Inequality: A wake-up call for Bangladesh

Rahman Jahangir | Published: January 27, 2017 20:34:55 | Updated: October 24, 2017 04:30:28


Inequality in post-liberation Bangladesh was never given so much of prominence as it has been today. Economists, civil society leaders and even some policymakers have expressed their concerns over the issue. The Oxfam International's report: 'just eight men own the same wealth as the 3.6 billion people who make up the poorest half of humanity' brings it to sharper focus.
"The richest are accumulating wealth at such an astonishing rate that the world could see its first trillionaire in just 25 years. To put this figure in perspective - you would need to spend 1 million dollars every day for 2,738 years to spend 1 trillion dollars", the report said.
Although the spectre of inequality in Bangladesh is not as critical as the global scene is, the situation is getting worse with the passage of time. It will be explosive if such a trend is not held in check. Vice Chairman of Policy Research Institute (PRI) Dr Sadiq Ahmed in a recent research paper found that the top 5.0 per cent of the population own 25 per cent of the country's total national income. This reflects widening of income inequality. He said low levels of public spending on health, education and social protection and poor governance were some of the major factors behind widening the income inequality in Bangladesh.
Even Finance Minister AMA Muhith is aware of rising inequality in the country. He was on record as having told the Economic Reporters Forum (ERF), income inequality is on the rise in Bangladesh although the rate of extreme poverty dropped significantly, he said. More than 25 per cent people live in poverty and around 11 per cent in extreme poverty, according to the Planning Commission.
 "Income inequality has gone up, but we should also focus on the positive aspects, and that is, the rate of extreme poverty has dropped. So the government can take pride in this success."
But Muhith warned, income inequality will widen, but it should not be allowed to increase to such a level that social unrest takes place. More than 15 million Bangladeshis have moved out of poverty since 1992, according to a World Bank overview of the Bangladesh economy. Bangladesh has maintained an impressive track record on growth and development. In the past decade, the economy has grown at nearly 6.0 per cent per year, and human development went hand-in-hand with economic growth. Poverty dropped by nearly a third, coupled with increased life expectancy, literacy, and per capita food intake.
Despite the strong track record, around 47 million people in Bangladesh are still below the poverty line, the World Bank said. There are also many people who could fall back into poverty if they lose their jobs or are affected by natural disasters. Income inequality that has risen over the last three decades in Bangladesh indicates a low impact of growth for the poorest households.
Growing inequity in the distribution of economic output is also evident from an increase in the income of the rich at the expense of the poor.
Between 1984 and 2010 in Bangladesh, the share of the poorest 20 per cent of population in national income decreased from 2.9 per cent to 2.0 per cent, while for the richest 20 per cent of population, it grew from 28.3 per cent to 37.6 per cent. A hike in food prices aggravated poverty and food insecurity among the poor. In Bangladesh, between January 2005 and March 2008, rice inflation increased the number of poor people by 12.1 million.
Nobel laureate Joseph Eugene Stiglitz has explained why inequality is gripping the United States. His observations could be referred to the situation in Bangladesh. He said, "A lot of the inequality that we have is created by distortions - excessive financial sector, monopolies, giving companies resources at a discount. These things distort the economy, while they create wealth at the top. So it's not wealth creation - it's wealth redistribution, which makes the size of the pie smaller."
In case of Bangladesh, the government appears to be in full view of the inequality issue. Admitting that in countries under economic transition, growth is usually accompanied with a marked increase in income inequality, Muhith frankly admitted and said Bangladesh has set an exceptional example by establishing a positive relationship between growth and income equality. "In addition to pursuing an increasingly progressive tax policy, we are implementing various transfer programmes for the backward and disadvantaged sections of the society, which in turn, contribute towards equitable distribution of income", he said in his 2016-17 budget speech.  
In fact, the overall social safety net spending currently stands at almost 2.2 per cent of GDP which is equivalent to approximately 13 per cent of total budgetary allocations. The present government has formulated the 'National Social Security Strategy' to make the social safety net system appropriate for a middle income country.
But then following strategies need to be considered to bridge yawning gap between the rich and the poor in Bangladesh:
- Initiatives must be taken to overhaul the entire transfer programme with a view to mitigating life-cycle risks faced by poor and marginalised people.
- Social safety net programmes must be more target-oriented, accountable and transparent once these schemes are implemented,
- Programmes for health and education expenditure, construction of rural infrastructure, agriculture assistance, microcredit and financial inclusion, etc. should be strengthened,
- Formulation of district budgets, as proposed in 2016-16 budget but seemingly dropped from the 2016-17 national budget. District budgets will effectively end distortions in budget allocations and bring neglected regions to the national mainstream and
- District quota system for recruiting overseas manpower should immediately be introduced as it has been found that the country's manpower export is dominated by only eight districts out of 64. Such inequality will trigger social unrest in future.   
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