How we can mitigate the effects of rising inequality

May 27, 2024

DHAKA – “The question is whether Bangladesh’s strong economic performance can be sustained. As matters stand, the country’s prospects are excellent, but there are risks that policymakers will need to take into account,” wrote Kaushik Basu a few years ago. The question he posed is still on everyone’s mind.

So, what are the risks that Basu, the former chief economist at the World Bank, is referring to? The growing level of income and wealth inequality is undoubtedly one of them. Inequality in Bangladesh is rising, slowly but steadily. And it poses a very severe risk to our economic development and social stability. The government and society at large have to pay attention and work on the issue on an ongoing and sustainable basis.

The data from the past Household Income and Expenditure Surveys (HIES) carried out by the Bangladesh Bureau of Statistics over the last two decades clearly indicate the trend pointing to the rising levels of income and wealth inequality. Whether we take the well-known measure, the Gini coefficient, or an alternative measure, such as the Palma ratio, and compare the income share of the top 10 percent with the income share of the bottom 40 percent, the signs are clear. We are heading towards a very unequal society.

The final report of HIES 2022 released by BBS last December showed that the top 10 percent of households increased their share of wealth to 40.91 percent, around 2.83 percentage points rise in the past six years. In 2016, their share of wealth was 38.09 percent and 35.84 percent in 2010.

One of UN’s Sustainable Development Goals, SDG 10, is unequivocal about the deleterious effects of an increasingly unequal society. First, it can weaken trust in public institutions and