By Dr. Santosh Kumar Mohapatra*
It is publicised now that exactly 30 years ago, a looming balance of payments crisis pushed India’s leaders to dismantle its socialist economy, embrace the economic liberalisation process ushering in private enterprise and years of higher growth. In reality, India embraced the so-called Washington Consensus under the pressure from IMF, World Bank.
Now, much discussion is going on supporting so-called economic reforms. It is argued that reforms have brought growth and prosperity. But in reality, the rich have become richer, and the poor have become poorer.
Inequality is increasing at a faster rate with the impoverishment of the masses in tandem. Health, education, and essential services have been privatised which has a cataclysmic impact on vulnerable sections of society.
The corporates/ rich have amassed wealth at the expense of the poor.
It is not only in India, but so-called reforms have failed in most developing countries to address the problems of the masses. Even poor people of rich countries are seriously affected.
The present corona pandemic has exposed how reforms failed to provide a safety valve to larger sections of society during a pandemic. Ensuring a dignified life is an illusion while all economies are crumbling being battered by the pandemic.
In his July 1991 budget speech announcing liberalization, erstwhile Finance Minister Manmohan Singh paraphrased Victor Hugo: “No power on earth can stop an idea whose time has come.” But ideas can only come of age in an environment conducive to nurturing them.
“Thirty years later, on 23 July, he was deeply saddened at the devastation caused by the COVID-19 pandemic, the loss of millions of fellow Indians and livelihoods. He recalls Robert Frost’s poem — ‘But I have promises to keep, And miles to go before I sleep’.
Singh said the reforms process unleashed the spirit of free enterprise which has helped produce world-class companies and help India emerge as a global power in many sectors. But the road ahead is even more daunting than during the 1991 economic crisis and the nation would need to recalibrate its priorities to ensure a dignified life for all Indians.
It means, indirectly, unknowingly Manmohan Singh admits that reforms have failed. If after 30 years of reforms process, India even rich countries are struggling to grapple with a pandemic, how can we say liberalisation process has made the Indian economy and world economy stronger.
Notwithstanding fast global growth, inequalities have been growing across the world and within countries. The rise of inequality has not only created massive social unrest but also adversely affected the global consensus on the kind of economic policies that countries follow. The Oxfam India’s “Inequality Virus” (January 25,2021) report and other reports are pointers to this crisis.
According to various Oxfam reports, the gap between rich and poor grows wider every year and leads to huge differences in life chances. It exacerbates existing inequalities in other areas, such as those based on gender, geography, ethnicity, race, caste, or religion. Extreme inequality is hurting us all, but it is the poorest people who suffer most – especially women and girls.
It damages our economies, fuels public anger across the globe, and stands in the way of eliminating global poverty.
No matter how hard they work, far too many suffer the indignity of poverty wages and are denied basic rights. In many countries, a decent education or quality healthcare has become a luxury only the rich can afford. Extreme inequality is a barrier to poverty reduction.
According to the Oxfam report 2021, titled “The Inequality Virus”, released January 25, the wealth of world billionaires has increased 19% while ‘the Wealth of 100 Indian billionaires increased by 35% during 2020. From 2009 to 2020, their wealth has increased by 90% to touch 422.9 billion dollars. India’s 100 top billionaires saw their fortunes increase by Rs 12,97,822 crore since March last year when the Covid-19 pandemic hit the country and this amount is enough to give 13. 8 crore poorest Indians a cheque for Rs 94,045 each.
Meanwhile, the collective wealth of the world’s billionaires rose to $3.9 trillion between March and December 2020 to reach $11.95 trillion, the 10 richest men saw their net worth increase by $540 billion in the same period.
The world’s richest 1% have more than twice as much wealth as 690 crore people. Nearly half of the world’s population – 340 crore people – is living on less than $5.50 a day. Every year, 100 million people worldwide are pushed into poverty because they have to pay out-of-pocket for healthcare.
Today 25.8 crore children – 1 out of every 5 – will not be allowed to school. Globally, women earn 24% less than men and own 50% less wealth. It could take more than a decade to reduce the number of people living in poverty back to pre-crisis levels. Unless rising inequality is tackled, half a billion more people could be living in poverty on less than $5.50 (£4.00) a day in 2030, than at the start of the pandemic.
The report says Covid-19 has the potential to increase economic inequality in almost every country at once, the first time this has happened since records began over a century ago. It sets out how a rigged economy is enabling the super-rich elite to amass wealth in the middle of the worst recession since the Great Depression, while billions of people are struggling amid the worst job crisis in over 90 years.
