The Role of the State in the Economic Development of Bangladesh during the Mujib Regime (1972-1975) Author(s): Syed

Serajul Islam Reviewed work(s): Source: The Journal of Developing Areas, Vol. 19, No. 2 (Jan., 1985), pp. 185-208 Published by: College of Business, Tennessee State University Stable URL: http://www.jstor.org/stable/4191343 . Accessed: 26/11/2011 05:53
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The Journal of Developing Areas 19 (January 1985) 185-208

The Role of the State in the Economic Development of Bangladesh during the Mujib Regime (1972-1975)
SYED SERAJUL ISLAM The painful circumstances in which the state of Bangladesh was created produced utter chaos and confusion in its economic system. The new state launched a peaceful program to replace and redesign the old institutions of the war-ravaged economy in order to eliminate poverty, unemployment, and social injustice. It discarded old rules and attempted to set up new ones in consonance with the regime's own preferred goals. The state of Bangladesh that emerged in 1971 was essentially an "intermediate state." In preliberation days, the development strategy pursued by the "administrative state," strictly controlled by the civil-military bureaucracy, had focused on rapidly increasing the GNP through heavy reliance on private investment. The masses had found that policy of little benefit, however, because it failed to bring about any noticeable reduction in inequalities in income, unemployment, and poverty. Consequently, the new state of Bangladesh rejected that strategy of development and tried to rectify the deficiencies of the past by initiating a "socially desirable" development policy. What then was the nature of the strategy pursued by the new state of Bangladesh? What was the rationale behind the adoption of a particular type of development policy? In order to explore these questions, it is necessary first to define briefly an "intermediate state" and its link to development strategy. An intermediate state is one that is dominated by political elites, largely drawn from the intermediate class-i.e., rich and middle-income peasants, petty traders and businessmen, urban professionals, and intellectuals. In the context of Bangladesh, Bertocci points out, the elites belonging to this class (which became the ruling class in the aftermath of the independence of Bangladesh) "stem from or have links to, other persons of professional or small-scale entrepreneurial backgrounds," and they are also allied with the rich peasants who dominate rural politics.' In an intermediate state, it seems, the state basically pursues a mixed strategy of development, emphasizing public enterprise, by means of which the state performs the role of dynamic entrepreneur, undertakes the basic investments necessary for economic development, and promotes "the pattern of amalgamation of the interests of the lower middle class with state capitalism."2
Assistant Professor, Department of Political Science, University of Dacca, Bangladesh. ? 1985 by Western Illinois University.

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The rationale for the adoption of this type of strategy by the intermediate state rests on the promotion of the interests of the intermediate class in both urban and rural areas, the class that serves as the base of political support for the regime. Kalecki points out that this type of strategy is highly beneficial to the interests of the middle classes for three reasons. In the first place, "state capitalism concentrates investment on the expansion of the productive potential of the country. Thus, there is no danger of forcing the small firms out of business." Second, "the rapid development of state enterprises creates executive and technical openings for ambitious young men of the numerous ruling class." Third, "the land reform, which is not preceded by an agrarian revolution, is conducted in such a way that the middle class which directly exploits the poor peasants, i.e., the moneylenders and merchants, maintains its position while the rich peasantry achieves considerable gains in the
process."3

This type of economic strategy seems to result in accomplishing neither growth nor equity, however. Since the strategy prevents the free functioning of private enterprise, it may lead to low rates of economic growth. Perhaps the result of this type of strategy is the alienation of both the "bottom" (workers and peasants) and the "top" (upper bourgeoisie and also the bureaucracy), who then seek to discredit the policies of the intermediate state. These largely theoretical statements, however, require empirical verification. In this study of Bangladesh, an attempt will be made to evaluate the development policies pursued by the state under Mujib. The main purpose of such an examination will be to show the link between the nature of the state and the type of development policy pursued. In other words, why does a particular state adopt a particular type of strategy? What is the class basis of these policies? The Intermediate State of Bangladesh and Its Pledges to Development Strategy In postindependent Bangladesh the state apparatus was controlled by political elites belonging to the Awami League (AL), which was the mouthpiece of the intermediate class during the nationalist movement. The main decision-making structures in the state apparatus of Bangladesh were the office of the prime minister, the cabinet, and the Jatiyo-Sangsad (Parliament), and all these were dominated by men from the intermediate class belonging to the AL. The data on the socioeconomic background of the AL leaders indicate that the party was all along dominated by the intermediate class. The AL originated in 1949, and in the then central working committee of the party 57 percent were lawyers, 14 percent small businessmen, 14 percent landholders, 11 percent teachers, 3 percent labor leaders, and 3 percent religious leaders.4 Until the independence of Bangladesh in 1971, party leadership remained strictly in the hands of the same people. Of the 37 members in the central working committee of the party in 1970, 85 percent were representatives of the intermediate class.5 After the independence of Bangladesh, the office of the prime minister was occupied by Sheikh Mujibur Rahman (Mujib), who was a son of a serestadar (civil court clerk). Of the 23 ministers in his cabinet, 15 were lawyers, 4 former business executives, 1 a landholder, 1 a teacher, 1 a trade union leader, and 1 a retired army officer.6 The date on the income of the members of the Constituent Assembly also indicated the preeminence of the

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intermediate class. Over 75 percent of the members had an annual income of less than 30,000 taka (Tk) (with 51. 11 percent below Tk2O,000 and 24.1 percent between Tk2O,000-30,000) which, by Bangladesh standards at that time, would put a man in middle and lower-middle income groups.7 The parliamentary elections of 1973, in which AL won 292 out of total 300 seats in the Sangsad, further reconfirmed the position of the intermediate class in the postcolonial state apparatus of Bangladesh. Of the 292 members, 26 percent were lawyers, 24 percent small businessmen and petty traders, 3 percent large landowners, 15 percent rich and middle farmers, 10 percent teachers, and 5 percent medical doctors.8 In the state structure of Bangladesh, the Planning Commission and the public corporations were the chief advisory and implementing bodies in the economic sector, and these were also controlled by men of intermediate-class background. The prime minister of Bangladesh was the ex officio chairman of the commission while the deputy chairman was an academician. The other members of the commission were also drawn from university faculties and had, in the main, been Mujib's closest advisers during the nationalist movement. Until the fall of Mujib in 1975 there were 76 chief executives in public corporations and, of these, 44 belonged to the professional class, while 25 were from government service, 3 were business executives, and 4 were retired army officers.9 In sum, therefore, it can be said that during 1972-1975 there existed an intermediate state in Bangladesh. It was an intermediate state because its ruling political elites came neither from the top nor from the bottom echelons of the society. The Awami League, which dominated the state apparatus in Bangladesh during the years 1972-1975, adopted a strategy of development to which the party had a political commitment that was reflected for the first time in a consolidated way in the 1970 election manifesto.'0 Before the declaration of the manifesto, whatever had been stated by the AL regarding economic policy was concerned mainly with the demand for autonomy of East Pakistan. The party program of the AL, as enunciated in the six-point program, only talked of redistribution of resources between East and West Pakistan." The 1970 election manifesto can be considered as the first clearcut commitment on the part of the AL to the economic development of the country. In order to preempt the attraction of the leftists to workers and peasants, in the manifesto, the party promised the implementation of the following measures: (1) establishment of a socialist economy and, as a first step toward the achievement of this objective, nationalization of banking and insurance companies, the jute industry, and cotton textile as well as other basic and heavy industries; (2) implementation of land reforms and change in the system of ownership of land with a view to redistributing land among the landless laborers; and (3) reform of the tax and revenue system and, specifically, abolition of the salt tax and land revenue in all landholdings below eight acres.'2 After independence, the earlier political commitment of the ruling party to these economic objectives was evident in the constitution of Bangladesh, which laid down the fundamental state policies in the economic sphere. The preamble of the constitution declared "that the high ideals of nationalism, socialism, democracy and secularism shall be the fundamental principles of the Constitution.'3 In particular, it was the principle of socialism that vividly expressed the attitude of the ruling party toward economic

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development. The meaning and implementation of socialism was enunciated in the constitution as follows:
A socialist economic system shall be established with a view to ensuring the attainment of a just and egalitarian society, free from exploitation of man by man.... The people shall own or control the instruments and means of production and distribution, and with this end in view ownership shall assume the following forms-(a) state ownership, (b) cooperative ownership, and (c) private ownership.'4

In addition to their promises in the election manifesto and the constitution, leaders in various public speeches reiterated the economic program of the state and their faith in economic planning. In a statement on 9 February 1972, Prime Minister Sheikh Mujibur Rahman declared:
I assure our workers that a basic goal of the socialist economy which we are committed to establish will be securing the just rights of workers and ensuring their welfare. A plan is being prepared whereby measures of nationalization would be combined with new arrangements to ensure workers' participation in the management of industries. Indeed they would themselves share in the fruits of increased production."5

