On poverty, MDG and income inequality

Economic disparity is as old as civilisation itself. The situation has unmasked various other implications over the centuries. Economic disparity among people in a community or a country is found out to be a cause of sluggish growth for the national economy. Improvement at micro level or, in other words, a rise in the real standard of living of individuals is an indicator of balanced growth. In macroeconomics, balanced growth is a trajectory where all variables grow at a constant rate. The whole thing boils down to the fact that real economic progress in a society is not possible without narrowing down income inequalities among people. Although reduction in poverty is generally perceived to narrow down economic disparity, the ground reality indicates that reduction in poverty through economic growth does not cause any substantial change in income inequality and on the contrary, income inequality is increasing despite economic growth achieved around the world. There are expressed inequalities in the world at present. In most countries of the developing world, the rich are enviably rich and the poor are alarmingly poor. What is more disconcerting is that distribution of income is much more unequal than the distribution of consumption in most economies. The saddest part of the episode is that the poorest half of the population of a country often controls less than 10 per cent of its wealth.
Income inequality is rising despite economic growth through increased economic activities. There is bound to be something profoundly wrong when the number of rich people in a society escalates on one hand and millions of people of the same society are found working longer for lower wages, on the other. In the world today, in developed and developing countries alike, the poorest half of the population owns less than 10 per cent of wealth. That is why, while poverty is going down, income inequality is rising. As poverty retards growth, disparity slows down and in some cases reduces the sustainability of growth.
As the deadline for MDGs (Millennium Development Goals) expired, 74 countries have been able to halve their poverty. The number of people living on less than $1.25 a day has been reduced from 1.9 billion in 1990 to 836 million in 2015. According to our planning commission, Bangladesh met its target in reducing headcount poverty to 26.2 per cent as of 2013, but it needed to lower its poverty rate to 29 per cent by 2015 as envisaged in MDG targets. In view of shortfall in achieving targeted poverty eradication by some countries, particularly in East Africa, poverty eradication was again included in Sustainable Development Goals (SDGs).
Although Bangladesh has progressed in terms of poverty reduction, income inequality has also risen substantially during the last four decades or so. This was disclosed by the Household Income and Expenditure Surveys conducted by the Bangladesh Bureau of Statistics (BBS) since 1973-74. The crux of the problem is that the rich are enviably rich and the poor are alarmingly poor.
Actually, income inequality was not very high in Bangladesh during the 70s and 80s of the last century. In fact, Bangladesh had lower degree of inequality compared to other developing countries of Asia (e.g., Malaysia, Philippines, Thailand) and this continued until 1991-92. Later there was a sharp rise between 1991-92 and 1995-96 which further increased during 1995-96 and 2005.  As such a high degree of income inequality now exists in the country. The share in total income increased substantially only for the top 10 per cent of the households, while the share of the bottom 40 per cent of the households declined considerably, on the other hand. Among the upper income groups, it is only the very rich who have been able to increase their share in total national income. Thus it is clear that inequality may have increased among the richer households also. Secondly, the share of the middle income groups in total income has declined, which means that it is not only the poorer households who were deprived of the benefits of economic growth during the last couple of decades. The middle income groups also appear to have lost out.
Regionally, income inequality is widening in the 12 countries that make up 80 per cent of the region's population. An Asian Development Bank (ADB) study report suggests that this is affecting the process of poverty reduction. In fact, persistent inequality can impede growth prospect and sustainability. In a way income inequality and poverty do not affect economic growth in the same way.
Inequality in distribution of income has increased, so has economic growth around the world. Unfortunately one is the cause of the other. On the contrary, inequality affects the growth path and often retards the growth process. This is a major challenge that the world faces today. Both the developed and developing countries face this challenge although the nature and magnitude of the problem are different from one country to another.
Similarly, addressing inequality is not only a responsibility but an opportunity as well that can be utilised to foster economic growth. It creates new communities of consumers, widens the market and increases profit opportunities. Efforts to bring down inequalities and close the wealth gap will require concerted action and an integrated agenda at all levels, from local to national, and regional to global. Countries need to undertake a policy that will effectively address inequality across the social, economic and environmental dimensions. The challenge of inequality is particularly daunting for developing countries like Bangladesh where rise in inequality needs to be prevented without creating an adverse effect on economic growth.
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