The obsession with growth has widened the gap between rich and poor

Income inequality in Bangladesh has seen a sharp rise over the past 12 years through 2022, official data shows, with economists blaming a focus solely on growth rather than addressing income disparities.

The Gini coefficient, a measure of inequality, increased from 0.458 in 2010 to 0.48 in 2016. This upward trend has continued, reaching 0.50 in 2022, according to the Bangladesh Bureau of Statistics (BBS). This places Bangladesh among the countries with the highest income disparities in the world.

A number of indicators throughout 2024 suggest that income inequality may have widened over the following year. For example, consider the number of bank accounts holding Tk 1 crore or more.

Between April and June this year, that number increased by 2,894.

In contrast, high inflation over the past two years has pushed at least 78,000,000 people into poverty, including 38,000,000 into extreme poverty, according to the non-governmental think tank Research and Policy Integration for Development (RAPID).

According to the World Bank definition, people belonging to the extreme poverty group could not even earn Tk 256 per day in the last two years.

Amid this inflationary pressure, the Bangladesh Institute of Development Studies (BIDS) reported that poorer rural residents were increasingly relying on rice to satisfy their hunger, thereby reducing their consumption of rich foods. in proteins.

Ironically, the country has imported eight Rolls-Royce luxury cars in the last six months, priced between Tk 3.5 and 8 crore.

Drawing on his long experience as a bureaucrat, economist AB Mirza Azizul Islam said previous governments showed little interest in reducing inequality.

“Their main focus has been GDP growth,” he said. To reduce inequalities, Islam recommends creating more jobs.

“Private investment has been stagnant for years,” he noted. “Increased investment would lead to job growth and higher incomes, thereby reducing inequality.”

WEALTH INEQUALITY, A DEEPER PROBLEM

Compared to income inequality, wealth inequality is much worse in Bangladesh, meaning that a tiny portion of the population has disproportionate wealth compared to the majority.

The “White Paper on the State of Bangladesh’s Economy”, prepared by a group of economists and experts and submitted to the chief advisor to the caretaker government in December, said that wealth inequality increased from 0.82 to 0.84 between 2016 and 2022.

Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (INM), said the lack of timely intervention has led to historically high levels of income and wealth inequality.

He said as economies grow, income opportunities increase, particularly in urban areas. However, if governments fail to address these disparities, inequality may worsen.

“Corruption has also contributed to high inequality, as power, income and wealth are interconnected in Bangladesh,” Mujeri added.

IS HIGHER TAXATION THE ANSWER?

To reduce income inequality, Mujeri, former director general of BIDS, suggested a progressive income tax system, in which higher incomes would be taxed at higher rates.

However, he acknowledged obstacles such as the difficulty of accurately assessing the real income of high earners and the influence of wealthy individuals on policymaking.

Therefore, along with tax policies, the government should prioritize creating opportunities for the less fortunate. This includes improving education for low-income families, improving access to health care for marginalized groups and expanding social protection programs with minimal diversion of funds, a- he explained.

Such measures are urgently needed to create a more inclusive and equitable socio-economic structure, he added.