Such statements and pronouncements indicate that an important plank of the AL platform, immediately before and after liberation, concerned economic development. The AL seriously expressed its desire for implementing a type of strategy whereby workers and peasants would be benefited and an "exploitation-free society" established. Accordingly, the state under the AL formulated a concrete strategy of economic development in independent Bangladesh directed toward the achievement of these ends. Development Policy and Its Implementation During the first few months after independence, state activity centered around the reorganization of the party and the administration. In the economic sphere, the state concentrated mainly on providing food and relief to the needy and on rehabilitating the uprooted masses. Even during this period of reconstruction and rehabilitation, however, a planning commission was set up in February 1972 to formulate a development strategy for Bangladesh. The commission took the position that any modifications in institutions and in economic policies should be introduced in "'such a manner as to avoid serious or sudden dislocation in the economic system."", It suggested a few institutional changes as a precondition for the transformation of the economy, however. According to the planning commission:
The removal of the capitalist system of income distribution, of the private ownership of the means of production and of the pre-capitalist mercantile or feudal forms of production relations is a necessary pre-condition to social transformation.... Reforms to such an end are needed to be worked out in phases. in landownership, cooperatives among small and landless farmers; in large, heavy and basic industries ascendancy of the public sector; in trade, both domestic and international as well as in housing, transport and distribution, state and cooperatives will largely rule leaving small enterprises and retail trade in private hands. In such a society, where the function of the state is usually more than in a welfare state, the public sector perforce will be expanded. 7

The commission's strategy of development emphasized the "ascendancy of the public sector while leaving small and cottage industries largely for private initiative and enterprise."'8 In the field of trade, both domestic and foreign, state and cooperative enterprises were to be given the dominant role, but the retail trade would remain primarily in the hands of private traders. In the agrarian sector, the commission prescribed extensive land reforms and restructuring of rural institutions, such as the establishment of

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cooperatives."' In its summary version, the planning commission concluded that the state would follow a mixed strategy-a strategy of redistribution with growth, emphasizing public-sector planning for development-and that the aim of the strategy would be "to generate a rate and pattern of income growth which will not only meet a minimum consumption standard but also expand employment opportunities and ensure a socially desirable pattern of income distribution."20 Subsequently, in order to implement the stated strategy of development, the state adopted several fundamental measures, such as nationalization of industries and other financial institutions, imposition of ceilings on private investment, both domestic and foreign, and initiation of land reforms and restructuring of rural institutions. I shall first examine these fundamental measures of the state for implementing the strategy of development; then I can analyze the rationale behind the strategy. Nationalization of Industries and Financial Institutions As a first step, in early February 1972, the planning commission submitted to the cabinet a paper on "policy options and recommendations for the nationalization of industries," which recommended the nationalization of all enterprises in the jute, textile, and sugar industries with fixed assets of over Tk1.5 million.2' The cabinet set up an interministerial committee to examine the implications of the planning commission's recommended proposals. This committee accepted the recommendations of the planning commission, following which Prime Minister Sheikh Mujibur Rahman announced in a policy statement on 26 March 1972 that all large industries and other financial institutions (such as banks and insurance and shipping companies) with assets of over Tkl.5 million stood nationalized and would henceforth be managed by the state.22 In all, 254 large industrial units were nationalized in the jute, textile, sugar, iron and steel, engineering and shipbuilding, fertilizer, pharmaceutical and chemical, oil, gas and mineral, paper and paper products, and forest industries.23 In preliberation Bangladesh, there were 12 local commercial banks, which had 1,175 branches throughout East Pakistan, and a few insurance companies. All these banking and insurance companies were nationalized. As a result of nationalization, the share of the state in the ownership of all industrial assets in Bangladesh went up from 34 percent in 1970 to 92 percent in 1972; correspondingly, the private sector's share in industrial assets was reduced from 66 percent to 8 percent following nationalization (see table 1) 24
TABLE 1
POSITION OF STATE AND PRIVATE SECTORS IN INDUSTRY BEFORE AND AFTER NATIONALIZATION

1969-1970 Value of Assets (Millions of Taka) 2,097.0 4,040.5 Share of Fixed Assets (Percentages) 34 66

AFTER 1972

OWNERSHIP

Value of Assets (Millions of Taka) 5,637.5 500.0

Share of Fixed Assets (Percentages) 92 8

State Private

SOURCE Rehman Sobhan and Mujaffer Ahmad, Public Enterprive in an Intermediate Regime

(Dacca: Bangladesh Institute of Development Studies, 1980), p. 192.

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In order to manage and control the nationalized enterprises, ten corporations were set up.25 The chairmen of the sector corporations were appointed by the prime minister. The commercial banking sector was organized under six banks. The central bank, the Bangladesh Bank, was entrusted with the responsibility for appointing managing directors and general managers and of supervising the nationalized banks. The insurance business was grouped under two nationalized insurance companies.26 In order to meet the financial needs in different sectors-such as agriculture, housing, and industry-a number of specialized financial institutions were set up under state ownership-Bangladesh Krishi Bank (Bangladesh Agricultural Bank), Bangladesh Griha Nirman Rindan Sangstha (House Building Finance Corporation), Bangladesh Shilpa Bank (Industrial Bank), and Bangladesh Shilpa Rin Sangstha (Industrial Loan Corporation). The state also nationalized about 80 percent of the foreign trade. A Trading Corporation of Bangladesh (TCB) was established for controlling the import business. For handling the jute business, the Jute Marketing Corporation, the Jute Stabilization Corporation, and the Jute Export Corporation were set up. The state under Mujib claimed that the nationalization measure was adopted as part of the AL's commitment to restructure "property relations by placing the means of production under the ownership of the people." The attempt was felt necessary to establish socialism in Bangladesh.27 Ceilings on Investment in the Private Sector The nationalization decision of 26 March 1972 was supplemented by the imposition of ceilings or limits on private investment. Though the nationalization measure drastically diminished the role of the private sector in large industries, many small enterprises still remained in private hands. In July 1972, therefore, the state fixed a ceiling of Tk2.5 million on private investment which could grow up to Tk3.5 million through reinvestment of
profits.28

With the establishment of the ceiling, those units that survived as private enterprises were mostly small-scale and cottage industries. There remained in the private sector only 27 enterprises with fixed assets of about Tkl million, while in the rural areas, there were 330,400 small industrial enterprises with assets under Tk500,000.29 In order further to promote small industries, the Bangladesh Small Industries Corporation was set up to offer financial and technical assistance. In some cases, if private domestic enterprises were not forthcoming, the corporation itself could pioneer enterprises through direct ownership, either alone or jointly with workers' cooperatives or foreign investors. The state, however, reserved the right to nationalize any private enterprise in case of mismanagement or underproduction. Meanwhile, the state promised financial assistance and other incentives in the case of new investments.30 The imposition of the ceiling on private investment also limited the operations of foreign private enterprises in Bangladesh. A policy statement made clear that foreign investment would be allowed, within the fixed ceiling, only in collaboration with the state, whose share in equity capital would be at least 51 percent. Foreign private enterprise could collaborate with domestic private enterprise only in licenses and patents, but without equity participation. In the case of new investments,

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the foreign collaboration should generally provide the entire amount of foreign exchange components of the project as equity capital. The terms and conditions determining equity participation and the precise nature of association including management contract in individual cases will, however, be subject to negotiation.3'

The state allowed foreign investors to remit all posttax dividends on foreign capital in Bangladesh. Foreign investors were also permitted to repatriate "capital including capital gains."32However, "within the first ten years from the commencement of production repatriation cannot take place in one installment but will have to be spread over ten years."33 The state under Mujib thus severely restricted both domestic and foreign private investment. Nevertheless, by early 1974, many members of the ruling party felt that the ceiling on private investment was too low, and they created increasing pressure for an upward revision of the ceiling and for allowing a larger role to private investment, both domestic and foreign.34 The issue was brought before the cabinet for discussion, where the minister for industries, Syed Nazrul Islam, argued in favor of raising the investment ceiling for several reasons. First, equipment prices had gone up by 200 percent, with the result that a Tk2.5 million unit in 1972-1973 prices cost much more in 1974; the ceiling had thus, in effect, been lowered. Second, many applications for investment were really above Tk2.5 million but concealed the higher cost in order to get permission for private investment. Finally, he asserted, the owners of large industries were experienced entrepreneurs, who should be considered as national assets and utilized for the development of the country.35 In fact, the minister for industries suggested removal of the ceiling on private investment altogether; however, the finance minister, Tajuddin Ahmed, and a few others objected to any change.36 After extended debate, the cabinet reached a compromise and decided to raise the ceiling on private investment from Tk2.5 million to Tk3O million.37 The revised policy, approved in July 1974 and put into effect immediately, was justified as follows:
In pursuance of the Government's commitment to the establishment of a socialist economy the key sectors including the bulk of the industries are already in the public sector. All industries of basic and strategic importance, or in the nature of public utility services, will remain exclusively in the public sector. It is, however, considered conducive to the goal of rapid industrialization and mobilization of investment funds to afford scope to the private entrepreneurs to play an expanded role within the framework of a planned economy.38

