. Who is happier? What is the role of good governance here?

It does not mean that we do not advocate for proper institutions and good governance. They may explain affluence or the level of prosperity. But they do not directly interpret happiness. Nor does social support guarantee a higher degree of happiness. Japan with excellent institutions and marvellous social support has one of the highest suicide rates in the world. The Golden Gate of San Francisco — a sign of prosperity — once turned into a launching pad for suicides. Did they ‘happily’ commit suicide?

Are not these people of the super-rich nations less happy than the poor boatmen in the rivers of the Padma or Meghna — who struggle to live happily every day? How societies with high divorce rates — particularly evident in richer nations — can be happier than societies with high family ties? Is divorce a source of happiness? It is surprising to see how economists no less than Jeffrey Sachs and John Helliwell are invading the territory of psychiatrists. Economists had never been that predatory; nor was economics this diluted in the past.

On disembarking from the flight, I get my luggage at John F. Kennedy after, say, 15 minutes. However, I get the same luggage at the Dhaka airport after, say, 120 minutes (on a lucky day). It does not mean I am [120/15 =] 8 times unhappy in Dhaka’s case. My rational expectations operate in such a way that I feel like a prince once I get my luggage back after 2 hours and I feel like a king if I find the locks unbroken. Thus, a state of institutions may not necessarily translate everything mechanically and proportionately into happiness. People redefine happiness adaptively and dynamically.

My son once drew my attention to a story which showed that couples who got married during the Great Depression hardly resorted to separations. Why? They were more committed to the bond that embraces genuine feelings, constant adjustments, sacrifice, and deeper love — the unfailing recipes for happiness, which the so-called index cannot capture at all.

The writer is visiting fellow of Bangladesh Institute of Development Studies and guest faculty at the Institute of Business Administration at Dhaka University. E-mail: birupakshapaul@gmail.com

This story was originally published by The Daily Star, Bangladesh

Over every summer, I leave the US to visit my village in Nalitabari where I look after construction work and run an online class for the students of mainly upstate New York. This is called globalisation. Sometimes I go to the Garo Hills branching from Meghalaya, or travel by boat on the river of Vogai while responding to important emails or checking my balance after a mobile transaction – a scene beyond imagination in Bangladesh some 30 years back. All thanks to globalisation.

Of late, we are wasting more and more energy carrying out a confused propaganda against globalisation, claiming that it is in reverse gear. However, it never was and it never will be. The issue is how we see and define globalisation. The main strength of globalisation comes from technology that does not regress – whether we like it or not. The two major events on the global stage last year, Brexit and the election of Donald Trump, seem to have once again solidified the conviction of those who have been anti-globalisation since long. But that is a misinterpretation of these two victories, which mainly banked on anti-immigration sentiments and some mistakes in state policies of the respective governments.

Many critics are now extremely hyperactive in their fight against globalisation, some of whom are Nobel laureates. Of course, they present facts but often these facts are honey-coated with their biases and prejudice. But globalisation has many wings; it is a comprehensive, complex dynamic. And only labour migration cannot explain the whole story. Among other dominant determinants are capital, technology, knowledge, and above all human psychology that helps us understand and learn about different cultures. Capital flows from one side of the globe to the other in a couple of seconds, and so do knowledge and technology. Resisting this phenomenon by a simple display of ‘likes’ or ‘dislikes’ is nearly impossible.

But why would we resist globalisation? It goes against the basic Darwinian motion of evolution. No one would like to get back to the age of clumsy typewriters when computers are readily available. I witnessed the death of two upstate New York cities, Endicott and Cortland, because they could not swim upstream against globalisation and the principles of profit maximisation. Cortland was noted as the origin of a world-class typewriter company, Smith Corona, whose slogan was ‘commitment for excellence.’ But any excellence that is myopic or does not figure in technological growth is doomed to perish.

Endicott, the birthplace of IBM, saw jobs being outsourced to China and India, and could do nothing to hold them back, because the company treated the whole world as a single village for the sake of greater output and profit. Basic economic laws have empowered globalisation to keep on moving. No mighty commander was able to dictate this march. Had it been possible for any force to block this forward motion, the US could have done that to save millions of jobs outsourced to other countries in the last 20 years. And a large segment of US businesses would rather outsource their jobs to further their cost-lowering drive.

It is better to brainstorm which institutions we need to build to face the growing challenges of globalisation rather than blindly believe that some ‘saviours’ will reverse globalisation to protect the inefficient local mills and factories. Businesses are the main force behind global integration. Capital travels from one country to another for the sake of a better interest rate. Modern kabuliwalas are around and we need to deal with them for direct portfolio investment. There is no point in waiting for the kind-hearted kabuliwala of a Rabindranath Tagore story; people like him are no longer a part of this world order.

Noted Indian economist Jagdish Bhagwati initially believed in socialist closed-type planning, but later turned into a globalisation guru. His student and Nobel Laureate of Economics Paul Krugman believes that the good side of the big monopolistic competition that has spread over the world can guarantee lowest prices. Hence, fighting Walmart becomes almost impossible for local small businesses.

Some of us might be confused to see a drop in inter-country labour migration, which we immediately credit to a reversal of globalisation. New apps of Microsoft in Seattle can instantly be downloaded in Rangamati. But capital movements depend on how we handle a myriad of rules and regulations that we have bureaucratically built over time. The movement of labour is even more complicated, and therefore, the slowest. Capital does not have any choice, but workers have religion, taste, language barriers, and above all, family bonds. Hence, uprooting workers from one culture and asking them to adopt another is difficult. Capital from one country and workstations at various countries build a style, which makes globalisation even more sustainable today.

