After the liberation of Bangladesh in 1971, some socialistic approaches were taken by the Government of Bangladesh, increasing state participation in the productive activities to improve the economic status of the war ridden country. With a view to establishing a socialist nation, many large and medium-sized enterprises and public utility enterprises were nationalized. On 26 March 1972, all banks, and all insurance companies excluding the branches of foreign banks were nationalized. The reformation process left only the small and cottage industries for the private sector.
Although public sector expanded very rapidly, the share of public sector in GDP and in total productive efforts was insignificant. This was because the agricultural sector was left to the private sector, which comprised about 80% of the national economy.
On 25 January 1975, a single party socialist government was declared by Sheikh Mujib and Bangladesh Krishak Sramik Awami League (BAKSAL) was formed through the fourth amendment of the constitution. All other political parties were outlawed with the formation of BAKSAL through a presidential order. The party advocated state socialism as a part of the group of reforms under the theory of Second Revolution. BAKSAL was the decision making council to achieve the objectives of the Second Revolution. With the assassination of Sheikh Mujib in 1975, BAKSAL was dissolved.
During the years of military rule that followed under Ziaur Rahman (1975-1981) and Hussain Muhammad Ershad (1982-1990), socialist policies and rhetoric were abandoned. State enterprises were dismantled, state subsidies withdrawn and trade liberalization and exports promoted. Thus, contemporary Bangladesh has among the most liberalized economies of South Asia.