Economic design the world follows actually widens inequality.

Image courtesy: axios.com 

When I say perhaps you would not believe it. “The share of wealth held by public actors is close to zero or negative in rich countries, meaning that the totality of wealth is in private hands. This trend has been magnified by the Covid crisis, during which governments borrowed the equivalent of 10-20 per cent of GDP, essentially from the private sector.” 

Simply put, this observation from the World Inequality Report 2022 means that over the years the governments across the globe are witnessing a unique trend – increasingly they find their treasuries are getting empty. So much so that even the interest rate on small savings are being reduced to help bridge the deficit in revenue collections arising essentially from huge stimulus packages being periodically doled out to big business. It is therefore quite obvious that while the government coffers are getting depleted, the rich are amassing wealth in an unequal proportion. This does mean that the resources are in a way being transferred from the government treasury to the private lockers. 

That’s perhaps what must have prompted the British MP Zarah Sultana to say that the super rich don’t create wealth but they are given wealth. “The wealth of billionaires in UK rocketed £106,500,000,000 during the pandemic. The super rich – and not the working class – should pay more tax.” Another study by the New Economic Foundation shows the rich have a runaway success while the poor have been squeezed in the past two years. The widening inequality is not only restricted to UK but has emerged as a global phenomenon, a disquiet outcome of the neoliberal economic design that was thrust upon every nation. 

While more than 800 million people in India live on less than $2 a day, the combined wealth of the top 1 per cent rose by 35 per cent during the pandemic. While India added another 40 billionaires during the pandemic, nearly 50 per cent of its population is barely surviving on Rs 4,500 per month. This is the average, but don’t forget the shocker that the Economic Survey 2016 had brought out. The average income of farmers in 17 States of India, which means roughly half the country, stood at a paltry Rs 20,000 ($ 267) a year. Imagine how the farming families must be surviving with an average income of less than Rs 1,700 a month. 

“India stands out as a poor and very unequal county, with an affluent elite,” the report rightly observed. With the top 10 per cent having 20 times more wealth than the bottom half, the inequalities obviously galore. Similarly, at the international level, the richest 10 per cent hold 52 per cent of global income. The poor are left with only 8 per cent. As if this is not enough, the gulf between the rich and the poor has further widened during the pandemic. In America alone, the combined wealth of its billionaires has increased by a whopping 44.6 per cent during the pandemic, a study by the Institute of Policy Study had brought out. 

Interestingly, the World Inequality Report draws attention to a faulty perception that has been created in public thinking about the failure of socialism in restricting the economic divide. Between 1951 and 1981, the report shows that inequality was far less than what has been witnessed in the reforms era beginning early 1980s. And as Dan Price, a Seattle-based CEO tweeted the other day: “One of the biggest myths of capitalism is that the rich are job creators. In the pandemic, billionaires’ wealth is up $2.1 trillion and the number of jobs is down 4.2 million. The myth is so dangerous because it leads people to idolise the rich and give them whatever they want.” 

True. In India, whenever a question is raised on the need to provide more stimuli to raise rural demand, a chorus immediately emerges on giving more tax concession and economic stimulus packages to the supply side, meaning the industry, saying it will lead to more job creation. The official statistics have however belies this flawed argument, with almost six million salaried jobs lost in November alone.   

The economic design we follow is so built that it actually widens inequality. To illustrate: if only the annual Rs 1.45-lakh crore tax bonanza that was given to the Indian industry in Sept 2019 was instead provided to farmers , an additional Rs 12,000 per year could go to each land owing farmer, increasing the entitlement under PM Kisan Samman Nidhi programme to Rs 18,000. Such a decent direct income support would have not only helped bridge the existing economic disparity but would have helped create an increased rural demand thereby adding on to country’s economy. Providing more money in the hands of farmers would be the right step ahead in making agriculture economically viable thereby reducing the pressure on the cities for creating jobs. This makes strong economic sense given the speed with which automation is happening in the industry.   

