Until recently, many said the inequality problem was exaggerated by the likes of Oxfam and Thomas Piketty, adding that inequality is a growth spur to encourage those left behind to catch up. Many economists continue to say that government regulation of business interferes with competition and business innovation. Strong differences on the regulation of the technology industry highlight their contradictions.
Again, until recently, the consensus of mainstream economists was that governments should leave economics to the market. Now, disagreements over inflation levels and government fiscal activism have increased significantly, the study finds.
One issue on which economists remain divided is the question of raising taxes on income and wealth. Here, the divisions are clearer. Some are beginning to shift from neo-capitalists to socialists, admitting that higher taxes will not only reduce wealth inequality, but are also needed to provide governments with resources for public health and education services. in order to standardize the rules of the game, and to allow those who remain to catch up.
The price of the pudding
One wonders what a similar survey of Indian economists will reveal. India has become one of the most unequal countries in the world. The latest ICE 360° Household Survey conducted by People Research on India’s Consumer Economy (PRICE) released last week reveals that the income of the poorest fifth has fallen by 53% in five years, while the income of the poorest fifth rich increased by 39%. Moreover, the difficulties have increased for a majority of Indians. The incomes of the bottom 60% of the economic pyramid have shrunk, while the wealth of billionaires has multiplied. The GoI’s celebration of the emergence of unicorns, rather than the rise of more businesses that provide jobs and incomes to more people, in this context, is rather unbalanced.
India’s economic problems can no longer be concealed by simply increasing the size of the economy and GDP. The problem lies in the shape of the economy and the distribution of opportunities within it. India’s working age population has grown from 96 crore to 108 crore in the past five years. Young people who have been out of school in greater numbers than ever before – even those learning work skills – cannot find jobs. People leave the job market and see no hope in it.
The Monitoring Center for Indian Economy (CMIE) estimates that in Uttar Pradesh, the number of working-age people who are employed has fallen over the past five years, from 43% to 33%. In Uttarakhand, another relatively poor state, the drop is 40 to 30%. Even skilled workers and educated youth are unable to obtain stable jobs with social security and decent incomes. The problem is not limited to poor states alone. In Goa, one of India’s wealthiest states, the numbers fell from 49% to 32%, and in Punjab from 42% to 37%. The problem is national.
Nirmala Sitharaman will announce the national budget tomorrow. One wonders who are the economists on whom the government relies and their economic ideology. The “official” economists are spread around the Ministry of Finance, which now has a new chief economic adviser in V Anantha Nageswaran, the NITI (National Institution for the Transformation of India) Aayog, the Prime Minister’s Economic Advisory Council ( EAC-PM), and the Reserve Bank of India (RBI).
Other economists with strong opinions on India’s economic policies are speaking out loud and clear in public forums. Maybe the government listens to them too. Several of them living abroad have advised the Indian government earlier and can credibly claim knowledge of Indian economic and political realities. Others, whose opinions are relayed by the media, are advisers to large international financial companies or large Indian business houses.
A democratic economy
How to close the circle of growing inequalities and underfunded public services? What is today the true vision of economists who advise private sector companies, particularly in matters of taxation and balancing public budgets? In public, they support the interests of their employers and are generally hawkish about lower wealth and income taxes and low government deficits.
The economy has become too important to Indian citizens to be left to economists alone. It is time to broaden the deliberations on India’s development trajectory. The “non-economists” – according to economists – must be listened to. Economic policies focused solely on increasing GDP are not the solution. Policies must also focus on the bottom line – on increasing incomes at the bottom faster for all. Politics is not just about Hindu vs Hindutva etc. It’s about people left behind economically and coming together to secure economic justice for all.