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– Athreya Mukunthan

Is poverty and inequality in society a result of poor economic planning? Is it a result of inefficient implementation? Or is it that economics has no role in it, and it is just the word which we attribute anything out of our control to? –KARMA? CIA fact book estimates that around 255 babies are born every minute around the world. Simple mathematics would give us the result that 4.3 babies are born every second in the world. Now let us construct a though experiment on this. For simplicity let us assume that 4 babies are born in this world every second. With a 50:50 chance let us assume that 2 babies are born to super rich families, who will not become a popper even if their father’s business suffers continuous loss for a decade. On the other hand the other two babies are sent by GOD to a not so rich part of this beautiful world. They are born to extremely poor, landless, jobless parents. Now let us see how their life unfolds.

 

While the rich babies go to a pre KG play school, play around with the costliest of toys and eat the healthiest of foods, the poor babies spend their early years in the slum, susceptible to diseases and eating whatever their parents can afford. 5 years down the line the rich babies go to a state of the art international school and after their school timings they go for cricket or tennis coaching. They end the day watching cartoon network and a glass of cold milkshake. On the other side of the world the poor kids go to a government school where the teachers are absent half the days, skip a meal a day and playing games with stones with the slum children. We foresee further, at the age of 15 the rich kids enter high school, play with their video games and contemplate which country to go for their higher education. Here meanwhile the poor kids are not sure if they should continue their schooling because of extreme poverty, though the Government gives them free education. They feel they could contribute to the families cause by working as a daily wage earner instead. So where does policy come in here? Does it even come in actually? Even free education is a disincentive for these 2 kids born in to downtrodden family, because they feel they can earn something by working as a child labourer. The subsidies and freebies go waste until the two children are given equal opportunity to see, learn and experience life. In the above example unless equal schooling opportunity at a good school at atleast half the level of what the 2 rich kids are exposed to is needed to push these 2 kids up the ladder in the society. Education is just one example out of “n” number of sectors.

 

Now, do not the policymakers all around the world know this? Doesn’t a planner at a top position in the Government know this? Then why do these 2 poor kids often never come up in life? How much of it is attributed to initial level of income & wealth, how much is attributed to the effort they put in, how much is attributed to external factors? Do we even have a concrete answer to all these questions?

 

A recent PEW report suggests that 70% of the lower income citizens remain in the same bracket, while 26% rose to middle income earners and a mere 4% become high income earners by the end of their lifetime. Adding fuel to fire the report goes into state that wealth and income feed into each other. Those who have a high wealth are normally tipped to earn high.

 

There is another side to this argument as well put forward by policymakers and economists. They would shout out loud “YES! Policy obviously works”. Till date millions of people have been lifted out of poverty. They would give a number of statistics which say that people all around the globe have become better off than they were. Even the poorest of poor’s life has improved from what is was and so on. Well, statistics are deceptive you see. People might have climbed out of poverty, but has the overall development been equal? Has the speed of development commendable? Does the society provide equal opportunities for at least 50% of the population to grow at the same speed? Do at least 3 of the 4 kids born every second have an equal chance of progressing up the ladder, with the same pace?

 

After centuries of economic policy in action the world stands at a situation with deepening inequality.

 

Source: Credit Suisse Global wealth datebook 2014

 

Adding to this a forecast by OXFAM predicts that by next year the top 1% will hold 50% of the global wealth! Now, there is a group of economists who argue that money will accumulate on the top and slowly trickle down to the poor. The famous inverted “U” shape curve which argues that inequality will rise initially when development occurs and then fall down eventually. The eventually part is the mystery. Can I go and convince the two kids, who were born poor, grow up poor, live poor that eventually things will change? That maybe their grandchildren would live a far better off life?

 

The underlying question from all the above is that can economic policy change the fate of the two kids, who are born in poor conditions. At least can their next generation become half of what the lucky 2 kids had in the previous generation? Can policies ensure that all sections of the society are provided equal opportunities to grow? I repeat, can analysis and policy beat the law of karma? Is there something that humans cannot control? Why is it that while I munch away to glory at McDonald’s or KFC, there are those 2 poor kids, now grown up and as tall as me standing outside staring at me like they would do anything for a bite? Why am I here and they there, behind the glass? As an economic thinker these questions are burning thoughts inside my head. And the fire has only intensified. The quest within has gained momentum.

Post Author: pacindia