While wealth is a great factor for ensuring happiness in life, it is easily liable to be employed by one set of people against another. Besides, wealth has an inherent tendency to concentrate in the hands of a few, with the result that the rich become richer and the poor poorer.
In the existing conditions of the society we find there are few people who are affluent, well-fed, well-dressed and comfortable, while a vast majority of people who are poverty-stricken, miserable and unhappy. Such differences in the economic conditions are mainly due to the wrong distribution of wealth in the society. In considering the welfare of the society, we must not refer to individual fortunes or conditions of a few people. By human welfare we are to mean the greatest good to the greatest number. And this is the very genesis that underlies what is called “inclusive growth”.
Bangladesh, over the years like many developing countries have witnessed rapid growth in the GDP. The 7.28 per cent economic growth achieved in the last fiscal year, which the government reported recently, is the second largest growth rate in Bangladesh’s history. The country registered the highest growth of 9.6 per cent in 1974 but it should be dealt with caution. The post independence year of 1972 saw the highest negative growth of 14 per cent, making the 1974 figure look exceptionally high since it rose from a very low base. If we ignore the 1974 figure, the country has attained 7-plus growth a total of five times – in 1978, 1981, 2007, and 2016 and finally in 2017. And 2017 figure is the highest among them. While this is a cause for celebration for the present regime, it also raises a basic question as to whether this growth reaches all segments of our society.
There is an age-old dictum: “A rising tide lifts all boats”- suggesting when economic prosperity takes place, its benefits trickle down. However, there is indisputable evidence to debunk this theory and most importantly, we see in one country after another that this creed is not acceptable even as a national policy. A rising tide does not always necessarily lift all boats. In the vortex of tide some boats suffer damages, some lose their occupants, and others become too costly to run. While the big and newer boats sail away, the ones that stay behind need a little help to join the rest.
In these days of globalised economy we more often come across a catchy word “inclusion” in almost all economic discourses. Politicians, economists, sociologists and even the civil servants are incorporating the term inclusion in their lectures and sermons. Political leaders and activists never hesitate to declare their commitment about inclusion while running for elections or when they speak before parliament or public places. But do they really mean it, as we know only action speaks louder than political rhetoric. The lip service to transforming an inclusive economy sounds hollow because while pushing the GDP growth is easy and usually demonstrable, achievement in the area of income inequality, reduction in the numbers of poor or creating jobs for the bottom rung of the ladder are difficult.
Bangladesh, like all other developing countries, faces challenges of inclusion on many fronts. Whilst the country’s macro economy is robust and is blessed with population dividend having a large number of workable young generation, the nation can’t fail to address the needs of those left behind. According to recent Asian Development Bank (ADB) data, almost 25 per cent of our population remains below poverty line. This is a sharp contrast to 19 per cent for India and 6.7 per cent for Sri Lanka. Indeed, growth in Bangladesh in recent years has been driven by rapid expansion of ready-made garments sector and remittance from abroad, both of which are at one level widening the gap between the have and have-nots.
Admittedly, fast income growth is one of the per-conditions in matters to reducing poverty. In a frequently cited cross-country study, Arat Karaay, a leading researcher of IMF shows that growth in average income explains 70 per cent variation in poverty reduction (as measured by the headcount ratio) in the short run, and as much as 97 per cent in the long run. We also note that most of the remainder of the variation in poverty reduction is accounted for changes in the distribution. The Organization for Economic Co-operation and Development (OCED) suggests that growth, at any level, often fails to tackle three over-arching issues: poverty, unemployment and inequality. Therefore, there is a need to address quality and inclusiveness of economic growth. These questions have recently acquired added relevance because of the slowdown in rich countries and the simultaneous rise in inequality.
Fortunately, this call for inclusiveness is not only coming from progressive circles but also from international agencies. IMF proclaimed that policymakers need to focus more on the poor and the middle class. Research done at IMF has shown that income inequality matters for growth and its sustainability. Other analyses suggest that income distribution itself matters for growth as well. To say specifically, if the income share of top 20 per cent (the rich) increases, GDP growth actually declines over the medium term, implying that the benefit of the growth do not trickledown. In contrast, an increase in the income share of the bottom 20 per cent (the poor) is associated with higher GDP growth. The poor and the middle class matter most via a number of interrelated economic, social and political channels.
The UN agencies, by and large, have geared up to push inclusiveness in their Sustainable Development Goals (SDGs). And the World Bank has embraced the goal of boosting of shared prosperity and growth of bottom 40 per cent as irreversible objective to reducing global poverty to 3 per cent by 2030, finally conceding the harsh truth that “the type of growth that stimulates inequality is the type that further advances inequality”.
To build an inclusive economy Bangladesh needs to focus more on three broad-based aspects: a) to introduce good governance by upgrading the existing bureaucracy with a meritorious and skilled pool of committed civil servants, b) to evolve a just and promotional tax policy, suggesting the more you earn the more you pay tax and c) to expand a vigorous and workable social safety net programme meant for the abject poor, enabling them to lift themselves out of the vicious circle of poverty. The sooner these are done, the better.
The writer is a retired Deputy General Manager, BSCIC, Khulna. Gmail: email@example.com