Expressing concern over growing economic inequality, globally and in India, seems to be the flavour of the season. The Economist carried a special report recently on the alarmingly growing inequalities. “More than two-thirds of the world’s people live in countries where economic inequalities have risen since 1980, often to a startling degree”. It concludes saying, “Inequality has reached such a stage where it can be inefficient and bad for growth”. It is not that its moral conscience has been pricked by the spread of poverty and misery. The concern is more in achieving higher growth for larger profit generation.
Nobel laureate Joseph E Stiglitz has written a new book, The Price of Inequality. He argues markets have an inexorable tendency for greater accumulation of capital thus dividing society into what he calls the top 1% vs the other 99%. Incidentally, Karl Marx had presciently analysed this tendency of centralisation and concentration of capital more than 150 years ago. In his conclusion, Stiglitz says, “Our economic growth, especially if properly measured, will be much higher than what we can achieve if our society remains deeply divided.”
The Time magazine recently carried a special cover report on “Reinventing India”. At one place, this report says, “For over two decades, since the economic liberalisation of the early nineties India has indulged in the gratifications and titillations of a market economy”. Among many of its positive results, the report says that, “But it (reform) has also led to unprecedented levels of corruption and environmental degradation, and created new forms of deprivation and dispossession among those left behind by the economic reforms”.
The World Bank Report on Global Hunger 2012 ranks India at number 65 out of 79 countries. Worse, it observes, “According to latest data on child undernutrition, from 2005-10, India ranked second to last on child underweight out of 129 countries. Only Timor-Leste (try to locate this country on the map) had a higher rate of underweight children.” A “national shame”, as our PM says.
To understand the menacing degree of the economic divide in our country, consider the fact that during the course of last year, the number of US dollar billionaires in India doubled to 52 holding combined assets equivalent of 25% of Indian GDP. Apart from these people, there is another minuscule section called high net worth individuals (HNWIs). They are just 0.01% (120,000) of the total population of our country and their combined worth is close to one-third of India’s gross national income. According to the 2010 World Wealth Report brought out by financial services firms Capgemini and Merrill Lynch Wealth Management, India now has 126,700 HNWIs, an increase of more than 50% over the 2008 number.
As Marx had famously said once, the point is not merely to recognise and interpret existing realities, the point is to change them. It is here that those expressing concern over growing inequalities simply fail to provide any meaningful answers. The Economist debunking its own definition of the Left’s positions says, “The Left’s default position is to raise income tax rates for the wealthy” and calls for a dramatic re-thinking of what it calls “true progressivism”. What this means we do not know. But what it suggests is to resolve this issue without affecting growth (read profits).
That growth will be accompanied by a ‘trickle-down’ process, thus, reducing levels of poverty continues to remain an illusion. It has never happened and will never happen unless there is an interventionist effort by the State. Those worshipping the neon Gods of the market economy are aghast at such a proposition. When John Maynard Keynes called for State intervention to revive the global economy after the great depression of the 1930s, market fundamentalists opposed this by arguing that the markets will bring about a balance in the long run. Keynes famously remarked that in the long run, all of us will be dead!
With State intervention, it is perfectly possible for us in India to tackle our growing economic inequalities. It has been officially estimated that to provide universal food security of 35 kg of grains per month to every family at R2 per kg would cost no more than R1.2 lakh crore annually. Universal employment guarantee, properly implemented, will cost Rs. 80,000 crore. The universal right to education can be achieved according to the ministry by spending Rs. 40,000 crore annually. Comprehensive health coverage for all would cost Rs. 1 lakh crore annually and the universal pension scheme of Rs. 2,000 per month for eight crore people will cost nearly Rs. 2 lakh crore. All these put together comes to little over Rs. 5 lakh crore. Already the State has various schemes which are partial and halting, on which a substantial amount of money is spent. Thus, the additional cost for achieving the above objectives, which would go a long way in mitigating growing economic inequalities, would be much less than Rs. 5 lakh crore.
Where will these resources come from? Last year’s Union budget tells us that tax concessions to the rich and the corporates were Rs. 5.28 lakh crore. While subsidies for the poor are being drastically cut, such huge subsidies for the rich, we are told, are ‘incentives’ for growth. Yet, growth in the manufacturing sector declined from 3.6% in July 2011 to 0.1% in July 2012.
It is perfectly possible for us in India to meet the challenge of the growing divide among our people. The consequent improvement in people’s livelihood will enlarge domestic demand leading to a sustainable growth trajectory. This, of course, requires a qualitative shift from the present trajectory of economic reforms.
Sitaram Yechury is CPI(M) Politburo member and Rajya Sabha MP
The views expressed by the author are personal