If economic growth is more evenly distributed, the same rate of growth can alleviate poverty more quickly, posits Prof MM Akash, chairman of the Department of Economics at Dhaka University.
Today, economists agree that economic growth and inequality reduction has no systematic relation between them. But the same amount of growth can reduce poverty more quickly if the growth is more equal, he said in a presentation.
Thus, only in a few exceptional cases, a well-orchestrated strategy of making growth more inclusive was able to simultaneously attain higher growth and lower inequality, he argues.
Observing that very large negative deviations have taken place from the liberation war ideals enshrined in the original 1972 constitution of the country, he said Bangladesh has become a more unequal and a more divided nation economically.
“The distribution of our macro achievements mentioned at the beginning among the different classes of our country has become more unequal. We are now a more unequal society in terms of income, wealth and social power and security,” he further said on Tuesday while speaking at the fourth session of a four-day virtual international conference titled “Fifty Years of Bangladesh: Retrospect and Prospect”.
Organized by the CPD and co-sponsored by the South Asia Program of Cornell University, the conference aims to explore the country’s developments in different sectors — politics, economy, society, and culture.
In his draft paper, titled Responding to the Challenges of Inequality, Professor Akash said Bangladesh has achieved surprising success in various socioeconomic indicators such as quantitative expansion of education facilities for children, low infant mortality rate, relatively high average life expectancy, and decreasing incidence of poverty.
“Despite its glorious transformation, high economic growth and human development-quantitative expansion of education facilities for children, low infant mortality rate, relatively high average life expectancy, decreasing incidence of poverty, and quick recovery in the pandemic period, access to quality education, quality health services, cheap and adequate finance, employment opportunities, and democratic fundamental rights remain largely unrealized for the majority of citizens situated in the lower end of the society who face various structural constraints and discriminations against upward mobility,” he said.
Only studying human development and focusing just on aggregate levels is insufficient, as the aggregate frequently obscures differences in both human development successes and human deprivations. As a result, focusing just on averages may produce a false image, he argued.
To acquire a genuine picture of human development in a society, therefore, it is necessary to go beyond the average and disaggregate the human development statistics, he added.
According to Akash, Bangladesh's independence war was primarily directed on two types of inequalities: regional inequalities and class inequalities, the professor said, adding that such inequalities still prevail in the country, and it is growing at a fast rate.
“This is known as ‘crony capitalism’, where cronies flock together and use state power to serve each other. Inequity and inequality are perpetuated in all spheres of development due to the structural dynamics of such a nexus of economic, political, and state power,” Akash explained.
The uneven power system created by inequity and inequality generates the so-called "inequality trap" for both developing and middle-income countries, he said.
“The current development process in Bangladesh enables, in general, a more or less absolute development of all classes but with very unequal speed and therefore relative inequality continues to rise which is now generally recognized to be unsustainable in the long run,” he said.
As a result, the most pressing problem confronting Bangladesh now is to build a more inclusive society by achieving Sustainable Development Goal (SDG) 10 which is arguably best expressed in the following epigram: "reducing inequality inside the country and across countries", he also said.
“Will Bangladesh be able to learn the appropriate lessons of history and then construct and implement such a viable strategy of its own — that is the main challenge confronting today’s Bangladesh?” Professor Akash pondered.
Tracking and tagging rural poverty
In another paper, titled Ascent, Descent, Churning, Persistence and Permanent Escape: Contemporary Poverty Dynamics in Rural Bangladesh, the authors provided new evidence on the poverty dynamics in Bangladesh in the 2010s using the three rounds of a large-scale rural representative panel data of the Bangladesh Integrated Household Survey (BIHS) survey of 5,024 households generated by International Food Policy Research Institute (IFPRI).
Dr Binayak Sen, director general of the Bangladesh Institute of Development Studies (BIDS), presented the paper at the session, which has been authored by him and Tanima Ahmed, economist consultant at the World Bank.
“The evidence suggests considerable progress in poverty reduction in the 2010s. The poverty rate dropped from 34% in 2012 to 29% in 2015, and dropped further to 22% in 2019,” according to the paper.
The paper unpacks the relative magnitudes as well as the drivers of five major migrations in and out of rural poverty against the backdrop of shifting poverty patterns over the previous 25 years.
These patterns pertain to: continuous ascent out of poverty (movers); constant descent into poverty (fallers); chronic poverty (chronic poor); occasional slippage into poverty and occasional escape from poverty (churners); and those who manage to stay permanently above poverty (never poor).
Each poverty group was discovered to have unique characteristics and anti-poverty policy consequences.
Evidence suggests that there is a lot of churning in and out of poverty, as well as a requirement for resilient graduation out of poverty, said Dr Sen.
In the paper, the authors found a net upward mobility in poverty — 12.6% permanent movers compared to only 3.6% permanent fallers.
There were 8.2% recent movers and 4.6% recent fallers. When the household employment status was explored, the permanent fallers seemed to be stuck in agriculture, although the percentage of households with all household workers working in agriculture has declined for all poverty groups.
The household size has increased for the permanent fallers and this could be a potential reason for the fall in poverty, the paper shows.
Education level of the workers among the “movers” has always been higher than those of “fallers” and “chronic poor,” Dr Sen noted.
