Has the Quest for Equity become
Irrelevant in India?
Arun Kumar, Sukhamoy Chakravarty Chair Professor, CESP,
SSS, JNU.
Yusuf Meherally Memorial Lecture at GPF, Sept 23, 2014.
I. INTRODUCTION
Yusuf Meherally was in the vanguard of India's
struggle for independence who played a leading role in peasants' organisations
and trade unions. He was imprisoned eight times during the freedom movement.
The 'Quit India' slogan coined by him was adopted by Gandhiji for India's
final Nationwide campaign for independence. One of the founders of the Congress
Socialist Party, Yusuf Meherally wrote, "I hate ugliness and cruelty and
that is why I am a socialist. My socialism is based on aesthetic and ethical
premises and not on Economics." In
the words of late Dr. Zakir Hussain, the Vice President of India, "It was
the primeval sorrow of Man for what Men do to each other, knowingly or
unknowingly, which moved him … ." (www.yusufmeherally.org). It is this philosophy and the
growing all round inequity in society that made me choose the topic of this
talk.
Historically, most societies known
to us have had disparities whether looked at in terms of living standards or
other aspects of life. Earlier, the differentiation between various groups of
people was less for many reasons but perhaps above all because there was a
greater sense of justice associated with equity due to the higher value
attached with community life which seems to have eroded over time. Atomization
and alienation of individuals are responsible for this decline and led to a
greater acceptance of inequity in society.
Disparities are of course
multi-dimensional with political, social, historical, cultural, geographical,
economic, etc., factors contributing to them. These reflect themselves in
differences in living conditions (including housing), access to health and
education, in environmental factors or differentiation in incomes and wealth,
etc. The differentiation may manifest itself in terms of gender, class,
community and caste. All this gets embedded in social consciousness and,
therefore, inequality takes societal, cultural and civilizational forms.
Consequently, inequality becomes difficult to tackle (reduce) or deal with.
II. RECENT
HISTORICAL TRENDS
Present day India
is characterized by growing inequality (See Graph I).
On the one hand, we have the largest number of poor people in the world and on
the other hand, we have a large number of billionaires. The number of
billionaires is larger than in many other much richer countries than us. We
also have the largest number of malnourished and the largest number of
illiterate people in the World. Inequality across the nation is also
substantial with regional disparities growing over time (Table 1).
II.1. National
Developments
Is equity in society a natural state of affairs? History tells us
that is not so. Equity is a social construct and each society has had its own
ideas about it. In India,
during the colonial rule, there was not only extreme poverty among the masses
but society had become highly iniquitous with a small well off elite class
created by the colonial masters to rule the country. After independence in 1947,
society strove to not only eliminate poverty but also reduce inequity.
Government was given a large role in this and policies were pursued to achieve
these ends. The policy paradigm adopted in 1947 had the underlying view that individuals
are not responsible for their problems of poverty, illiteracy, ill-health, etc.
These were seen to be the result of social processes hence characterized as
social problems which had to be solved by the nation as a whole (Kumar, 2013). These tendencies need to be understood
in a historical context.
II.1.1 Colonization, Disruption of Society and Present Day Inequity
Just like biological systems are determined by their genetic make
up, societies are conditioned by their history. However, there is no
determinism since people can change the course of society because they are
conscious beings and not automatons. But change in social consciousness is
often slow so that social change also takes place gradually unless there are
revolutionary times.
Societies in the developing world were disrupted by colonization and
India
was no exception with its colonization beginning around 1750. This left a deep
mark on Indian society; its social dynamics was disrupted by the colonial
masters to suit their own ends of control and exploitation. It linked the Indian
elite to interest of the foreigner rulers and distanced them from the common
people of India.
As Macaulay said in his Minutes of 1835 that there was a need for a class
intermediate between the rulers and the common people of India. There
was a hegemonization of the thinking of the Indian elite. The impact of
disruption was on every aspect of Indian society. Agriculture, industry,
education, etc., were all impacted and the effect persisted after independence
(Kumar, 2013). Society as a whole lost dynamism.
The knowledge base of society and its understanding of itself become
dependent on that propagated by the colonizer. Even after independence, the
nation has substantially depended on knowledge generated in the advanced countries.
Thus, Indian intellectuals have become largely `derived intellectuals’. There
is a continuing loss of value of ideas and curtailment of creativity.
