Stiglitz says, one-third wealth of United States is with the top one per cent!

An evening with Joseph Stiglitz, Ravi Kanbur and Robert Wade - Economists who make a difference

Sibichen K Mathew

At a time when 60% of Americans could not figure out where India was in the world map, Harold Isaacs asked his fellowmen who claimed to know India very closely, ‘What is your image of India?’ That was in 1950s and the answer was: “ Maharajahs, jewels, wealth, snake charmers, elephants, cobras, snakes, monkeys, mongooses, pig sticking……”( p. 244). I read the book ‘Images of Asia: American views of China and India’ written by Harold R Isaacs (Capricorn books, New York, 1957) yesterday morning. It was quite interesting to read about the perceived image of the country as narrated by the author in the 1950s.

 ‘India is a country of ‘emaciated people, diseases, ribs showing, shrivelled bellies, corpses, children with fly-encircled eyes, with swollen stomachs, children dying in the streets, rivers choked with bodies; people living, sleeping, lying, dying, on the streets in misery, beggary, squalor, wretchedness, a mass of semiaboriginal humanity…..’ (p.273).

What a ‘poor’ image of India in the minds of affluent, equitable, prosperous Americans decades before! With those sad thoughts, I walked into the public lectures by Joseph Stiglitz, Ravi Kanbur, and Robert Wade on ‘Globalization, Development and Inequality’ yesterday evening. And I came back home with pride. Because all the three of them shared their anguish over what is happening to the people and economy of America and the advanced west. They say, it is not that bad in India!

Following are my notes on what Stiglitz and others said

Joseph Stiglitz (Nobel prize winning economist and Professor of Columbia University, who wrote the books ‘The Price of Inequality’, ‘Globalization and its Discontents’,  ‘Making Globalization Work’ etc)

• Inequality and unemployment are increasing rapidly in the United States. Top 1% of Americans get 25% of country’s income and one-third of country’s wealth. 90% of the gains of growth go the top 1%. The plight of most Americans worsened in the last several years.
• Who are these 1% people? They comprise of ‘monoplists’, people in the finance sector, and those who earn corporate revenues.
• Economists and policy makers in US wish to talk about inequality only in closed rooms and in quiet voices. (They don’t want to admit?)
• Youth are increasingly depending on their parents for survival.  Gone are the days where every major citizen of America used to find a livelihood without depending on their parents or guardians. This has created a major social crisis.
• Reasons: Weak regulations that do not curb monopoly and policies to bail out the loss makers. At the same time, the students are facing severe loan repayment strains as rules are stringent.
• Corporates thrive through lobbying. Political donations are not expenditure, but high return investments! Real income is kept in tax havens by smart people. Many large corporates don’t pay as much taxes as paid by ordinary taxpayers.
• Good that, at least now, IMF is concerned about the growing inequality. Economists still not! 

Ravi Kanbur ( T H Lee Professor of Word Affairs and Professor of Economics at Cornell University, Consultant World Bank, IMF etc.)

•       If there is structural inequality, the growth process will be unequal. The extent of inequality depends on the nature of policy steps taken to address the structural inequalities. He cited examples from various countries
• Korea and Taiwan started with land reforms in the 1960s. It also focussed on providing equitable educational facilities. These policy steps led to equitable growth in these countries.
• In China, inequality was curbed initially through systematic policy initiatives in the agricultural sector. However inequality increased dramatically in the last thirty years as China opened up to the world aggressively. The inequality between coastal area and inland area increased. Recently, Chinese Government has taken steps to create investments in inland areas aimed at reducing the disparity.
• South Africa, in the post-apartheid period, addressed the issue of inequality. Since the inequality is structural, the results are slow.
• In Ghana, structural inequality is regional in nature. Most of the export activities are in southern region and consequently poverty rates have fallen there. However, the northern region was neglected. But politicians have realized the huge regional disparity and various policy measures have been initiated to reduce the gap.
• In Latin America, inequality is coming down because of certain effective policy measures. Direct cash transfer to parents of children for sending children to the schools is a successful policy measure. 

Robert Wade   (Professor of Political Economy and Development, London School of Economics)

•      Both IMF chief and OECD chief kept on saying that the economy is better and there will be more job creation just before the recession. They couldn’t possibly predict the signals of economic slowdown.
•  He quoted Willem Buiter, who was the Chief Economist at the European Bank for Reconstruction and Development: ‘Poverty bothers me, inequality does not. I just don’t care’. Interestingly, Wade says, Buiter is now the Chief Economist at the Citigroup. Robert Wade said: Economists should understand the link between inequality and economic stability.
• UK, US and many countries are facing the consequences of Plutonomy. (Plutonomy means economic growth that is powered and consumed by the wealthiest upper class of the society). Governments are now for corporations, of corporations and by corporations.
• One can see in history that rapid liberalizations have resulted in inequality. 

Mr Anurag Behar, the young and dynamic Vice Chancellor of Azim Premji University effectively handled the Question-Answer session after the lecture and discussions.

Concluding note

All speakers tend to agree that the economists are profoundly ideological. Main stream economists need to know more about macro economy in the context of people rather than just dominant market forces. They say India escaped sharp downfall because the liberalization was not very rapid. But I would have been happy if all the three of them admitted that Indian regulatory system was relatively more mature, grounded and robust than many of the ‘developed’ countries.

Yes, present India, is not just a land of snake charmers, beggars and people with shrivelled bellies, but of people who cannot be that easily bamboozled anymore with hollow economic jargons. 

(Views are personal. Article is based on notes taken during the conversations and discussions. Apologies for inadvertent errors. No responsibility for the respective speakers. Click COMMENTS below to give feedback))

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