Income inequality in Bangladesh perspective

Inequality in Bangladesh has always been a major problem. The rich continue to be richer while the poor the poorer. Inequality in distribution of income has increased. Rising economic inequality is a major challenge that the world faces today.
There are many theories and explanations about why some nations fail while others succeed, but history shows that the quality of political leadership is the key factor in deciding the fate of a nation. "Prosperity is not determined by fate or religion or geology, it is determined by people. By making right and wrong decisions, political leaders cause societies to rise and fall," argues Alan Beattie, former Bank of England economist in his book False Economy.
THE CHALLENGE OF INEQUALITY: The challenge of inequality is particularly daunting for developing countries where the rise in inequality needs to be prevented without creating an adverse effect on economic growth. Bangladesh also faces this twin challenge. Alongside the acceleration of the rate of economic growth since the early 1990s there has been a rise in the degree of inequality in distribution of income.
Bangladesh has remained a country with a substantial income inequality due to wrong policies pursued by successive governments. Income inequality has remained almost at the same level since independence as it took the gloss off the country's successes in meeting the MDG goals in the areas of poverty, child mortality, primary school enrolment and sanitation.
Bangladesh has witnessed a modest progress in reducing poverty since the early 1990s. However, there is no room for complacency. About one-third (31.5 per cent) of its population were living below the so-called poverty line, according to the Bangladesh Bureau of Statistics, 2010. Like other developing countries, Bangladesh has promoted globalisation as a tool for economic growth. The period from 1990 to 2001 in Bangladesh's economic history has been characterised by blind openness of the economy through accelerated trade liberalisation, but proper attention has not been given to financial and fiscal reforms.
Although globalisation is adopted to strengthen the economy to fight any upcoming threats, it is also associated with problems which have raised legitimate concerns, including income inequality. A closer look at globalisation reveals that while it has helped reduce poverty in some of the largest and strongest economies, the developing world has seen a widening gap between the winners and the losers. The share of the poorest 20 per cent of the world's population has shrunk from 2.3 per cent of the world income in 1960 to 1.1 per cent today - and it is still falling. Conversely, from several studies it can be concluded that the richest 10 per cent of the world population have increased their share in the world income. Globalisation has dramatically increased inequality between and within nations.
Professor MG Quibria notes in his article titled Piketty, inequality and Bangladesh: "Evidence - though fragmentary - suggests that the distribution of income as well as wealth in Bangladesh has become more skewed over the years.   Along the way, the country has also experienced a significant reduction in poverty. Though income as well as wealth inequality is a concern for the country, it is much less so than in many developing countries in Africa and Latin America...
"In a fledgling democracy like Bangladesh, where the separation of powers between various branches of the government is often blurred, political capital is a powerful instrument for advancing one's  economic and social position. Possession of political capital opens up myriad economic opportunities including preferential access to finance and business, restructuring and loan default options, lucrative employment, access to privileged information, tax evasion or even outright corruption."
The income share of 5.0 per cent of the population at the bottom fell from 1.2 per cent in 1983/84 to 0.8 per cent in 2010. In comparison, the income share of the top 5.0 per cent has grown from 18.3 per cent to 24.6 per cent over the same period. In addition to the adverse implications for poverty reduction efforts, the growing concentration of income presents a social challenge of relative deprivation.
Sadiq Ahmed, vice chairman of Policy Research Institute of Bangladesh, observes: "Bangladesh alone is not witnessing the growing income inequality. Other countries in the same situation with rapid economic growth include China and India. In economic literature, there is a debate, popularised by Nobel laureate Simon Kuznets, about whether low-income countries will have to experience some increases in income inequality before they reach a threshold level of income, after which the income inequality will fall...
"The income inequality problem has sometimes been sought to be addressed through policies that seek to change the initial unequal distribution of wealth and assets. The economic philosophies of communism and socialism are based on the premise of redistributing income directly through public rather than individual ownership of wealth and assets. In market economies of the type prevailing in Bangladesh, a radical programme of redistribution of existing wealth and assets to address the problem of income inequality is not a realistic option."