Consequently, the leadership at the
time of independence was enamored of western modernity and wanted to copy it
quickly. This bias introduced contradiction in government’s policies with the
ruling elite in pursuit of western modernity going for a top down model of
development. This marginalized the vast majority and aggravated inequality. Thus,
while the government paid lip service to the poor and to equity in society, its
overall policies did not work to reduce inequality in society even though
specific policies were supposedly working in favour of the poor. The former
dominated while the latter could not achieve their goals.
The growing black economy undermined
all policies – marco and micro – so that general development was set back with
consequent ill effects for the marginalized. Policy failure due to both the top
down approach and the growing black economy was visible from the mid 1960s.
This only worsened as the years rolled on with the downgrading of planning and
the failure of the public sector to mobilize resources. The final nail in the
coffin for the state dominated economic policies came with the Iraq crisis in
1989. India
found itself in a debt trap in 1989 due to its embracing massive consumerism in
the 1980s based on imported goods (especially, petro products). The foreign
debt rose from $10 billion in 1980 to $ 90 billion in 1990.
The crisis starting in 1989 led to a
shift in policy paradigm in 1991 to `marketization’ (See Section V). While
markets always existed, marketization was new. The state retreated in favour of
capital with `market friendly state intervention’. Solutions to problems lay in
the market – removal of poverty, employment, education and health. Individuals had
to accept blame for their own problems and society was largely absolved of its
responsibility. However, after the collapse of the South East Asian Tiger
economies in 1997, this was called `crony capitalism’ and the World Bank
changed its line to a pure market based growth strategy called `growth at any
cost’. The US
economy was booming on the back of the asset bubble in the financial markets.
The Fed chief, Alan Greenspan, pronounced that `markets are self correcting’
and there is no need to intervene in them.(The Age of Turbulence:2007, not
sure, but in this book he has presented this ideology as per the sources on the
internet). Government of India
also pursued this strategy and under it, all costs have fallen on the workers
and the environment. This has aggravated inequality further.
II.2 Global
Developments
Rising inequity since the mid-1970s
is a global phenomenon (Picketty, 2014). The welfare state put into place after World
War II, following Keynesian prescription faced the crisis of stagflation after
the mid-1960s. Consequently, these policies were largely replaced by the
neo-liberal economic paradigm. Mrs. Thatcher came to power in 1978 and argued
that `There is no alternative’ (TINA) and attacked the Trade Unions. Mr. Reagan
became the President of the USA in 1980 and he pushed these policies. Given the
weight of these countries in the institutions of global governance, like, the IMF
and the World Bank, these institutions also pushed the developing world to
adopt more conservative, market based policies which came to be known as the
Washington Consensus (Williamson 1989).
Globally there was a shift in the strategic
balance which aided this process of Anglo-American domination. With the passing
away of Mao in 1976, Deng Xiaoping came
to power and he moved China’s economic policy paradigm to Capitalist policies
under an authoritarian regime and called it Socialism with a difference.
Soviet Union
which used to help the developing countries balance the pressures from the
Western powers itself started to falter from the mid-1970s due to growing
inefficiencies and corruption. From 1980, when Reagan announced the Star War
programme, the collapse of the Soviet economy set in. The weight of defense
expenditure became too much for them to sustain. By the mid-1980s it was clear
that the developing countries would have to deal with the Western powers on
their own and India
was no exception. Thus, the Western powers were emboldened to introduce the new
issues in GATT in the Uruguay Round of negotiations in 1986. The collapse of
the Soviet bloc in 1989 was sudden and capitalism become dominant.
The rapid growth in some of the poor
countries like, China and India
and the rise of the South East Asian economies has meant that across countries,
disparities have declined in the last 25 years. However, in each country the
disparities have increased. Thus, if disparity is measured globally between the
top 1% and the bottom 50%, they have risen (Picketty,
2014). These trends have had their impact on India.
III. EQUALITY
AND EQUITY – FROM ABSOLUTE TO RELATIVE
All important religions and philosophies talk of equality among
people. Our Constitution talks of equality of all before law. Why then does it
not come about? People are born equal (except when there are genetic problems) with
the same social potentialities but it is in terms of their social existence,
they become unequal. The potentialities of individuals get modified by social
processes – where one is born, the social status of the family and so on. These
become the sources of inequality in society. Even if there are natural
differences amongst different people, it depends on society whether they would
be treated as equal or if not, how unequal.
