Policymakers, academicians, thinkers, and other leaders around the world are grappling with the issue of economic inequality and rising disparity among the rich and the poor. While these leaders call for action to remove disparities and create a more equal world, the opposite seems to be happening. The rich and super rich are pulling away from the rest and gaining greater momentum. Are we looking at some utopian goal or is there some other way?
In the 2030 Agenda for Sustainable Development, governments have recognised that “rising inequalities within and among countries”, “enormous disparities of opportunity, wealth and power” and “persistent gender inequality” are among the “immense challenges” confronting the world today.
Estimates by a global research institute suggest that in 2017, the bottom half of the global population owned less than 1 per cent of total wealth. On the other hand, the richest 10 per cent owned 88 per cent of the world’s wealth. Even more starkly, the richest 1 per cent alone held about 50 per cent of all wealth. Looked at in another way, the richest 1 per cent of the world controlled as much wealth as the remaining 99 per cent of the population.
There are several studies and reports on the subject, most suggesting that the situation over the years has become more unequal. WEF looks at the period between 1995 and 2021. Of all the growth that took place in global wealth (additional wealth generated) during this period, the poorest half of the population could capture only 2.3 per cent; by contrasts, the top 1 per cent captured 38 per cent of this additional wealth. As we strive for a more equal world, several events, often unpredictable or uncontrollable, make the task more daunting. Conflicts, public health emergencies and events related to Climate Change and natural disasters push large populations into poverty and distress and result in deepening of inequalities and disparities. Also, some argue that this growing disparity, in many countries is not by mere chance. It is the outcome of policy choices – fiscal and regulatory policies including on taxation – that led to such accumulation of individual wealth and concentration of economic power among a few. However there are other factors too.
Technological disruptions
Technology has played some role in this whole process. Take the example the music industry. Earlier in the era of audio cassettes and CDs, there were many companies (possibly employing large number of people) who created these cassettes and CDs. In addition there were thousands of vendors in each city selling the cassettes and CDs. With technology disruption, all these are out of business. Now we have a few companies that provide apps that can be downloaded on our smartphones and we can listen to millions of musical creations that too in excellent digital quality at a fraction of the cost. So income of many cassette/CD producers and sellers has got concentrated in the hands of a few music app developers.
Then, there is the imaging/photography industry. Gone are all the cameras, the film rolls, the photographic paper, the processing labs; and all their incomes. These are replaced by the handful of companies manufacturing smartphones. A smartphone is all you need to click, store, edit, and share photographs, all at no cost. Once again concentration of income and wealth in the hands of a few while destroying incomes of a large number of people.
We could see the same happen in the case of edtech. It is likely that the apps and online education tools developed by a few edtech companies will put out of business large numbers of private coaching classes employing large numbers of teaching professionals. Once again we could see concentration of income, wealth, and economic power in the hands of a few.As we look around, we will find many such transformative changes taking place. And none of these changes are reducing inequality; they are all doing the opposite.
The spiral effect
Wealth concentration gives rise to income concentration which in turn enhances wealth and thus the spiral which accelerates the concentration of economic power. Wealth gives rise to income (interest, rent, dividends, capital gains), which again shores up wealth leading to enhanced incomes; thereby setting in motion a cycle leading to greater economic concentration.
Sky-high rewards
The way the current systems and practices are structured has much scope for increasing inequity, not reducing inequity. Consider the following example in sports as an illustration. We all know that the talent and capabilities of the two finalists in say the Wimbledon or the US Open tournaments are almost the same. One of them will win the championship and one will lose. The loser may lose just because of a minor error of judgement in one shot while he played as brilliantly as the other throughout the match. So both are equally deserving candidates for the championship. But only one will win. And see the difference between the winnings of the two. The Wimbledon men’s singles winner reportedly takes home 2 million pounds while the runner-up gets just half at 1.05 million. In the US Open, the winner walks away with 2.6 million US dollars while the runner up gets just 1.3 million. Or take the 100 metre sprint in the Olympics Final. The difference between the winner and the one coming second could be one hundredth of a second or less. But see the enormous fame, glory, and fortune (including brand endorsement contracts) that await the winner while one hardly talks about the athlete who came in second. We may say ‘the winner takes it all’. So the structure of rewards and compensations is built in such a way, intentionally or otherwise, as to spread more inequality.
Take the compensation in the corporate world. The CEO’s paycheck is sometimes breathtakingly removed from that of the other senior management personnel. Or even the highest pay package offered to a B-school graduate compared to the median pay package of the same institute.
Are cities just & fair?
Given this environment, it seems that the ones hoping to see a more equal world could face disappointment. The world is just not designed that way, and the situation could get more unequal. As for the situation in our urban spaces, we could look at the wide (and widening) disparities between the rich and the poor and feel disheartened. But that may not be the right way to look at things. On the other hand we could possibly see whether the city dwellers including the poor are better off than they would be in their villages. Are they getting a better deal in the city? Are they able to experience better service delivery like treated drinking water in taps, public toilets (sanitation), health services in public hospitals (one hears of villagers having to walk over 10 kilometres to the nearest public health facility), schools, efficient (and very affordable) public transport, and a host of livelihood opportunities? The answer is pretty obvious.
City planners must therefore think less about removing disparities and more about creating efficient, effective, affordable services which will benefit all, mostly the less affluent. The suburban railway system in Mumbai is a shining example of how a good public service can improve the lives of millions. It is an efficient, very reliable, and highly affordable way for the poor to access attractive livelihood opportunities even 30-50 kilometres away, traveling each way every day, enabling them to earn decent incomes. People swear by it inspite of the overcrowding and physical discomfort. It also enables governments to create stock of affordable (including rental) housing in faraway places where land prices are more moderate. So, in a way, this rail system is the one facility that puts the poor on an even keel in many ways; something they could hardly imagine in their villages.
Cities must work to ensure that inequalities in incomes and wealth do not result in inequalities in access to opportunities.
As we strive for a more equal world, several events, often unpredictable or uncontrollable, make the task more daunting. Conflicts, public health emergencies and events related to Climate Change and natural disasters push large populations into poverty and distress and result in deepening of inequalities and disparities