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Unsustainable inequality: Why India must tax its super-rich

Interviews


The Prime Minister suggested in Parliament that wealth creators and the rich should not be blamed for creating wealth.

Our reports do talk a lot about billionaires like Mukesh Ambani. We have nothing personal against any billionaire. Mukesh Ambani might be a wonderful person, but we are critiquing the system that has led to obscene levels of inequality.

When you are producing wealth, how is it distributed? In the system that we have, disproportionate amounts go to the top. When the economy is growing by say one billion dollars, the top 1 per cent are getting away with the cream and the cake, say 800-900 million dollars of the pie while remaining99 per cent are sharing 100 million dollars.


Editor and commentator Shekhar Gupta has endorsed the PM and written that India needs to grow wealth because without wealth what we will have is equal distribution of poverty…

The fundamental question is how to distribute the wealth. I disagree with the view that the objective is or ever was to equally distribute poverty. How can you allow one person to earn 90 crore rupees in an hour while24 per cent of Indians continue to live on less than three thousand rupees per month?

The real question is how labour is rewarded and how capital is rewarded. Today somebody who has put in the capital gets 90 per cent of the reward whereas people who work don’t get anything except a meagre salary and some bonus. So, it is all about a fair and just distribution system and not about making everybody poor.

Are you then saying that free market economy is the problem?

There are multiple models of free market. But even the richest billionaires who attend the World Economic Forum, the mecca of free market, are saying we need to move away from this unequal system. We need to move away from share-holder capitalism to stakeholder capitalism.

The founder of WEF himself said that the time of neo-liberal capitalism is over. America has free market, but there too we have seen Occupy Wall Street movement. I was in USA at that time and on Wall Street people stood with placards saying that “economy of 1:99 would not work”. The International Monetary Fund is also saying you cannot have this level of inequality.

We are reaching unsustainable level of inequality and it is causing social unrest. In the pandemic year, the top 10 billionaires added 500billion dollars to their wealth whereas most of the people globally were finding it difficult to put bread on their table. This cannot be justified by any free market model.

People who have wealth get more and more rewards from economic activities while lives of those at the lower strata get worse or remain unchanged. It is a rigged system where capital takes disproportionate credit for creating wealth.

We have done a survey among 295 top economists in 79 countries. They included leading global economists such as Jayati Ghosh, Jeffrey Sachs and Gabriel Zucman; and they all agreed that this model is unsustainable and problematic for the world.

When you say ‘unsustainable’ inequality, what does that mean? Rich people do not seem to have any problem, why should they care?

For me personally, it is a moral question. India has not done a poverty estimate in a decade but going by latest estimates 20-22%people are below the poverty line and this is not even a multi-dimensional poverty line which assesses access to education, health, shelter and so on. Fifteen years ago, the Arjun Sengupta Committee report (on the Conditions of Work and Promotion of Livelihood in the Unorganised Sector) said an overwhelming 836 million people in India lived on a per capita consumption of less than Rs 20 a day.

Ultimately, societies are moving ahead to create a better world. But is this what a better world looks like? It is also a social or political question. This system is going to create social unrest, unemployment among youth and internal strife. Political systems and even the existing economic systems would crumble.

Some of my radical Left friends tell me this Inequality Report is actually helping the capitalist system by alerting them against the total collapse of the system and by taking the steam off. They accuse us of suggesting that it is ok to have inequality but not “so much” inequality.

The planet itself would not sustain this system. The recent flood in Chamoli, Uttarakhand was a fallout of aggressive development against environmental norms.

Did you also look at inequality in the context of gender, caste and religious minorities?

In this report we have not looked at those groups separately, but it is easy to conclude that each of these vulnerable groups has been impacted a lot more. The Sachar Committee report said Muslims lagged in all socio-economic indicators; so, they would be worst affected in a pandemic. Our data shows that in USA, 22,000 Hispanic or Black lives could have been saved if the mortality rate of these groups were the same as the White Americans. In Brazil an African descendant is 40 times more likely to die of COVID than descendants of Whites. There is clear gender and ethnic dimension to inequality.

You said the system is rigged. Who would then fix it?

Our report is an attempt to show the mirror and give a wakeup call to the governments and the super-rich. The super-rich must pay their fair share of taxes. A data from Tax Justice Network says 427 billion dollars is lost due to tax evasion by countries. Most big companies are finding ways to evade tax by off shoring in tax havens. The government must have more efficient tax collection system. It is time to levy a COVID surcharge on the super-rich. Argentina has done it. These are unprecedented times and 40 crore Indians are going to slide back to poverty as per ILO reports. We must tax the super-rich. Most critical aspect is which sectors should the government invest its resources? The best drivers of equality are investment in education, health and social security. Look at the model of Norway, Sweden, Finland, France, Germany, where investment in education and health is very high and they consequently are more equal. India on the other hand is 4th from the bottom in terms of investment in health. Putting both health and education together we are not able to invest more than 5-6% of the GDP.

We need to move out of ‘minimum wages’ framework to ‘living wages’ ensuring people a life of dignity. The pandemic exposed the ugly underbelly of the country. The workers were largely in the informal sector, they had no social security and they had to walk hundreds of miles to their villages. Why cannot we ensure social security, job security for everyone?

Is there any country which is a role model for change?

I cannot say specifically but look at New Zealand which has stopped preparing a growth budget. Rather they call it ‘well-being’ budget. It is a fundamental shift that considers every citizen at the centre of the budget, not just the billionaires. Bhutan does not chase GDP but chases gross happiness index. Argentina is taxing the super-rich. South Korea and Vietnam are saying fighting inequality is at the centre of their planning. So, there are countries which have woken up to the problem and taking inequality busting initiatives.

Has India woken up?

To be honest, we did not see any commitment from previous governments either. Thomas Picketty found levels of inequality today in India are as high as in pre-independence days. India was constantly able to reduce poverty till the 90s, he said, but post- economic liberalization the gap between the rich and the poor has been widening


https://www.nationalheraldindia.com/interview/unsustainable-inequality-why-india-must-tax-its-super-rich

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