Treating everyone as equal even when people are recognized as have
varying capabilities as per different attributes of life is an absolutist idea.
The dominant sections decide on who gets what status and for their own benefit
create divisions/hierarchies. This is justified as a `natural’ division to lend
legitimacy to their view of society. Their notion of justice is also based on such
views.
Even the oppressed or the victims of the system largely accept it as
`just’. For instance, in the present day male dominated world, successful women
also adopt the male centric values of society and implicitly accept them as a
natural state of affairs. Similarly, in the Indian caste ridden society, the
oppressed, like, the Dalits, adopt upper caste norms.
Equity is a relative idea which specifically recognizes the
differences amongst individuals. According to principle of equity, equals
should be treated alike while unequals need to be treated unequally. For
instance, two individuals with the same level of income should pay the same
amount of tax. Those with different levels of income ought to pay different
amounts of tax. How unequal should the treatment of unequals be is for society
to decide. There is no one rule for it since different societies value equity
differently – some more and others less.
III.1 Wider
Context – Social, Political and Economic
Features affecting our notions of equality/equity are not just
economic but also social, political, cultural, linguistic, ecological and so
on. Change comes through change in social consciousness and not just through
the good intentions of the rulers.
Societies are not in a stationary state and are buffeted by new
ideas and influences from outside so that they keep responding to different
factors. Existence of inequity and changes in it are both causes of tensions in
society. Any time there is change in the prevailing level of inequity in
society, there is a build up of tension. Whether it is an increase or a
decrease in the prevailing levels of inequity there is resistance from those who
lose out. Both existence of inequity and changes in it can disturb social
harmony.
All known societies have had
various degrees of inequity. At times, societies seem to accept inequalities easily
and without disturbing their functioning. Keynes (1936)
and Hicks (1974)have pointed out that a historically given income differentiation
amongst the various groups does not lead to big social conflict while rapid
changes in does so.
The acceptability of a historically
given income ladder is perhaps reinforced in a variety of ways. If society
attaches a notion of justice with the prevailing income disparity, it becomes socially
acceptable. Rapid changes in income relativities would then be seen by those
who are losing out as unjust and resisted.
In post independence India, income
relativities have been disturbed significantly. The nature of the elite changed
and businesses started playing a more dominant role. In a democracy, like, in India,
those in control of larger numbers also played a significant role and tried to
get a larger share of the national pie. The peasantry/ rich farmers fall in
this category. The judiciary and the executive consisting of the police and the
bureaucracy (who were essential to the colonial rulers for their continued hold
over the country and hence constituted the elite of the country) slowly lost
out to these upcoming groups. There was a reaction to this via the
instrumentality of the black economy.
III.1.1 Material Aspects of Social Progress
Economists have principally used
income distribution to measure disparities in society believing it to be the
principal manifestation of inequality. It correlates well with the other
economic parameters that signify inequality. However, it may not be able to
explain other social, political and cultural aspects of inequality. Like, in India,
disparities based on incomes need to be supplemented by the caste and community
factors.
In spite of these limitations, traditionally, economists have principally
measured disparities in terms of skewdness of incomes. More recently, there
have been attempts to take into account multi-dimensional factors by
constructing indices like, the human development indices but as is usually the
case, they suffer from a certain degree of arbitrariness about the weights
attached to their different components. Of course, different societies may view
each factor differently and assign different weights making inter-society
comparisons difficult. Even in income terms, comparisons across nations may be
difficult since the exchange rate used may have a degree of arbitrariness.
In brief, while inequality has many dimensions, today it is taken to
refer largely to the material dimension. The question is whether material
progress can be the sole yardstick of progress.
The present age is one of selling everything from self to one’s
reputation to the Taj Mahal (Bunty and Bubbly style). Advertisers depend on
creating a feeling of dissatisfaction amongst the people and especially the
young; contentedness amongst individuals is a casualty. Sex and violence are
used to sell products and this both commercializes them and also creates a sense
of dissatisfaction in people. Hence material progress is disjointed from being happy.
Notions of freedom are used to justify any checks on irresponsible advertising.
People are posited to be strong and able to discriminate between what is or is
not good for them. However, the entire exercise of advertising is to weaken
people and catch them at their weakest. Its psychological impact on people, especially
children, needs careful analysis.
Since the purely material possession devoid of other attributes can
only give momentary satisfaction, the purely economistic view of society
results in short termism. It leads to a disjuncture between society’s long run (and
existence itself) and short termism of the individual with severe consequences
for Humankind.
