Review the WTO treaty

Dr Bharat Jhunjhunwala
Welfare can be defined in two ways-poverty alleviation or reduction of inequality. The two definitions are different. Poverty alleviation means that basic means of livelihood such as food, clothing and shelter are made available to every individual. This can be done along with prevalence of high levels of inequality. For example, big companies can make huge profits and give out huge salaries. This will create huge inequality. Simultaneously, taxes collected from them can be used to provide food, clothing and shelter to the poor. In this way poverty alleviation and increase in inequality can go together. But the converse is not true. Less inequality does not mean less poverty. Communist Albania had an relatively equal distribution of income but at dismally low levels. The tribal society is, relatively speaking, equal but has widespread poverty. Distribution of wealth of the rich among the poor may create equality but absence of investment will lead to stagnation in the economy and breed poverty. This is precisely what happened in China during the Cultural Revolution of the 1960s. The rich and the educated were sent to the villages to learn from the peasants. Equality was promoted. But this led to economic stagnation and later led to the adoption of the capitalist model of development in the 1970s. We have to therefore choose between poverty alleviation and equality.
Another reason for increase in inequality in recent times is the use of labour-saving technologies in industries. One skilled worker can manage 10 automatic looms in a modern textile mill. The wages of this skilled worker are high while unskilled workers lose their jobs and have to make do with lowly incomes. One more reason for increase in inequality is ‘primitive accumulation’. The common man is deprived of even subsistence incomes in the initial period of industrialization and the money is used for investment. The workers of England were impoverished in the 19th century to release money for investment in factories of Manchester. The industrialists became rich while the workers became poor and inequality increased. India and China are passing through such a phase presently. The rich are making huge money while the common man is getting impoverished or, at best, holding on to his low incomes. This is inevitable in our quest for economic prosperity. Increase in inequality appears to be inevitable for these reasons.
Increase in inequality can go together with reduction in poverty. The Zamindar can provide a pair of dhoti, shoes and umbrella to the bonded labour and remove his poverty while inequality reins supreme. Our Government is trying to establish precisely such a system through the Employment Guarantee Scheme. The poor are being provided with minimum employment and incomes while big companies make huge profits and inequality increases by leaps and bounds. The loan waiver for debt-ridden farmers and provision of subsidized food grains to BPL families are all designed with the same objective.
The underlying thinking is that poverty, not inequality, is the main problem. This is not correct in my reckoning. Actually reduction of poverty will create more social instability by enabling people to protest against rising inequality. The poorest hungry have no capacity to protest. They have no energy to participate in a mass procession or hartal. Poverty alleviation makes it possible for them to rise in protest. In areas like Bastar, the tribals were previously too poor to protest. The area had widespread poverty but was yet peaceful. Now, fortified with cheap food grains provided to BPL families, they are joining the Naxalites in protesting against inequality.
Inequality is also an impediment to economic growth. It kills demand for goods. If 99 percent of the people are making a living with, say, Rs 100 per day, then there will be little demand for motorcycles, refrigerators and TVs. It is necessary that the market grows for economic growth to sustain. Karl Marx had pointed this out in his major work Das Kapital. He said that the businessmen are ever trying to reduce the payment to workers in their effort to reduce their cost of production. These low wages prevent the workers from consuming goods. In the result, there is more production from modern factories along with low demand. This leads to a ‘crisis of overproduction’. Goods lie in the market but people do not have the income to buy them. In the result, the income of the rich will implode if it is not distributed just as the Zamindar’s haveli becomes a ghastly house if there are no workers to upkeep it.
Yet another problem with the model of inequality with poverty alleviation is that it kills the incentive to work among the poor. Easy availability of food, clothing and shelter removes the incentive to work for a better life among the poor. This problem is now clearly visible in countries like the United States and Germany. Poor people are content living with the unemployment compensation and social security benefits. They have stopped trying to find work. For these reasons I believe that the model of inequality with poverty alleviation will not provide stability to the society.
We have a difficult choice to make. Inequality is likely to increase because it is inherent in the process of development. This inequality will become explosive despite poverty alleviation for the reasons mentioned above. The solution, perhaps, lies in simplicity of the rich and private charity. Simple lifestyles by the rich will remove the irritation towards richness among the poor. The poor rickshaw puller is less likely to be agitated if the rich businessman sitting behind him is wearing simple clothes. Simultaneously, distribution of wealth by the rich in building village roads, schools and hospitals and running old age homes will transfer incomes to the people and create demand in the market. Making of schools and roads will make it easier for the poor to earn and act as an incentive to work. Therefore, we must combine rising inequality with simplicity and charity. The model of rising inequality with poverty alleviation will not work.

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