2020 The Gilded Age: Free markets, fractured societies

False prophets, free markets, fractured societies: The Gilded Age

The year 2020 must qualify as the annus mirabilis of our times, the year that changed the world. When John Dryden chose the Latin title -- the year of miracles -- for his English poem, he was referring to the hope that sprang phoenix-like from the debris of the great London fire and the widespread disease and death from the great plague of 1665-66. As we turn our backs on a forgettable year, it is time to step back and reflect on where we are as a society, how we came to be where we are, and where we want to go. As we step into the third decade -- the 2020s -- the times that we live in and our society are reminiscent of the Gilded Age of 1920s America -- an era of rapid economic growth, and at once an era of abject poverty and inequality. It was a time when the high concentration of wealth was vulgarly visible and contentious. India today is no different.

Many decades hence, the year 2020 will be remembered as the year of the privileged. The coronavirus disrupted the daily lives of the poor in city after city. As cities locked down, the informal sector and migrant workers and their families experienced their deepest downturns in recent memory. The battle against the pandemic has come at great cost: mental illness, economic hardship, increased inequality, disruption in essential medical services, and the hiatus in school education that will set back a generation of schoolchildren. Evidence from past pandemics point to sharp increases in inequality. Typically, five years after a pandemic, the Gini coefficient (a measure of income inequality) moves about 1.25% above the pre-crisis level -- a sharp rise for what is intrinsically a slow-changing variable. Equally, the evidence suggests that employment for people with low levels of education declines by 5%. This time, it will be no different.

The most important lesson from the pandemic is that greed is not good. Equality and justice are fundamental to prosperity and economic growth. The problem is that almost every opinion-maker -- economists, politicians and the media -- tells us otherwise. Our current crisis of inequality is the direct result of this moral failure. The government must start conscious work on reducing inequality, undertaking all the measures necessary -- taxes and transfers, a guarantee of basic income in some form for the less fortunate, paid for by taxing the most fortunate. What’s lacking, however, is the political will to do this.

When I think about the growing inequality, I am reminded of one of the delightful tales of the incredible Mullah Nasruddin: Mullah had lost his ring in the living room. He searched for it for a while, but since he could not find it, he went out into the yard and began to look there. His wife, who saw what he was doing, asked: “Mullah, you lost your ring in the room, why are you looking for it in the yard? Mullah stroked his beard and said: “The room is too dark and I can’t see very well, I came out to the courtyard to look for my ring because there is light out here.’’

Why do we obsess about India’s ranking on the World Bank’s Ease of Doing Business index and dismantling labor laws intended to protect workers, in the absence of a tax-based universal social security system? The problem is that often, conventional wisdom is not actually supported by the evidence. And where does conventional wisdom come from? It almost always reflects the preferences and interests of the elite. So, when people make silly observations, such as that there is too much democracy in India, they symbolise the ever-widening gap between the conflicting preferences of the elite, in contrast with the needs of the common people.

The general public would like to see welfare and social insurance programmes strengthened, and the elite would like to see them cut back. Then you ask what the conventional wisdom is? It is that the deficit is a terrible problem and we must cut back on social protection entitlements. For those compelled to choose between life and livelihood, working from home is not an option. And as the pandemic keeps children out of schools, many poorer workers face the unconscionable choice between going to work and looking after their children’s’ education. The digital divide further exacerbates the inequity.

The experience of neoliberal economics raises a more disturbing question: Considering all the ruined small businesses and communities and the millions of livelihoods lost in the interim, did the growing middle-class help elect populist right-wing leadership in the country after country? Although different dynamics are at play in the US (Trump), Brazil (Bolsonaro), Turkey (Erdogan), Philippines (Duterte), and India (Modi), why did populist leadership rise in all these countries at roughly the same time is an interesting question. Is it a mere coincidence or are there some similarities – the common discourse presented with a false sense of scientific certainty about the wonders of free markets presents a larger intellectual struggle over free markets versus government intervention? After a quarter-century of liberalisation, privatisation and deregulation in India, big business and crony capitalists have turned the country into their economic fiefdoms -- to the near-complete exclusion of the millions of small and marginal farmers and informal sector workers; ironically, this is playing out in the current half-truths driven agitation of the farmers primarily from Punjab and Haryana.

If there is one New Year resolution to make, it should be to transform our basic outlook and reject monism. We need to choose between two stark and mutually exclusive systems of ethics: striving for a plural, inclusive society that advances the dignity of individuals and aims to improve the quality of life for all people; and a powerful State aimed at the power and glory of the body politic. The question is whether we will have the wisdom to recognise the duplicity in false prophets, free markets and fractured societies?

(The writer is Director, Public Affairs Centre, Bengaluru)