Rich beyond description, poor beyond description

Illustration: TBS

'Here in a country rich beyond description, there are people poor beyond description'

If the pithy comment made by the British politician Will Crooks more than a hundred years ago is borrowed, it is easy to describe economic inequality in today's Bangladesh in one sentence: "Here in a country rich beyond description, there are people poor beyond description."

A small group of people in today's Bangladesh have become ultra-rich beyond description in recent years while the majority of the population struggle to buy an egg or a chicken or any meat.

Media reports say that they don't regularly see some common proteins such as eggs, farmed fish and broiler chickens in their plates due to the high prices.

Their income could hardly keep pace with the rising cost of living. Many of them lost their jobs in the economic slowdown in recent years. Countless youth today face a bleak future: There are no jobs for them.

This dystopian world did not start to crumble suddenly in the last two-three months following the ouster of Sheikh Hasina's regime.  

Overall inflation stayed above 9% since March 2023. Food inflation has remained above 10% for six consecutive months since last April.

Globally inflation eased following various measures. But in Bangladesh no government measures could tame the inflation.

Even Bangladesh failed to take advantage when commodities prices started to fall after a peak in the global market because of the national foreign currency reserve shortage – a crisis manufactured by economic mismanagement and reckless expenditure by the ousted Hasina regime. The train wreck of the current economic shock, therefore, has been bearing down at breakneck speed for a while, only the management kept the screen pulled to hide the view.      

A year ago, a survey by SANEM revealed that as many as 70% of the households in Bangladesh had to change their diets involuntarily to cope with the high prices in the market. It concludes that such drastic cut down of food consumption habits puts households at risk of food insecurity.

SANEM's findings in March this year are based on interviewing 9,065 households across Bangladesh between April and November last year. It measured food insecurity following the Food and Agriculture Organisation guidelines on the Food Insecurity Experience Scale (FIES).

A week before SANEM survey findings were made public, a BBS survey said in terms of overall population, around 3.77 crore, or 22% of the population experienced moderate to severe food insecurity in 2023.

Both the findings indicate weak economic growth in Bangladesh over the years.

Infographic: TBS

The official data says gross domestic product known as GDP to measure the economic growth increased 12 times in the last 15 years during the rule of Hasina than what it was in 2006, the last year of the past BNP government.

The size of the GDP ballooned to 50 lakhs 31 thousand crore taka in 2023 from 4 lakhs 15 thousand crore taka in 2006.

Per capita income [nominal] increased to $2,793 in 2023 from $543 in 2006.  The budget for the 2024-25 fiscal year exceeds Tk 8 lakh crore, including a Tk 2,65,000 crore Annual Development Programme (ADP) from only TK61 thousand crore in the last year of the BNP government in 2006.

The official figures, though mired in controversy over its doubtful accuracy, however, depict a story of the rise of the economy until it was hit by the pandemic in 2020, which was also frequently lauded by development partners.

But given the sufferings of the poor amid high inflation, the big question is who were the beneficiaries of the "spectacular" economic growth and whose plates ended up with the largest pie slices of the national income, wealth and assets?

The answer lies in data. 

In 2022, the wealthiest 10% of households in Bangladesh controlled an astonishing 40.92% of the country's total income, marking a sharp rise of 12.62 percentage points from 1983-84, according to data from BBS-- the Bangladesh Bureau of Statistics.

An even more troubling fact is that the top 5% now hold 30.04% of all income, up from just 18.30% four decades ago. In stark contrast, the bottom 5% of households have seen their share of income shrink to a mere 0.37%, down from 1.17% in 1983-84.

This growing disparity is underscored by the Gini coefficient, which increased from 0.360 to 0.499 over the same period, signalling a deepening economic inequality.  The Gini index determines a nation's level of income inequality by measuring the income distribution or wealth distribution across its population. A higher Gini index indicates greater inequality, with high-income individuals receiving much larger percentages of the population's total income.

The coefficient of the Gini index ranges from 0 (or 0%) to 1 (or 100%), with 0 representing perfect equality and 1 representing perfect inequality.

With a Gini index nearing 0.5, Bangladesh now faces a "big income gap" on the verge of becoming a crisis of severe disparity, according to UN standards.

While average household income has risen more than fifteen fold, reaching Tk32,422 in 2022 from Tk1,917 in 1983-84, the benefits of this growth have disproportionately favoured a privileged few, leaving the poorest segments of society further behind.

That average household income means a domestic aide and the country's top rich family has equal income! In reality, the gulf between rich and poor in Bangladesh has been widening for years.

Today's Bangladesh is a textbook example of two economies appearing to be a tragic irony of the historic fact that such economic disparity was the root cause leading to its independence five decades ago.

Economic inequality in erstwhile East Pakistan now Bangladesh was a result of West Pakistan depriving East Pakistan of equal opportunities. But the inequality that has re-emerged in Bangladesh is different in nature. Bangladesh has none to blame for the widening economic inequality but itself due to its wrong policy, economic mismanagement and uninhibited corruption on a grand scale. The collapse of every key societal institution, be it economic, legal or political under state patronage has worsened the situation.

