Inequality: The world and Bangladesh
Mashrefa Tarannum, Mariya Begg, Rongon Richard Areng, Azizur Nahar Lima and Enamul Hoque Tauheed
At a time when income inequality has posed numerous questions about the world economy, it has come to light that the worlds richest 1per cent are on their way to control two-thirds of the worlds entire wealth by 2030. An estimate by the British House of Commons suggested that if tendencies remain similar as seen after the financial recession of 2008-09, the top 1per cent of the worlds richest, 7.6 million people from a total of 7.6 billion people, would own 64per cent of the entire worlds wealth in just over a decade.
Why is there inequality? Are we all slaves of our fate? Suppose, if youre born into a family with wealth and assets, you get a head start in your life which gives you better chance in life to shine. Thats particularly important for Bangladesh, as long as you held land possession, your existing possession will form a base of wealth which will preserve inequality.
Our childhoods intensify those initial inequalities that were born into. Families with wealth are able to pay for better education for their children, opening doors to all kinds of opportunities and giving them options to choose. But in case of poor, the case is totally opposite. Bangladesh has very poor social mobility, which means that those born into a Rickshaw pullers family are likely to remain a Rickshaw puller or something of the same sort.
Globalization has brought lots of advantages, but its also been a massive driver of inequality. The collapse of the Soviet Union and the rise of China brought over a billion new workers into the global economy.
Together with global forces, the make-up of individual economies also affects equality the balance between manufacturing and services for example. Bangladesh has been de-industrializing for some recent years, and the value of professional qualifications has risen, thus creating a huge value difference between labor and professional sector.
Finally, taxation could be progressive or regressive. Taxation is one of the first things that comes to our mind when talking about sharing the wealth, but its much better to prevent inequality from emerging in the first place than to redistribute it afterwards.
Quality education opens the doorway to better paying jobs. But due to extreme poverty, many poor parents cant afford to send their children to school because everyone has to earn to live, even the children. There is a set of indicator known as Policy and Institutional Indicators (PII). It has identified 15 policy domains that have the potential to drive both stronger growth and wider social inclusion. These also allow countries to benchmark their institutional strength and policy incentives in these areas.
Bangladeshs position in the PII is disappointing when compared with its competitors. In the education and skills indicator, Bangladesh lags behind countries like Burundi, Uganda, Tanzania, Nepal, Kenya and Zimbabwe and ranked 9th among 16 developing countries considered by the WEF. In the basic services and infrastructure, though the country is 5th among 16 countries, its score is at the lower end of the scale. In employment and labor compensation, only two African countries (Burundi and Chad) lag behind Bangladesh while countries like Mozambique, Malawi and Cambodia are well ahead. PII ranking provides a comparative idea about the real advancement of the country in the area of inclusiveness. Weak education and skill, inadequate basic services and infrastructure and lack of proactive actions in employment generation and labor compensation are detrimental to sustainable, inclusive development.To put it in another way, continuous higher and sustainable growth are not adequately transferring the resources to the all sections of the society.
The reasons for inequality also include wage exploitations by big companieskeeping the wage of employees at the lower steps of the hierarchy as low as possible to maximize their profit.
According to the different labor force surveys conducted by the Bangladesh Bureau of Statistics (BBS), the number of informal employment increased from 50.8 million in 2013 to 52.3 million in 2015-16. The rate of informal employment, however, decreased from 87.4 per cent in 2013 to 86.2 per cent in 2015-16. It means the current economic growth is not helping the informal sector in contributing significantly to the national economy.
In Bangladesh, there is another unescapable factor that also contributes to income inequalitylack of access to credit. While banks are channeling loans worth billions by violating banking rules-regulations and procedures to influential businessmen backed by the political influence, many small business owners and poor farmers usually have zero access to credit because of collateral requirements like land, building, etc. Even if they manage to get small loans, they live under the constant pressure of repayment. Statistics show that access to credit for farmers is significantly low relative to their contribution to the GDP. In the 2013-14 fiscal year, the part of agriculture in the GDP was around 16 percent, while agricultures part of advances in total stood at about 6 percent.
Is Inequality a Dead End? There is no denying the fact that rich people have an advantage in life. Income inequality is mostly due to a lack of economic opportunity, mainly for the people on the bottom step of the socioeconomic ladder. Therefore, our leaders should come up with policies that, instead of disproportionately rewarding those at the top, rewards everyone whos in need. 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 marginalized 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 countrys manpower export is dominated by only eight districts out of 64. Such inequality will trigger social unrest in future.
When the economy is growing at an annual average rate of 7.0 per cent and the country is on its way to graduate from the status of a Least Developed Country (LDC) to an upper one, it is crucially important to maintain focus on balanced growth with a view to making development sustainable. Keeping the overwhelming majority of the workforce in the informal sector and allowing concentration of most resources in the hands of a minority group cant help build an inclusive society.
The writers are students of Department of Development Studies,
University of Dhaka