“The average education of the workers in the never-poor group was consistently higher than in the case of other poverty groups. In contrast, the average education level was consistently lower for chronic poor compared to all other groups,” he said.
Moreover, movers had better initial land ownership than the chronic poor.
And although the paper states that non-land assets held by the fallers initially were higher than that of the movers, the fallers underperformed in utilizing such resources effectively.
The movers had greater access to microcredit compared to the fallers and loans taken from the non-institutional sources remained considerably higher among the permanent fallers than the rural average.
In terms of investing of loans in income-generating activities the movers have outperformed the fallers. There was inequality also in terms of the shocks experienced by each group of poor.
Permanent fallers were found to have experienced significantly more health shocks than the rural average. While trying to cope with the shocks, each group resorted to borrowing. A significantly high percentage of permanent fallers have taken loans from non-institutional sources.
Sen said that the overall story suggests that permanent movers had better human capital, physical asset accumulation, occupational diversification, and better transfer payments than other groups.
“However, we need a better understanding of the shock dynamics and their interplay with poverty dynamics in order to explore the different routes available for poverty reduction,” he added.
Commenting on both the papers, SR Osmani, professor of Developmental Economics at Ulster University, said inequality is incubated by the market during its developing economic stage, which in theory should reduce inequality by itself when developed or the market is rich, but it is only partially right.
“When the economy develops sufficiently, the government has to take conscious action through policy and these policy actions can take place only when an economy gets rich,” he stated, pointing out that although the government acknowledges that certain very radical measures are the best strategy to address the problem of inequality, they have yet to be adopted or executed.
“For the chronic poor to move above the poverty line, they need a push in the form of policies, which also need assurance of implementation. For promoting more equitable economic growth and human development, development literature suggests neoliberal development strategy, the mixed economy strategy, and innovative national strategy. But the current government appears to be following the so-called mixed economy strategy inconsistently,” he added.
Democratizing the ‘middle income’ dream: The next challenge for Bangladesh
In the third paper presented at the session, Hossain Zillur Rahman, founder chairperson at Power and Participation Research Centre (PPRC), said there have been two turning points in the 50-year journey of Bangladesh.
The first one was in the ‘90s when there was the ideological embrace of competitive capitalism and the market economy, along with contested politics and greater political accountability.
And the second turning point, in 2010, was somewhat a contrast.
One-third of youth were not in education, employment, or training, competitive capitalism turned into a privileged economy, and school enrolment increased but the quality of education fell, he added, while presenting his paper, titled Democratizing the ‘Middle Income’ Dream: The Coming Challenges for Bangladesh at 50.
“Bangladesh was characterized by a fatalistic mindset in the 60s but the 1971 independence war incubated a personality revolution that drove multiple types of transformation,” he said.
But there is now a “new normal” of political governance in Bangladesh that constitutes extreme intolerance of non-sanctioned political governance, marginalization of grass-root actors and consequent loss of accountability, purposeful encroachment into social space and corruption innovations such as unjustified project cost escalation, and land-grabbing, he added.
“These forces are fueling a new paradox of ‘uncertainty despite stability,’” the economist stated.
According to Rahman, the deficit in political development is holding Bangladesh back from realizing its foundational dream of building an inclusive and humane society.
“The country must also expand the idea of development beyond narrow growth statistics such as GDP growth to more encompassing indicators such as quality of life,” he further said.
In response to the paper, Dr Iftekharuzzaman, executive director of Transparency International Bangladesh (TIB), said: “There are different puzzles that Bangladesh must solve in order to democratize the ‘middle-income’ dream. The country must expand the idea of development beyond narrow growth statistics such as GDP growth to more encompassing indicators, such as the quality of life.”
There needs to be “de-linkage” between political positions and direct or indirect beneficial affiliations from business and profit-making opportunities, he added.
“Political leaders need to recognize that it is essential to transform their political bodies into general political institutions instead of leveraging opportunities for profiting,” Iftekharuzzaman further said.
He also said that governance deficit, institutional corruption, and the culture of impunity need to be removed while ensuring the public and media can voice their rights without getting entangled in-laws that make them the enemy of the state to ensure a just society.
Geof Wood, professor emeritus of International Development at the Department of Social and Policy Sciences, University of Bath, who chaired the session, said Bangladesh is currently at a crossroads.
“This is not just the celebration of 50 years of liberation, effectively this very week, but also about the prospects it faces with the LDC status, perhaps moving into a more uncertain world. Despite its impressive per capita income increases and HDI achievements over the last decade, Bangladesh has to unpack the notion of security of agency,” he said.
There is a greater political challenge of redistribution where opportunities and the enjoyment of security require readjustment of rights and entitlements vertically, between classes, and horizontally between genders and identities, both, ethnic and religious, according to Professor Wood.
Socialism is Bangladesh’s “origination principle” which dictates the expansion of justice from institutional domains, state, market, community, and households, he added.
“The rich have much more control over their future than the poor and the experience of uncertainty is an inequality differentiator. It is a contributory definition of poverty and a limit on freedom,” he further said.
Dr Khondaker Golam Moazzem, research director of CPD, moderated the session, which was also attended by CPD Chairman Professor Rehman Sobhan and Distinguished Fellow Professor Rounaq Jahan.