Inequality has grown globally over the past few centuries. Some may argue that growth should happen before inequality is resolved. Some may go further to allow for inequality by quoting Aristotle: “The worst form of inequality is to try to make unequal things equal.” But proportion and balance are vital in nature; the bases of natural beauty are not the same as man-made inequalities for control of one by the other. There is a growing voice that seeds of inequality have been sown within the framework of the present wealth creation process.
The basic rules of transaction in a competitive economic system within a local economy tend to fuel existing differences, and not otherwise. At the national level, with reforms aimed at liberalisation and privatisation, inequality rises within local economies and across the country. While globalisation of trade and commerce has integrated economies and helped movement of goods and services around the world, the rules of international trade and investment seem to perpetuate asymmetries or inequalities between developed and underdeveloped countries.
It is shocking that in 2017, the richest 1 per cent of people in India owned 73 per cent of wealth created here. This is not unique to India; most other developing countries face the same situation
Does this mean creation of inequality is inevitable and natural in competitive market economies? Should we merely accept the ‘development paradox’ that inequality comes with economic growth? Are we to make every effort to stay ahead of others in a competitive market economic system without seeking an alternative?
One of the most challenging issues we face today is reversing the growth of inequality. Nelson Mandela has said: “As long as poverty, injustice and gross inequality persist in our world, none of us can truly rest.” The essence of good leadership is to work towards reforming systems, processes and institutions and to reverse inequalities of the past. BR Ambedkar has said: “What are we having this liberty for? We are having this liberty to reform our social system, which is full of inequality, discrimination and other things, which conflict with our fundamental rights.” This has been a phenomenon across countries globally. Said Musa has observed: “Too often, customary practices and discrimination on the basis of gender, ethnicity, race, religion, social status, or class are the root sources of pervasive inequality in many countries.”
In industrial economies, higher growth tends to increase inequality; a phenomenon termed as development paradox. The phenomenon can completely disrupt a stable society built over centuries. Thomas Piketty has said: “Extreme inequality is not only useless but can be harmful to growth because it reduces mobility and can lead to political capture of democratic institutions.” Rising inequality is not only toxic to growth but also excludes people, both innovators and customers. This would diminish innovation and demand; the basis of economic growth. The current level of inequality in the US and fast growing economies such as India are examples of this growth and inequality paradox.
USA, the richest nation, has the highest inequity index. Jay-Z has said about the US: “One reason inequality gets so deep in this country is that everyone wants to be rich. That is the American ideal. Poor people do not like talking about poverty because even though they might live in the projects surrounded by other poor people and have, like, ten dollars in the bank they don’t like to think of themselves as poor.”
It is shocking that in 2017, the richest 1 per cent of people in India owned 73 per cent of wealth created here. This is not unique to India; most other developing countries face the same situation. Dionne Warwick says: “Rural communities in Africa, South Asia and Latin America are where the majority of hungry people are and the inequality that exists between women and men in these communities is holding back progress.” Unless growing inequality is seriously dealt with; huge social and environmental unrest would be a natural response.
If any government were to adopt the single purpose of removing inequalities; economic, social, political, gender, caste, class, race, ethnicity, and religion, that nation would be happy and sustainable. Instead even democratically elected governments tend to work otherwise. Joseph Stiglitz notes: “High levels of economic inequality leads to imbalances in political power, as those at the top use their economic weight to shape our politics in ways that give them more economic power.” Not only are elected representatives increasingly caring for their own select interest groups, but also often lack both clarity and intent in policy making. Teresa May has said: “Ministers often look puzzled when reports show that Britain has one of the lowest levels of social mobility in the developed world. They see poverty, inequality, fairness, as all about income. They have relied on tax credits to solve this. But tax credits do not solve poverty: They mask it.” Unfortunately, not many politicians and bureaucrats understand the long-term dangers of growing inequality. Jeremy Corbyn has said: “Inequality is a terrible waste of time, a waste of people’s resources.”
Interestingly, the principles of nature are contrarian to the principles of economic transactions designed by human actors that allow for asymmetry generation. In nature; matter moves from the point of higher concentration to points of lower concentration; as observed in heat transfer from hot body to cold body, fluid moves from higher level to lower level, or movement of air from high pressure to low pressure. The effort of nature is to bring balance and harmony. Should not human beings draw some lessons from this natural principle to bring balance between the poor and the rich? If transition towards balancing in all spheres is not carried out, people at the base of the society or the nature ultimately is likely to respond to balance the incorrigible human behaviour that promotes imbalance. From being a gentle and pleasant breeze, the winds can turn to cyclonic storm if the defective or purposely designed policies, practices, organisations and institutions that perpetuate inequality are not reformed.
The writer is a professor of strategy and NABARD Chair Professor at XIMB.