Economic emancipation in an unequal scenario

Bangabandhu Sheikh Mujibur Rahman (1920-1975) concluded his historic 7 March (1971)  speech by pronouncing the  word "freedom" twice because he knew that achieving economic emancipation is equally important to freeing the country politically from the then  Pakistani colonial administration. 

His struggle was for achieving economic emancipation for the deprived section of the society. At independence, over 90 percent of Bangladeshis were villagers, a share that has now come down to nearly 67 percent. 

The new state of Bangladesh was the product of a "Bengali nationalism" that arose to challenge West Pakistan's economic exploitation of its Eastern wing. In the 1950s and 1960s, a group of Bengali economists carefully documented the process of economic disparity and demonstrated how a "two-economy" system was increasing the economic inequality in the East and West Pakistan. 

The economic and political demands, as stipulated and enumerated under the six-point programme, were the frontal assault on the foundation of Pakistan's colonial exploitation and authoritarian modes of governance. 

Hence the General Election of 1970 was fought on the basis of economic and political autonomy and inclusiveness, which reflected the legitimate demands of the people of the then East Pakistan. Bangladesh emerged out of a quest for economic and political emancipation – where people's participation will be the key to its development.

With the acceleration in the growth of per capita income, Bangladesh has made considerable progress in poverty reduction. The economic progress has translated into steady decline in poverty rates. During the 1990s, the national incidence of poverty declined from nearly 60 percent to about 50 percent; and a much more rapid reduction in poverty seems to have taken place in the following one and a half decade period with the national poverty rate reduced to about 21 percent.

Bangladesh has achieved robust and sustained growth of export earnings, and exports have become an ever more important part of the economy. While exports accounted for around 5 percent of the economy in the post-war years, now it accounts for over 20 percent. 

Illustration: TBS

More recently, remittances from migrant workers have emerged as a major factor, amounting to over 10 percent of the economy in recent years. Export performance also demonstrated a similar positive relation with democratic regimes. During the same period, Bangladesh also moved from aid dependency to self sufficiency as total exports of goods and services were more than six times the foreign aid it received in most recent years. However, to what extent has such growth in national earnings has added to human welfare?

Historical experience suggests that if our economy grows faster, more and more people will flock to cities. Dhaka, in particular, has gone from being home to 2 percent of Bangladeshis to 10 percent in the past four decades. Lack of decentralisation is causing a growing spatial inequality in income earning, where residents of Dhaka and Chattogram are earning way more than the residents living elsewhere. 

Our economic emancipation agenda definitely goes beyond the middle class in urban areas. If we are to adequately address the triple challenge of poverty, unemployment and inequality, we have to generate meaningful economic activity in townships, rural villages and rural towns. 

Boosting small business in these areas is a most logical way of achieving this goal. All successful economies have, as amongst the ingredients of success, invested strongly in the development of small business as well as cooperatives. Bangladesh should strive  to focus on growth-orientated enterprises as well as enterprises in priority sectors such as tourism, construction, agriculture, and cultural industries as well as information and communication technology. 

The target is needed to support primarily the enterprises that are owned by medium and small scale entrepreneurs, disabled persons, women as well as the youth. We have been encouraged by the increasing involvement of the corporate sector, organised business, labour, private financing institutions, non-government organisations, universities as well as our international partners. They all spread the same message of the need to grow small business, which is the engine of growth and development. 

Having engaged the small business sector and other social partners, we know what we are supposed to do. There are three key pillars of our small business strategy. These are financial and business development support services, procurement support and thirdly an improved regulatory environment. 

A key factor is, no doubt, access to finance. There remains an urge for creation of an enabling environment where it has been imperative that an improved service to small businesses, a one-stop shop for funding. The availability and cost of funding to small businesses is vital but not sufficient. More needs to be done to strengthen technical skills and promote market access. They will support small businesses and establish a business hub to provide technical assistance to small and medium enterprises. Support extends to export promotion. 

Amidst all achievements, an important area of concern for Bangladesh is the rise in inequality in the distribution of income. After all, dream of economic emancipation through the alleviation of economic inequality was one of the driving forces of our independence. 

Regrettably, in Bangladesh, there has been an increase in the degree of inequality in income distribution from the mid-1980s. 

The Gini coefficient, a measure of the inequality of wealth or income distribution, in the country was 25.88 in 1984 and went up to 33.46 in 1996,  again it  stood at 33.12 in 2010 from 33.22 in 2005. 

Bangladesh remains a country with substantial income inequality with all its manifestations even 49 years after independence. A small section of the society enjoys most of the country's wealth, depriving the larger section. Income share held by the highest 10 percent increased from 21 percent in 1984 to 35 percent in 2017. Income share held by the lowest 10 percent decreased from 4.13 percent to 3.95 percent. 

The pattern of distribution of income can be perceived from percentage share of income of household by docile groups. The gap between the poorest of the poor (bottom 5 percent) and the richest of the rich (top 5 percent) is extremely high. 

In 2005, the income accruing to top 5 percent of the households was 26.93 percent whereas the same was 0 .77 percent for the bottom 5 percent households. In 2000, income accruing to top 5 percent of the households was 28.34 percent whereas the same was 0.93 percent for the bottom 5 percent. It decreased from 0.93 percent in 2000 to 0.77 percent in 2005. 

On the contrary, the share of income of the top 5 percent decreased from 28.34 percent to 26.93 percent over the same period indicating that income was accruing at the middle level. 

Macroeconomic and social indicators show that Bangladesh has been better-off in some segment as an independent nation though it is far behind in achieving its primary goal of alleviating economic and political inequality. 

Macroeconomic growth contributed to higher national income, but growing income inequality needs to be addressed. Geographically centralised industrialisation has contributed to a higher flow of domestic migration and export of goods and services helping the national economy gain its self-sufficiency, but it is essential to safeguard and rights of the workers, the most ordinary people and the  marginal poor as well. 

The economy cannot gain independence and self-satisfying victory with the growing income inequality or sufferings of the industrial workers, the farmers who do not get good price of their produce and the petitioners who are deliberately denied dignity. 

The author is, retired secretary, and former chairman, NBR.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.