Why society should be concerned about inequality and poverty

Recently, after my talk on the current economic situation in India at a private university, I was asked, why those students should be concerned about inequality and poverty. I had raised these as major issues of concern. The university being a private one, the fees are high not only compared to the public universities but in comparison to the country’s per capita income. So, most students there belong to well-off families. The question was therefore not surprising.

Having studied in the elite St Stephens College for my undergraduate degree in the late 1960s, when many left to join the Naxalite movement and the discussion was usually around poverty and inequality and the failure of the State to tackle these issues, I have been under the illusion that college students typically question the status quo and the establishment. Especially since poverty and inequality are a result of the rules of economic gains set by the system and are not natural phenomena.

During my teaching career, I had not faced such a question from either the students in my class or during the hundreds of talks that I have given in the last 40 years. Talking of public policy in India invariably led me to refer to inequality and poverty. So, the students’ question recently suggested that the well-off increasingly believe in ‘me for myself’, a huge shift in societal thinking.

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The next day, I happened to visit an elderly gentleman, a former neighbour of over 25 years. Again, I heard similar thoughts. When asked how he spends his day, he replied, “I do my thing, and do not worry about what I can do little about”. It sounded rational for an 85-year-old who is coping with an increasingly complex and less familiar world. But also, because he is well-off and well taken care of, the wider societal processes are not his concern.

Oxfam, Credit Suisse, etc., have been pointing to growing inequality in society. During the pandemic, 80 per cent of workers said they did not have enough savings to buy one week of rations. So, as soon as work stopped due to the lockdown, millions, fearing starvation, migrated from the cities to their villages, with children in tow and carrying their meagre belongings. They were ready to travel hundreds of kilometers in the heat, without food and water for long stretches. Their desperation was evident.

Images of the desperate migrants were beamed into the drawing rooms of the well-off. They could no more be in denial about the persisting poverty and inequality in India. But now, with the pandemic under control, concern seems to have waned. Should the elite still be concerned about inequality and poverty?

Shift in perceptions

Why this changing attitude towards the poor? There is increasing self-centredness of the well-off and the middle classes due to the philosophical shift in society brought about by growing marketisation. Markets as a place to exchange goods and services have always existed, even under barter. It is marketisation that is new and implies the penetration of the market principles into social institutions. This is what is changing societal and individual consciousness.

One of the principles is ‘more is better’, which results in growing consumerism. That is, consumption for the sake of consumption. Demand is created where a need does not exist. Like, drinking fizz drinks, which is 99 per cent water. Using private vehicles when public transport is available. Discarding things when repair is feasible or the item is usable for many more years, and so on.

Consumerism has become the new opium of the masses -- diverting attention from societal issues. In India, a developing country, there is a ‘demonstration effect’ from the richer countries. So, at a low per capita income, India has some of the most polluted rivers and air.

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Marketisation has made people think of themselves as homo economicus – only economics matters. Social concerns – such as poverty and inequality -- are losing importance. People are assumed to be rational and acting to maximise individual welfare. For this, they have to minimise costs, such as feeling guilty about their self-centredness.

The self-perception of being homo economicus dilutes social concerns and weakens collectivity. For instance, concern about poverty could at a minimum make one feel guilty about societal processes that benefit oneself. It is then natural to say, “I will only be concerned about what I can do something about”. The corollary is, “I can do nothing about poverty, so I will not think about it”. The result is rising atomisation, with people increasingly catering to their narrow self-interest and maximising their individual welfare. This decline in the desire for collective action also impacts action on critical issues, such as pollution and climate change.

Why inequality matters

A high degree of inequality, as is prevalent in India, has economic, social and political implications. It results in inadequate demand, decline in investment rate and growth of the economy, and rising unemployment. This creates a vicious cycle that is hard to escape. To tackle the demand problem, the World Bank had suggested ‘safety net’ in the 1980s, and has recently proposed the more drastic solution, the ‘universal basic income’. Not only are these palliatives which do not solve the basic problem, they are against the capitalist principle of ‘You only pay for work done’. Responding to the crisis, many of the global rich have proposed since 2012 that they need to pay more taxes if capitalism is to survive.

The political aspect is that the poor can be manipulated by the rulers by offering them sops during elections. The attention of citizens can be diverted by raising divisive issues and blaming the plight of the poor on some other groups or on some events in the distant past. Conflict in society grows as there is jostling over a few well-paying jobs. So, conflict over reservation in jobs and in education has intensified, though that is not a solution to the problem of unemployment.

In brief, growing inequality and poverty have huge costs for society, including for the well-off. But the ruling elite in India is increasingly short-term-ist. They are not considering the long-term implications of their unwittingly embracing marketisation, which is shaping their thought processes. So rational policies, such as depending more on direct taxes than the regressive indirect taxes, do not get implemented. Wealth taxation is run down, though that is the best way of raising resources for development. Thus, while ostensibly acting in their self-interest, the rich are undermining it.

(The writer is a retired Professor of Economics, JNU, and author of ‘Indian Economy’s Greatest Crisis: Impact of the Coronavirus and the Road Ahead’)

(This is the first of a series on inequality in India, curated in collaboration with the Centre for Financial Accountability, New Delhi)