Case Study 1 — Bangladesh: The Improbable Development Success
Bangladesh was called "the basket case of Asia" by Henry Kissinger in 1974. GDP per capita was about $400. The country had recently gained independence through a brutal war, had virtually no natural resources, was prone to catastrophic flooding, and had one of the highest population densities in the world.
Fifty years later, Bangladesh's GDP per capita has risen to about $2,800 — a sevenfold increase. The country is the world's second-largest garment exporter. Life expectancy has risen from 46 to 74. The fertility rate has fallen from 6.9 to 2.0. Bangladesh has overtaken India in GDP per capita — a fact that would have been inconceivable in 1974.
What drove the success
Garment manufacturing. Starting in the 1980s, Bangladesh became a major exporter of ready-made garments — exploiting its comparative advantage in low-cost labor. The garment industry now employs about 4 million workers (mostly women) and accounts for about 80% of exports.
NGOs and social infrastructure. BRAC (originally Bangladesh Rural Advancement Committee) is the world's largest NGO. It provides microfinance, health services, education, and training to millions of rural Bangladeshis. Grameen Bank (founded by Muhammad Yunus, Nobel Peace Prize 2006) pioneered microfinance. The NGO sector has partly substituted for weak government institutions.
Women's empowerment. The garment industry and the NGO sector have both disproportionately employed and empowered women. Women's labor force participation has risen dramatically. This has contributed to lower fertility, better child health, and higher household income — a virtuous cycle.
Remittances. About 10 million Bangladeshis work abroad (primarily in the Gulf states). Remittances account for about 5–6% of GDP and are a major source of household income.
What Bangladesh did NOT do
Bangladesh did not follow the East Asian model (no state-directed industrial policy, no heavy investment in human capital before industrialization). It did not have strong institutions (governance is poor by most measures — corruption is high, the judiciary is weak, political violence is common). It did not receive large amounts of foreign aid (aid is less than 2% of GDP).
The Bangladesh success challenges the simple version of the institutions-only thesis. It suggests that even in a weak-institutional environment, growth can happen through bottom-up mechanisms (garment exports, NGOs, women's empowerment, remittances) — though it also suggests that the growth may be more fragile and more limited without institutional improvement.
Discussion questions
- Bangladesh has grown rapidly despite weak institutions. Does this challenge the Acemoglu-Robinson thesis?
- The garment industry employs 4 million workers — mostly women earning $80–150/month. Is this exploitation or empowerment?
- Could the Bangladesh model (garment exports + NGOs + remittances) work for sub-Saharan African countries?