IV. DISPARITES
– REGIONAL, SECTORAL, INCOME, GENDER AND MARGINALIZED.
The Indian economy started to open indiscriminately with the New
Economic Policies (NEP) launched in 1991. While its exports and imports as a
per cent of GDP in 1991 were around 7% (roughly the figures for the USA, Japan
and China)
now these numbers have risen to about 20%.
As already argued, NEP led to a paradigm
change in policies. The market has taken over from the state and is playing a
leading role in the growth process. This has meant giving concessions to
capital and ignoring the distributional consequences of policies. As pointed
out in Kumar (2007a) there is a simple dichotomy
playing itself out between agriculture and non-agriculture.
Since 1991, while agriculture grew at about 3.1 per cent per annum, non-agriculture
has grown at around 7.5 per cent. While agriculture still employs more than 50%
of the work force, its GDP share is only 14%. In contrast, the Services sector
employs 30% of the work force but it contributes more than 60% of the GDP.
Thus, those in agriculture are the majority but marginalized in national
income. Since agriculture is concentrated in rural areas and services in the
urban areas, this disparity is leading to a growing rural-urban divide.
Further, since the backward states are predominantly agricultural, they are
lagging behind the advanced states which have a dominant contribution to the
services sector. Finally, since agriculture employs largely unorganized workers
there is a growing divide between the unorganized and the organized sectors (Kumar, 2007a). It is accentuating the disparities
between the top 3 per cent (elite) and the bottom 40 per cent broadly those
around the poverty line. (Graph II shows that
the decadal rate of growth was unchanged).
The growing disparity is also based on the post 1991 concentration
of resources in the hands of the private corporate sector which is investing in
the organized sector and mostly in the advanced states except recently when it
is investing in buying out natural resources. Thus, agriculture is receiving
hardly 10% of the investment (for 50% of the work force) and is lagging behind
in productivity and wages. It is hardly generating new jobs (Kumar, 2005a). In contrast, the corporate sector is
investing but in capital intensive activities and is, therefore, shedding jobs
in a kind of jobless growth. Consequently, overall, few jobs are being
generated and this is resulting in rising under employment.
Growing problems of employment generation and rising disparities
have led to increased political and social instabilities in India. There have been violent
protests against land acquisition for projects and setting up of SEZs. Agitations
for reservations and affirmative action have often turned violent since the
government is seen as non-responsive and pro-corporate sector. Growing
corruption has added to a loss of faith in the government which is seen to be
working against the poor and in favour of the rich and the corrupt.
To correct its image, government has been forced to go in for
programmes for the support of the poor like, rural employment generation
(MGNREG), right to food, right to education, mid day meal scheme in schools,
loan waiver for poor farmers and so on.
However, as Graph II shows, spurts in growth since 1991 have been
short lived.
V. NATURE
OF GLOBALIZATION – ONE-WAY AND MARKETIZATION
Globalization is not a new phenomenon. It has been going on for a
long time. India
has traded with S E Asia, Arab countries and so on for thousands of years.
Buddhism went from India
two thousand years back and that is also globalization. The coming of the
British was also globalization. But it was a two way process till the British
colonized India
starting 1750. That is when globalization became a one-way process with severe
impact on the dynamism of Indian society.
V.1 Disparities
and Marketization
As mentioned above, data indicate, the process of marketization of
society has led to growing economic disparities in India since 1991. The pre existing
disparities have worsened. While economic growth accelerated in the Eighties
and went up from an average rate of growth of 3.7% between 1950/51 to 1980/81
to 5.3% in the Eighties, disparities remained in check. In the Nineties, this
rate of growth was maintained but with rising disparities (Kumar, 2005b). After
2001/02, the rate of growth accelerated further to about 8.5% for 5 years but
the disparities increased even faster (Kumar, 2007a).
It needs to be clarified that markets are an institution of exchange
of goods and services and have always existed. It is the process of
marketization that is new. It leads to the penetration of market philosophy
into every sphere of human activity and the guiding factor of social
institutions. Markets are considered to be `objective’ and society as
`subjective’. Thus, it leads to the advance of the former and the retreat of
the latter.
V.2 Principles
Underlying Marketization
Why does marketization result in growing disparities? First, markets
in themselves are devoid of values which come from society. It is society which
decides implicitly or explicitly what level of inequity or equity it should
have. As society retreats and markets advance, judgments about equity become
less important. Free competitive markets by themselves cannot deliver equity.
