May Day, frozen capital and the silent cost to the economy

As the world observed International Workers' Day this past week, much of the discussion rightly focused on workers' dignity, fair wages and social justice. Yet in developing economies like Bangladesh, there is another dimension of labour welfare that receives far less attention: the economic consequences of immobilised capital.

Recent years have witnessed the freezing and seizure of substantial amounts of cash, shares, land and business assets in the name of anti-corruption enforcement and financial investigations. The objectives behind such actions may well be legitimate. No civilised society can function without accountability, transparency and the rule of law. Genuine corruption must be investigated and punished firmly.

However, an important economic question deserves careful consideration: what happens when very large amounts of productive capital are effectively removed from circulation for prolonged periods?

In economic terms, frozen assets often become dormant assets.

Cash trapped in frozen bank accounts no longer circulates through the banking system. Shares under restriction cannot be collateralised to raise financing. Land under seizure frequently remains undeveloped. Businesses facing prolonged restrictions delay expansion, reduce procurement, slow construction activity and become hesitant to hire.

The result is not merely an accounting issue. It affects the velocity of money, the speed at which money moves through an economy supporting salaries, suppliers, transport operators, contractors, retailers and countless small enterprises.

In a developing economy, this velocity matters enormously.

Tk 100 circulating productively through wages, purchases and investment contributes far more to economic activity than Tk 100 lying legally immobilised for years. When multiplied across tens of thousands of crores, the secondary effects can become significant: lower private investment, weaker employment generation, slower industrial activity and reduced tax collection.

The first people to feel this pain are rarely wealthy owners. It is workers.

Tk 100 circulating productively through wages, purchases and investment contributes far more to economic activity than Tk 100 lying legally immobilised for years. When multiplied across tens of thousands of crores, the secondary effects can become significant: lower private investment, weaker employment generation, slower industrial activity and reduced tax collection.

Construction slows. Contractors wait longer for payments. SMEs supplying larger businesses experience cash flow stress. Banks become cautious. Industrial expansion is postponed. New employment opportunities diminish quietly, often invisibly.

This is particularly important at a time when Bangladesh faces multiple economic pressures simultaneously — global energy volatility, high import costs, external payment pressures and the challenge of sustaining industrial growth after LDC graduation.

International investors also observe these developments closely. Investors understand the necessity of lawful investigations. But they also assess whether productive enterprises can continue operating normally while judicial or administrative processes proceed. Long periods during which commercially viable assets remain economically paralysed can unintentionally weaken investor confidence, especially in infrastructure-intensive sectors requiring long-term financing.

The solution is not to weaken accountability. Rather, it is to create balanced mechanisms that preserve economic productivity while legal processes continue.

Many countries utilise court-supervised operational structures that allow businesses to continue paying salaries, maintain operations and pay taxes, while also servicing banks and preserving productive activity, even as investigations proceed independently.

This distinction is important. There is a difference between protecting society from illicit enrichment and unintentionally suppressing productive national capacity.

For a developing nation, capital formation remains precious. Infrastructure, industry, energy systems, telecommunications and logistics networks are not merely private assets; they are components of national economic capability. If these become inactive for prolonged periods, the wider economy absorbs the cost.

As Bangladesh reflects on the spirit of May Day, perhaps the broader lesson is this: economic justice is not achieved only through enforcement. It is also achieved by ensuring that productive capital continues creating employment, supporting growth and sustaining economic momentum.

Justice must certainly punish corruption. But justice must also ensure that workers, industries and the national economy do not become unintended casualties of economic paralysis.

Muhammed Aziz Khan is the chairman of Summit Group.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.