Challenge Of Rising Income Inequality
Context:
Addressing income inequality is crucial for building a more equitable society, particularly in countries like India, where disparities in wealth and income are significant.
Key Areas to Address:
- Progressive Taxation: Implement progressive tax policies to redistribute wealth from the affluent to marginalised communities.
- Revenue should be used to improve public services like education, healthcare, and skill development, fostering job creation.
- Education and Skill Development: Ensure access to quality education and lifelong learning programs to enhance employability and earning potential, crucial for reducing income inequality.
- Fair Labour Laws: Strengthen labour rights, enforce minimum wages, ensure workplace safety, and promote collective bargaining to protect workers and ensure they benefit from economic growth.
- Infrastructure Investment: Invest in infrastructure to reduce regional disparities and promote inclusion.
- Focus on environmental infrastructure, water, sanitation, energy, housing, and transportation.
- Super Rich Contributions: Encourage initiatives like the ‘Giving Pledge’ for the wealthy to donate a portion of their wealth for public good.
- Consider inheritance taxes to promote equitable wealth distribution.
Recent Economic Growth in India:
- FY 2022-23: India’s real GDP grew by 6.9%, driven by strong domestic demand and government infrastructure investment.
- Future Projections: By 2030, India is projected to become a $7.3 trillion economy, though challenges related to inequality must be addressed to ensure inclusive growth.
India’s Inequality Context:
- Wealth Distribution: The top 10% of the population in India holds 77% of the total wealth, and the top 1% owns 53%.
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- The bottom 50% holds a mere 4.1% of national wealth, indicating extreme wealth concentration.
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- Income Disparities: The top 10% earn 57% of the national income, while the bottom 50% only 13%.
- Tax Burden: The bottom 50% contribute 64% of the total GST, highlighting the regressive nature of indirect taxes.
- Healthcare: Many Indians are pushed into poverty due to healthcare costs, with 74% unable to afford a healthy diet.
Causes of Inequality:
- Historical Legacy: Colonial rule and socio-economic stratification have left deep inequalities, exacerbated by unequal land distribution and caste-based discrimination.
- Educational Disparities: Unequal access to quality education limits opportunities for marginalised groups, perpetuating income inequality.
- Employment and Wage Gaps: Informal sector workers face precarious conditions compared to formal sector employees, deepening income disparities.
- Technological Change: Automation and digital advancements have led to job displacement and wage stagnation, worsening inequality.
Strategies for Resilience and Growth:
- Decentralisation and Local Focus: Embrace a Gandhian model of development that focuses on local needs, talents, and resources.
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- Investing in small and medium-sized enterprises (SMEs) can boost local employment and prosperity.
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- Tech-Driven Economic Model: The future lies in integrating technology with decentralised economic models, focusing on digital platforms to connect local production to global markets.
- Lifestyle Changes: A shift towards values like “sharing and caring” over conspicuous consumption promotes a more equitable and sustainable economic model.
- Inclusive Governance: Strengthen inclusive governance by encouraging citizen participation, promoting transparency, and reducing corruption.
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- Empower local governments to ensure marginalised communities are part of decision-making processes.
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Steps Towards Inclusive Growth:
- Universal Access to Public Services: Provide universal access to healthcare, education, and social security benefits to reduce inequality.
- Employment Generation: Focus on labour-intensive industries, which can absorb a large workforce and reduce joblessness, particularly in rural areas.
- Financial Reforms: Address biases in banking, where loans favour large corporations over SMEs, and promote financial inclusion through digital technologies.
- Social Safety Nets: Expand social safety nets to protect vulnerable populations from economic shocks and job displacement.
“What Went Wrong With Capitalism?” By Ruchir SharmaRuchir Sharma’s book What Went Wrong with Capitalism offers a critical examination of the modern capitalist system. He attributes its current dysfunction to excessive government intervention and the proliferation of “easy money” policies. He argues that the expansion of state power over the past century has distorted financial markets, exacerbated inequality, and led to a culture of bailouts that undermines capitalism’s core principles. Sharma posits that the government’s increasing role in the economy has transformed capitalism into a system characterised by “socialised risk.” This means that while the state bears the risks of failure, the profits are privatised, primarily benefiting the wealthy. He highlights how bailouts for large corporations during economic downturns, such as the financial crisis of 2008, exemplify this trend. Instead of allowing inefficient businesses to fail—a concept central to capitalism’s “creative destruction”—the government intervenes to prop them up, leading to a misallocation of resources and a stifling of competition. In contrast to the failures he outlines, Sharma points to examples of countries that have maintained healthier capitalist practices. He praises Switzerland for its robust capitalist economy and Scandinavian nations like Sweden and Denmark, which, despite being labelled as socialists, operate on strong capitalist foundations. Taiwan is also highlighted for its successful semiconductor industry, showcasing how adherence to capitalist principles can yield significant economic benefits. Sharma concludes with a call for reform, proposing a series of seven solutions aimed at restoring the balance between government support and free market principles. He emphasises that simply expanding government programs will not address the underlying issues and that a return to proper capitalist practices is necessary for sustainable economic growth and social equity. |