It is well known that they are consistent with complete inequity with one
having all and the rest nothing.
Second, markets are based on `dollar vote’. Purchasing power of the
individual is what counts and not `one person one vote’. The outcomes of the
market depend on the former and not the latter. This results in the `marginalization
of the marginal’, that is, the less purchasing power one has the less one can
influence the outcome of the markets. This operates at the international,
national and regional terms accentuating disparities at all these levels.
Third, the notion of welfare under the markets is based on the idea
that `more is better’ and leads to consumerism. This leads to demand for higher
incomes to enable greater consumption. It justifies consumerism but that leads
to environmental problems which affect the poor more than the well off and
aggravate disparities through health effects (Kumar,
2006b). This principle also implies that sacrifice is stupidity so
equity through transfers should be resisted and cannot be considered to be
welfare enhancing.
Fourth, the market notion of `let
prices prevail’ is used to justify the retreat of the state. Thus, in the
labour market minimum wage laws are diluted and unemployment dole is frowned
upon. Subsidies are considered to be distorting so they need to be withdrawn.
This impacts prices of basic goods and the welfare of the poor since they are
able to afford less of them. In fact, unemployment is considered to be
desirable as a means of disciplining labour and this accentuates disparities by
causing a downward pressure on wages.
The marketization process results in basic philosophical changes in
society. The free goods of nature or the non-marketized aspects of life are
marketized, like, beaches, rivers, common areas, etc. This leads to a
deterioration of the situation of the income poor who could otherwise get some
sustenance from these free goods (Kumar, 1997).
Fifth, marketization has led to a new international division of
labour, with polluting industries relocating in the developing world and clean
technology production concentrated in the advanced countries, reducing their pollution
levels. Larry Summers argued that it is more efficient for people to die due to
pollution in the developing world (The Economist,
February 8, 1992) hence polluting industries should relocate in the
developing countries.
Sixth, marketization has led to the notion of people as
homo-economicus and `rational individuals’ working solely to maximize their
profits. They are atomistic individuals. Optimization has become an important
tool in Economics. There are benefits and losses of every action of economic
agents and they optimize their gains to improve their welfare. There are no
absolutes and everything becomes relative. There is an optimum level of smuggling,
tax evasion and so on so the existence of ills of society are justified and need
to be tolerated as rational. Hence principles are less important today.
Atomization of individuals has led to wider impact on thinking in
society. In modern medicine a person is not a whole but parts and dehumanized.
In modern education, people are a resource, like, a mineral. They are
basically, a prerequisite for production. Education is referred to as Human
Resource Development or human capital formation.
In such a framework, with things becoming relative, no stand on
social issues need be taken by the individual. World is for enjoyment and not
denial which is a cost to the individual. Since profit maximization requires
minimization of costs, feeling of guilt has to be minimized. Consequently,
taking a stand in favour of greater equity would mean sacrifice and it should
be avoided by rational individuals.
These philosophical changes lead to the acceptance of the idea that
the poor themselves and not society are responsible for their poverty. This
makes inequalities acceptable. In this line of argument, it does not matter
that markets fail and have done so more and more. The ideology of the `free
market' which helps the better off sections is used to justify their privileges
in society and to further them. The marginalized and the less marketized
sections of the population fall behind due to marketization and resent this
change.
Thus, it is clear that the degree
of marketization in society stands in direct opposition to the extent of socialization
or the public good nature of many activities. While the former helps the well
off sections and the latter gives support to the marginalized but that is on
the decline under pressure of marketization. Globalization has narrowed the
space for pro-poor policies
VI. MACROECONOMIC
FACTORS – GROWTH, BLACK AND DISTRIBUTION
Under Capitalism, the biggest inequality is between
wages and profits and not amongst wage earners. As the degree of monopoly
rises, so does this gap. As capital gets concentrated in fewer hands and labour
gets weakened, the degree of monopoly rises. Capital is able to push for
policies favourable to itself. International finance capital has come to
dominate policies globally and earn vast sums of profits.
The macroeconomic environment to promote growth,
increase investment and exports has been weighed in favour of capital since
1991 and even before that since 1980 when India went to the IMF for loans to
meet its balance of payment difficulties. This has led to a rise in the share
of profits in the economy and led to greater inequality.