The terms and conditions of foreign investment in Bangladesh were also slightly modified. Foreign private investors were now allowed to collaborate with both the state and private entrepreneurs. In the private sector, foreign equity participation was limited to those industries where "technical knowhow is not locally available, technology involved is very complicated, capital outlay is high and to industries based on local raw materials or wholly export-oriented industries."39 Agrarian Reforms "In an economy where more than 80 percent of the activity is dependent on agriculture," the planning commission observed, "it is inconceivable to bring in socialism without the socialization of agriculture."40 With this prime consideration in view, the commission, in spelling out the strategy of development for the agrarian sector, emphasized extensive land reforms and the structuring of rural institutions in such a way that small farmers and

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landless peasants could participate effectively in local decision making. A more long-term objective of the strategy was "to reduce rural poverty and promote equality of income distribution."4' Land Legislation. As a first step toward the achievement of a more equitable distribution, the state on 14 August 1972 promulgated the Estate Acquisition and Tenancy Order (P.O. 96), which exempted family holdings up to 25 bighas (one bigha equals one-third of an acre) from payment of land revenue.42 Another order, Bangladesh Landholdings (Limitation) Order (P.O. 98), was issued on 15 August 1972 and imposed a ceiling of 100 bighas (33.3 acres) per family on agricultural land in Bangladesh.43 Those who had landholdings of more than 100 bighas were required to submit a statement on excess lands within 90 days of the commencement of the order. Compensation for the excess lands that would be taken over by the state was set at 20 percent of market value for the first 50 bighas and 10 percent for land over 50 bighas.44 It is significant that in 1950 the state had fixed a ceiling of 100 bighas of land per family, but the state, under President Ayub Khan, raised the ceiling to 375 bighas in 1961. Thus, the Bangladesh Landholding (Limitation) Order of 1972 in a sense merely reactivated the East Bengal Estates Acquisition and Tenancy Act of 1950. There was, however, one significant difference between the Act of 1950 and the Order of 1972. While the 1950 Act had defined a family as including all persons living in the same extended household, such as husband, wife, unmarried children, and many other types of dependents, the 1972 Order defined family as including "such person and his wife, son, unmarried daughter, son's wife, son's son, and son's unmarried daughter."'5 Such a broad definition of family was perhaps taken to prevent large landowners from transferring land to family members in order to avoid surrender of surplus lands. In the Estate Acquisition and Tenancy Order of 1972, it was further stated that all char lands (lands situated on the banks of a river or sea) were to be taken over and placed at the disposal of the state. Lands in char areas that had been illegally occupied by force were also to be taken over by the state. It was further announced that "such lands will be released from the unscrupulous landgrabbers, who maintain their possession with the aid of professional goondas, and will now be entirely distributed among landless peasants."46 The state estimated that, after the implementation of the land reforms, 1.2 million acres of surplus land would be available for redistribution without payment of any salami (a premium or consideration of money paid for the grant of settlement of any land or tenure by lessor) among those agricultural families who owned no land or less than 1.5 acres of land.47 Undoubtedly, the new land legislation represented an important departure from the past strategy of development in the agricultural sector. Restructuring Rural Institutions. With a view to giving further relief to small farmers and landless peasants, the state paid special attention to quickly restructuring and developing rural institutions. A Consumer Supplies Corporation, initially covering more than 4,000 unions, was established in order to eliminate exploitation by middlemen. It was expected that the state would procure food grains from surplus farmers and surplus areas and distribute them to landless peasants and deficit areas.48 The state also made attempts to build rural cooperatives for peasants for purposes of mobilization of savings and redistribution of income. In the past,

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the Rural Works Program of Ayub Khan had failed to improve the condition of the rural masses. In order to rectify the deficiencies of that effort, an Integrated Rural Development Program was introduced throughout rural Bangladesh. Under this scheme, a cooperative organization was planned for each village, consisting of all categories of people other than moneylenders, rentiers, or contractors of hired labor.49 The managing committee of each cooperative was to be elected, with representation proportionate to their population, from four categories of people-poor peasants, middle peasants, rich peasants, and large landowners.50 In order to supervise the village cooperatives, a Cooperative Development Board (CDB), consisting of both officials and nonofficials, was organized by the state. The board was intended primarily for regulative functions, such as registration and audit, but it was also supposed to build a cadre of organizers who would be placed in different thanas (administrative units) for initial promotional and organizational work. These organizers were to be carefully selected, preferably from local field-workers, and trained in ideological as well as operational matters. The First Five Year Plan categorically stated:
For radicalchangesin a society where traditionalvalues and habits are firmly rooted, there is also need for a politicalcadre, devotedto the ideologyof the state. A politicalcadrehavingroot in the masses and motivated by radical ideas can mobilise the people and transformthe behaviourpattern of the society. The cadreswill educate and motivate the people about the outlook. This is benefitsof social change, at least from the traditionalnorms to a progressive becauseunlessthe broad massesare aware of the changesthe society requiresand acceptthose can no spontaneously plan, howeverbiased or formulatedfor socialistictransformation, reach the end.5'

Thus the plan recognized that a "bottom up" in place of "top down" type of organization, with initiative coming from the farmer, was essential for a self-sustained and viable cooperative system. The primary functions of the cooperatives were to be the distribution of agricultural inputs-such as fertilizers, pesticides, seeds, credit, and machinery-to farmers and the creation of employment opportunities for labor. Above all, the rural cooperatives were expected to create "a healthy social consciousness and a desire for harmony and order" in the rural areas.52 By and large, the state under Mujib envisaged a strategy of development in which the bulk of large-scale manufacturing activity would be firmly under the ownership and control of the public sector. The underlying philosophy of planning for some 25 years prior to the birth of Bangladesh had been to emphasize rapid growth within the framework of the privateenterprise system. In Bangladesh, on the other hand, the state under Mujib imposed restrictions on the private sector and nationalized major industries. As far as the agricultural sector was concerned, the state imposed ceilings on the size of landholdings, while small landholdings were exempted from land tax altogether. The intention was to create, instead of a regime of large landowners, a system based on ownership and control being in the hands of a very large number of relatively small farmers. A program of rural cooperatives was also initiated to build an "exploitation-free society" in rural Bangladesh. The Rationale and Implications of Development Policy The state justified its strategy of development on the grounds of building the economy under public control for accelerated socialism-bringing

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growth and an equitable distribution of income.53 The imposition of very low limits on private investments, nationalization of large industries and financial institutions, imposition of ceilings on landholdings, and extension of the control of the state over various aspects of the economy were considered necessary for meeting both growth and redistribution objectives. As the deputy chairman of the planning commission stated:
The expansion of the assets of private industrial units from Tk2.5 million to Tk3.5 million and no more, was considered adequate for meeting their growth objectives.. .. Putting the investment ceiling in terms of assets rather than employment was also expected to stimulate labour-intensive techniques of production.54

The extension and expansion of the scope of state participation in productive activities was deemed essential for plowing back profits, which had hitherto enriched private enterprise, into investment for the benefit of all. As for equitable distribution, A. M. A. Rahim, economic advisor to the Bangladesh Bank, explained:
The constitutional goal of planning in Bangladesh is to establish a democratic socialist state. The logical implication of this new orientation is to emphasize deliberate changes in the distribution of real income to all people and to raise the same progressively until the range between the minimum and the maximum is reduced to the desired extent.55

