Former Prime Minister Sheikh Hasina frequently claimed that Bangladesh was a "market economy." But is it? A market economy is, by definition, a capitalist economy guided by prices, competition, and supply-and-demand dynamics. Yet, Bangladesh has never operated as a genuine market economy or functional capitalist system. Nor is it a hybrid of the two. It belongs to a different category: corrupting capitalism. Understanding this distinction is essential because labelling the system incorrectly blinds policymakers and citizens to the true sources of stagnation and inequality.
Ideally, roughly 60 percent of national income should flow to labour through wages, benefits, and social contributions, while about 40 percent should flow to capital for profits, depreciation, reinvestment, and innovation. This equilibrium can sustain worker purchasing power and provide businesses with the resources needed to modernise and remain competitive. When this 60/40 balance holds, even a capitalist can be deemed as efficient and even compassionate. When it collapses, both labour welfare and long-term growth will deteriorate.
In market capitalism, productive resources are privately owned, and decisions about production, pricing, and allocation are guided primarily by supply and demand. Capital and labour flow naturally toward high-return activities because incentives reward efficiency, innovation, and risk-taking. The invisible hand functions only when institutions ensure transparency, enforce contracts, and punish illicit behaviour. None of these factors operate reliably in Bangladesh.
Although private enterprises operate on the surface, the core levers of opportunity are controlled not by competition but by political access, administrative discretion, and entrenched rent-seeking. Licensing, procurement, customs clearance, taxation, port operations, land registration, and credit allocation—every essential interface between citizens and the economy is mediated by bureaucratic power and political patronage. Prices may be set in the marketplace, but entry, survival, and profitability depend on informal payments, political networks, and navigating layers of extraction.
Within such a system, the 60/40 architecture collapses instantly. Labour never receives anything close to its rightful 60 percent; wages are suppressed because corruption in every step of production inflates nonproductive costs. Capital fails to retain the 40 percent needed for reinvestment because profits are siphoned off through bribes, political tolls, extortion, overpriced contracts, syndicate fees, and hidden commissions. The result is neither capitalism nor socialism but a predatory fusion—corrupting capitalism—where corruption is not leakage but a dominant production input.
In Bangladesh, corruption is systemic and foundational. It structures incentives, allocates resources, determines winners, and sustains political arrangements. Market forces become secondary; informal power becomes primary. Efficiency does not determine outcomes; connections do. Taxes do not reliably fund public goods; inside deals fund political loyalty. Growth may occur, but it remains fragile and uneven because it is built on extraction rather than productivity.
No sector exposes Bangladesh's corrupting capitalism more starkly than the denim industry. Producing a single denim item requires nearly 3,000 litres of groundwater. In a functional capitalist system, such extraction would require environmental permits, monitoring, and compliance. In Bangladesh, many factories drill illegal deep wells and extract groundwater at zero cost because every clearance—environmental, hydrological, laboratory, or operational—can be bought through bribery.
Water used in denim processing becomes a chemical mixture containing heavy metals, synthetic dyes, caustic soda, chlorine bleaching agents, microplastics, and carcinogenic compounds. By law, this wastewater must be treated in Effluent Treatment Plants (ETPs). In practice, operating an ETP is expensive, while bribing inspectors is cheap. As a result, many ETPs operate only during staged audits; otherwise, they remain idle or are bypassed through hidden pipelines.
The consequences are devastating. Untreated effluent—thick, blue, acidic, and toxic—is discharged directly into the Buriganga, Turag, Dhaleshwari, Bangshi, and Shitalakshya rivers. Once-vibrant ecosystems have turned into chemically scorched wastelands. Oxygen levels collapse; fish populations disappear; riverbeds accumulate toxic sludge.
The damage spreads far beyond the water. Farmers irrigate fields with polluted river water, contaminating soil and crops. Fish, livestock, and vegetables absorb heavy metals and persistent toxins. Communities face rising rates of kidney disease, neurological disorders, skin ailments, reproductive harm, respiratory illness, digestive complications, and cancers linked to industrial pollutants. This silent public health emergency is the hidden cost behind the country's export earnings in the denim industry, paid by the poor who have no voice in regulatory enforcement.
This is not a market failure; it is environmental plunder masquerading as industry. The world enjoys inexpensive denim because Bangladesh pays with poisoned rivers, depleted aquifers, degraded soil, and damaged human lives. Denim becomes a metaphor for corrupting capitalism: the country's natural and human resources are the silent subsidies that sustain production. The recent discovery that marine fish stocks in the Bay of Bengal have collapsed by nearly 80 percent in just seven years further illustrates how corrupting capitalism devours natural resources when regulation becomes negotiable.
The denim case reveals the deeper moral collapse of Bangladesh's economic system. In compassionate capitalism, the 60/40 structure supports social trust, innovation, and reinvestment. In Bangladesh, corruption pulverises all these pillars.
Labour's share collapses because wages are suppressed by informal payments embedded throughout production. Capital's share collapses because profits are diverted into political rents rather than reinvestment. Environmental protection collapses because enforcement is negotiable. Innovation collapses because extraction rewards compliance with power, not creativity or efficiency. Institutional trust collapses because every rule, permit, and inspection can be bought. This produces a self-reinforcing cycle: corruption breeds inefficiency, which then demands more corruption to remain profitable, locking the economy in a low-trust equilibrium.
Finally, the future collapses because the nation somehow—in broad daylight and in the dark of night—cannibalises nearly all its productive resources: its rivers, ocean, groundwater, and even its people. Bangladesh is therefore neither a market economy nor a compassionate capitalist system, and not even a hybrid of the two. It is an economy in which natural and human resources are trapped in a downward spiral created by the system, yet struggling to sustain and seeking rescue.
Dr Abdullah A Dewan is professor emeritus of economics at Eastern Michigan University in the US, and a former physicist and nuclear engineer of Bangladesh Atomic Energy Commission. He can be reached at [email protected].
Views expressed in this article are the author's own.
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