As the share of profits has increased, demand has to be
generated by increasing investments. Even export demand has to be generated by
holding down wages. Demand from the middle classes and the well off has to be
based on creating asset bubbles like we witnessed in the 1990s and the 2000s up
to 2006. None of this is a stable solution for growth but all of them lead to
greater inequality.
VI.1 Inequality
Leads to More Inequality
Economic growth has come to depend on the actions of the capitalist elite.
Mobility of capital has helped it to extract concessions from different
countries. Thus, taxes in country after country have been lowered in order to
attract capital. Labour laws have been diluted across countries for the same
reason. Within different countries too, capital has been able to extract
concessions from society on the ground that it is the source of growth. Belief
in welfare state has been replaced by an exclusivist and elitist model of
development. Thus, inequality has become the cause of more of it.
But, long term growth can not be sustained on the basis of creating
an increasingly unequal society. The global economic crisis starting in 2007
also followed growing inequity in each country and in the world as a whole.
VI.2 Public Policy
and Equity: Fiscal Policies and Public Goods
Governments have had a close
association with businesses but under the weight of globalization and the World
Bank prescription of `market friendly state intervention’ they have become more
closely integrated with businesses. So, Japan
is called `Japan Inc.’ and in India
too post 1991, we have become Indian incorporated. Crony capitalism and the
associated corruption have been one aspect of this growing closeness between
the businessmen and the politicians.
Democracy has been truncated in country
after country. During the recent global economic crisis the `Wall Street’
dominated over the `Main Street’
and that led to the revolt of the 99% against the 1%. People in country after
country have lost their right to choose their path of development. International
Finance Capital is deciding that by propagating the notion of market `efficiency’.
Thus, national rules are subservient to the global demands of WTO provisions. India’s
food security or patent laws have to be as per the dictates of global capital.
For the Indian elite, globalization
implies linking with the elite in the developed world. The emotional attachment
with the nation is greatly diluted so that many of them have voted with their
feet, becoming Non-resident Indians and taking their capital abroad rather than
investing in their own capital short nation. The Social Contract has been
shattered. The State with a monopoly over violence has used it with a heavy hand
against all those who protest so that capital can be appeased.
Equity through taxation has been
diluted due to concessions in direct taxes. There has been talk of replacing
direct taxes by VAT or moving from progressive taxation to proportionate taxes.
Both these shift the focus of taxation from making post tax income distribution
more equitable to less equitable. Large concessions on property income had any
way dented the progressivity of taxes on high incomes (Kumar,
2013). The number of public goods that generated some equity have also
been reduced and now the emphasis is on shifting to the levy of `user charges’
for public goods.
In brief, the content of public policy for creating a more equitable
society has declined over the last 25 years.
VI.3 Black
Economy and Equity – From the Social Realm to the Individual.
The growing black economy implies rising illegality and is
anti-social. It is currently estimated to be around 50% of GDP in India so
is both systematic and systemic. It is concentrated in the hands of 3% of
Indians and results in huge additional inequity which is not captured in data (Kumar, 1999:75-78). So, in 1995-96, the disparity
between the top 3% and bottom 40% in the income ladder was 12:1 in the white
economy it became 57:1 if the black economy is included. So, the real disparity
in society is a result of the black economy. It makes social action difficult
by leading to growing alienation of individuals.
The inequity due to growing black economy is not
captured in the official data. This is true globally and especially in the
developing economies. Typically, the black economy is concentrated in the hands
of the already rich, the profit earners who try to increase their incomes by
illegal means. They share a fraction of this, as in India, with the other elite
sections of society, like, the politicians, the bureaucracy, the police and the
judiciary (Kumar, 1999).
The black economy leads to policy failure and social waste. It
results in less of tax collection and, therefore, to shortage of resources for
development and lower expenditures on essentials like, health and education.
Further, the money sent for development is siphoned out and that makes
expenditures less effective. Consequently, expenditures do not lead to
outcomes. Often due to it, resources are wasted, like, roads are poorly made
and repeatedly repaired rather than new roads built. Thus, the rate of growth
is shown to be less than the potential rate of growth by 5% due to the
existence of the black economy (Kumar, 2005c).
The Indian economy instead of being a $1.8 trillion economy could have been a $14
trillion economy this year. Thus, roughly $12 trillion of development is being
missed out every year. This is a major cause of the growing inequity.
