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6 years ago

State should take the side of the poor

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The capitalistic societies are unequal in almost every respect, but the inequality in income draws most of the attention of the concerned quarters. In fact, the inequality of income among the citizens leads to other types of inequality among them, like the difference in the quality of health, difference in the work skill, etc. Inequality in income is the product of the capitalistic free-market economy, though other types of economies like the one run, owned and managed by the state also produces inequality, though less than the former system.

World over, inequality in income is a problem, and different countries are found to be addressing the issue in different ways. In theory, market-based economy or the one based on demand & supply seems to be the best one. This system not only theorises on how to maximise production but also do the same in when it comes to distribution saying each factor of production will receive according to their marginal contribution. But in reality, over time the factors of production, including the important factor - capital, fall in the hands of the few. Capital has the power to supersede the other three factors of production -land, labour and management - in terms of receiving its share from production. As a result, the persons, who own or control capital, also own land and management in the production system. In such a set-up, labour is the end receiver and is employed by the owners of capital to drive the wheels of production. Capitalistic system wears a humane face or offers a semblance of equality if there is a competition in the system. But the truth is, competition hardly exists; in most cases the capital owners dictate both production and supply, and by extension, also prices.

The capitalists do not want that their rivals should grow and put them into competition. They adopt such policies which simply drive the aspiring competitors out of the market. When competition takes a back seat, the capitalists start controlling prices and the consumers are to pay what the capitalists ask to pay. The so-called competitive market economy turns into the instrument for handing over more and more incomes to the capitalists. Nowhere in the world, market economy behaves perfectly or in a desired manner on its own. Whatever good the market system does for the vast majority of the population, it does so when the government guides the market system.

Monopoly - meaning when supply of products is controlled by one firm, and oligopoly - meaning when supply of the same is controlled by a few are the common aspects of the market economy. A government with strong mandate can put a brake on monopoly and oligopoly or, at least, regulate them to the satisfaction of a large majority of the people.

Bangladesh graduated to a higher economic level in the recent years, and with that, has taken place a sharp increase in income inequality. Statistics show income inequality in the Bangladesh society is only being widened over time. The top 10 per cent of the population owns 38 per cent of the national income. Gini Coefficient, which measures income inequality, is gathering more value. Overall poverty in the economy is going down with increasing growth rate of gross domestic product (GDP), but overwhelmingly large share of income from the growth is being taken away by the rich. Economic history shows that it is a by-product of an increased GDP growth. But many countries with higher economic growth level have at times taken drastic measures to stop or put a brake on surging inequality. Will Bangladesh wake up to this problem and take appropriate measures to rein in galloping income inequality?

Free education and free health services for the poor are the two ways most of the market economies adopt to bring a kind of equality in the society. The other measure in this respect is progressive taxation on the income of the rich.

The writer is a Professor of Economics at the University of Dhaka.

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