Take another example. In the US, General Mills has already announced that given the high rate of inflation, it will be forced to raise the prices of its grocery products from the beginning of the New Year. What it did not say, and as Dan Price pointed out: “GM Mills paid a $ 300 million dividend to investors, brought back $ 150 million in stock to enrich execs and investors, and pays its CEO $ 16 million. It makes $ 2.1 billion a year in profit. It is raising prices by 20 per cent and blaming ‘inflation’.” Globally it has been seen that co's flush with cash (thanks to tax cuts, bailouts and stimulus) do not invest in creating jobs but use it for buying back shares. India is no exception. Media reports show that Indian companies had bought back shares worth Rs 2-lakh crore in the past five years. 

Inequalities also exist within the corporate houses. A significant proportion of the economic stimulus packages go towards meeting the staggering salary bills plus bonuses for the top executive or used for stocks buy back. As Robert Reich, former US Labour Secretary explains one way is to look at the CEO-to-worker pay ratio. Coca-Cola CEO has an income package that is 1,621 times higher than a median worker’s salary. Similarly, Levi Strauss: 661-to-1; McCormick & Co: 585-to-1; Carnival: 490-to-1; Unisys: 313-to-1; and Tyson Foods: 294-to-1. As per a media report, the basic salary of Star Bucks CEO was 12,617 per cent higher in 2020 than the media employees salary. This mind-boggling pay structure provides a basic salary of $ 1.54 million to the CEO while the average income of a farmer growing coffee beans is less than the international acute poverty line of $1.9 per day. The inequalities that makes the top executives walk away slush with money therefore is woven in the company’s balance sheets, and similarly I find the distressing level of inequalities we see globally are also entwined in the way reforms are designed. #

Source: Providing more stimuli to raise rural demand key to bridge economic disparity. Bizz Buzz. Dec 17, 2021. https://www.bizzbuzz.news/opinion/providing-more-stimuli-to-raise-rural-demand-key-to-bridge-economic-disparity-1085902

 

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How the rich become richer, and the poor are driven to the wall

Ever since the first wave of coronavirus pushed countries into a lockdown, the central banks, mainly in the rich countries, printed US $ 9 trillion of surplus money. Well, the underlying objective was to infuse this surplus money into the pandemic hit economies, which had been left gasping for breath.

According to economist Ruchir Sharma, Chief Global Strategist at the Morgan Stanley Investment Management, this pandemic stimulus in turn made the rich add on to their wealth. “Much of that stimulus had gone into financial markets and from there into the net worth of ultra-rich,” he wrote (Financial Times, May 16). The total wealth of the super rich has increased in the same period to somewhere between $ 5 trillion to $ 13 trillion. No wonder, markets are awash with money, while countries are struggling to pull economy out of slump.

The sad irony is that what appears to be an ingenious way to indirectly transfer wealth from public coffers into the pockets of the ultra-rich happened at a time when Brookings estimated that an additional 144 million people globally, in 2020, slipped below the stringently kept poverty line. Using the World Bank and IMF poverty estimates, the calculations show that India has surpassed Nigeria when it comes to having the largest population of people living in extreme poverty. India added another 85 million poor to its existing huge numbers that have somehow been surviving below the poverty line. The devastating second wave of Covid-19 may leave a still bigger dent in poverty estimates.    

But perhaps what we do not realise is that all it requires to eradicate extreme poverty from the globe is US $100 billion, a tiny fraction of the pandemic stimulus that was pumped in to revive the global economy and instead ended up rewarding the billionaires by helping them to amass more wealth. This is not the first time that such astonishing amounts of surplus money have been pumped indirectly into the hands of the super rich. For quite a number of years, central banks in rich countries have been printing surplus money. However, what remains unexplained is how come there is all the money for the rich, but the world is still unable to find enough money to fight poverty.

If only a fraction of the pandemic stimulus had gone to where it was needed -- to remove poverty, the world would have been a much better place to live.

Meanwhile, the pandemic has further widened income inequality taking it to obnoxious levels. In America, the Institute for Policy Study says the combined wealth of its billionaires increased by 44.6 per cent during the pandemic. During the same period an estimated 80 million people lost their jobs. In any case, top 50 super rich in America hold as much wealth as the bottom 165 million. In India, the income inequality is no less glaring. Just to give you an idea, the average farm income as worked out by 2013 National Sample Survey Office (NSSO) report, for roughly 50 per cent of the population dependent largely on farming, stands at a paltry Rs 6,426 per month (roughly half of it coming from non-farm activities). That is why protesting farmers have been demanding an assured income by way of an assured price for their produce.