Globally, black incomes earners are using tax havens to both take
their capital out of their national territories as well as round trip it back
to their countries. The tax havens are also used by the corporate sector to
siphon profits out of the developing countries via transfer pricing or under
and over invoicing of exports and imports. Illicit flow of funds from India has
resulted in loss of opportunity of about $1.2 trillion since 1948. The MNCs
like, Amazon, Google, Apple, etc., are taking billions of dollars of profits
out of the USA to Ireland.
Illegality is also damaging the environment in severe ways and the
impact of this degradation of the environment falls disproportionately on the
poor through attack on their employment opportunities and health.
Since the black economy is illegal it moves economic activity out of
the realm of the collective and into the hands of the individuals. Mobility of
capital has made the situation more complex and enabled capital to evade
government actions. This has become a major cause of the growing inequality
globally and in each of the nations.
VII. POLITICAL
ASPECTS – DEMOCRACY SUBVERTED.
The black economy operates by subverting democracy in the nation.
Political parties represent the interest of vested interests rather than the
interest of the citizens from whom they get the vote. The leadership of almost
all political parties across the ideological spectrum have been accused of
corruption and a party to the subversion of democracy.
Democracy has become formalistic. Choice
for the people is restricted to voting for one or the other corrupt set of
people. Data on candidates standing for elections shows how they multiply their
wealth while in power. This is the declared wealth and not the actual which is often
held as benami and through a complex web of holdings in India or abroad
in tax havens.
Leaders of parties do not encourage criticism within parties. Leadership
which used to identify with the poor by living simply has given way to one
which socializes with the rich and copies its style of existence.
Parliamentarians with designer clothes, gold and diamond watches and fancy cars
are now a common sight. These people when they get to power subvert democracy
to make gains. Even the leadership of the marginalized sections has rapidly got
corrupted under the influence of this undemocratic politics based on vote bank
politics. They feel they can only win elections if they have big money and not
because they have the support of the citizens. The result is unresponsive and
unstable politics, a weak democracy and a shift away from the politics of
achieving greater equity in society.
VII.1 Collective
Action - Difficulties
Organizing people is becoming increasingly difficult. National
governments have become more authoritarian and global capital has become all
powerful. Society’s horizons have become increasingly narrow and so have the
horizons of individuals. The process of atomization of the individual and the
retreat of the social in favour of the `objective and valueless’ market has
added to the difficulties of sustained mobilization of the citizens.
Arab Spring and the movement against the one per cent have faltered
with negative consequences. In the Arab world country after country is in
disarray – Egypt, Libya, Syria and so on. There is a lack of
a global society and global values. The power of global capital also is enormous
and it keeps the various movements divided. This is also the case in India where we
have many single issue movements but not ones that can challenge capital as a
whole.
The Gandhian principles can form a basis for change. He remains
relevant even if he appears to be not so in the present materialistic world.
His principle, `last person first’ can be a truly democratizing one which can
check the growing inequity in society.
VIII. CONCLUSION
Society has a civilizing aspect and even if there are natural
differences among people, they can be overcome because of the potentiality of
social thought and social organization. Civilized societies protect their weak
since they recognize the potential of each citizen. Thus, society has to regain
its domination and counter growing marketization and atomization. Altruism is
basic to people. This is being denied in the race for competition. Youth is
robbed of its best years and atomized. Its idealism and energy are largely
turned into cynicism.
To conclude, while many factors are responsible for inequality in
society, only some of the important ones have been dealt with in this paper.
The historical and international roots have been pointed out and the importance
of marketization, the black economy and some macroeconomic factors have been
highlighted. While the market marginalizes the marginal, the failure of the free
market framework is further accentuating the problems. The large and growing black
economy as indicated by the growing levels of corruption is vitiating the
problem of inequity by taking the issue out of the realm of the social.
Thus, today while the need to
promote equity in society is greater, the predominance of economics over other
disciplines and the economic system resulting from one-way globalization and the
growing marketization are marginalizing the quest for equity in India.
Even the marginalized social groups that should fight for equity are affected
by these factors and their struggle gets subverted by their leaders. Capitalism
is not known to produce equity but this feature has been known to lead to its
periodic crisis. The present juncture is also one of continuing crisis because
of rising inequality in society. The Indian ruling elite has made the struggle
for achieving equity irrelevant by ignoring it but they do so at their own
peril.
Note: This paper
is substantially based on my book on Indian Economy since Independence. Kumar (2013).
arunkumar1000@hotmail.com
