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Inequality and poverty in Bangladesh

QAZI KHOLIQUZZAMAN AHMAD
NOT so long ago growth in total and per capita gross national income (GNI) was generally used as the main indicator of development. But over the past three decades or so the issues of income distribution and poverty have increasingly come to the forefront. Poverty reduction is now the buzzword at the United Nations agencies including the World Bank and the IMF, regional development banks, and other international and regional organizations. The developed countries are also concerned about global poverty. In the developing countries, poverty reduction is enshrined as the principal goal by the governments. Civil society organizations are also vocal and active in the field of poverty reduction.
The Millennium Development Goals (MDG) of the United Nations centre around poverty eradication and most developing countries have prepared/or are preparing their national poverty reduction strategy papers (PRSPs). Following the MDG target of poverty reduction, the PRSPs generally set the target of
halving the poverty ratio by 2015 in relation 1990 (or a more recent year).
However, GNI growth, total and per capita, is still used a lot, particularly by the governments to indicate their successes or otherwise. Obviously GNI growth is essential so that the cake is larger for the people to share. But, its equitable distribution is critical for sustained, accelerated poverty reduction.
The reality is that, in the wake of free market and globalization, initiated in pursuance of the Washington Consensus formulated by the World Bank and IMF in the mid-1970s but gathered momentum around the world since the early 1990s, disparity has been accentuating both globally (i.e. between the rich and the poorer nations) and within nations (i.e. between the rich and the poor). Thus, while poverty reduction is the talk of the world, inequality has been sharply increasing on the ground.
A recent UN Report (The Inequality Predicament: Report on the World Social Situation 2005) has identified the glaring economic-social-political inequality as the key predicament in the fight against poverty. Regarding income inequality, globally one billion people living in the developed world own 80 per cent of the world's gross domestic product, while the overwhelming majority, a total of 5.4 billion, living in the developing countries have to make do by sharing the remaining 20 per cent. Within the developing countries, the income disparity between the tiny rich minority and the rest of population is glaring and increasing.
Indeed, despite unprecedented increase in global wealth and national income increases at reasonable rates in many developing countries, poverty persists at high levels in developing countries around the world. More than one billion people in the world live on less than one PPP US$ and another 2.7 billion on less than two PPP US dollars per person per day. The PPP US$1 a day is so little an income that hunger stares is the face of the people below it, and those who are even on twice that income are also extremely hardpressed to make both ends meet. Abstracting from income focus, if human dignity is considered as the poverty line, overwhelming majority of world's population would be poor.
Let us now consider the pattern of income distribution in Bangladesh. The country's average per capita gross annual income is very low at Tk.28,430 at current market prices (US$ 466) as of 2004-05, and income distribution is highly skewed and worsening. However, the most recent data available on income shares received by different deciles of the population are for 2000. Similar data are also available for 1995-96 and 1991-92. (See Bangladesh Economic Review 2000 and 2005, Ministry of
Finance, Government of Bangladesh)
The steeply worsening income distribution can be gauged from the following information. The national income share of the richest 5 per cent of the population increased from 18.55 per cent in 1991-92 to 23.62 per cent in 1995-96 to 30.66 per cent in 2000, while that of the poorest 5 per cent declined from 1.03 per cent (1991-92) to 0.88 per cent (1995-96) to 0.67 per cent (2000). The disparity between these two segments of population increased from 1:18 (1991-92) to 1:27 (1995-96) to 1:46 (2000). Income distribution has certainly worsened significantly
since 2000. Unemployment is rampant (about 40 per cent) and incomes of marginal and small farmers, agricultural labourers and of those employed in rural non-farm, often rudimentary type, activities, urban informal sectors, and lower-level jobs in semi-organized and organized sectors including the readymade garments industry (where a worker receives about Tk.1000 a month) are very low.
On the other hand, the rich are making a lot of money through their market power and, not infrequently, through shady deals and black market operations. Their burgeoning affluence should be obvious if one looks at the huge modern shopping malls and eating houses in Dhaka and other large cities, the flourishing highly costly private education, luxurious private cars on the street, etc. In fact, the richest 10 per cent of the population has increased its national income share sharply, while the other 9 deciles, particularly the bottom deciles, have experienced declines.
There are indications that the income distribution has worsened faster since 2000 compared to the 1990s. But, in the absence of more recent data, I have extrapolated the national income shares of the various deciles for 2005 on the basis of the trends estimated from income shares as of 1991-92, 1995-96, and 2000. The share of the richest 5 per cent of the population increases to 36.98 per cent and that of the poorest 5 per cent declines to 0.44 per cent. The income shares of the 10 deciles from bottom up are (in per cent): 1.48, 2.64, 3.40, 4.10, 4.90, 5.90, 7.30, 9.50, 13.65, and 47.17.
Applying the projected 2005 income shares to the GNI (in current market prices) and population of 2004-05, I have computed, for the year, per capita per day income of different deciles of population. The total GNI for 2004-05 is Tk. 3,894,660 million and the total population 138
million. The per capita per day income of the richest 5 per cent works out at Tk. 572 while that of the poorest 5 per cent at Tk. 6.80, which imply that the income of the richest 5 per cent is 84 times that of the poorest 5 per cent. The detailed results are shown in the Bar Chart.
Given the high prices of food stuff (particularly of the main foods of the poor: coarse rice, fish, spices, vegetables, onions, salt, oil etc.), other basic consumer essentials, and healthcare and other services on one hand and extremely low incomes as shown in the Bar Chart on the other, about a third of the population lives precariously and another 20 per cent struggles to make both ends meet.
At the same time, poverty reduction rate is very low. The poverty ratio on the basis of food energy intake declined from 44.7 per cent in 1999 to 42.1 per cent in 2004 (Bangladesh Economic Review 2005, p.165), implying an annual average reduction rate of 1.2 per cent (or 0.52 percentage point per annum)
Given the above mentioned reality relating to income disparity and along with it the accentuating social and political disparity and very low poverty reduction rate, the nation's socio-economic future is in the doldrums unless disparity can be brought down to tolerable levels and poverty reduction sufficiently accelerated quickly.
Dr. Qazi Kholiquzzaman Ahmad is President, Bangladesh Economic Association (BEA), and Chairman, Bangladesh Unnayan Parishad (BUP).