The crisis of imbalance in the world economy

Privatisation of social sector services are making people poorer and eating into their chances of upward mobility. Rise of finance compared to green field economic activity has made economic growth more skewed. Solutions to these problems requires coordinated, long-term policy actions.

The World Economic Forum (WEF), an annual event held in the Swiss ski resort of Davos, has become a symbol of global capitalism. Oxfam, an international advocacy organisation, releases its global report on inequality to coincide with the WEF to question the rising inequality which has accompanied the current phase of capitalism. The findings of the report, like other advocacy studies, are important, but also sensational at times.

Here are some examples from this year’s report. Twenty-six people owned the same amount of wealth as the bottom 3.8 billion people in the world in 2018. This figure was 43 in 2017. The total wealth owned by billionaires increased by $900 billion in 2018, while the wealth of the bottom 3.8 billion fell by 11%. In the 10 years since the global financial crisis, the number of billionaires has nearly doubled. These findings are based on calculations by Credit Suisse and Forbes, which, in turn, rely on multiple other sources and assumptions. Some of these are extremely volatile. Oxfam revised the number of billionaires who owned as much wealth as the bottom half of humanity from eight to 61 for 2016 in its 2018 report. Surveys estimating the wealth of the population are often conducted infrequently in countries, especially in the global south. For India, this data is not available after 2012-13. Even if these issues are set aside, there are other logical problems. Should wealth be the sole indicator of the problem of inequality? A rural house in Bihar might be worth nothing compared to a posh villa in South Mumbai. But, if the village where the house is located were to receive a significant boost in terms of education and health infrastructure, life would become a lot better for its occupants without there being any decline in wealth inequality at all. Similarly, if a labour intensive industrialist were to become the new billionaire instead of a stock market trader, the positive impact on incomes of the not so well off would be much greater.

Much of the crisis of inequality in the global economy is due to developments which run counter to the examples given above. Privatisation of social sector services are making people poorer and eating into their chances of upward mobility. Rise of finance compared to green field economic activity has made economic growth more skewed. The solution to these problems requires coordinated, long-term policy actions and not Robin Hood-type solutions which a cursory reading of Oxfam’s drastic conclusions might suggest.

Source: Hindustan Times, 23/1/2019