Notwithstanding the state's public justification of its strategy in terms of mass welfare, an interesting question relates to the class basis of the strategy. It can be argued, as revolutionary groups did, that the strategy was intended to serve the interests of the indigenous bourgeoisie and landlords. It seems, however, that the role of the state under Mujib cannot be described in terms of serving these particular interests. The nationalization of major industries, banks, and insurance companies, and the imposition of ceilings on private investment and landholdings patently could not have been designed for the purpose of serving the interests of the bourgeoisie and landlords. In fact, the indigenous bourgeoisie in Bangladesh was weak. Since the bourgeoisie in Bangladesh was kept underdeveloped by the British and later by the Pakistanis, no strong indigenous bourgeoisie developed in Bangladesh.56 Even those who were emerging as big businessmen in the late 1960s were not given opportunities to expand their assets during the Mujib period. Through the implementation of the above measures, indeed, the state intended precisely to weaken the power base of the emerging upper bourgeoisie, and also to prevent the further growth of the upper bourgeoisie in Bangladesh. Nurul Islam, deputy chairman of the planning commission, wrote: "the basic rationale behind the ceiling was that the private industrialists were not to be allowed to grow into big capitalists either by reinvestment of profits or by means of external financing."57 Similarly, Rehman Sobhan and Mujaffer Ahmad, two members of the planning commission, observed:
The new investment policy was a far more significant indication, than the nationalization policy, of the potential intentions of the government and their own role in the new order. The policy in its essence delimited the role of the private sector in industry to that of small industry.... In its social context, the possibility of an upper bourgeoisie anchored to a material base within the system of production relations in the economy was likely to be pre-empted by the policy. Since the scope for large-scale production in agriculture had since the early 50's been eliminated, it was only in the modern non-agricultural sector that an upper bourgeoisie could have established itself. The trend of policy had in effect excluded . . . [a bourgeois] from expanding his scale of operations in industry, inland and ocean shipping, banking, insurance and foreign trade. In activating such a policy they were excluded from having a significant degree of power and influence in the economy.58

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It is obvious that, through the drastically low ceilings on private investment and landholdings, there was very limited scope left to the upper bourgeoisie and landlords to expand their influence in the polity and economy of Bangladesh. It might be argued that the state had become a mere captive of the metropolitan bourgeoisie. It is clear, however, that the metropolitan bourgeoisie could not really penetrate the industrial economy of Bangladesh. Before independence, apart from Pakistani investment, there was not much foreign investment in Bangladesh. By 1971, there were 20 private industrial enterprises owned by foreign companies; 16 of them were pharmaceutical companies, while the other 4 were Lever Brothers, Bangladesh Tobacco Company, Bangladesh Oxygen, and Pakistan Fibers (jute). The total investment of all these companies was less than 1 percent of fixed investments in the modern industrial sector. Apart from industrial enterprises, there were two branches of foreign-owned banks, which accounted for 8.4 percent of deposits at the time of nationalization.59 All the foreign-owned enterprises had their head offices in Karachi. In 1971, soon after liberation, the state assumed control of all Pakistani assets in Bangladesh. As for the multinational corporations, once the policy on foreign investment became effective in January 1973, they were not particularly enthusiastic about investing capital in Bangladesh. In particular, the commitment of the state to socialism, the very limited endowment of the country's natural resources, the poor economic infrastructure, the small local market and the uncertain prospects of the new nation, all discouraged further foreign investment in Bangladesh. The ceiling on foreign private investment was, of course, raised in 1974, but the state did not make any major concessions to foreign capital in Bangladesh. As a result, during 1973-1975, no new foreign investment materialized in Bangladesh.60 Had there been greater certainty about the stability of the state and economy of Bangladesh, and had the state offered more attractive privileges to multinationals, perhaps the results would have been different in terms of foreign investment. Furthermore, the metropolitan bourgeoisie was given very limited opportunity to form any kind of alliance with the indigenous bourgeoisie. Had the indigenous bourgeoisie been allowed to establish direct contact with the metropolitan bourgeoisie, the Bangladesh economy might have become dependent on foreign capital with the indigenous bourgeoisie becoming integrated into the world capitalist system. Nevertheless, such eventualities were prevented from occurring by the industrial policy of the state under Mujib. The deputy chairman of the planning commission of Bangladesh later observed:
The exclusion of foreign private enterprise from partnership with domestic private interests was designed to forestall the possibility of a powerful pressure group being created for the extension of the private sector.... Restricting the association of foreign private investors with the public corporations was expected to contain the influence and reduce the pressure, which might be potentially exercised by foreign interests on the domestic economy and policy, while at the same time allowing Bangladesh to secure access to technology and capital. A large public corporation would also have bargaining power in its negotiations with foreign investors, which would far exceed that of small, private domestic enterprises competing for or seeking foreign collaboration."'

Indeed, it is a fact that the state had tried to restrict the influence of the metropolitan bourgeoisie in the economy of Bangladesh. There is no

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denying, however, that in order to meet its development needs Bangladesh had to rely on foreign aid, which increased from $551 million in 1972-1973 and $456.3 million in 1973-1974 to $902.4 million in 1974-1975.e2 A poverty-stricken society like Bangladesh, which had very few natural resources to export, had to depend on foreign aid. Dependence on government-to-government foreign aid is a different matter, however. There is a world of difference between the actions of a state that is the instrument of a metropolitan bourgeoisie which dominates it, and the actions of a state that seeks foreign aid to overcome its present weak capabilities. Overall, multinationals had a very limited role in Bangladesh. They were not as dominant or active in Bangladesh as they are in South Korea or in some South American countries. The above-mentioned steps indicate that the state in Bangladesh developed a comprehensive and consistent policy to control foreign investment. Thus, it would not be accurate to describe the role of the state in Bangladesh during the Mujib period as one of serving the interests of the metropolitan bourgeoisie, the indigenous bourgeoisie, or the landlords. It might be argued that perhaps the development strategy under Mujib was one that sought to perpetuate the autonomous role of the state, free from the influence of all social classes and dominating them all. Yet this, too, is inaccurate; in fact, the kind of development strategy that was formulated and pursued by the state in Bangladesh during 1972-1975 can be explained only in terms of a deliberate scheme whereby the intermediate class- the support base of the ruling party-would benefit. The basic nature of the state under Mujib propelled it toward fostering the dominance of state capitalism in every conceivable sector so as to contain the aspirations of the upper bourgeoisie but to offer employment and other economic opportunities to the cadres of the ruling party and its class allies. Given its character as an intermediate state, there should be no surprise that it focused on functions appropriate to itself. The Awami League, ruling party in Bangladesh during 1972-1975, was as we have seen a middle-class and urban-centered political party. It had no ideological commitment to socialism. Its commitment in the 1970 election manifesto and in the constitution of Bangladesh to the establishment of an "exploitation-free socialist society," of course, compelled the state to adopt certain measures in this direction. Nevertheless, after independence, the leaders basically were influenced by considerations of political convenience rather than by commitment to ideology. To those who controlled the state, socialism meant no more than nationalization of major industries, some land reforms, and a few other halfhearted measures. Its ideological proclamations were rarely anything more than middle-class romanticism. As Jahan points out:
Though the party was publicly committed to the principle of socialism, it never spelled out what the party meant by a socialist pattern of economy. By implication it appeared that by socialism, the AL meant a policy of nationalization. What is more important, in spite of adopting socialism as one of its guiding principles, the AL continued to depend on its old power base, i.e., on the surplus farmers in the rural areas, and on lawyers, businessmen and literati professionals in the urban areas."

In fact, all the steps taken in terms of nationalization and land reforms were meant to promote the interests of the intermediate class in both urban and rural areas, where lay the base of support of the state during 1972-1975. The policy of nationalization of large industries and of banks and insurance

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companies and the policy of land reforms could benefit neither the upper bourgeoisie and large landowners nor the landless and small peasants and workers; rather, these measures served to promote the interests of the middle strata that had emerged dominant in the political system. The development strategy chosen was best suited for perpetuating AL rule by promoting the interests of the intermediate class. Once, Sheikh Mujib himself told planners that he was not ready to antagonize the intermediate class: "In these discussions, the planners were told by the Prime Minister that he was determined to build a socialist economy but that some pragmatism must be exercised since he did not want to alienate his entire middle class support."64 Let us now examine how Mujib's strategy promoted the interests of the intermediate class in Bangladesh in both rural and urban areas. The Interests of the Urban Intermediate Class In the urban areas, the strategy of development promoted the interests of the intermediate class in various ways. In the first place, the nationalization measures did not affect the members of the ruling party. Except for two or three, members of the Jatiyo Sangsad from the business community did not own large-scale industries. The nationalization program of the state concerned only large-scale industrialists, mostly non-Bengalis who had left Bangladesh in 1971.65 On the other hand, in the nationalized enterprises, most of the administrators were recruited from among party leaders and workers, irrespective of their knowledge of management or administration.66 Nationalization certainly opened wider avenues of employment in white-collar jobs to members of the urban intermediate class. Of the 1,169 officers recruited during 1972-1975 in nationalized enterprises, only 50 had management training and only 86 had technical training specific to the task of managing an enterprise.67 The rest had knowledge neither of management nor of administration. Furthermore, many persons were promoted to higher positions, not because of their experience or efficiency, but because of personal patronage. In a study of 39 public enterprises, Sobhan and Ahmad have shown that during 1972-1975, while 25 percent of the total employees were promoted from unskilled to skilled clerical level, 56 percent were promoted from clerks (staff) to the officer level, and of these at least 30 percent did not have the requisite qualifications for the posts to which they had been promoted.6" The promotion trend shows that there was particularly strong pressure for promotion to the officer level, a rank highly valued by the intermediate class. It is not only that inefficient and incapable persons were appointed and promoted in public enterprises, but also that an excessive number were appointed in these enterprises. Again, the pressure manifested itself especially at the officer level, a particularly valued target of the intermediate class.69 Second, the ceiling on private investment systematically favored smalland medium-size enterprises. The beneficiaries of this policy were selfemployed businessmen, such as traders, truck and taxi operators, small-scale industrialists, lawyers, doctors, and other professionals.70 Apart from the industrial sector, the state relaxed restrictions in other spheres, such as water and road transport, construction, and trade. In the inland water transport sector, even though the Bangladesh Inland Water Transport Corporation was set up, 50 percent of the mechanized cargo boats and ships still remained in private hands. Passenger boats and launches were also largely

