Economy

Tax on rich can stimulate economy: Stiglitz

Our Bureau Kolkata | Updated on October 05, 2020 Published on October 05, 2020

Nobel laureate Joseph Stiglitz

‘Pandemic: India is a poster child of what not to do’

India should look at the possibility of raising tax on the “rich” in order to fund welfare programmes and generate demand in order to stimulate its economy. However, such control over the economy is possible only when the pandemic is contained, said noted economist and Nobel Laureate Joseph Stiglitz.

According to him, the government should have looked at “helping the vulnerable” while controlling the disease. Engaging early would have led to migrations. Money can be shifted “from areas of low impact to those of high impact”.

“If you can’t raise resources from say SDRs (special drawing rights) and so on, then one way is to raise taxes for the rich. You (India) have quite a few billionaires. By doing so, the money can be diverted to generate economic activities. This is what we economists would call a balanced budget multiplier,” Stiglitz explained during a virtual interactive session organised by the FICCI on Monday.

Poor handling of pandemic

“You spend money in ways to control the pandemic that helps. The reality is India has not done well in handling the pandemic,” he pointed out while criticising the Lockdown as not well thought out. People migrated rendering the exercise futile and further spreading the virus.

“India is a poster child of what not to do,” Stiglitz said.

He added that “authoritarian regimes” like the Trump-administration in the US and Bolsonaro’s regime in Brazil too had struggled in dealing with Covid-19. On the other hand, democracies like New Zealand and South Korea successfully controlled the virus and its spread.

According to Stiglitz, these “authoritarian regimes” failed (at controlling the pandemic) as they have often tried to divide societies or shift the blame on someone else; rather than accepting faults.

For instance, in the US, President Donald Trump blamed China for the spread of the virus; withdrew funding to WHO and so on. In India, PM Narendra Modi’s regime “has done the same” by pitching one religion against another.

Politics of solidarity

“That (religious divide) is the fundamental division that you have to get rid of,” he said adding that the pandemic has proven in more ways than one that “you need politics of solidarity”. According to him, “tolerance” has been one of the cornerstones of India’s economic successes.

Stiglitz also pointed out that in the current global order “no country can be fully self reliant” with things like raw materials or technology being imported. Such a pitch – towards full self reliance – is out of touch with the 21st century and is something one would expect from authoritarian regimes.

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Published on October 05, 2020
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