Economic Expansion and Political Regimes in Bangladesh (1972–2017): What the Business Cycle Reveals

By Niaz Murshed Chowdhury

PhD in Economics, California Department of Public Health

In the years following Bangladesh’s independence, the nation has experienced dramatic swings in economic performance. From famine and fragility to booming growth and infrastructure development, these shifts often reflect more than just global market trends—they mirror the political landscape.

To understand how different governments influenced Bangladesh’s economy from 1972 to 2017, we analyzed real GDP using detrended data, which filters out long-term growth and highlights short-term fluctuations—known as the business cycle.

🔄 Understanding the Business Cycle

The business cycle tracks the ups and downs of economic activity—expansion and contraction. When GDP rises above its trend, the economy is expanding. When it dips below, contraction occurs. Using this method, we visualized Bangladesh’s economic rhythm over the decades—and the results were striking.

📉 1975: The Sharpest Economic Contraction

Following the assassination of Bangabandhu Sheikh Mujibur Rahman in 1975, Bangladesh’s economy reached its lowest point. Political upheaval, institutional breakdown, and loss of visionary leadership contributed to deep contraction.

📈 1977–1981: Ziaur Rahman’s Stabilization & Growth

Under Ziaur Rahman, Bangladesh witnessed a rapid economic turnaround. Zia laid the groundwork for privatization, decentralized rural development, and administrative reforms. He may not have had a long rule, but his impact on stabilizing and expanding the economy remains unmatched in that early post-independence phase.

📊 Ershad’s Long Rule: Consistency Supported Growth

H.M. Ershad inherited a recovering economy and, despite his autocratic rule, sustained macroeconomic expansion until 1988. His investments in rural infrastructure, local governance (Upazila system), and agricultural policy helped maintain growth.

⚠️ 1990–2004: Democratic Transitions and Economic Volatility

Following the fall of Ershad, Bangladesh transitioned into parliamentary democracy. However, this era saw frequent changes in government, widespread political conflict, hartals, and strikes. Economic contraction returned between 1996–2001 during Sheikh Hasina’s first term, as political gridlock and policy inconsistency undermined investor confidence.

From 2001 to 2004, Khaleda Zia’s government initially saw further contraction, but then the economy rapidly expanded between 2004 and 2006—indicating partial recovery and global tailwinds.

🌍 2008 Global Recession and Recovery (2008–2017)

The 2008 global financial crisis affected Bangladesh as well, but the economy rebounded sharply. From 2010 to 2017, especially between 2014–2017, Bangladesh saw consistent and robust growth—largely under Sheikh Hasina’s uninterrupted second and third terms. Her government’s focus on megaprojects, digital connectivity, and power sector reform drove expansion.

🧠 So, What Patterns Emerge?

1. Continuity Enables Execution

Longer ruling governments—Ershad and Hasina—had time to implement their development visions. Infrastructure takes years. So does education reform. Political stability breeds economic delivery.

2. Transitions Bring Disruption

Most contractions occurred right after government transitions, excluding Zia's regime. New governments often purge institutions, alter priorities, and introduce policy shocks. These disruptions slow investment and performance.

3. Autocracy Prioritizes Growth for Legitimacy

Both Ershad and Hasina's long tenures used growth as political capital—to win legitimacy and credibility. It worked, especially with large-scale infrastructure and rural projects.

4. But Growth Hasn’t Been Inclusive

A 2018 Wealth-X report showed Bangladesh had the highest growth in ultra-high-net-worth (UHNW) individuals globally (17.3% between 2012–2017). Meanwhile, wage growth and poverty reduction remained sluggish. Wealth has become highly concentrated, undermining the quality of growth.

📌 Final Thoughts

On the surface, it may seem that long-term regimes—often autocratic—have delivered the best economic results. But this comes with trade-offs: reduced democratic accountability, wealth concentration, and risk of institutional decay.

Bangladesh must ask:Do we need autocracy for growth? Or can we build institutions strong enough to deliver prosperity under democracy?

As we plan for the future, we must learn from the past—not just the numbers, but the context that shaped them.

Author’s Note: This analysis was supported by Mubarak Bhai. We have treated economic expansion as positive, and contraction as negative, strictly in business cycle terms.