By Dr Anand Kulkarni
Leaders of the world congregated at the Annual Meeting of the World Economic Forum (WEF) in Davos, Switzerland, from 17th to 20th January. The focus this year was on national as well as international inequality. But the irony of the meeting has gone unnoticed. After all, the gathering is attended by the world’s wealthiest elite.
Neoliberalism as the culprit
In the backdrop of the event, Oxfam International made waves with the release of its latest report, ‘An Economy for the 99%’. The inequality picture it paints is damning. Eight men earn the same amount of wealth as the poorest half of the world and since 2015, the richest one percent has more wealth than the rest of the world. Moreover, between 1988 and 2011, the earnings of this super elite have increased 182 times the income of the poorest one-tenth.
The implications of inequality are profound, ranging from the lack of opportunity and empowerment to breakdown in social cohesion and the threat to democratic institutions. As the Oxfam report also suggests, government institutions have become captive to vested interests – striking at the heart of accountability and transparency in public life.
With the high mobility of capital, large corporations are able to pit one government against another to extract the strongest deal for themselves, taking advantage of imperfections in the taxation system and regulatory arrangements. As a result, public policy objectives regarding social welfare, the environment and the like are put in peril.
Our democratic deficit
It is fascinating that politicians around the world – irrespective of whether they represent the right or the left – have leapt onto the issue of inequality, although their solutions and slogans are different and their actions remain inadequate. The rising inequality in the United States, for instance, is associated with structural as well as technological changes in the economy.
The disparity between the ‘haves’ and the ‘have-nots’ has heightened in recent times, contributing in no small measure to the ascendancy of Donald Trump.
While inequality is inextricably tied up with the system of capitalism, the Oxfam report succeeds in pointing out a far more pernicious effect. In terms of the sheer concentration of wealth and concomitant power amongst a select few, it is a far cry from the essence of a capitalism-based society that ought to see small and medium sized enterprises engaging in competition. It seems as if the current situation reflects shades similar to those seen in Germany and Italy in the 30s, with big businesses and fascist governments in cahoots.
India, as one would imagine, is interlinked in this gloomy inequality story too. India’s richest one percent amassed sixty percent of the country’s wealth last year. No more than fifty-seven Indian billionaires accumulated the same wealth as the lower three-fourths of the country. Quite tragically, income inequality between the two genders is even more pronounced than in the rest of the world. According to a report in the Hindustan Times, women represent sixty percent of the lowest paid, but only fifteen percent of the highest paid.
Get the rich to pay their due
Like all good reports, Oxfam too goes ahead and outlines a number of potential measures to address inequality. The ones that stand out are taxes on financial transactions, taxes on wealth, and an outright crackdown on tax evasion associated with tax shelters and shell companies. While these measures are certainly alluring, implementing and sustaining them present obvious challenges.
A more comprehensive approach, focussed on India but more generally applicable too, would involve the following:
- Fundamental commitment to employment linked to growth industries of the future (not those beholden to vested interests) fuelled by a massive expansion in human capital.
- Facilitation of social enterprises motivated by factors other than pure wealth.
- Consideration of universal basic income schemes and remuneration for unpaid work.
- Measures to promote female entrepreneurship and employment.
- A strengthened transition from the informal to the formal sector in towns and rural areas.
- Encouraged citizen engagement and participation in both corporate and government decision-making.
- Growing accountability to challenge the status quo.
Oxfam and many others are rightly concerned about inequality. However, all is not lost. Inequality is not inevitable and it can certainly be fixed. The simple solution being – get the rich to pay their due.
Dr Anand Kulkarni is a Consultant and Principal Advisor at Victoria University, Melbourne.
Featured Image Credits: Hinckley Institute