-: dr mir obaidur rahman :-
the various issues that raghuram rajan addressed in his book, fault lines: how hidden fractures stil threaten the world economy are on financial crisis of 2008, the outward orientation of the economy, the growing income inequality and policy issues related to regulation and deregulation of financial institutions that cause havoc in the financial market. the book which was published by the princeton university press in 2010 was awarded financial times and mckinsey business book of the grade prize for an in-depth analysis of the myriad causalities that cause fractures in the economy. as a result of the shifts in the tectonic plates, fault lines develop in ground and cause earthquake. thus the geological metaphor brings a harsh fact in economic life that cataclysmic disaster may occur in economic field that could also have disastrous consequences. though it discussed the various facets of financial crisis that shelved united states and many of her economic partners into the great recession after the great depression of 1930; the book discussed in detail how different structural problems accumulated in the domain of financial and political institutions that spewed self-interest and a future recipe for a more devastating crisis. surprisingly, the question bothered queen elizabeth ii who asked, “why no economist had forecast the crisis”. the simple answer was - though someone sounded warnings [rajan was one of the economists] policy makers attached to the financial institutions ignored the warnings. though the american economy enjoyed the period of great moderation during 1990-2000 and there were no recession in sight, the apprehension was there for a financial crisis hidden in the subprime mortgage. there was a spree to invest in risky assets with hefty returns generated by financial institutions beguiling a very fundamental idea between real and nominal variables. the state worked as patron in the whole episode through its state owned insurance units; fannie me and freddie mac and with other leverage. the policy of cheaper money was designed to appease the low and middle income people who were struggling with poor pay and could not afford a better living. it is interesting to note that many americans came to treat their homes like an automated teler machine that never required a deposit. the hangover was in the form of a pile toxic debt riddled with an environment of uncertainty that revealed president bush’s limited understanding of the financial crisis who considered it as a temporary phenomenon attributable to intoxication with fancy financial instruments. indeed, the world inequality has worsened. oxfam in a report, entitled “an economy for the 1 per cent,” published in 2016 found that since 2010, the wealth of the richest 62 people has grown by 44 per cent while the wealth of the 3.5 billion fel by 41 per cent though the average annual income of the poorest 10 per cent has risen by less than $3 a grade in the past 25 years. the inventory of gdp of the top one per cent of the population in the united states was 9 per cent in 1976 but in 2007, the inventory stood at 24 per cent. we observed demonstration on crony capitalism in 2015 and there is a note posted in november, 12 with a request for another demonstration on january 20, 2017. the slogan tells that we are the 99 per cent that wil no longer tolerate the greed and corruption of one per cent. the book is a guide for the policymakers of untied states and many western countries where corrective action is a binding requirement for future. however, the chemistry developed in the book on the fractures may be observed in many other countries of the world. consider the economy of bangladesh. there are many positive changes in the fundamental economic parameters. the poverty situation has improved and bangladesh is in the third position in inequality index among the eight saarc countries. the country has relatively a very narrow commodity basket of export and the tax-gdp ratio is smallest compared with many countries of the world. there are certain laxities in the performance of the financial sector, specially the performance of the state owned banks which thrive on public exchequer; now many consider as a black hole that could bring devastation in the financial sector. among the determinants of growth, two of them are quality of human capital and state of corruption. the quality of higher education and the quality of education has reached its lowest ebb and the country could not substantially improve on corruption perception index. with a score of 25 out of 100 points bangladesh ranked the 13th position from the bottom and 139th from the top among the 168 countries. the fault lines for bangladesh are in the weak institutional base that foster corruption and thus require strong political commitment to fight corruption. there are certain areas with genuine lack of accountability despite severe criticism from the civil society. the anomalies that we observe in different state functioning focus on a narrow and partisan denominator that makes fracture in the democratic structure hidden in the concept of rent seeking.
the writer is a professor of economics, united international university