Economic Inequality

 ECONOMIC INEQUALITY

The first time I visited Mumbai was back in 2011, being an eight year old it was natural for me to see and experience certain things for the very first time in my life. The first time I had a vada pav, ate paani puri and not gol gappa, saw the beauty of Taj Hotel, went to a beach, saw sky-high buildings accessorized with the scorn slums. I couldn’t help asking my mother why this paragon of city, has been blotted with the stain of these slums, how a place which I ostensibly took as the city of the richest, could be the home of such filthy tramps. My mother explained how these tramps are the hands who maintain the glint of these tall glass buildings, who knead the dough for their cakes, who give their labour so that the rich can travel in their shiny wagons while they never hesitate to call them ‘tramps’.  It was then that I realised that the city of the richest was also the city of India’s largest slum and that India itself was the house of some of the richest and most of the poorest of the world.  The concept that the analogy of mine highlights is that of economic inequality in India, a reality that has been the reason as well as the consequence of the economic recession that India faces as of now. 

It might not be shocking to know that by many measures, India is among the top three most unequal countries in the world. According to some sources, India’s top 1 per cent now holds almost 35-60 per cent of the nation’s wealth, while the top 10 per cent holds almost 70-80 per cent. 

The reason of the inequality increase in past 20 years is credited to increased penetration of technology and industrialization.

Since the technology is skill based, the increase in productivity and skills is seen in case of those who are able to use technology as compared to their counterparts. The increase in productivity leads to the proliferation of technology, which, in turn, creates a higher demand for skilled workers. This self-reinforcing cycle increases wealth and income inequality.  

But regardless of general scenario, things have taken a drastic turn in past few months. Inequalities have skyrocketed, while the wealth of some tycoons is multiplying, some have seen their income level stooped so low that they are unable to even make their ends meet. This is the elephant in the room. As the economy is seeing itself in its worst position since decades, the fortunes of Ambani has multiplied spectacularly.

Given the situations that corona virus has led us to experience, extended lockdowns, social distancing measures have hit the poor households the hardest. Why poorer segments of the society disproportionately? As they typically have jobs that cannot be performed remotely, e.g. construction workers, taxi drivers, housekeeping and maintenance staff, factory workers etc. and require physical presence at work sites.

As a large percentage of unskilled or low-skilled jobs are in unorganised sector, the security around and about the jobs of people working here is close to none. With flocks of labourers migrating back to their villages, there is no point of doubt that the unprecedented crisis have hit them real hard, so much so that the horrendous scenario of seeing them get crushed while sleeping on train tracks, footpaths, roadsides due to the unavailability of shelter was a frequent site. 

On the contrary, educated white-collar workforce is largely insulated from the impact of lockdown. People who do high value-adding jobs in financial services, consulting, information technology etc. can work from home (or any other location) seamlessly. Additionally, contrary to the more affluent class, poorer segments tend to have very low or no savings and limited access to credit. While there’s no denial that a major proportion of educated population has also seen financially painful days and the world economy in general has been pushed into a tailspin, but billionaires, at least a select set of them across some countries, have seen their wealth soar during the past three months. Popular example in India is that of Ambani.

The reasoning for government’s reluctance to work more today in order to resurrect the economy and reduce the developed gap is derived from the will to conserve resources for a possible future stimulus. Meanwhile, the relief packages by government in the current scenario are being anticipated and have been highlighted to be integral for economic recovery.

 Taking example from Brazil where a significant spending on relief fund has resulted in a lower downgrade growth than India, suggestions are being made to implement the same as the waiting for the stimulus may backfire if the damage skyrockets, resulting in a more shrunken and scarred economy by then. 

The need of the hour is to address the economic gap, to provide for the needy and to create stimulus package according to the requirements. If the private market fails to provide enough jobs to achieve full employment, the government must become the employer of last resort.

When growth is below capacity and the job market is slack, there must be application of fiscal and monetary policies aggressively to achieve full employment. Right now, this means not raising interest rates pre-emptively and investing in public infrastructure. 

Economic equality is a dream that is a promise of a day when glass buildings are not accompanied by the sight of the slums, when healthcare facilities is no more a privilege, when no one is seen sleeping on the footpaths due the their situation of homelessness. This dream shouldn’t have been dream in the first place, yet we strive to see a day when economic equality isn’t a utopian ideology.