Rising inequality

Dr Bharat Jhunjhunwala
Political parties are vying with each other to present a pro-poor face in the ongoing elections. The Congress is rightfully claiming that MNREGA and Food Security Act have provided much relief to the poorest of our people. The BJP is promising 12 instead of 9 LPG cylinders every year. AAP, BSP and SP are all contesting on a pro-poor plank which is all welcome. The main issue today, however, is not of poverty. The main issue is that of inequality which has increased beyond socially sustainable levels.
Certain degree of inequality is necessary for the growth of any species. The bees will not grow if all bees are reduced to the same level of equality. None will be able to become queen bee and procreation will come to an end. Or, the tribal society has collapsed because it was too equal. The division of labour required for making guns-miner, smelter, chemist, etc.-was not possible in an equal society. As a result they could not stand up to the invaders armed with guns. The unequal won against the equal.
On the other hand, inequality becomes a destructive force beyond a certain point. Lions of the herd will be starved if the King Lion were to eat away all the meat. The lone surviving King too would hardly be able to hunt and survive on his own. Mankind has likewise both accepted certain degree of inequality; but also ensured that the upper classes do not capture all the resources. At the same time mankind has discarded equal distribution. Man will be reduced to a primitive existence if the resources are distributed equally. Every man will spend all his time growing food and weaving cloth and have little time left to make spacecrafts or computers. A particular level of inequality is best for the growth and survival of any species.
The immediate problem is that inequality is increasing beyond the point of sustainability. Incomes of the masses are stagnant, or increasing marginally, while incomes of the rich are increasing very rapidly. The difference of income between the street corner shopkeeper and his employee would be, say, 10 times. The shop keeper may earn Rs 50k per month and pay a salary of 5k to his employee. The situation is dramatically different in the case of Wal Mart. The annual profits are USD 16 Billion whereas the average salary of the employee is USD 24k. The difference is 600,000 times. This happens because globalization has enabled owners of Wal Mart to earn profits from across the world. Profits tend to increase with expansion of technology. The employee, on the other hand, has to compete with others workers from across the world. Hence wages tend to decline with the integration of the world economy. This is leading inexorably to an unprecedented increase in inequality in our society. This is not the first time this is happening though.
Inequality has increased throughout history. The productivity of labour increased many-fold consequent to the introduction of iron tools in ancient Greece. Those technological developments were no less exciting than those of the internet today. It was also an era of globalization with Alexander’s empire stretching across Asia. But did it lead to an increase in the wages of the common man? No. J D Bernal writes in his seminal work Science in History: “The beauties of the Greek cities, temples, statues and vases blind us to the fact that the way of life for most people in civilized countries at the fall of the Roman Empire was much what it had been 2,000 years before when the old bronze age civilization had collapsed.” Technological developments of the Iron Age and globalization a la’ Alexander brought no improvement in the conditions of the Greek labour.
The historical precedent has another lesson for us. Leaders of that ancient empire were not able to reduce inequality. The slaves were disillusioned. They had an emotional disconnect with the leaders. Thus, they sided with the Berbers when they attacked Greece and the Grand Empire was reduced to dust. The British Empire was moving in the same direction in the nineteenth century. The leaders, however, saw the impending danger and brought in a spate of laws to reduce the length of work day, ensure payment of minimum wages and other similar measures. That ensured peace in England. The same British Empire could not secure improvement of the living conditions of the people in India and was thrown out from here. The lesson is clear. The leaders will survive only if they are able to establish some sense of equality and secure loyalty of the common man. The society collapses if the common man is disenchanted. This has been described by historian Arnold J Toynbee in A Study of History. He says that a civilization grows as long as the leaders pay attention to the welfare of the common man and obtain support of masses by their policies. Such leaders he calls ‘Creative Minority’. On the other hand, civilizations decline when the leaders impose policies on unwilling masses. Such leaders he calls ‘dominant minority’. Breakdown of civilizations takes place because the rulers instead of creatively leading the masses, try to dominate them.
We may be approaching precisely such a breakdown despite reduction in absolute poverty. The increasing inequality is creating social instability and dissonance. In fact, the poverty reduction programs have empowered the people to raise the issue of inequality. A poor man who cannot get two meals a day is unlikely to get agitated about inequality. One who has his stomach full is more likely to react. And this agitation is increasing along with the increase in inequality in our society.
Four out of 100 richest persons in the world live in India. Nearly half of the poor of the world also live here. It is this widening of inequality that lies behind the Chhattisgarh massacre. British NGO Oxfam has calculated that wealth of the hundred richest persons has increased by Rs 13k crores in the last year. Each of the poorest 100 crore peoples of the world would get Rs 13k if only the increase in their wealth were to be distributed.
The so-called welfare measures such as MNREGA and Direct Benefit Transfer have failed to mitigate this increasing inequality. These measures are welcome. They provide relief to the poorest people. But these are predicated on an increase in inequality. Taxes are collected out of the higher profits earned by the rich and used to provide these welfare measures. Therefore, increase in inequality is an integral part of the present development model.  The voters must as the political parties not about poverty reduction but about measures they would adopt to contain rising inequality. Unfortunately, all parties are silent on this which indicates that they are comfortable with inequality. This will not do.

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