Compare this with what an Oxfam’s ‘Inequality Virus Report’ brings out. The combined wealth of India’s billionaires has risen by 35 per cent during the pandemic, and to explain how the increase would translate in simple terms, the report states that the rise in wealth of just top 11 billionaires alone is enough to pay for MNREGA work for ten years. In any case, the top 1 per cent holds four times the wealth that the bottom 953 million has.  

To understand how an increase in income works wonders for the poor, look at the outcome of this experiment on the feasibility of universal basic income. Two years before the pandemic struck, in early 2018, Foundation for Social Change, a charitable organisation, along with the University of British Columbia in Canada gave $ 7,500 Canadian dollars (or US $ 6,206) to 50 homeless families in the Vancouver region. A year later, during which time the charity kept a tab on how the money was being utilised, the results that emerged were not only astounding, but equally encouraging. More or less same results have been achieved in almost similar kind of studies conducted elsewhere.

Contrary to the public perception wherein it is generally believed that the poor don’t know how to handle money, the results clearly brought out how wisely they made use of the limited financial support, spending it on necessities like food, clothes, housing and other utilities. According to news reports, while the consumption of basic food needs went up by 37 per cent; the poor had actually cut down on drug and alcohol by 39 per cent. By moving fast into housing, these homeless actually worked to ensure a roof over their head. What the study therefore conclusively established is the significance of roti, kapda and makaan for the poor households everywhere in the world, and their strenuous efforts to work towards attaining it. In other words, such petty cash transfers have the potential to uplift the poor from the clutches of poverty.

Instead, we see more money being routed to the rich by way of tax concessions, economic stimulus packages, bank write-offs, bailouts and massive subsidies in the name of incentives for growth to bolster corporation profits with the faulty assumption that some of it will trickle down to the poor and needy. When it comes to giving poor their share, the argument is that by giving surplus money directly into the hands of the poor everyone will have more to spend, and that will lead to higher inflation.  

The economic growth model therefore has been very cleverly designed to help widen income inequality, and make the fat cows still fatter. The poor are expected to fend for themselves. #

Growth should take the poor into account. The Tribune. May 22, 2021 https://www.tribuneindia.com/news/comment/growth-should-take-the-poor-into-account-256674?fbclid=IwAR3OX6dgsHwmg3kBgPxtksZkQKxPaSjOxe9v10eK0wxIlMXZskwip2RXvAE

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When billionaires are willing to sacrifice human beings for the sake of economy ..

As coronavirus spreads, the rich are buying lavish bunkers to escape the virus. This one in Germany is spread over 76 acres. 

Pic reproduced from -- Los Angeles Times  

Let’s be very clear. As Robert Reich, a professor of economics at the University of California at Berkeley and the ex-Secretary of Labour in former US President Bill Clinton’s first term put it: “The problem is the virus, not the economy.” Prime Minister Narendra Modi too echoed this when he told G-20 leaders to put human beings first, and then look at economic targets.

But as the world grapples to contain the spread of the deadly coronavirus pandemic, the voice to sacrifice people – especially grand-parents – for the sake of the economy, is growing. In an interview with Fox News, Texas Lt Governor Dan Patrick, said that grandparents should be willing to die for the sake of America’s economy, and for the sake of younger generation. He said people should be smart to survive, but wanted people to return to work. However, at no stage in the course of his interview did he say that he being a grandfather himself, with six grand children, is willing to sacrifice his life. Obviously he thinks he is smart enough. And of course we know the ultra-rich as a class are smart to always maintain a physical distance from the rest of the society. Sales of bunkers with special air-filtration systems, escape tunnels and assured food supplies for one year are going up.      

