From the Viewsroom

Sheer poverty of policy

A Srinivas | Updated on March 30, 2021

Response to sky-high inequalities, post Covid, has been poor

Covid has widened the already high income inequalities the world over. Reports by US-based Pew Research and Oxfam point to the spiralling rise in billionaires at a time when the middle-classes were pushed into poverty. In India, 32 million tumbled out of the middle-class, reducing this set to 66 million, according to Pew Research. As for billionaires, Oxfam says that the “increase in the 10 richest billionaires’ wealth since the crisis began is more than enough to prevent anyone on Earth from falling into poverty because of the virus, and to pay for a Covid-19 vaccine for everyone”. This is an unconscionable situation.

Joseph Stiglitz, in his article in the Fall 2020 issue of IMF’s newsletter, makes a broader systemic point: “Weakening constraints on corporate power; minimising the bargaining power of workers; and eroding rules governing the exploitation of consumers, borrowers, students, and workers have all worked together to create a poorer-performing economy marked by greater rent seeking and greater inequality.” As a result, women, minorities and other groups on the socio-economic periphery have borne the brunt of Covid.

Neo-liberalism has run its course, as Stiglitz says. It must be remedied through higher direct taxes on the wealthy. It is surprising that the Centre should celebrate wealth creation without taxing the super-rich of the Great Gatsby variety. A ‘Tobin tax’ on market transactions would do no harm at all.

As for direct transfers, India has done reasonably well last year in distributing foodgrain and implementing MGNREGS, but informal sector workers were left high and dry as credit relief went to enterprises and not to workers. Direct transfers are no substitute for structural change in policies.

Countries with strong welfare systems, such as New Zealand, have protected their vulnerable sections better than the US. A resurgence of the pandemic will raise existing distress to staggering levels. This is morally unacceptable and socially dangerous.

Published on March 30, 2021

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