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under private ownership. In the field of road transport, since the Bangladesh Road Transport Corporation operated only about 15 percent of the passenger service, the small private operators retained the predominant share. In the construction sector (i.e., the construction of government buildings), business was in the hands only of private contractors.7' In the sphere of domestic trade, the private sector retained a paramount role; public-sector manufactures and imports were marketed through private dealers and retailers. In all cases, except sugar, private traders dominated the distribution network. The private dealers were issued permits and licenses for marketing goods produced by the public sector. A substantial number of these licenses, permits, and dealerships were given to AL workers who, in turn, became the owners of large sums of "unearned income."72 The goods produced by the public sector were at times sold below the price prevailing in the black market, thus providing a surplus income to traders and dealers.73 Therefore, while the goals of nationalized enterprises outwardly appeared to be surplus maximization for investment, objectively their function was to provide the dominant elites of the intermediate state with control over this surplus for use as a political instrument in holding together the support base of the regime. The English journal, The Wave Weekly, of Dacca, commented on 23 September 1973:
The mishandling of national economy was deliberately done with political motives. National economy has been plundered to help create the base of power for the ruling politicians.. . . Nationalization opened the gates to material prosperity to the new and old generation politicians. Nationalization of industrial sectors is a pre-condition for any phased plan to socialize the economy. But it turned out to be State capitalism-all the evils of capitalism without corresponding efficiency of capitalist production. It brought no benefit either to the Government or to the people. . . . Under the cover neo-capitalism operated and so it did not have a chance to prove beneficial to the people. This scheme was taken for the benefit of the politicians. They became rich overnight, opened accounts in Swiss banks, made frequent trips abroad, acquired all luxuries of life. Nationalization saw the introduction of collective ownership by a section of the society seeking political power base through iligotten money.74

In the field of foreign trade, though the major share was intended to be in the hands of the public sector, the state allowed considerable scope to the private sector. The responsibility for importing important goods, such as cement, cotton, iron, and steel products, was given to the state trading corporation of Bangladesh, while food items were imported by the Ministry of Food. Private commercial license holders, however, could import most of these items in the name of the public corporations. During the year 1972-1973, "56.56 percent of cash imports were in fact handled by private commercial importers."75 In the export sector, though the public sector had been given a 100 percent monopoly over raw jute, jute goods, newsprint, and paper, the export trade in tea, hides, skins, leather, and fish took place through private commercial arrangements. Even the procurement of jute from the farmers, as well as its grading and bailing, were still left in the hands of private traders.76 The mechanism of private trading in certain sectors of export, "instead of eliminating private profit from foreign trade, enhanced it for a class of people in the urban areas who professed support of the Awami League."77 It is thus evident that the nationalization of industries, the imposition of a ceiling on private investment, and the retail trade being left in private hands were all measures undertaken with the political motive of satisfying the interests of the urban intermediate class.

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The Interests of the Rural Intermediate Class In the rural areas also, through its development strategy, the state promoted the interests of the intermediate class-rich peasants and middle farmers-rather than the interests of the poor or landless peasants. While large landowners also became unintended beneficiaries of state policy in many ways, the state's primary goal was to advance the interests of the rich and middle-income peasants who dominated the rural economy.78 The way the state intended to benefit the rich and middle peasants can be found in the concrete policies of the Awami League. The limitation on landholdings at 33.3 acres, no more or no less, perfectly suited the class interests of the rich peasants. Immediately after liberation, a few members of the planning commission suggested to the cabinet that the ceiling on landholdings be reduced to 10 acres or below.79 They felt that such a move was necessary in order to break the power of the rural bourgeoisie as well as to improve the condition of the poor and landless peasants. This suggestion was effectively opposed by the members of parliament, however, and the state ultimately fixed the ceiling on landholdings at 33 acres per family.80 Since nearly three-fourths of the members of parliament owned landed property of more than 10 acres, it should occasion little wonder that the state fixed the ceiling on landholdings that it did.81 In fact, land reforms had been conspicuously absent from the six-point formula that constituted the ideological foundation of the Awami League in the 1960s. It was only in the wake of the independence movement that land reforms became integral to the party's rhetoric. The top leaders of the AL had made strong statements in favor of land reforms immediately before and after independence, and therefore they had to take some steps toward this end. Nevertheless, the proposed "radical reforms" consisted merely of a return to the 33.3-acre ceiling provided for initially under the 1950 Act.82 The state under Mujib was absolutely dependent on surplus farmers-rich and middle-income peasants-for its survival, both to hold down unrest in the countryside and to mobilize votes at election time. Therefore, the land reforms were carried out in such a way that the "kulak class" was not affected adversely.83 The abolition of land revenue on all landholdings of up to 25 bighas (8.3 acres) also served the interests of the middle peasants. The measure was, no doubt, a genuine relief to many small peasants but, in practice, the middle peasants were the ones to benefit the most from it. In Bangladesh, only 25 percent of the agricultural land is held in farm units of more than 8.3 acres, while 55 percent of it is held in farm units ranging between 2.5 and 8.3 acres, and the remaining 20 percent in units below 2.5 acres.84 Even those farmers who had land above 8.3 acres could take advantage of the exemption by realigning their titles within the family to form units of 8.3 acres or less. Azizur Rahman Khan observed:
It is therefore difficultto acceptthe argumentthat the purpose the abolitionof land revenueon of
farms up to 8.3 acres is to reduce the tax burden on subsistence or below subsistence farmers.

Such an objectivecould easily have been assuredwith an exemptionof, say, 2.5 acres.85

In essential terms, agriculture remained in the private sector, and there was no real honest attempt to redistribute land to the landless. By the end of 1973, the state proclaimed that a mere 900 acres of land had been distributed as a result of the reforms. Even if this were true, Blair pointed

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out that "already the surplus farmers who dominated the rural machinery of the Awami League were not going to countenance anything serious in the way of land distribution."86 In the absence of land redistribution, the state's high ambition to bring about an equitable income distribution could hardly be fulfilled. The cooperative system was also beneficial to the rich and middle-income peasants allied to the ruling party, because all the landowning MPs, who mostly came from these classes, were generally chairmen of cooperatives in their districts.87 At the union level, the chairman of each union parishad was usually a member of the union cooperatives, while the chairmen and other members of the cooperatives were mostly rich and middle-income peasants. In a study of Mahajanpur village in the district of Comilla in southern Bangladesh, Majumder found that the managing committee of the cooperative consisted of 6 members and, of them, 50 percent had landholdings between 2 and 5 acres, 33 percent had landholdings of over 5 acres, and 17 percent had between I and 2 acres of land. There were no representatives from the landless peasants (see table 2). In another study in the northern part of Bangladesh, it was discovered that 56 percent of the members of the cooperatives had farm sizes larger than 2.5 acres.88
TABLE 2
LANDHOLDING PATTERN OF MANAGING COMMITTEE OF THE COOPERATIVE AT MAHAJANPUR. COMILLA (1974)

Landholding Category Landless Below 1 acre 1-2 acres 2-5 acres Above 5 acres Total
SOURCE:

Number of Members 0 0 1 3 2 6

Percentage 0 0 17 50 33 100

A. Mannan Majumder, "Village Mahajanpur," in Exploitation and the Rural Poor: A Working Paper on the Rural Power Structure in Bangladesh, ed. Ameerul Huq (Comilla: Bangladesh Academy for Rural Development, 1978). p. 191.