The policies pursued by successive governments failed miserably to address the problem of growing income disparity. The present government had realised the fact, but income inequality cannot be addressed, unless suitable income tax measures are taken and quality education is ensured. The economic policies adopted by subsequent governments enabled a small group to make fabulous wealth illegally. However, the gravity of the growing income inequality becomes even more serious when we take wealth accumulation into account. About 75 per cent of the population live on US$ 2 a day. This indicates that they hardly ever save to ensure significant wealth accumulation compared to the richest 1.0 per cent, which hold a significant proportion of the national wealth and continue to accumulate more over time, as they can make handsome savings. Hence, the actual inequality is much worse, once the existing wealth and the prospect for future wealth accumulation are taken into account.
As Rizwanul Islam, former Special Adviser, Employment Sector, International Labour Office, Geneva, says, "How can the low-income people be helped to build up productive assets other than their own labour power? One example is the ownership of poultry and livestock made possible through micro-credit. While this appears to have helped many to get out of poverty, whether this level of asset ownership is adequate from the point of view of tackling inequality remains a question. It is time to think of a quantum jump in the level of asset ownership of the poor, and mechanisms have to be found for attaining that goal. Credit and other assistance for small businesses and cottage industries could be one such way. Of course, one has to remember that conventional mechanisms of credit for such enterprises would not work for the poor and low income people. Innovative approaches need to be developed to provide them with easy access to credit for such economic activities that will help develop their asset base. And that has to be accompanied by assistance in finding markets for both inputs and products.
"Political will is extremely important, when it comes to addressing challenges like income inequality. If there is the political will, it should be possible to find a variety of measures..."
WHY THE SLOW PACE OF POVERTY REDUCTION? Although the government has taken several initiatives for alleviating poverty, yet the poverty persists. This is mainly due to the problems associated with the neo-liberal paradigm that the successive governments are pursuing in reducing poverty including those of the poverty reduction strategies (PRS). [Unnayan Onneshan - The Innovators]
The problem arises in its failing to conceptualise that poverty is the manifestation of social property relationship. The rate of decline in poverty is accelerated or decelerated, depending on the social property relations, rather than the neo-liberal articulation that an increase in the size of the "things-basket" reduces poverty. This happens as this "things-basket" operates under particular social relationships. The "things-basket" may reduce poverty up to a point, but it is reproduced due to social property relationship, embedded through institutions, structures, power, and reality and composition of the state.
In the instrumental sense, the major reasons for persistence of poverty are: absence of adequate state intervention for expansion of production, deficiency of equalising income augmenting employment system, shortfalls in public expenditure for enhancement of capabilities, inadequacies in regulatory regimes, and lack of complementary policy structure and non-existence of enforceability of constitutional rights.
The eradication of poverty and inequality and meeting basic needs are the primary goals of the government. Nevertheless, achieving a reduction in poverty and inequality is a fundamental challenge in the country, without which the achievement of human development, economic and employment goals of the government may be hindered. It is the constitutional obligation of the government to ensure a decent living standard for the citizens by alleviating poverty. However, as in many other countries, poverty in Bangladesh is still a serious concern. And the present government of Bangladesh is very much hopeful about achieving the target of Millennium Development Goals (MDGs) as well as the targets of Vision-2021 related to poverty and inequality. The government can also help improve income distribution through better governance. This requires rule of law, proper regulations and letting institutions grow and work. The type of inequality that exists in Bangladesh does not require an internationally mediated wealth tax, as proposed by Piketty. The solution lies in the domestic arena - in improving governance that ensures an economic level-playing field and reforming the political system. In poorer societies, the issues of politics and inequality are intertwined - they are conjoined like Siamese twins. [Prof. Quibria]
  To conclude, the gap between the rich and the poor is increasing and poverty is decreasing at an agonisingly slow rate. A lot needs to be done in the years to come to make sure that the fruits of economic growth go down to those who need it the most.
The writer is Sr. Assistant Secretary (Research & Development), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). [email protected]