Problems Central to Economic Policy Deregulation in Bangladesh

Abstract In this paper, an attempt is made to apply Keynesian imbalance principles to the problem of deregulation, based on a case study of Bangladesh. It is argued that in a structurally heterogeneous economy which is characterized by dependency on equipment imports, major elements required for the smooth functioning of market mechanisms are absent. Above all, fiscal and monetary policies cannot influence total demand through their effect on equipment production. Nor will the relaunching of the business cycle after protracted depression through the replacement of physically worn out or technically obsolete machinery lead to an increase in the level of employment with additional multiplier effects. Thus, the major mechanism of redistribution of power as found in capitalist development countries is therefore lacking. Structural defects are associated with the emergence of rent, which requires non-market forms of allocation and which is closely associated to aid. As rent/aid lead to high equilibrium exchange rates, they discourage diversification and require planning and limits to deregulation. It is therefore argued that because of the misallocation of aid/rent in the actual project implementation process, the simple support of the purchasing power of the marginalized population is preferable.