Since rich and middle-income peasants dominated the cooperatives, it is to be expected that they would obtain the bulk of facilities provided by the cooperatives, which would in no way "alleviate inequalities."89 In fact, in Comilla, 63 percent of the loans were received by members of the managing committees.90 The "pump groups," which were formed for distributing irrigation water, also mainly helped surplus farmers. In one study, it was found that 63 percent of the farmers in these groups had holdings of more than 2 acres.9' The fact that land was the only valid security acceptable for grants of fertilizers and seeds, and for loans, made cooperatives and other rural institutions useless for landless peasants.92 The entire cooperative structure was dominated by rural elites in collaboration with urban elites. Even the planning commission admitted in 1974 that "the cooperatives have turned into closed clubs of Kulaks. Membership is dominated by large and medium farmers and the small farmers are grossly underrepresented."93 In fact, in a

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polity dominated by the intermediate class, it is difficult to see how a cooperative organization could serve the interests of the poor and landless peasants. A neutral cooperative cannot be expected to work within a nonneutral power structure. In the context of Bangladesh, Wood comments:
The institutionsof the state are themselvesthe result of political and economic forces, so the rulersof the state arelikelyto deferto thoseforcesin theirallocativedecisions.In this way the institutionsof the statecannotbe opposedto the forcesfromwhich they derive, and theseforcesexist in the village as well as elsewhere.94

As a consequence of Mujib's development pol-icy, Bangladesh's economy faced a grave economic crisis that compounded the political problems of the country. There were a continued low rate of production, excessive money supply, deficit financing, and decline in foreign exchange reserves. Until 1974-1975, the last year of Mujib's rule, the GDP could not even reach the 1969-1970 benchmark level. In 1974-1975, while the GDP growth rate was 2 percent, the population growth rate was 3 percent. In real terms, the value of both agricultural and industrial output was at least 5 percent lower in 1974-1975 than in 1969-1970.95 The nationalized enterprises, overloaded with an excess of not-so-qualified officers, led to mismanagement and corruption. A group of petty bourgeois traders made a quick profit as a result of state patronage. While, on the one hand, the petty bourgeois elements in trade saw themselves as prospective industrialists, the economic position of the upper bourgeoisie (despite its small size) and that of the workers deteriorated sharply after liberation. The upper bourgeoisie found itself cut off from economic and political power, while the workers and landless peasants saw a sharp decline in their real wages. While the cost of living went up, the real wages of the workers in nationalized enterprises, during the years 1972-1975, went down about one-half (see table 3). Once the large industries were nationalized, the workers expected that they would share in the resulting advance of the public sector through higher wages and participation in management. Nevertheless, all those expectations remained far from realization. Very soon they found that the traditional division of labor between the manager and workers remained the same; there was hardly any distinction between the erstwhile capitalist and the new managers of the public enterprises. The workers saw little change in terms of benefits.
TABLE 3
WAGE RATE INDEXESFOR BANGLADESH (1969-1970

- 100) Wage Rate Index Deflated by Cost of Living Indexes 98.50 65.88 64.57 49.44

Year 1971-1972 1972-1973 1973-1974 1974-1975

SOURCE: Governmentof

Wage Rate Index 106.50 130.74 173.07 221.31

Cost of Living Index of IndustrialWorkers 108.12 198.46 268.03 447.60

the People's Republic of Bangladesh, Bureau of Statistics, Monthly StatisticalBulletin, November1978 (Dacca: GovernmentPress1978), p. 135.

Even as the upper bourgeoisie and workers were antagonistic to the regime, the AL faced an internal crisis. Although the state generally intended to benefit the intermediate class, it could not satisfy the entire class. The

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patronage in employment could not accommodate many aspiring young men. Many of them who had equal or superior qualifications were still in need of jobs. The same story appeared in the indenting and trading business. The more successful and influential among the petty bourgeoisie, of course, extracted surplus from the public sector and thus became rich in the postliberation period, but many of those who failed to receive indenting contracts, import licenses, or dealerships could not improve their standard of living. In the rural economy, too, many of the surplus farmers who had access to state patronage made considerable gains in the postliberation period, but the less-favored elements among them became antagonistic toward the state. More importantly, the leftist elements within the ruling party, who sincerely expected to establish an exploitation-free socialist society, became highly critical of the regime. Tajuddin Ahmed, finance minister, and formerly prime minister of the government-in-exile of Bangladesh in 1971, publicly proclaimed that "government policies are responsible for these developments," and consequently, Tajuddin and six other ministers were forced to resign from the cabinet in 1974.98 The contradiction in the support base of the party and the resulting internal crisis within the state apparatus weakened the party organization of the AL and laid the groundwork for the eventual downfall of Mujib in 1975. In this vulnerable situation of the intermediate state under Mujib, a successful army coup was expected, because during the Mujib regime the military bureaucracy lost the political power, positions, privileges, and facilities that it had enjoyed as the "ruling elite" in preliberation days. Conclusion In brief, the intermediate state of Bangladesh under Mujib pursued a mixed strategy of development-a strategy of redistribution with growth-emphasizing a dominant role for the public sector. The state justified its strategy of development as necessary for implementing socialism, which would promote the national interest. Nevertheless, my analysis finds that the strategy was designed neither for establishing socialism nor for advancing the interests of the upper bourgeoisie or metropolitan bourgeoisie. In fact, Mujib's strategy fostered a kind of "state capitalism," designed to promote the interests of the intermediate class in both urban and rural areas where lay the base of support for the regime. It was because of the expansion of the public sector that opportunities were opened for the intermediate class in white-collar jobs and for the self-employed private traders, who would obtain from the state exchequer the privilege of extracting a surplus by means of import licenses, dealerships, and construction contracts. In the rural areas, land reforms and tax exemptions were carried out in such a way that they did not hurt the intermediate class. On the contrary, under statesponsored cooperative systems, members of this class could acquire wealth through their dominance in the distribution of agricultural inputs. Thus the intermediate class, which through the politics of patronage could obtain import licenses and dealerships in the urban areas and membership in the rural cooperatives, had a positive interest in the mixed strategy of development pursued by the state under Mujib. Eventually, Mujib's development policy resulted in a grave economic crisis and alienated the workers, peasants, and fixed-income groups. Crisis and contradiction also emerged among the different elements of the in-

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termediate class, finally contributing to the fall of Mujib regime in 1975. In conclusion, it can be said that the state in Bangladesh under Mujib adopted a strategy of development that promoted the interests of the class allies of the regime but failed to improve the standard of living of the general masses. The state seemed to make an unrealistic attempt to combine the virtues of socialism and capitalism and to avoid the undesirable aspects of both systems. Those who controlled the state apparatus, however, had knowledge neither of a socialist nor of a capitalist system. Consequently, Bangladesh acquired the undesirable aspects of both systems without being able to enjoy the benefits of either. NOTES
'For the concept of the "intermediate state" and "intermediate class"see Michael Kalecki, Essays on Developing Economies (Hassocks,UK: HarvesterPress, 1976); see also Rehman Sobhanand Mujaffer Ahmad,PublicEnterprise an Intermnediate in Regime(Dacca:Bangladesh Instituteof DevelopmentStudies, 1980);and PeterJ. Bertocci,"Bangladesh the Early 1980s: in PraetorianPoliticsin an Intermediate Regime,"Asian Survey22 (October1982):988-1008. 2Kalecki,Essayson DevelopingEconomies,p. 31.
3Ibid.

4Talukder The Maniruzzaman, Bangladesh Revolutionand Its Aftermath(Dacca:Bangladesh BooksInternational,1980), p. 20. 5Ibid., p. 29. 'MarcusF. Franda,"Population Politicsin South Asia, Part 3: PopulationPressures the and Beginningof Bangladesh,"AmericanUniversities FieldstaffReports,SouthAsia Series16 (May 1972): 10; see also Maniruzzaman, Bangladesh Revolution,p. 192. 7RounaqJahan, "Membersof Parliamentin Bangladesh,"LegislativeStudies Quarterly3 (August1976):361. 8RounaqJahan, BangladeshPolitics: Problemsand Issues (Dacca: UniversityPress, 1980),
p. 99.

'Sobhan and Ahmad, Public Enterprise,p. 535. 'Oln fact, the attitude of the Awami League to the choice of the economic system and policies-in particular,whether to adopt socialismor capitalism-was first revealedin 1969, when it adoptedStudentAction Committee's(SAC) 11-pointdemand, which includedcertain socialistmeasures such as nationalization industries,land reforms,etc. In 1969, when Mujib of came out of jail, a receptionwas held at Dacca'sRamnaRace Course,wherehalf a millionpeople welcomedMujiband raisedthe slogansof Joi Bangla(LongLive Bengal)and Khrisak Shrmik and Raj (Peasants' Workers' Rule). Seeing the attitudeof the people, Mujibannouncedthat his partywould fight for the implementation both the 11-point and 6-pointdemands.By commitof ting itselfto the 11 points,the Awami Leaguemanagedto expandits supportbaseto the socialists and the militantyouth. "The sixpointswere: (1) the establishment a federalform of government the basisof the of on Lahore Resolution and the reintroductionof parliamentaryform of governmentwith the supremacyof the legislaturedirectlyelected on the basis of adult franchise;(2) reservation of federal subjectsto defenseand foreign affairsonly; (3) introductionof two separatecurrencies and establishment two separatereservebanksfor the two provinces; powerof the provinces of (4) to collecttaxesand revenues; maintenance two separateaccountsfor foreignexchange;and (5) of (6) the setting up of a militia or paramilitaryforces in East Pakistan.See Sheikh Mujibur Rahman,Amader BancharDabi: Chhay Dafa Karmasuchi(Six Points:Our Demand for Survival) (Dacca: GeneralSecretary EPAL, 1966), pp. 1-11. "2A.Mannan,Manifestoof All PakistanAwami League (Dacca: PublicitySecretary,1970). "3The Constitutionof the People'sRepublicof Bangladesh,p. 1.

