As the series of memorable dates on the calendar wraps up on this Golden Anniversary with the climatic December 16, Bangladesh has much to be proud of, and hopeful for. Born as an impoverished, war-torn state, there has to be a recognition that poverty reduction has been always the most immediate responsibility of the state, and the substantial reduction in poverty in Bangladesh since independence is a cause for celebration. Continued rapid growth in per capita income will help reduce poverty further, but the ability of higher growth to lower poverty is hampered by growing income inequality, some economists insist. No doubt they have their reasons.
Just 1 percent of Bangladesh's population holds 16.3 percent of the total national income in 2021 and the bottom 50 percent of the population holds just 17.1 percent, according to the 'World Inequality Report 2022', released by the World Inequality Lab, a Paris-based institute. The latest update of the index, published on December 7, showed 44 percent of Bangladesh's total national income is held by only 10 percent of the population. The remaining 90 percent are left to scrap over just over half the total national income. No matter how you look at it, that speaks to glaring inequality, but the picture is by no means unique to Bangladesh. In neighbouring India, 20 percent of the national income is held by the top 1 percent, according to the same report.
The fact is that Bangladesh at this point exhibits the features of a nation on the trajectory described by Nobel Laureate Simon Kuznets in 1955. In what is still regarded as the seminal empirical investigation of the relationship, he found the following relationship between per capita GNP and income inequality: during the early stages of development characterised by low per capita GNP, income inequality is low, but it then tends to increase with higher growth; as development proceeds, this rising inequality is arrested and eventually reversed at higher levels of per capita GNP. Bangladesh, over the course of the last two decades, has been experiencing its first burst of growth, and we may align this timeline quite precisely with our progress through the UN charts: we've just moved into the middle-income category, still on the lower side.
The trend that as development proceeds, there is a transfer of activities and employment from the agro-rural economic base to an urban-industrial set up, where income tends to be higher because of higher value-added activities, is also one for which plenty of evidence can be found in the Bangladeshi experience. As a result, the gap between the average income in the agrarian rural economy and the average income in the urban-industrial complex grows, contributing to increasing income inequality. Eventually, more and more people can be expected to transfer to the urban-industrial economy, thereby tending to equalise incomes. At the moment, Bangladesh is fitting this classical picture. Questions may be raised if this doesn't come to fruition. And certainly this isn't to say policies should not be sought to reduce income inequality, because that can also lead to growth. At the moment, let us guard against complacence, but don't let that take away from the achievements we have before us.
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