A nation in crisis: which way out?

by Anis Chowdhury

spe03THIS piece is not about the political crisis or the problem of extremism that the country is now plunged into, but of confidence, social capital or trust — inter-linked, nonetheless. The thread that binds them together could be many, but one that stands out is the growing inequality or relative deprivation.
Bangladesh is no longer a basket case, or a bottomless basket; it has come a long way, and is now aspiring to become a middle-income country by 2021. The rising tide of impressive economic growth averaging approximately 6 per cent a year has lifted more than 15 million people out of poverty since 1992.
However, the rising tide has also caused fissures in the social fabric. Income and wealth gap has yawned wide, turning a reasonably equitable society at the time of independence into one of the most unequal societies. The Gini coefficient, a common measure of inequality, has increased from 0.36 in 1973 to 0.46 in 2010. As can be seen from Figure 1, there has been a secular transfer of income from the lowest quintile of the households to the highest quintile. The average annual loss of the bottom 1st quintile’s share in the national income has been -0.71 per cent as opposed to the average annual gain of 0.46 per cent for the highest (top) quintile during 1973–2010.
Surprisingly, the trend gained momentum since 1991–92 after the fall of the autocratic quasi-civilian government of Ershad, resulting in a precipitous increase in the ratio of income of top 10 per cent to that of bottom 10 per cent (Figure 2). The middle-class also lost; income shares of 2nd, 3rd and 4th quintiles declined since 1973. This does not augur well for our democracy. Nor can we celebrate this development in a country where one of the founding principles is socialism.
Nevertheless, Bangladesh is not alone in witnessing widening income gap; this is a global phenomenon unleashed by the embrace of the neo-liberal economic philosophy of privatisation, liberalisation, deregulation and globalisation dictated by the interest of the corporate power. Supported by the International Monetary Fund and the World Bank, ‘corporate globalisation’ or ‘globalisation under hegemony’ shaped the need to dismantle barriers to international trade, foreign direct investment, international finance or intellectual property rights. After pushing the developing countries to conform as a condition for financial support over more than three decades, the IMF’s research department has recently admitted that the neoliberalism, responsible for rising inequality and economic insecurity, was ‘oversold’.
In the process, the civil society simply became apolitical NGOs, happy to receive crumbs from the donors to engage in so-called development activities. Citizens became ‘stakeholders’ together with the large corporations and donors, instead of ‘right-holders’. Bereft of rights and no longer an end itself of development, citizens are now ‘human resources’, an epitaph cleverly designed to hide that they are dehumanised fodders for the profit-machines of corporations. Should one be surprised in the falling share of wages in the national income, stagnating or falling real wages and tragedies like the Rana Plaza incident?
The process in Bangladesh got an added impetus due to a fledgling democracy, where the separation of powers between various branches of the state is often blurred, an environment conducive for unchecked corruption. Where democratic institutions are weak, political capital is a powerful instrument for advancing one’s economic and social position. As professor MG Quibria of Morgan State University (USA) and ADB’s former senior adviser, pointed out, ‘possession of political capital opens up myriad economic opportunities including preferential access to finance and business, restructuring and loan default options, lucrative employment, access to privileged information, tax evasion or even outright corruption’. The link between corruption and economic growth could be debated; but it is a method of plunder and primitive capital accumulation by the lumpen bourgeoisie that exacerbates inequality of wealth.
Additional boost to accelerating inequality comes from a three-stream education system (Bengali-medium national curriculum, traditional religious curriculum and English-medium overseas curriculum). It perpetuates inter-generational inequality. Furthermore, under the corporate globalisation, schools and universities — both public and private — are no longer places of learning where youths are transformed into enlightened citizens and agents of change, and where visionary future social-political leaders are produced. They are simply factories for mass producing so-called ‘job-ready’ certificate or diploma holders, apathetic to social, economic and political issues. In a deregulated economy, workers are dehumanised, constrained to socialise and participate in political activities.
Growing income and wealth inequalities, where obnoxious luxurious living by the few co-exits with a large populous struggling to survive, fuel a sense of relative deprivation which is found to contribute to violent social conflict. Weakened democratic institutions and rising inequality create a vicious circle that leads to diminished trust — among citizens, and between the state and citizens — which chips away social capital, the glue that binds society.
What is the way out? One can get some cue in AK Sen’s observation that ‘a country becomes fit through democracy’; and democracy versus development is a false dichotomy. Sen defines development as freedom — freedom from hunger and poverty; from fear and persecution; and freedom to express, associate and participate.
Therefore, the first step is strengthening democratic institutions or consolidation of democracy. This requires depoliticisation of administration and civic associations. There exists a large volume of research findings showing that politicisation vis-a-vis politicisation of administration and civic groups along party lines not only boost corruption, but also accelerate social cleavage. But civic associations where members hold different political views help build trust among political parties. They can agree on critical national issues while still disagreeing on details.
A depoliticised public administration serves wider citizenry. In the process the government, even though led by the winning party, governs for all and becomes inclusive, thus strengthens the trust between the state and the governed.
In the economic arena, there is an urgency for reorienting to pursue strategies for growth with equity. This is an imperative if Bangladesh is serious about its state principle of socialism. The state has to recapture its lost leverage over the corporate sector to protect the interest of the wider community, to ensure decent jobs, and a fair living wage. It has to give priority to citizen’s well-being over balancing the budget, be bold to use its fiscal power to redistribute the growing wealth by using progressive taxation and widening public provisions of basic services, such as healthcare, education and housing, and universal social protection. There is ample evidence of a close negative association between tax-GDP ratio and inequality as well as between public social expenditure and inequality, clearly indicating the redistributive role of the government.
State actions are needed to smoothen the rough edges of the market forces that manifest in exclusion and inequality which are found to fuel social and political unrest harming growth in the long-run. Equity of access, opportunities and outcomes are fundamental aspects of socialism. They enhance both economic and political freedom essential for rights-based development that empowers citizens and expands their capabilities.
In sum, Bangladesh has to find the solution to its woes in its founding principles — a democratic polity and a egalitarian economic construct. Both are critical in rebuilding trust and social capital, needed to overcome the current national crisis.

Anis Chowdhury was professor of economics, University of Western Sydney, Australia during 2001-2012 and held senior United Nations positions in New York and Bangkok during 2008-2015.

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