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to 4Ibid., pp. 5-9; Articles10, 13, 14, 15, 19, and 20. According Article13 of the constitution, by state ownershipimplies"ownership the state on behalf of the peoplethroughthe creationof an efficientand dynamicnationalizedpublic sectorembracingthe key sectorsof the economy." Cooperativeownershipmeans "ownershipby cooperativeson behalf of their memberswithin by by such limits as may be prescribed law." Privateownershipindicates"ownership individuals by within such limits as may be prescribed law." 15Sobhan Ahmad, Public Enterprise,p. 122. and A 'Nurul Islam, DevelopmentPlanningin Bangladesh: Studyin PoliticalEconomy(London: C. Hurst, 1977). p. 31.
17Government of the People'sRepublicof Bangladesh,PlanningCommission,The First Five Year Plan (1973-1978) (Dacca: GovernmentPress, November 1973), p. 2. See also A. R. Perspectivesof the First Five Year Plan of Bangladesh,"Political Negaban, "Socioeconomic Economy(Dacca) 1 (March1974):74.

"8Ibid. '9FirstFive YearPlan, p. 6. see "0Ibid.; also A. M. A. Rahim, "SomeCommentson the Five-YearPlan and Planningin PoliticalEconomy 1 (March1974): 127. Bangladesh," 2""Policy Options and Recommendationsfor the Nationalizationof Industries,"mimeographed (Dacca: BangladeshPlanning Commission,February 1972); see also, Sobhan and Ahmad,Public Enterprise,p. 129. Policy Proposals,"mimeographed(Dacca: BangladeshPlanning Commission, 22"lndustrial of March 1972). Not all the ministersin the committeewere in favor of nationalization all industries.The commerceminister,who had been associatedwith the industrialhouse of A. K. only of abandonedindustries.Of the 43 houses Khanin Pakistan,arguedfor the nationalization and EconomicPower in Pakistan listed by LawrenceJ. White in his IndustrialConcentration Press, 1974), A. K. Khan'shousewas one businesshousein (Princeton,NJ: PrincetonUniversity from Bangladesh.The restof the memberson the committee,however, arguedfor the Pakdstan of nationalization all industries,and the whole cabinet supportedthis proposal. of cited as GPRB), Ministry of 23Government the People'sRepublicof Bangladesh(hereafter Law and ParliamentaryAffairs, BangladeshIndustrialEnterprises(Nationalization)Order, 1972 (Dacca: GovernmentPress, 1972). 240f the 92 percentin the nationalizedsector, 34 percentof the total industrialassetswere (EPIDC), DevelopmentCorporation alreadyunderthe managementof East PakistanIndustrial 43 percentwere owned but abandonedby Pakistanis,and 15 percentwere owned by Bengalis. See Sobhanand Ahmad, Public Enterprise,p. 192. Bank(Nationalization) Affairs,The Bangladesh Ministryof Law and Parliamentary 25GPRB, Order, 1972 (Dacca: GovernmentPress, 1972); and idem, The BangladeshInsurance(Nationalization)Order, 1972 (Dacca: GovernmentPress, 1972).
27The

Wave Weekly(Dacca), 16 December 1972, p. 1.

Ministryof Industries,A Handbookon PrivateInvestmentin Bangladesh(Dacca: 28GPRB,

Government Press, 1972), p. 1. During 1972-1973, 1973-1974, and 1974-1975, US$1 was equal to Bangladesh Tk8. See GPRB, Ministry of Finance, Bangladesh Economic Survey, 1980-81 (Dacca: Government Press, June 1981), p. 358.

Bureau of Statistics,Report on the Surveyon Small and HouseholdIndustriesin 29GPRB,

Bangladesh (Dacca: Government Press, 1972).

30Hand book on PrivateInvestment, 1972, p. 1.

31Ibid., p. 3; however, it was not specifically mentioned in which industries foreign investment

would be allowed. 32First Five YearPlan, p. 263. 33Ibid.

Economic Development: Bangladesh during Mujib Regime

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34Nurul Islam, deputychairmanof the planningcommission,pointsout: "By 1974therewere of to a numberof factorswhich had contributed an accumulation surplusfundsin privatehands. For one thing, high profitswere earnedin domesticand importtradingactivities, includingilwere illegal, the riskpremiumwas legal tradesuch as tradein the border.Sincethesetransactions high and hence, profits, once realized, were high. In addition many residentialbuildingsand tradingor commercialenterprises,abandonedby Pakistanis,were illegallyoccupiedby private of persons,in some casesunderthe coverof politicalprotection.The "care-takers" suchcommercial enterprises,hastily appointedby the governmentin 1972 immediatelyafter independence, made large fortunes through the undeclaredsale of assets. . . Those who had accumulated and to were pressingthe government commit itself to a moresubstantial perfinancialresources (DevelopmentPlanning,pp. manent role for privateenterprisein the economy of Bangladesh" illegal income, those 244-45). To this point, Lawrence Lifschultzadds, "Sincethis represents A who possessit have been searchingfor ways to legitimize their new fortunes"("Bangladesh: State of Siege,"Far EastemnEconomicReview, 30 August 1974, p. 51). 35GPRB,Planning Commission,Minutes of the Meeting Held on 3 March 1974 (Dacca: GovernmentPress, 1974). p. "Ibid.; see also Lifschultz,"Bangladesh," 51. 37GPRB, Ministryof Industries,A Handbookon ForeignInvestmentin Bangladesh(Dacca: GovernmentPress, 1974), p. 4. 38Ibid.,p. 3. 39Ibid.,p. 4. 40First Five YearPlan, p. 2. Ibid., p. 87. Order 1972." 42p.O. 96 is called "The Estate Acquisitionand Tenancy (ThirdAmendment) Part 3, 15 August1972. See The BangladeshGazette: Extraordinary,
43P. O. 98 is called "TheBangladesh (Limitation)Order1972,"TheBangladesh Landholdings Gazette, 15 August 1972.

44Ibid.

45Tafazzal Hossain,"Land Policy: The EmergingPattern 1," The BangladeshObserver,16 May 1972. 4"The BangladeshObserver,17 August 1982. minister, 47Ibid.,25 May 1972;see also the statementof the land reformsand administration in The BangladeshObserver,5 August 1972. However, accordingto Abdullah,by 1975 "only 5,371 families[had] filed returnsshowing excesslands, and total area of excessland declared [was] 76,712 acres."See Abu Abdullah,"LandReformand AgrarianChange in Bangladesh," BangladeshDevelopmentStudies4 (January1976):6. "See Rahim, "An Analysisof PlanningStrategyin Bangladesh," 284. p. 4"Md.Rafiqul Islam Molla, "CooperativeFrameworkfor the Development of Marginal Political Workers the FirstFive YearPlan of Bangladesh," in Farmersand LandlessAgricultural Economy 1 (March1974):240-44. "These terms have been defined in Betsy Hartmanand James K. Boyce, NeedlessHunger: Voicesfrom a BangladeshVillage (San Francisco, CA: Institute of Food and Development Policy, 1979), p. 17.
5"Cited in A. R. Negaban, "SocioeconomicPerspectivesof the First Five Year Plan of Political Economy 1 (March1974):74. Bangladesh,"

in and deVylderandDaniel Asplund,Contradictions Distortions a RuralEconomy: 52Stephan DevelopmentAgency, 1980), SwedishInternational The Case of Bangladesh(Utredningsbyran:
p. 135.

Frameworkand Problemsof Economic Policy: Some -3M. K. Chowdhury, "Sociopolitical on PoliticalEconomy 1 (March1974):61. Observations DevelopmentPolicy in Bangladesh,"

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'Islam, DevelopmentPlanning, p. 220. 55Rahim, "PlanningStrategyin Bangladesh," 384. p. 'Bill Christeson, "Neither Food Nor Peace, U.S. FoodPolicyin Bangladesh," PacificResearch
10 June 1980): 11.

