The Financial Express

Reflections on discriminatory growth

Asjadul Kibria | Published: April 23, 2020 21:48:53 | Updated: April 29, 2020 23:03:32

Reflections on discriminatory growth

The prospect of the global economy in the near-term is bleak and there is almost no hope that dullness will be subdued in the medium-term. The outlook in the long-term is quite uncertain. Just as anywhere in the world, unofficial lockdown in Bangladesh in the form of public holidays has already started to take toll on the overall economy and society as a whole. To contain the spread of COVID-19, the government has announced the holidays up to April 25, which may be extended.

The government has also announced a series of incentive packages for different industries, agriculture, health and social safety net programmes. The basic idea behind the packages for industry and agriculture is to provide financial support to these sectors so that minimum production activities may continue. So far, around Tk 900.00 billion has been allocated for these packages -- mostly in the form of subsidised bank loans. The allocation for health and social safety net sectors is not entirely clear. There is a thrust on implementation of the existing social safety net programmes.

But assistance for the poor and vulnerable people through social safety net programme is mostly hand to hand transfer and so there is a big room for leakage and misappropriation. Already a number of cases of irregularities and misappropriations of relief materials have been identified across the country. It clearly shows how inefficient and vulnerable the country's distribution system is.

As a matter of fact, inefficiency in the distribution of relief materials for the poor needs to be viewed as part of the larger context of overall resource distribution in the economy, distribution of growth to be precise.

Over the years, to the policymakers, it is the size and the rate of economic growth that have become more important. There is no doubt that higher growth is necessary and the country has also been in the path of accelerated growth of Gross Domestic Product (GDP).  The annual rate of growth reached 8.13 per cent in FY19 from 6.01 per cent in FY13. The annual average growth rate stood at 7.0 per cent in the last nine years.  Higher rate of GDP growth also contributed to increase the per-capita income to US$1905 from $1054 during the period under review. Per capita income is an indicator of growth distribution.

The emphasis on growth is based on the presumption that high growth will help more people to generate their income through market mechanism and market will be more efficient with deregulation. One reason for adopting the market-oriented development approach is inefficiency of the state machinery where corruption and mismanagement persist. There is no doubt that privatisation and liberalisation help to move the economy at a faster rate which is reflected in persistent economic growth. It gives a  strong impression that the private sector has now become the main driver of growth. 

Thus the policymakers find it necessary to maintain higher rate of growth at any cost. They think that 'sufficient trickle-down' of resources will ultimately distribute the growth to those who do not have adequate access to the market. This is a misguided approach.

In a country like Bangladesh, where millions of people are poor and resources are still very scanty despite high economic growth, market-based allocation of resources only enhances the wealth inequality. Instead, welfare-centric resource distribution is necessary to make growth as balanced as possible.  That's why, the Medium Term Macroeconomic Policy Statement (for FY19 to FY21) argues: "..More focused and coordinated policy-action will be needed to help ensure shared prosperity and an equitable distribution of income and wealth. Apart from growth, acceleration programmes, generation of adequate and decent employment, enhancing eligibility of the new entrants into the job market and ensuring everyone's access to resources and services would be the key. …In addition, an efficient income transfer arrangement (e.g. social security programme) for the disadvantageous and backward section of the society is crucial." (P-8 )

A number of policymakers, however, think that income disparity should be ignored for the time being and there is little need to intervene in this regard. They argue that once the country reaches at a sustainable level of higher growth, income disparity will gradually narrow down. It also appears that in some cases, acknowledging the disparity is uncomfortable for policymakers. The finance minister, in his budget speech in June last year, said: "Through the implementation of the planned and inclusive development strategies of the government, the country has achieved a sustained and high rate of growth at an unprecedented speed. The positive changes in all sectors of the economy are quite visible. In tandem, the rural economy has also become vibrant. No disparity exists between north-south and east-west region of the country."

Nevertheless, income inequality increased to 0.48 of Gini coefficient in 2016 from 0.41 in 2010. The income share of top 10 per cent household increased to 38.16 per cent of national income from 35.85 per cent during the same period.  The share of the bottom 10 per cent household, however, decreased to 1.10 per cent from 2.0 per cent in the same period. 

Concentration of most of the national resources in a few hands makes growth uneven and discriminatory. The current suffering of millions of people due to the ongoing lockdown highlights that hard truth.  Within a month, thousands of factory workers lost their jobs and millions of informal workers are without any income. They are desperately trying to survive. Small businesses and traders are also turning helpless as there is no economic activity.

It is thus time to revisit the growth-obsessed approach and make concentrated effort to focus on balanced distribution of economic output. The immediate priority is to channel resources both in cash and in kind to millions of vulnerable and poor people efficiently. As market mechanism is not functioning properly, the government needs to fix its flawed delivery system plagued with corruption and irregularities. The COVID-19 thus brings an opportunity for the government to establish good governance to make growth distribution non-discriminatory.


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