In the early 1990s, many were opposed to three terms: globalisation, liberalisation, and free market economy. Some critics bundle all three items together and associate a similar (negative) connotation to all of them. Needless to mention, all three terms differ slightly in their meaning. Liberalisation mainly refers to the easing of trade; the main rationale of a free market economy is efficient pricing; but globalisation mainly refers to global travelling of capital, labour, and technology – a prerequisite that eases global integration of production and consumption. Tagore’s hope for a borderless world is definitely far from reality, but inter-country dependence, as proposed by David Ricardo’s theory of comparative advantage, is inevitable – and so is globalisation.

The writer is Associate Professor of Economics at the State University of New York at Cortland.
E-mail: birupakshapaul@gmail.com

This story was originally published by The Daily Star, Bangladesh

In 1900, Argentina looked like a promising country with respectable growth. It was queueing to be an industrialised country like many other western European nations. However, financial markets, the legal system, stock exchange, and the central bank were not ready with up-to-date regulations and, more importantly, their enforcement. Argentina turned out to be unfortunate for not being able to keep the pace of other European nations which had better institutions in place. Argentina’s per capita income is now USD 14,000, far below the mark of USD 40,000 which it should have enjoyed right now like its other comparable European peers.

Ivory Coast and Mexico had similar periods of promising growth even until the end of the 1970s, but both of them soon plunged into zero or negative growth. Ivory Coast was a role model to many African countries, but the country failed to understand that its institutions, such as the public administration, property rights, and law enforcement, must be ahead of African standards. Abidjan, its economic capital, is slightly less congested than Dhaka, reflecting a failure of street discipline. After independence in 1960, Ivory Coast (Côte d’Ivoire) grew almost at 10 percent for the first 20 years – the highest of Africa’s non-oil exporting countries. But average growth since the early 1980s until now has remained in the doldrums of 2 percent or so.

A once growth champion can thus turn into a case of growth disaster, alerting us that growth may cascade down like spring water anytime if the society fails to build adequate institutions. There are many stories in the world to remind us that we should fix our institutions at a faster pace to keep our growth going. Otherwise, challenges, as faced by countries like Argentina, Mexico, or Ivory Coast won’t be a surprise. It is imperative to clarify first what the term ‘institutions’ means.

The term, ‘institutions,’ has different meanings in different disciplines. But when we speak of it in relation to growth, we usually refer to the definition of institutional economics. Although ‘institutions’ and ‘organisations’ may appear the same, in reality they aren’t. Institutions are a set of consistent rules that shape the behaviour of organisations and individuals in a society. They can be formal, such as constitutions, laws, regulations, contracts, and procedures. Norms, values, and traditions are informal institutions. Since values, traditions, and laws are often interwoven, institutions give us a much bigger width and depth than a simple set or rules.

There are four key sectors such as finance, education, justice, and public administration, where institutions play the most effective role in promoting growth in a society. If a rule is broken, it’s often both an institutional and organisational failure. Dhaka is a thriving city representing 35 percent of the country’s GDP. Different studies state that Dhaka’s mobility impediments owing to traffic congestion are taking a toll of USD 1 to 3 billion from the nation’s potential income. Thus, we are losing almost 1 percentage point of growth each year. This is partly an infrastructural constraint and heavily an institutional problem, because rules aren’t there. Laws aren’t enforced even if they are there. Defective institutions are in place. A recent report by Brac’s Institute of Governance and Development states that 40 percent of Dhaka’s traffic jam can be removed without any engineering effort, but by enforcing street laws.

Opening an organisation isn’t enough to ensure proper institutions – just like opening the Board of Investment didn’t guarantee enough comfort to foreigners to jump into Bangladesh. The newly formed Bangladesh Investment Development Authority ((BIDA) has taken a different approach. It is examining why Bangladesh’s position in the ease of doing business is so poor – 176 out of 190 countries. The target BIDA has taken is to bring down the number to at least 99. Here the authority is directly addressing the institutional problems that are actually preventing foreigners to flow in. And that is how a nation can build institutions.

The medicines of growth economics, as suggested in textbooks are not new, but they don’t work without institutions. Imagine a case where a patient with physical injuries approaches two different physicians separately. Doctor A prescribes antibiotics and pain relievers. Doctor B emphasises on therapy but prescribes lesser antibiotics and pain pills. Who is better is hard to say, but Doctor B appears to have kept the patient’s less medicated recovery and therefore long-term welfare in mind. Institutions provide long-term sustainability of growth to a nation. Otherwise, growth gets out of steam at some point.

When there is no good rule to drive in the street, there is a legal gap. But when the law is there without any regard from the public, there is an enforcement gap. These two gaps must be filled before defining institutions. When we see vehicles of some powerful officials being driven on the wrong side of the road, it sends a signal to many that institutions are not in place. Institutions mean laws not in books but in real action.

Bangladesh has investment opportunities as well as a bundle of fiscal and monetary policies which are, at least in theory, no less accommodative than those in Vietnam. Then why is Vietnam attracting FDIs equivalent to 5 percent of its GDP while ours is less than 1 percent? Simply put, institutions in Bangladesh are not as well-prepared and accessible as they are in Vietnam. It’s high time to look at improving institutions for Bangladesh just to make sure that we want to maintain this growth momentum. Bangladesh can’t afford the similar fate of growth as experienced by Ivory Coast, Mexico, or Argentina.

The writer is Associate Professor of Economics at the State University of New York in Cortland.

This story was originally published by The Daily Star, Bangladesh