It’s Inequality, Stupid!

Published in BDNews24 as “Socialism Debate”


A spectre looms over Bangladesh, the spectre of socialism, since the Fifth Amendment verdict.

In its simplest definition, socialism promotes public ownership of the means of production and distribution of resources. But as we are debating the issue of means of production, we are missing the forest for the tree.

Let’s muse over Bangladesh’s experience with socialism and reverse-socialism to identify that missing link.

A journey towards socialism

Even before the independence, Awami League campaigned for socialism and promised nationalisation of heavy industries in its 1970 election manifesto. So after the independence, ‘socialism’ became part of the fundamental principles of the constitution.

The first Industrial Investment Policy promoted nationalisation as a means of production for ‘Socialism being one of the fundamental precepts of State policy’.

So when the post-independence government nationalised all industries that were abandoned by the former Pakistani owners, they nationalised Bengali-owned big industries too. About 92 percent of nation’s industrial fixed assets came under the nationalisation process.

However, mismanagement of the industries not only failed to serve the purpose, it damaged further investment prospect in the private sector. Amid the growing socio-economic crisis of the country, the investment policy was finally revised in July 1974 to increase the ceiling on private sector investment and offer monetary and fiscal incentives to encourage private investment.

Then, the reverse-socialism

After the 15 August massacre, subsequent martial law governments abandoned ‘socialism’ as state principle and pursued a growth strategy based on privately owned means of production.

There are studies on how million-dollar properties were sold at token prices during the decade long privatisation race. But let’s focus on the performance of those privatised industries.

A 1991 survey by Bangladesh Board of Investment, initiated by the then interim government, reported that out of 290 enterprises which were privatised before 1979, 152 were shut down by 1991.

In 1997, the Ministry of Finance asked the BIDS to conduct a survey on industries that were privatised since 1979. The 1997 findings of that study were also very disappointing. Of the 205 units that were surveyed by BIDS, 83 were found closed and 10 were proved to be non-existent (see chart 1).


While a number of industries also registered increasing performance after privatisation, overall performances of the rest were very disappointing.

Privatisation and growth

After the restoration of democracy in 1991, the government focused on creating conducive environment for private-sector led investment. Flow of industrial credit to private sector went up, fiscal and monetary incentives were extended, and more investment sectors were opened up for private and foreign entrepreneurs.

As can be seen from chart 2, public investment went down from around 7 percent of GDP in fiscal year 1991 to only 4.6 percent in fiscal year 2010. During the same period, private investment doubled from around 10 percent to almost 20 percent of GDP. The GDP growth rate also doubled during the past two decades.


With higher GDP, we also accounted higher national income. Just between fiscal year 2005 and 2010, our average per capita annual income increased from $463 to $750.

But this doesn’t mean that we have finally got it right.

Income distribution in Bangladesh

According to the latest available Household Income and Expenditure Survey, in 1991-92, the top 10 percent earner of our population shared 29.2 percent of our total national income. By 2005, their income share has increased to 37.6 percent. During the same period, the income of lowest 10 percent earners has gone down from the miniscule 2.6 percent to only 2 percent of total national income.

For the lowest 5 percent, this income share has decreased from 1 percent to only 0.8 percent of national income. As a result, the Gini co-efficient that measures the income-inequality has gone higher, indicating a growing inequality in the country (chart 3).


When we redistribute our Gross National Income based on the above income distribution, annual per capita income of top 5 percent of our population stands at $4040, which is 5.3 times the average national per capita income.

In contrast, per capita income of lowest 5 percent of the population stand at only $116 — that is only $10 per month, or .32 cents per day! This is also 6.5 times less than the national average. Chart 4 shows this income distribution in ten income groups, along with the top and lowest 5 percent earners.


If one calculates the real income of top and lowest 1 percent earners, the picture will appear even bleaker.

We can debate for and against socialism from our own political perspectives. But until we focus on equitable income redistribution, our empty words will mean nothing to millions of people who can’t even earn 50 cents a day!


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