Same diagnosis, different remedy.

Ever since Prof Thomas Piketty published his book, ' Capital in the Twenty-First Century ' there has been an outpouring of articles about inherited wealth and inequality. Now a professor in Delhi has written that inequality reduces growth of the economy, based on a report by the IMF. " ... the report shows that an increase in the income share of the poor and middle classes by 1 percentage point raises growth by 0.38% percentage points in a country over five years. On the other hand, an increase in the income share of the rich by 1 percentage point reduces growth by 0.08 percentage points," he quotes. Then he writes,"....countries with high income inequality, such as the US, Brazil and China, had lower economic mobility compared with low inequality countries such as Denmark, Norway and Finland." But then China has been growing at over 10% for over a decade, pulling a staggering 680 million people out of poverty and the US economy is growing faster than Europe, where there is far greater social support. Brazil adopted a different system of social handouts, called Bolsa Familia which gave cash directly to poor women if their children went to school and had regular health checks. This stimulated the economy by reducing poverty and increasing demand but may have produced a culture of dependence. As long as the Chinese economy was racing ahead, creating a boom in commodity prices, Brazil was growing but as China began to slow down Brazil has gone into recession with high inflation and interest rate of 13.5%. So it was the unequal growth of China that was underpinning the the equal growth of Brazil. In Scandinavian countries high taxes subsidise education, healthcare and pensions for everybody, including the rich. It is possible because they have small homogeneous populations. A study has shown that countries with with few languages are richer, with more social networking, resulting in less corruption. The importance of social mobility is not in doubt but there is heated debate about how to achieve it. Conservatives believe that increasing productivity and employment enriches people while social welfare hurts the poor by creating a culture of dependence. Socialists believe that redistribution is the key to reducing poverty. We Indians have been brainwashed by our politicians and our movies to be suspicious of the rich. But perhaps we should stop to think why Indians are doing so well in the US. Last year Indians working abroad sent back $70 billion. Imagine how much wealth they could have created here if the government was helpful. After the plague epidemic in Britain real wages shot up by 250% between 1300 and 1450 because fewer people increased wages of labor. Perhaps it would prudent to reduce population than depend on mother nature. After all, death is the greatest equality.