Tuesday, July 14, 2015

Surging tides of inequality

Surging tides of inequality

Children and grandchildren of the poor will remain impoverished, regardless of their potential and hard work.
The Hindu Archives

Children and grandchildren of the poor will remain impoverished, regardless of their potential and hard work.

Robust and lasting growth requires reducing inequalities, which undermine the productivity and morale of working people, and limit the number of people who could participate in the market.

In much of the world, the accident of where a person is born continues to determine her life chances, education and wealth. Even It Up, a recent significant report by Oxfam, marshals worrying evidence of rapidly growing inequality between and within nations, which continue to block chances for billions of the world's poor people to improve their life situations. Eighty-five people own as much wealth as the poorest half of the global population put together. This is a "tiny elite whose numbers could all fit comfortably on a double-decker bus", in the words of Winnie Byanyima, Oxfam Executive Director. From March 2013, these 85 people grew richer by $668 million every day. If Bill Gates were to encash all his wealth and spend one million dollars each day, it would take him 218 years to exhaust all of it.

The unfairness of this unequal world is enhanced because the majority of the richest persons are born into their wealth. Children and grandchildren of the rich will largely replace their parents and grandparents in the steep economic ladder, as much as children and grandchildren of the poor will remain impoverished, regardless of their potential and hard work. As Byanyima observes, "A child born to a rich family, even in the poorest countries, will go to the best school and will receive the highest quality care if they are sick. At the same time, poor families will see their children taken away from them, struck down by easily preventable diseases because they do not have the money to pay for treatment."

Many people believe that inequality is an inevitable part of the surge of economic growth and globalised technological progress. But in fact inequality "is the product of deliberate economic and political policies", of which the two biggest drivers are market fundamentalism and the capture of power by economic elites. Both of these are in abundant evidence in the India of today. Market fundamentalism — much in favour with India's successive governments, but pursued with particular fervour by the one led by Narendra Modi — is the insistence that economic growth requires reduced government interventions, and further freeing up markets. It opposes public investments in education, nutrition and health, and progressive taxation, and demands dilutions of labour protections and acquisition of people's lands and forests, all of which further fuel inequality. Accordingly, dramatic reductions in public investments in the social sector, weakening of labour protections and the land acquisition law, mark the first year of the Modi government.

The other feature of elite capture of the levers of power is the unreported story of India's public life. Economic elites buy political clout, which in turn purchases tax exemptions, land concessions, cheap credit, and subsidies on electricity and water. In India, tax exemptions to corporate India in every recent budget of around five lakh crore rupees could substantially finance India's education, nutrition and health care gaps. Oxfam calculates that if even a tax of 1.5 per cent was imposed on the wealth of all the world's billionaires, it could get every child into school and deliver health services in all the poorest countries of the world, saving an estimated 23 million lives. It estimates that if India just stops inequality from rising, it could end extreme poverty for 90 million people by 2019. If it reduces inequality by 36 per cent, it could completely eliminate extreme poverty.

Contrary to the widely propagated belief that fighting inequality would damage the pace of economic growth, the report points instead to evidence to the contrary that extremes of poverty are bad for growth. Robust and lasting growth requires reducing inequalities, which otherwise undermine the productivity and morale of working people, and limit the number of people who could participate in the market. Indeed public investments like in MNREGA not only extend social protection to India's impoverished populations: they also place more disposable income in millions of more hands which spurs growth, but equitably, from below.

India today is home to the third largest numbers of dollar billionaires in the world but, at the same time, harbours within its borders a third of the world's poor and hungry. From two resident billionaires with an income of $3.2 billion in the mid-1990s their numbers grew to 46 and combined wealth to $176 billion in 2012, and their share in GDP rose from one to 10 per cent.  By contrast, if judged by the median developing country poverty line of two dollars a day on purchasing power parity, more than 80 per cent rural and just below 70 per cent urban inhabitants in India continue to be poor. The burdens of birth weigh down even more heavily on those born into disadvantaged castes, gender, religion and tribes. In the countryside, poverty rates are 14 per cent higher for Adivasis and nine percent for Dalits, compared to non-scheduled groups. In urban areas likewise, the poverty of Dalits and Muslims is 14 per cent higher than the others.

Further worrying news is that seven out of 10 persons in the world live in countries where the gap between the rich and poor is greater than it was 30 years ago.  Oxfam observes that income concentration at the top fell in the first three decades after Independence, but since then for the top 0.01 per cent real wages grew annually at 11 per cent. By contrast, the rise in real household expenditure for the rest of the population rose by only 1.5 per cent. In agriculture, growth in real wages was five per cent in the 1980s, but fell to two per cent in the 90s, and virtually zero in the 2000s. No wonder that farmers across large tracts of rural India continue to despair enough to take their lives.

The ways to dam the surging tides of inequality are today well known: raising and enforcing statutory wages, expanding taxation of the rich, enhancing public investments in education, health and the small farm agriculture, enlarging social protection for the aged, infirm and disabled, enhancing maternity and child benefits, protecting indigenous and socially disadvantaged groups, ensuring water, sanitation and basic utilities to the rural poor and urban slums, and protecting the rights of workers. But in India, as in much of the world today, market fundamentalism and powerful economic elites still determine state priorities and resist policies for a more equal world. The world therefore remains one in which however hard poor people, women and socially disadvantaged communities toil, to survive with dignity remains a distant, often impossible dream.


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