Piketty, inequality and Bangladesh

Although somewhat unknown in Bangladesh, Thomas Piketty, an economics professor at Paris School of Economics, is now possibly the most well-known economist in the world. He has written a book on inequality that has taken the West by storm.
Entitled Capital in the Twenty-first Century, the book evokes Marx's Das Kapital. Magisterial in scope and ambition, the book parallels Marx's earlier tome; but in data and method where Marx's research falters, Piketty is extraordinary.  The book   is deeply grounded in painstaking empirical research.   Along with a few collaborators, he spent more than a decade amassing an enormous quantity of data covering centuries and many countries. And the outcome is an elegant book that clarifies our understanding of long-term trends in inequality across the rich world.
The book provides readers with a simple explanation for rising inequality under capitalism: wealth generally grows faster than the economy, as the rate of return on investment normally exceeds the overall growth rate. And if this trend continues, it leads to a concentration of income and wealth-as few natural economic forces exist to counter this tendency. Except in periods of rapid economic growth or of exceptional geopolitical instability - such as the interregnum between two world wars -inequality grows unchecked. This is what Piketty calls "the central contradiction of capitalism".
While Marx foresaw an apocalyptic end of capitalism and the establishment of dictatorship of the proletariat, Piketty sees a future of sluggish growth and wide disparities - in which the rich, the owners of capital, capture a progressively larger share of global wealth and income. Piketty's analysis of the past, however, is more rigorous than his predictions for the future or his remedy.
As capital is foot-loose, Piketty's favoured remedy for inequality is a progressive global wealth tax, enforced by comprehensive international agreement. He understands, however, that the proposed progressive global tax on wealth is a utopia, which requires a high and unrealistic level of international cooperation. As Robert Shiller, a Nobel laureate from Yale, reminds us, Finland had a wealth tax but dropped it; so did Austria, Denmark, Germany, Sweden, and Spain.
Now, how does Piketty's analysis relate to Bangladesh? Although the analysis is insightful, it does not apply verbatim to Bangladesh. The nuance of inequality differs between rich and poor worlds.
Evidence - though fragmentary - suggests that the distribution of income as well as of wealth in the country 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.  On the other hand, poverty is a major challenge, but Piketty has little to say about abject poverty that largely afflicts developing countries.
As contrasted from many developing countries, this juxtaposition of declining poverty with increasing inequality seldom obtains in the present-day rich world, particularly in the US, where poverty has proved to be recalcitrant. Though overlooked by Piketty, this trend has its historical precedence in the US, during the gilded age between the Civil War and WWI, when poverty reduction went hand in hand with rising inequality.
In explaining the rising inequality, especially at the upper-end, the analytical framework of Piketty is helpful, but it requires a broader definition of capital than the one adopted by him.
His definition of capital includes physical and financial capital but notably excludes human or political capital. While human capital's role in boosting growth and shaping inequality is widely accepted, political capital is seldom discussed by economists.    
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 primal role of political capital is obvious from a recent report in the Wall Street Journal about public asset declarations by the candidates in the 2014 parliamentary election in Bangladesh.  It revealed that the personal fortunes of many ruling party leaders   increased even more than a hundredfold since the last elections in 2008.  This plus other reports from civil society organisations corroborate the critical role political capital plays in shaping the dynamics of inequality in Bangladesh.  
The etiology of inequality differs, so does the remedy. The type of inequality that exists in Bangladesh does not require an internationally mediated wealth tax, as proposed by Piketty. The solution belongs in the domestic arena - in improving governance that ensures an economic level playing field and reforming the political system that impedes accretion of political capital in fewer hands. In poorer societies, the issues of politics and inequality are intertwined - they are conjoined like Siamese twins.
The writer is Professor Economics, Morgan State University, US and  currently Senior Fulbright Visiting Fellow at Bangladesh Institute of Development Studies.
 mgquibria.morgan@gmail.com