As the labor riots in Dhaka enter their second day, one has to wonder if the chaos caused by a garments factory closure should have caught anybody by surprise. Trade economists have long predicted upheavals in the post-MFA Bangladeshi textiles and wearing apparels industry. While it is true that many Bangladeshi garments are in a slightly different market than what our East Asian neighbors may produce, it was inevitable that our competitors would chip away at our market share. For Bangladesh, where almost three-fourths of our exports are textiles and wearing apparels, even the smallest of predicted declines should have sent the alarm bells ringing long before we would see hundreds of disgruntled workers on the streets facing off with riot police.

I would contend that these labor riots are a symptom of a much more serious problem than the disciplines of competition forcing down our exports, shrinking our garments industry, and reducing the incomes of our garments workers. For too long, our industrial base has had too narrow a focus. In the capital, one may hear about various services sectors – marketing, telecommunications, and what have you – growing and its urban, higher-educated workers prospering. As the services sector grows, so do the incomes of the workers. However, the reality of Bangladesh is that higher-skill services, while accounting for almost half our GDP, cannot be the primary driver of income growth for the masses when it only employs a fourth of our workforce. Stagnation in income growth is a reality for the vast majority of our workforce who are less-educated and, working in agriculture and manufacturing. Being employed in this manufacturing sector – where output prices and subsequently wages – are set by international markets, income growth is expected to be volatile. Slow growing and high variance incomes are at the heart of the current troubles.

The incessant inflation of the past couple of years, eating away at the real incomes of the labor force, has brought this all to a head. The Government’s response –importing more food, open market sales, and various social safety nets – may mitigate much of the damage that high commodity prices for lower income groups. These measures, however, are just a few more fingers in the dam. As Jyoti Rahman wrote back in November, global inflation (agflation) is on the rise and it is certainly going to continue to bite us. At the same time, our current monetary policies are certainly not the best of anti-inflationary policies.

So what can be done to improve our labor force’s income growth, or at least reduce the variation due to international market forces? An extension of Jyoti’s recommendation for dealing with the inflation – increasing our own agricultural output – may be the key. I would extend this idea to expanding not just agriculture, such as through judicious investments in biotechnology, but to also encourage the growth of our manufacturing sector. These two sectors are the ones that are going to be hiring the people that are rioting right now, not the services sector. If these sectors absorb them, and provide a steadily increasing paycheck over the years, perhaps we could expect a lot fewer riots, and perhaps more equitable – albeit slower – income growth.

If anybody else has any bright ideas, now would probably be a good time to share with the powers that be.