According to Credit Suisse’s 12th wealth report, the wealth share of the top 1% went up from 33.5% in 2000 to 39.5% in 2019 and rose further to 40.5% by the end of 2020. India is the second most unequal country behind Brazil whose top 1% holds 49.6% of the nation’s wealth. The wealth share of the top 1% in the US is 35.3%, China 30.6 %, UK 23.1% and Italy 22.2%.
It means despite a decline in wealth creation, rich Indians have garnered more proportion of wealth than in previous years.
Employing CMIE’s Consumer Pyramids Household Survey, Professor Arpit Gupta from New York University, Stern School of Business, Professor Anup Malani, University of Chicago Law School, and Bartek Woda, University of Chicago Law School studied Income and Consumption Effects of COVID (paper published in National Bureau of Economic Research, June 2021, and found that the COVID-19 pandemic led to stark reductions in economic activity in India. They found large and heterogeneous drops in income, with ambiguous effects on inequality.
While incomes of salaried workers fell 35%; incomes of daily laborers fell 75%. as a result of voluntary and forced changes in behaviour. Particularly white-collar workers, saw virtually no loss; while incomes fell for nearly 90 percent for other groups such as daily laborers. With regards to consumption, the data show that consumption fell even among those that did not experience income loss, suggesting precautionary savings and consumption behavior that reduced the distributive effects of COVID-19.
Public healthcare is a great leveller and directly helps in reducing health inequalities. In Oxfam’s “Commitment to Reducing Inequality Report 2020”, India ranks 154th in health spending, fifth from the bottom. In the 2021-22 Union Budget, a year following a pandemic, the Ministry of Health and Family Welfare (MoHFW) was allocated a total of Rs 76,901 crore, a decline of 9.8% from Rs 85,250 crore from the Revised Estimates of 2020-21.
The World Economic Forum, which organises the well-known annual gathering of the world’s most influential business and political decision-makers in the ski-resort of Davos (Switzerland), had come out with its first-ever Global Social Mobility Report, in January 2020 which has ranked India a lowly 72 out of the 82 countries profiled. According to the report, in India, it would take 7 generations for a member of a poor family to achieve an average income.
The Nordic economies such as Denmark and Finland top the social mobility rankings while countries like India, Pakistan, Bangladesh, and South Africa languish at the bottom.
According to Oxfam report, extreme inequality is not inevitable or accidental. It is the result of deliberate political and economic choices, and it can be reversed. Bringing together a world torn apart by coronavirus through a fair, just, and sustainable economy.
It is necessary to fight for a more equal world. What is disquieting is that when inequality is rising debt -GDP ratio is increasing too. That means debt-induced growth is benefiting the rich more while the burden of debt is borne by the masses in form of reduced expenditure, higher interest repayment.
The race to the bottom on personal income and corporate tax is a large part of the problem. While public services are suffering from chronic underfunding or being outsourced to private companies, many governments are under-taxing corporations and wealthy individuals, losing significant amounts of money that could be invested in schools, hospitals, and roads.
Corporate tax dodging costs poor countries at least $100 billion every year and financial secrecy that shelters trillions hidden in tax havens.
According to Oxfam, the crisis has exposed our collective frailty and the inability of our deeply unequal economy to work for all. Yet it has also shown us the vital importance of government action to protect our health and livelihoods.
Transformative policies that seemed unthinkable before the crisis have suddenly been shown to be possible. There can be no return to where we were before. Instead, citizens and governments must act on it.
Oxfam report suggests increasing investment in universal education and healthcare. In it had suggested to invest in work on tax justice and domestic resources mobilization and advocate fairer pro-poor taxation policies. Hence, it is imperative to support civil society to monitor public finance and to hold governments accountable for the delivery of free quality services. It is time to support campaigns for health and education and support organizations that work with governments on innovative ways to reach women and girls.
Oxfam suggests, a temporary tax on excess profits made by the 32 global corporations that have. The IMF’s Fiscal Monitor shows that raising taxes for higher earners is an effective way of reducing inequality without having any adverse impact on economic growth. The government must also re-introduce inheritance tax.
Wealth held by billionaires in India arises from three major sources – inheritance, self-made, and inherited and growing. Countries such as Chile and South Africa have raised taxes on corporations and wealthy individuals generating millions of dollars to invest in vital public services.
The author is an Odisha-based eminent columnist/economist and social thinker. He can be reached through e-mail at [email protected]
DISCLAIMER: The views expressed in the article are solely those of the author and do not in any way represent the views of Sambad English.