Aspiring Social Equality

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  • Debates about the accuracy of Karl Marx’s prediction regarding the demise of capitalism have come to the fore in the wake of two events:
    • Studies that indicate a widening of economic inequalities in major economies of the West and in emerging economies such as India, Brazil and China. 12 economies which account for 80% of the developing economies in Asia have registered a steep rise in the gap between the rich and the poor in the last decade.
    • 70% of Indians were dissatisfied with the state of corruption, inflation and inequality in the country.
  • The book 'Capital In The Twenty-First Century' by French economist Thomas Piketty from Paris School of Economics shows data from tax returns that indicate a stagnation in the middle class economies in the US, while the rich are speedily accelerating their economy. The author has observed a trend of slow growth and increasing inequality which will continue to rise unless democratic politics step in to change the trend.
  • This is the state in most places except for a few Northern European countries.
  • The ones with high incomes generated by investment zoom ahead of those dependent on wages and benefits much like the landowners did in the past. Over a long period of time, productivity per person grows between 1 and 1.5% while average return on investment grows between 4 and 5% resulting in rising inequalities.
  • Results: curbed growth, heightened social tension and wayward directions of public policies.
  • Expanding power created by massive wealth owners intervene in political process through lobbying or funding political campaigns or by bribery to influence policy decisions in a way to make the rich more wealthy and less accountable. This disrupts the system of checks and balances which are the pillars of democracy.
  • An example is Russia in which the government is run by the wealthy where a small fraction roams free by pleasing the autocrat in charge.
  • While we are all different from each other, we can all aspire to the equality of opportunity and level of playing field.
  • Pinketty’s studies of the history of income distribution over the past 100 years lead him to conclude that in most cases interest on capital, which is income from investment and ownership, generates higher returns that the overall growth rate of economy. However, unlike Marx he doesn’t forecast the death of capitalism but says that democratic measures such as judicious regulations, law and progressive taxes can reign in inequality.
  • Whoever comes into power in Delhi must tackle this growth inequality and engage in sustainable democratic capitalism to prevent India from sliding into a crony-capitalist autocratic region.

Exams Perspective:

  1. Corruption
  2. Inflation
  3. Capitalism
  4. Democracy
  5. Stagnation
  6. Public Policy
  7. Crony Capitalism

 

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