The Washington Post ran an article on Bangladesh last Wednesday. Most of it reads like a first-year undergraduate’s research paper, which is fine given that this is for public consumption. However, the story gets it wrong on one very important front: inflation.

The article says:

The transition from a system in which corruption rules to one in which institutions do has indeed been difficult. Prices for daily essentials such as rice and fish, staples of the Bangladeshi diet, have increased. The reason, according to some analysts, is that businesses are finally paying taxes levied on their products and passing on the costs.


and again:

Many business leaders say that what used to get through with a call to the right contact, a slap on the back and an envelope of cash now requires paperwork in triplicate and rounds of approvals. On Dhaka’s traffic-clogged streets, fruit and fish dealers are learning about new tax codes and fees that need to be paid to get their products to market.

“This is all news to us,” said Kazzim Uddin, 37, a father of four who swatted the flies away from his silver trays of sardines and white fish. “We don’t have to pay bribes anymore. But we do notice the prices are so much higher. Long-term, it is so much better. But short-term, it hurts the family budget.”

Yet another instance of an America-centric media covering only that part of the story that fits in with their ideological spectacles and ignoring the reality on the ground!

For those interested in a better treatment of our inflationary pressures, please read this old post by Jyoti bhai and the subsequent discussions. There you will see that the current inflation goes above and beyond the passing-taxes-onto-the-consumer rationale given in the WP post. It is tragic that such a childish view of such an important problem for 140 million people is presented in a major American newspaper.

It has been argued that the current government has made inflation worse through its anti-corruption drive against businessmen and businessmen/politicians. That argument has been made with regards to the business confidence of the businessmen themselves. That is not the argument that this article is making however. This is seeing inflation as (ONLY) the result of a move from a patronage(corruption)-based system to an institution-based system. What I find baffling is the logic involved in constructing this argument in the first place: essentially they are saying that political patronage networks take less “tax” from the people than the “institutional” state, which is why prices are now higher. IF this is true (and there is no empirical study on BD to prove it), this is not exactly a great incentive to move away from patronage systems into institution-based ones in the short-run! But given the inherent stability of institutions over patronage networks, not a bad price to pay.

What they don’t do is cover the other side of the picture: what services the government is providing in return for the taxes. Are they doing a better job without political patrons interfering? That is of course not something that the article deals with. Shoddy research and reporting!