Inequality slows down macro economic growth

Published: 00:05, Oct 11,2018 | Updated: 00:33, Oct 11,2018

 
 

A HIGHER growth rate often does not bridge the gap of income inequality. So has been the case of development in Bangladesh. As the nation prepares to graduate from low-income to lower-middle income country, the gap between the rich and the poor is widening. An Oxfam report, as New Age reported on Tuesday, ranks Bangladesh seventh among South Asian countries in the commitment to reduce inequality global index. The latest nationwide government survey on household income and expenditure also suggests the same. The Bangladesh Bureau of Statistics report Household Income and Expenditure Survey 2016 shows that the poorest 5 per cent had 0.78 per cent of the national income in their possession in 2010 and now their share is only 0.23 per cent. In contrast, the richest 5 per cent, who had 24.61 per cent of the national income six years ago, now has a higher share of 27.89 per cent. Meanwhile, the World Ultra Wealth Report 2018 shows the number of ultra-high net-worth individuals in Bangladesh rose by 17.3 per cent in the period, leaving Bangladesh at the top of the countries that saw quickest growth in ultra-wealthy people. The statistical scenario clearly bears the sign of unequal development.
While creating the commitment to reduce inequality global index, Oxfam has considered national policies on social spending, tax and labour rights. For some time now, there are various social safety net progarmmes, including vulnerable group feeding and open market sales programme in Bangladesh. The government in the budget for 2019 financial year has also decided to bring more people in poverty under the purview of these initiatives without increasing the budget allocation. Aside from budgetary constraints, such government efforts also suffer from inefficient management, particularly distribution of subsidised food items being rigged with corruption. Labour rights policy, the other indicator defining the government’s political will to reduce poverty, is also flawed. The recently proposed minimum wage for apparel workers, as many economists have claimed, is nothing but a poverty wage. The proposed wage, as labour rights activists say, is an increase in nominal wage but it adds nothing to a worker’s purchasing power. It was expected that the revised minimum wage would not only compensate for inflation but also add to worker’s purchasing power; it, ufortunately, did not. It is, therefore, no surprise that Bangladesh’s rate of poverty reduction has slowed down in recent years.
The existing income inequality makes it evident that the government is singularly focused on improving the per capita income and its much-celebrated high economic growth is a fragmented projection of progress. It must develop an inclusive development plan, by creating an investment-friendly political environment for stable growth in job market and improving the governance structure, to ensure an equitable distribution of wealth. It must know that socio-economic inequality eventually slows down the macro economic growth and effects larger political environment.

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