Introduction to inequality
Inequality is the gap between the rich and the poor. It is where a group of individuals or people control most or maximum resources while the rest are left with pittance/leftovers. Our world has the ultra-rich who are just a handful of people but they control over 98% of the resources and economy while the rest of the world population has hardly 2% of the proceeds from the economy.
It is a barrier that divides and traps millions in the vicious cycle of poverty, further it causes fracturing and rifts/ friction in our society and undermines democracy. This skewed system favors the ultra-rich, allowing big business corporations and billionaires of the world to gather vast amounts of money at the expense of the rest of the world. Extreme levels of inequality can lead to corruption and bribery. E.g. in the case of Vijay Malaya or Neerav Modi who looted banks and fled the country without facing any major consequences.
The Indian Inequality Report of 2018, authored by Mr. Himanshu, an Associate Professor of Economics at JNU, argues that contrary to the popular perception that India is quite low in terms of inequality compared to the global standards –
Inequality in India is multi-dimensional: with inequalities based on wealth, income and consumption patterns, as well as structural inequalities of opportunity, region, and social groups. The report counters the claims of India as being a low inequality country due to consumption expenditure inequality generally being lower than income inequality—also most other countries measure inequality on the basis of income and not the expenditure.
By Himanshu’s estimates, inequality in India measured through income, wealth and consumption shows instead of expenditure shows higher inequality trends and most alarmingly India is among the world’s most unequal countries. Furthermore, it is worrying to note that not only is inequality high in India but it is also been on the rise in the country over the past 3 decades.
Different types of inequality
The 5 common types of social inequalities:
Political Inequality: This type of inequality is when we are denied equality under the law or not given political freedom and representation.
Income and Wealth Inequality: this type of inequality is a result of income distribution or the earnings of individuals.
Life Inequality: This type of inequality refers to the discrimination or lack of opportunities and resources that if provided can improve the quality of life of an individual.
Inequality of Treatment and Responsibility: this type of inequality is subtle and deals with respect, status, influence and results in problems of responsibility and dominance.
Inequality of Membership: This type of inequality deals with the membership and associations of faith, family, and nation.
How does Inequality affect us?
Due to much of the wealth being concentrated with the ultra rich, there are very little resources left that trickle down to those who need them the most- the marginalized and the underprivileged.
It is believed that working hard is the key to success and becoming wealthy. But, many of the times the ultra-rich do not earn their fortunes through hard work or talent and either inherit or have access to opportunity and resources from the start- nearly Two-thirds of billionaires globally have either inherited their wealth or made it through monopoly rather than talent. The CEO of India’s top information technology firm earns 416 times the salary of a typical employee of his company. The rewards of a growing economy are enjoyed by the billionaires and company bosses (bourgeoisie). Profits accrue only to the rich capitalists and don’t go to the working proletariat.
In addition, most of the wealthy people in India have the means to stash their wealth in offshore tax havens or evade/ dodge taxes. If these taxes were paid properly it could help the government provide good policies/measures like quality education, healthcare etc for everyone in India and improve the standard of living.
Some common misconceptions/myths about inequality
Poor people are poor as they are lazy: this is completely untrue as much of the work and effort/labor is done by the workers/laborers but they are paid unfair and low wages while the profits are taken by the boss.
Poverty is reducing and so is Inequality: One does not have to be poor to experience inequality but everyone who is poor is at the bottom of the inequality ladder. The World Bank has estimated that extreme poverty will not be eliminated by 2030 and over 200 million will still be living on Rs 120 a day (the extreme poverty line).
The huge inequalities we see today are the direct result of a rigged economic system that has enabled a small minority to amass huge fortunes through monopoly, cronyism, and inheritance.
Over the next 20 years, over 500 of the world’s richest people will hand over $2.1 trillion to their heirs a sum larger than the total GDP of India, a country of 1.3 billion people.
It is possible to bridge the gap between the rich and poor and evidence from more than 150 countries rich or poor shows that investment in healthcare, education, and social protection reduces the inequality.
Steps the government can take to reduce inequality:
Create an economy for all: Promote inclusive growth by ensuring that the income of the bottom 40% of the population grows faster than that of the top 10% so that the gap between the two begins to close. This can be done through:
• Promotion of labor-intensive sectors to create more jobs
• Investing more in the agricultural sector and allied activities
• Implementing properly the various social protection schemes that exist.
Seal the leaking wealth bucket: Reduce extreme wealth and create a more equal opportunity country.
• Tax the super-rich by re-introducing inheritance tax and increasing the wealth tax;
• Reduce and eventually do away with corporate tax breaks;
• Take stringent measures against tax evasion and tax avoidance; and
• Increase public expenditures on health and education.
Bring data transparency: Produce and make available high-quality data on income and wealth. And regularly monitor the measures the government takes to tackle the issue of rising inequality.
Inequality in India is a major problem and has many facets from rich and poor gap which is ever widening with the IT sector and service sectors expanding rapidly while the agriculture sector with the majority of the population is seeing a rise in suicide rate due to debt.