Which is worse: Inequality or Extreme Poverty?
As all of us know the one real issue facing India is poverty. Today’s economic downturn has pushed more people into poverty than ever. 200,000 to 400,000 more babies will die each year. Most of them will be will be in Africa but one cannot help wondering how many of them will be in India. It is disturbing to know that India is now ahead only of sub-Saharan Africa when it comes to the percentage of people living in extreme poverty. The World Bank defines the extremely poor as those who earn less that USD 1.25 a day. Let’s check out India’s progress over the years:
India – 51.3% of the population below the poverty line
China – 60.2%
Sub-Saharan Africa – 57.6%
India – 41.6 percent
Sub-Saharan Africa – 50.9%
India – 24.4%
China – 6.1%
Sub-Saharan Africa – 37.1%
China is leap frogging, and the World Bank has said that it has surpassed its target. India apparently is on target while Sub-Saharan Africa is not.
I have capitalist ideas (although not of the extreme variety) and I believe the answer lies in encouraging business. So far it has worked for India, if one goes by the figures of the last decade.
Many find the inequality more disturbing than the poverty
There are those who find it discomforting to have slums and affluence side by side, and in fact find it more disturbing than the actual poverty. In India the gap between the haves and the have-nots seems to be rising and it is creating discontent amongst the poor as well. Let’s take a look at the Gini coefficient which measures inequality of income distribution. The lower the number, the more the equality. The map showing comparisons between countries is from the wiki. India doesn’t fare too badly. Income disparity seems very high in South America and higher in China than in India, although there are fewer poor people in China.
A high Gini coefficient can lead to an unstable society. But a way to tackle the discontent that arises in an in unequal society is to ensure equal opportunity for all. This is easier said than done as it is not happening even in advanced and liberal economies according to this article from The Economist.
There might also be an argument in favour of wealth disparities if social mobility was high and the sons and daughters of office cleaners could fairly easily rise to become chief executives. But America and Britain have the highest intergenerational correlations between the social status of fathers and sons; the lowest are found in egalitarian Norway and Denmark. Things are even worse for ethnic minorities; a black American born in the bottom quintile of the population (by income) has a 42% chance of staying there as an adult, compared with 17% for a white person.
I need hardly add that India will fare worse than America. The high costs of education must be one of the obstacles to success in a country like America. A few smart people can rise in life without an education, but most cannot. In India college education is not that expensive but often it is not of a good quality. Not that all of the poor manage to get themselves educated. The extreme poverty forces parents to send their children off to work, not to school. And then in India there is far too much reliance on influence and contacts when it comes to jobs. This ensures that the system promotes those who are already well-to-do and influential. Yes, talent is wasted, and many smart people are confined to hovels. Lack of hope leads to dissatisfaction and anger. We know that this is the case in India but why is there less dissatisfaction in America if indeed their society does not provide equal opportunity for all?
The theory (based on studies) put forward by The Economist is that Americans put up with the system because they have unrealistic expectations of their chances of success. In reality only 2-3% of the poor have a chance of becoming rich, but as many as 31% think that they can . And only about 12-17% of the middle class actually become rich but over 50% of them think they can!
Random conversations with poor people in India will reveal that they do not expect to become rich. If they have not turned unhappy and bitter it is more to do with the fact that they have accepted their “karma”. A time will come when they won’t accept it and in fact the new generation isn’t accepting it. If India doesn’t give them opportunities we will have grave problems. Naxalism is an ever present danger.
Growth is not leading to development in India
Trade is better than Aid!
The gap between the rich and the poor in India is not that wide
Instead of making the rich poorer lets make the poor richer
Is poverty declining in India?
Do top management deserve their high salaries?