And if you think Dan Patrick is alone in carrying such repugnant views, just hold on. US billionaire Tom Golisano told the news agency Bloomberg: “The damages of keeping the economy closed as it is could be worse than losing a few more people.” At a time when number of people testing positive is increasing in a geometric proportion, crossing 82,000 in the US (as on Mar 27 morning), and the number of those succumbing to the virus are steadily growing, billionaires are instead busy raising concern over dwindling profits and therefore the urgent need to restart the businesses. With nearly half the global population under a virtual house arrest, with industries having pulled down shutters, and with international and domestic travel at a standstill, the Wall Street Journal in an editorial Rethinking the Coronavirus Shutdown wrote: “no society can safeguard public health for long at the cost of its economic health.”      

If you’re still not shocked, take a look at what columnist Thomas Friedman wrote in New York Times: “Let many of us get the coronavirus, recover and get back to work – while doing our utmost to protect those most vulnerable to being killed by it.” As if human lives don’t matter, and the death rate from Coronavirus infection is nothing more than a set of statistics, like the way policy makers view farmer suicides in India, another advocate of ‘choose the economy’ refrain, another US billionaire, Dick Kovacevich, was quoted as saying: “We’ll gradually bring those people back and see what happens. Some of them will get sick, some may even die, I don’t know.”

The US President Donald Trump tweeted on Sunday: “We cannot let the cure be worse than the problem itself. At the end of the 15 day period, we will make a decision as to which way we want to go.” This was before the infection rate zoomed in America. Far away in Brazil, the far-right President Jair Bolsonaro calls the coronavirus outbreak as a ‘little flu” and thinks the media is ‘tricking’ people of the severity of the crisis primarily to topple his government. He is not in favour of a lockdown in his country.

With such insensitive responses pouring in from the rich and mighty if you are wondering what kind of a 

society we are living in, where economics takes precedence over what might turn out to be gravest of human tragedies, let me tell you it has historically been more or less like this. When the British government asked the then Viceroy of India, Lord Wavell, to explain the reasons behind millions of people (3 to 4 million) who perished in the Bengal Famine in 1943, the Viceroy wrote back saying that these poverty-stricken people in any case would have died. As we all know, Nobel laureate Amartya Sen’s seminal work later had shown that there was no shortfall in food production in 1943 and the resulting famine was the outcome of British government’s deliberate policy of diverting food elsewhere. But instead of accepting the blame for depriving the poor of food, Winston Churchill is reported to have shifted the blame for the famine to poor Indians, saying they were "breeding like rabbits." Much earlier, at the time of the Irish Famine between 1845 and 1849, during which time an estimated one million people died of starvation and another one million migrated, the deaths from starvation were perhaps nothing more than a collateral damage. 

At the 150^thcommemoration of the Irish Famine at Cork in Ireland, I vividly recall the mayor of the city in his opening remarks saying what kind of society existed in Ireland at that time when people were dying of hunger from the failure of the staple potato crop, devastated by potato blight disease, the Colonial masters were busy loading ships with corn to be carried to Britain. From the starvation deaths to the pandemics – including the Spanish Flu in 1918 which killed roughly 20 to 25 million people – many political economists view it as a subjugation of the ordinary people by a small section of the elite.

At these pressing times, Robert Reich finds it ‘morally reprehensible’ on how corporations are exploiting the crisis. The US Senator Bernie Sanders said “When we say it’s time to provide health care to our people, we’re told we can’t afford it.” But when the stock markets feel jittery, there is no shortage of money. Out from the hat the US government pulls out $1.5 trillion to calm investor’s worries. This is true globally. Hopefully, when everything calms down, the world may see a behavioural change as well as encounter a dramatic change in economic thinking.

Nevertheless, saner voices dominate. The global response to combating the pandemic is on right track -- limiting the spread. India’s response with a nationwide three-week lockdown is a step ahead of the international curve, and rightly so. After all, if you survive the crisis you can always rebuild the economy. #

In America, economy first. The Tribune. April 1, 2020

https://www.tribuneindia.com/news/comment/in-america-economy-first-63839?fbclid=IwAR0lBeOCa4dEoXVRrAfsrop_P_ZjBHxTNZyeA3fHoaXkJm-PvESeRRQhcPU

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