A tale of two cities: What went wrong?  

Why have the rich become richer? Why have the poor become poorer?

This year's laureates in economics have provided compelling evidence of why inequalities among nations arise and persist. That evidence presents the causes of inequalities that many countries including Bangladesh suffered for years.

Their findings in "Why Nations Fail" the 2012 book by Daron Acemoglu and James A. Robinson is that institutions and politics are key.

They provide an impressive host of empirical evidence ranging from ancient Rome to modern-day Nogales, a city split between Arizona of the USA and Mexico – and the verdict is that "inclusive institutions" make countries richer.

Geographically they are in the same location. A fence cuts the city in half. The two populations also have similar origins. But the residents in Nogales, Arizona, are relatively well off, have longer average lifespans and most children receive high school diplomas. Property rights are secure and people know they will get to enjoy most of the benefits from their investments. Free elections provide residents with the opportunity to replace politicians with whom they are not satisfied.

On the other hand, the residents in Nogales, Mexico are considerably poorer than on the north side of the fence. Organised crime makes starting and running companies risky. Corrupt politicians are difficult to remove, even if the chances of this have improved since Mexico democratised, just over 20 years ago.

Why do these two halves of the same city have such vastly different living conditions?

The answer lies in their governance and economic system.

Democracy, the rule of law and the protection of property rights helped Nogales, Arizona to shine. But Nogales, Mexico failed due to its "extractive" arrangements where a small ruling class owns most resources and wealth.

Bangladesh has been suffering from a governance crisis for years. Absence of democracy and aberrant rule of law has contributed to developing "extractive arrangements." Controversial businessman S Alam, Salman F Rahman, ex IGP Benzir Ahmed are just some of the prominent names that exemplify the extractive system.

Hasina's bad politics denied people voting rights in the last three general elections. Every key institution such as the parliament, the judiciary, the civil administration and the law enforcement agencies were brutally destroyed to make Hasina and her cohorts' rise above accountability a cakewalk. Grand scale corruption, robbing banks in the name of loans, incidents of extra-judicial killings and non-existent human rights were rampant. In these extractive arrangements, many people have become rich beyond comprehension. The absence of inclusive institutions has made the poor poorer.

The extractive systems are responsible for the rise of global inequality too. The poorest half of the world's population owned just 2% of global wealth in 2021 while the richest 10% controlled 76% of it, according to the World Inequality Report.

Forbes counted a record 2,781 billionaires in the world as of 2024 while the World Bank estimates that more than 700 million people globally are living on less than $2.15 per day.

Bangladesh is contributing to this unequal world too as its economic inequalities have made a few million people to join those who are living on the disadvantaged side of the hapless.

Is there any way out?

The economic inequalities in the UK described by Will Crooks in 1908 have been addressed after the second world war through various reforms including increase in health and education expenditure. Rising social spending has effectively been used to combat inequality resulting in transforming Britain into a welfare state.

Bangladesh however has gone in the opposite direction. The health and the education sectors remain ignored in the annual spending year after year. The budget allocation for health in the FY25 budget is 5.20% of the total budget and 0.74% of the GDP. Expenditure on health as a share of GDP in Bangladesh was the lowest among 45 LDCs in 2021, according to CPD. The result is disastrous.

The out-of-pocket healthcare expenditure in the country rose to 73% in 2021 while it was 68.5% in 2020, according to the Bangladesh National Health account. Many people slipped into poverty due to the health expenditure burden. Quality of education still remains dismal.

Instead of increasing social spending, the governments in the last 15 years focused on building showpieces infrastructures to make development visible. But at what cost? Not only mega projects, all other development projects saw abnormal escalation of cost due to mainly alleged grafts and mismanagement.  

Showpieces infrastructures were also built in the education and health sector. Numerous good looking buildings are now seen on hospital and educational institution premises from rural to urban areas. All those development projects contributed to the growth of GDP.  But the quality of the services they offer is questionable at best. Bangladesh has become stuck in a trap. Is there any way out?

This year's laureates in economics Daron Acemoglu, Simon Johnson and James A. Robinson have developed an innovative theoretical framework that explains why some societies become stuck in a trap with what the laureates call extractive institutions, and why escaping from this trap is so difficult.

They also show that change is possible and that new institutions can be formed. In some circumstances, a country can break free of its inherited institutions to establish democracy and the rule of law. In the long run, these changes also lead to reduced poverty, says a statement issued by the Nobel committee.

Building institutions and good politics are the keys. The interim government formed following the ouster of the Hasina regime has moved to rebuild institutions from the wreckage.

It formed commissions to bring necessary reforms in judiciary, financial sector, electoral system, administration and anti-corruption system. People are now hoping against hope that the measures taken by the interim government will yield some good results.