57Islam, DevelopmentPlanning,p. 22. and 58Sobhan Ahmad, Public Enterprise,pp. 217-18. 59Ibid., p.' 211; see also Mohiuddin Alamgir, "Foreign Capital, Inflow, Savings, and EconomicGrowth-A CaseStudyof Bangladesh," Bangladesh EconomicReview2 (April1974): 577-98. of '?Onlyin June 1974, officialsin the Ministry NaturalResources indicatedthat they were on the vergeof signingcontractswith seven foreigncompanies,grantingthem offshoreoil exploration rights.The total investment outlayfor all 7 fields, if theyprovedto havecommercially viable deposits,could have been US$1,500million over a 6-yearperiod. This did not materializeuntil Mujib'sdeath in 1975, however. See Lifschultz,"Bangladesh: State of Siege,"p. 51. A DevelopmentPlanning,222-23. A similarstatementis offeredby RehmanSobhan,in "I1slam, his "Bangladesh the WorldEconomicSystem:The Crisisof External and Dependence," Development and Change 12 (January1981):331. 62See BangladeshEconomicSurvey,1980-81, p. 127. 03jahan,Bangladesh Politics, p. 99. "See Sobhanand Ahmad, Public Enterprise,p. 122. '50f the 392 nationalized 263 enterprises, were abandoned,owned by Pakistanis. U. A. B. See Razia Akhter Banu, "The Fall of the Sheikh Mujib Regime: An Analysis,"Indian Political ScienceReview 15 (January1981):6. 88Talukder Maniruzzaman, in "Bangladesh 1974:EconomicCrisesandPoliticalPolarization," Asian Survey 15 (February 1975): 118; see also, Tushar Kanti Barua, Political Elite in Bangladesh(Bern:Peter Lang Publishers,1978), p. 64. and Ahmad,Public Enterprise,p. 545. "7Sobhan 68Ibid.,p. 544. The Wave Weekly(Dacca), 13 October1973, reportedthat "themanagement personnelin the nationalized sector,i.e., managers,administrators, were given the jobsnot etc., becauseof theircommitmentto socialismor becauseof theirexpertise,experience efficiency, and but becausethey had the right connectionswith the Awami League." '9A.T. M. A. Quddus,chairmanof the PorjotanCorporation 1981, told me that, when he in took chargeof this corporation 1979, he noticedtherewere a numberof unnecessary in officials. Some of the officersdid not even have a chair to sit on. They used to come to the office and sign their names in the signaturebook and take their salarychecksat the end of each month. He claimed that, when he became chairman,the first thing he did was to open a few restaurants, such as "Ruchita" Dacca, and stores,such as the storein the New Airportof Dacca, underthe in ownershipof the corporation,where these "unwanted" officers were appointedas managers. Personalinterview, 19 May 1981. '0PremShankar notesthat "thedominantcharacteristic self-employment that thereis Jha of is no divorce, or at least a nascentdivorcebetween labourand capital on the one hand, and between capital and managementon the other. Correspondingly, earningscan neither be its classifiedas a rewardforlabor, noras a paymentfor risktaking(i.e., profits)but arean amalgam of the two. The self-employed thus lie between the large-scale professionally managedcapitalist of enterprises the privatesector, and the workingclasses" (India:A PoliticalEconomyof Stagnation [Bombay:OxfordUniversityPress, 1980], p. 95). "'Holiday(Dacca), 9 August 1973. "2Ibid.,29 April 1973;see also Banu, "Fall of the SheikhMujibRegime,"p. 14. "Aniket (pseudonym), of "MagicbehindDisappearance Merchandise," Dainik Bangla(Dacca), 1 November1972. See also Rahim, "Analysis PlanningStrategyin Bangladesh," 387. of p.

Economic Development: Bangladesh during Mujib Regime

207

74 The Wave Weekly, 23 September1973. and 75Sobhan Ahmad, Public Enterprise,p. 195.
70Ibid., pp. 195-96.

Political Elite, p. 65; see also Holiday (Dacca), 19 August 1973. 7"Barua, 78AbuA. Abdullah and RichardNations, "AgrarianStructureand the IRDP: Preliminary BangladeshDevelopmentStudies4 (April 1976): 209. See also, G. D. Wood, Considerations," A "The PoliticalProcessin Bangladesh: ResearchNote," in Exploitationand the RuralPoor:A WorkingPaper on the Rural Power Structurein Bangladesh, ed. Ameerul Huq (Comilla: Academyfor RuralDevelopment, 1978): 17-58;PeterJ. Bertocci,"ElusiveVillage: Bangladesh Social Structureand CommunityOrganizationin RuralEast Paldstan"(Ph.D. diss., Michigan State University,1970). and 79Sobhan Ahmad, Public Enterprise,p. 145. "Fall of the SheikhMujibRegime,"p. 6. 80Banu, 81Jahan,BangladeshPolitics, p. 150. She shows the individual landholdingpattern of the membersof the parliamentas follows:
OF LANDHOLDINGS MPs

(Percentages)
NUMBEROF ACRES YEAROF ELECTION

Less
Than 1 1-3 3-10.4 10.5-25.5

Above
25.5

1970
1973

0.9
1.3

10.1
11.0

34.7
26.2

28
31.1

26.8
30.4

Total 228
237

was 82In1968,only 4.5 percentof the land in Bangladesh held in unitseven as largeas 25 acres, so the amountof land over the new ceiling was rathersmall indeed. See Governmentof East in of Pakistan,Ministry Agriculture,TheMasterSurveyof Agriculture EastPakistan,sixthround (Dacca: GovemmentPress, 1968);see also AzizurRahmanKhan, The Economyof Bangladesh (London:Macmillan, 1972), p. 39. 83The followingtable showsthat in 1965about63.26 percentof the membersof unioncouncils of had landholdings above7 acres,whereasin the 1973electionof union parishads,63.6 percent between 2 to 7 acres, renderingthem middle peasants. of the membershad landholdings
UNION LANDHOLDINGS

LandYear less

Up to 2
Acres

2 to 7
Acres

Above 7
Acres

Percentage
(Total)

1965 1973

0 0

2.29 18.20

34.43 63.60

63.26 18.20

100 100

LocalBodiesand Change:The Emerging "Pakistan's SOURCE:For 1965, see M. Rashiduzzaman, Orient9 (August1968): 127. For 1973, See M. Solaimanand M. Patternof Local Leadership," in of Alam, "Characteristics Candidatesfor Electionin ThreeUnion Parishads Comilla Kotwali (Comilla:BangladeshAcademyof RuralDevelopment, 1977). Thana," mimeographed SouthAsian EconomicPoliciessinceIndependence," AzizurRahmanKhan,"Bangladesh 84See The Review 8 (October1974):25; see also, M. A. Zaman,, "Bangladesh: Case for FurtherLand Reform,"SouthAsian Review 8 (January1975):97-115; and Abdullah,"Land Reform." Economic Policies,"p. 26; a similar argumentis given by Salil 85A. R. Khan, "Bangladesh Economicand Political Weekly8 Long Haul to AgrarianReforms," Sanyal in his "Bangladesh: (15 December1973): 2211-13. W. 86Harry Blair, "RuralDevelopment, Class Structure,and Bureaucracyin Bangladesh," WorldDevelopment6 (January1978):70.

208

Syed Serajul Islam

87Islam, Development Planning, p. 204. 8"Ibid. 89Abdullah, "Land Reforms," p. 96. Mohammad Sekandar Khan points out that "the broad national objective of attaining welfare of the people is likely to be frustrated eventually by the mechanism of subsidy as it aggravates the problem of the inequality of wealth." See his "Rural Institutions and Agricultural Development of Bangladesh," Political Economy 2 (March 1976): 538. 'OM. Rahman, "Economic Incentives and Rural Income Distribution: Some Observations in the Light of Bangladesh Experience," mimeographed (Dacca: Bangladesh Planning Commission, 1973). "'Islam, Development Planning, p. 205. 92The subsidized seeds and fertilizers were given only to those who had property worth mortgaging. Those who had more land could take greater advantage of the opportunities offered through subsidies. For example, in times of scarcity, subsidized fertilizer below market price would create a black market and if there were no scarcity there would be competition to buy more of government-priced goods as opposed to goods at market price. In either case, the rich benefited, for they had the money to buy and trade in the black market, or the money and influence to "corrupt government officials in charge of distribution." See Blair, "Rural Development," p. 71. 93Cited in deVylder and Asplund, "Contradictions," p. 153. 94Wood, "Political Process," p. 29.

95GPRB,Ministryof Finance, BangladeshEconomicSurvey, 1979-80 (Dacca: Government Press,June 1980), p. 2. "6Maniruzzaman, in "Bangladesh 1974,"p. 119;see alsoN. H. Harun,"Tajuddin,Usmani,to Resign,"Holiday (Dacca), 6 January1974.