Tuesday, May 24, 2016

Is equality the answer to inequality?

The International Monetary Fund reports that India is a highly unequal country, with a huge difference in earning between the rich and the poor. The IMF compares changes that have occurred in Asia from 1990 to 2013. India's Gini coefficient, in which 0 means perfectly equal society while 100 means that 1 person controls all the wealth, has increased by 6.18 points to over 50, but during the same period China's Gini coefficient has jumped by 19.61 points, from around 30 to higher than India. In 1991 India was bankrupt and had to pledge 67 tonnes of gold to avoid defaulting on its debts. After 1991 the economy was gradually liberalized and began to grow faster than before. China's growth was even faster so that it has become the second largest economy in the world. So does it mean that inequality increases as a country grows richer? A rich country provides easy opportunities for an individual to become rich while in a poor country everyone is equally poor so there is more equality. This would seem to be true when we see that Albania's Gini is 29 and Belarus boasts of a Gini of 26, compared to the United States, the richest country in the world, with 41. Yet, Switzerland has a Gini of 31.6 while Sweden's Gini is 27.3 and these are rich countries. The US has the largest number of billionaires, so maybe it is not because the rest of the population is poor but because some are just super-rich. The Scandinavian model where high taxes provide cradle to grave social security for every person could be the reason why these countries are more equal. India has a higher proportion of people living in poverty, compared to Indonesia, Vietnam and Philippines and our middle class is much smaller than East Asian countries. Why? We have reservations in higher education and government jobs for those deemed to be disadvantaged by being of lower caste. There are innumerable social security schemes for the poor. From MGNREGA to midday meals in schools to help in building houses, the government generously hands out trillions of rupees to the poor and disadvantaged. Trouble is that to finance all these schemes the government has to tax the middle class heavily which maybe why India does so poorly in building up the middle class. The US also has a lot of social security schemes to help the poor. At 83.59% India has the highest proportion of people working in the informal sector, where wages are lower and there is no safety net. Is it possible that discrimination by our government is responsible for inequality? Oxfam estimates that just 62 people hold as much wealth as 3.6 billion people. People are born unequal. Perhaps we should concentrate on eliminating poverty and not inequality, by supporting all the people, as in the Scandinavian model, rather than through discrimination. Only non-politicians can even think of that.

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