The Hindu Business Line : Globalisation and persistent inequality

The agenda for globalisation is "dominated by the issues of free trade, intellectual property rights, financial and capital account liberalisation, and investment protection". Absent are issues "of critical importance to developing countries" such as labour mobility and financing mechanisms to compensate marginalised countries and social groups. — The UN Report on the World Social Situation

"THE GLOBAL commitment to overcoming inequality, or redressing the imbalance between the wealthy and the poor, as clearly outlined at the 1995 World Summit for Social Development in Copenhagen and endorsed in the United Nations Millennium Declaration, is fading. Eighty per cent of the world's gross domestic product belongs to the 1 billion people living in the developed world; the remaining 20 per cent is shared by the 5 billion people living in developing countries. Failure to address this inequality predicament will ensure that social justice and better living conditions for all people remain elusive, and that communities, countries and regions remain vulnerable to social, political and economic upheaval."

This is the first paragraph of the executive summary of the latest UN Report on the World Social Situation (named The Inequality Predicament), which clearly outlines the framework of the discussion that is taking place on the achievements of the newly emerging countries and how the focus of economic growth is gradually shifting to the hitherto "developing" regions of the planet at the expense of the established, rich nations.

What the report in fact tells us is that, in spite of the remarkable economic progress that is being made by countries such as China and India, the economic gap separating the world's rich and the poor is very large indeed, and that it may take a while before it can be reduced to a proportion which, first, one can even begin to comprehend in realistic terms and, secondly, which can lead to hope that a time will come when the categories of today's rich and the poor can be compared with each other economically.

Problem of income, distribution

Fundamentally, it is a problem concerning income and distribution. In other words, there may be situations where there has been phenomenal "economic" growth, in the sense that the national gross domestic product has shot through the roof, but that growth has not been able to benefit the population involved in the way intended. In other words, the high rate of growth of GDP has not been able to raise the average living standards of the people at large to a point which would lead to a reduction in the gap between the living standards of the rich and the poor.

As the report says: "Ignoring inequality in the pursuit of development is perilous. Focusing exclusively on economic growth and income generation as a development strategy is ineffective, as it leads to the accumulation of wealth by a few and deepens the poverty of many; such an approach does not acknowledge the intergenerational transmission of poverty".

So what does the report recommend? Among other things, it urges a multi-faceted approach to poverty reduction, including the "social, economic and political dimensions, integrating improvements in health, education, economic development, and representation in legislative and judicial processes". It says pointedly that implementation of policies in these areas would contribute "to the development of human capital, enabling the poor to realise their full productive potential" and "increasing the odds that future generations will reap the benefits of today's policies rather than remain trapped in a cycle of poverty".

A false dichotomy

This multi-dimensional approach to poverty-reduction is the result of the realisation that there is, in fact, a "false dichotomy" between the economic and non-economic aspects of inequality, the inference being that policy decisions must be targeted at both broad spheres if the overall picture of inequality in a nation is to be altered for the better.

To quote the report: "Inequality is complex and multidimensional and is manifested in various forms at the community, national and global levels. Individuals, groups and countries that lack opportunities at one level generally lack opportunities at other levels as well. For example, in societies with high levels of income inequality, those who control the resources also tend t control the political system, and those without access to either are neglected.

"Likewise, the global marketplace operates to the advantage of richer countries; poor countries are less likely to benefit from globalisation and are more vulnerable to its risks and failures... This interdependence is one aspect of a complex structural relationship between economic and non-economic inequalities both within and between countries; the many, varied linkages are impossible to isolate, complicating efforts to develop solutions".

For a country like India, among the more important issues now is globalisation of the national economy and its impact on economic and social inequality within the country. What does the UN report have to tell us on this specific score? First, the report draws attention to two contrary points of view — the one focusing on "economic convergence" which holds that "the increasing integration among countries brought about by globalisation will promote the convergence of income levels and a consequent reduction in overall income inequality", and the other which refutes evidence cited for this argument and specifically raises doubts about whether globalisation "in its current form" can contribute to reducing inequalities.

The report then goes on to say that the current agenda for globalisation is circumscribed in the sense that it is "dominated by the issues of free trade, intellectual property rights, financial and capital account liberalisation, and investment protection". Absent are issues "of critical importance to developing countries" such as labour mobility, taxation of capital income and financing mechanisms to compensate marginalised countries and social groups.

Little policy space

More pointedly, the report draws attention to the contrast between "the rapid pace of economic globalisation and the relative weakness of the international social agenda," which has left little "policy space" for developing economies for the protection of what has been described as political, social, economic and environmental "global public goods". In the words of the report: "Global competitive pressures tend to restrict a country's policy choices and often have an adverse effect on social development, since decisions or actions required to advance social policies and social equality are usually perceived as unnecessary costs. Put simply, social development policies are often mistakenly considered to be in conflict with the preservation of a country's international competitiveness".

One result of this has been that the objective of poor economies "to attract foreign investment and expand exports has frequently led to a `race to the bottom' in which labour protection and environmental standards are ignored or compromised to make the countries more competitive in the international market".

What this, in turn, means is that "external competitive pressures have restricted the ability of some countries to pursue certain aspects of social policy and have therefore undermined the progress of social development," which has had a direct bearing on the level of inequality in their societies.

The seven steps

So what is to be done to strengthen the quest for social justice and social development in the world today? The report outlines seven measures all of which are eminently sensible but all of which will probably fail to be implemented because of the lack of the required political will on the part of the governments of the individual countries involved and also on the part of the international bodies and institutions such as the UN itself.

Thus, the very first step recommended is that action be taken by the international community "to lend political and institutional support to national capacity-building in the developing world, particularly to restoring the regulatory capacity of public institutions and especially in areas where privatisation of the delivery of social services has created new challenges to, and difficulties in, the actual exercise of individual and collective rights to education, health and other social rights of citizenship".

The intention is clearly laudable, but it is more than likely that implementation will not be easy as is amply indicated by our very own experience of the ongoing tussle between the court and the government on the issue of reservation in private colleges.

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