Growth was prone to be associated with rising equality – known as Kuznets hypothesis – is generally accepted as an inevitable feature of the development process.
National economic and fiscal policies are generally perceived from Kuznets dictum. In all western philosophy-dominated so-called open market economies, when economic and fiscal policies are formulated, it is assumed that the market is perfectly competitive (efficient), and thus would engage in ensuring equality.
However, Nobel laureate economist Joseph E Stiglitz, in his 2012 book The Price of Inequality, showed how markets are neither efficient nor stable and will tend to accumulate money in the hands of the few rather than engender competition.
He demonstrates how government policies and political institutions, far from countering these trends, often enhance them, and that politics frequently shapes markets in ways that advantage the richest over the rest. This in turn weakens democracy and the rule of law by putting more and more political power in the hands of the wealthy. Though The Price of Inequality was written in the context of the United States, the observations are applicable in Bangladesh, as capitalism and capitalists behave in the same way irrespective of time and space.
A market is efficient when it is free from all sorts of private and public restrictions, except for property rights and free flow of information to market players. Efficiency of an open market cannot achieve without freedom of the individual and artificial individuals, companies are ensured.
In reality, market is heavily distorted by so many practices to please few wealthy and powerful, for example: Duties, tax holidays, licenses, permits, quota, unavailability of required market information, infringement of property rights, corruptions, mastanies, exercise of undue political power, dominance of big monies on policies, etc.
Thus, in no way can Bangladesh’s market be called an efficient market. Absence of an efficient market is the main reason for which even pro-people policies cannot bring desired results.
Economic and fiscal policies in Bangladesh have been devising based on open-market philosophy since 1976, keeping an efficient market in the illusion. These illusionary policies have resulted more than a 5% GDP growth and ushered a high level of inequality in the distribution of income.
According to data from the World Bank, Gini Coefficient (a widely used measure of income inequality which assumes value between 0 and 1, with higher values indicating greater inequality) has risen from 0.26 in 1984 to 0.33 in 2005. It had reduced to 0.32 during the 2005-10 period.
On the other hand, income for the top 20% of the population has increased by 5.57% while income for the remaining 80% has decreased by the same amount between 1984 and 2010. Meaning, the wealthy and powerful 20% have taken away the income of the middle and lower class folk, making them poorer.
This social injustice had occurred because of inefficient national policies and their implementations. Inequality has a price. It hinders the implementation of poverty-reducing policies, thwarts economic growth, and throws the economy into a poverty spiral.
The government can reduce inequality through the redistribution of income and wealth. The poor and marginalised people have access to few resources, which is being grabbed by the wealthy and powerful by way of land-developing, inciting communal atrocities, lower wages in firms and factories, unreasonably high profitability of industrial and financial products including microfinance loans, low price of agricultural produces, and such.
The rule of law is the means for ensuring social justice, including economic justice. It can safeguard resources in the hands of the middle and lower class from the unscrupulous wealthy and powerful people.
The government has initiated many safety net projects in order to redistribute social resources among vulnerable and poor people. Some of which are: Free primary education, kabikha, test relief, cash benefits for freedom fighters, elderly citizens, vulnerable women, and physically challenged people. These projects are theoretically sound and their effectiveness is visible.
However, according to social observers, about 40% of the expenditures are being eaten up by bureaucratic labyrinth. Payments directly made to vulnerable people through bank accounts are a comparatively better method of redistribution of social funds.
Nothing is perfect. In this case, because of widespread nepotism, a significant number of undeserving people are receiving public funds. In the past, the government has tried to distribute khash lands and houses among deserving people.
Many wealthy and powerful individuals exploited the opportunity in disguise. These initiatives were also unable to bring in desired results because of the chronic nepotism of the wealthy and powerful.
Safety net programmes, along with free education, allowances for education, and such, should continue defying nepotism and corruption in order to save the vulnerable and towards forging a skilled workforce.
Vocational and diploma engineering institutions and their education system should be made attractive. These institutions can produce a skilled workforce for both the local and international market.
Though with improved and efficient safety net programmes, the vulnerable portion of society can be saved but it cannot address the 9% unemployed youth. For our country to eliminate poverty and be promoted to a middle-income nation by 2020, the solution is in the creation of enormous employment opportunities.
Bangladesh is ready to fly high with its 65% workforce, nearly US$ 300bn gross domestic product, US$ 19bn reserve, US$ 14bn annual remittance and US$ 25bn export market.
Now she needs infrastructure and investment climate. Remittances are generally being used for household consumptions and purchasing real estates. That pushes consumer price to higher level, creates real estate bubbles. Families that do not receive foreign remittances are becoming marginalised.
Government and private entrepreneurs can collect this huge amount and use for infrastructure development and in constructing manufacturing factories, IT labs, cottage industries, and farming. Software development and other IT related service providing could become another big sector like readymade garments and create enormous employment for educated people. Investment in agro based industries would create huge employment in rural Bangladesh. Factories are to be erected in coastal areas that would save transportation costs and ease pressure on metropolitan cities.
The government can bring all these dreams to the reality using upcoming national budget. The budget should not only be devised for higher economic growth it should also be formulated for bringing social justice fighting inequality.