Inequality in Developing Countries, India

http://richmondvale.org/effects-of-poverty/

An older article on Inequality by the author has been popular in this blog. It talked of rising wealth and income inequality over the last forty years, primarily in the richest country of the world, US. Suggestions were given as to how the problem may be overcome.

This year, 2017, OXFAM carried out a study of inequality in 152 countries of the world including both rich and poor countries. According to a report in times of India  based on the study, India has been ranked 132 out of 152 countries on the basis of inequality. Sweden ranked the highest while Nigeria was at the bottom. The US had the highest level of inequality among developed countries, though it is the wealthiest country in the world. However, most of its budget goes on military spending and maintaining wars and military bases around the world.

In India, the new Narendra Modi government has been seized of the problem and his approval rating is one of the highest in any country in the world. One may question why it so if inequality is so high. The reason is simple. India had been declining on many fronts until 2014. Ever since he came to power PM Narendra Modi has arrested the rate of decline and thing have begun to change for the better. Nevertheless this Oxfam study indicates that mere platitudes, posturing and tinkering would not be sustainable and more aggressive measures are required to tackle this very fundamental problem of inequality that concerns well being of majority.

The solutions suggested in the earlier note by this author were relevant for all countries but have greater significance for the developed world. As regards the developing world, other additional measures are required. The best way to discover these are from examples of other developing countries that have been successful in dealing with this issue. Namibia is the shining example for other developing countries to emulate.

According to a report in the Guardian  Inequality is not inevitable. It is a policy choice. For proof, look at Namibia , Here is a country that inherited the highest levels of inequality in Africa when it gained independence from apartheid-era South Africa in 1990. Yet the Namibian government has since managed to systematically reduce the gap between rich and poor, more than halving the poverty rate from 53% to 23%. A key factor has been its investment in education: Namibia has the world’s second-highest percentage of overall budget spent on education, enabling it to provide free secondary school to all students. It also spends a greater proportion of its budget on health than Finland.

As a comparison, the following list reveals spending ranks of some countries on health, education and social protection

1 Ireland

2 Germany

3 Finland

4 Belgium

5 France

-

148 Bangladesh

149 India

150 Laos

151 Myanmar

152 Nigeria

As can be a seen there is a close correspondence if not a precise one between inequality and education and social spending. Thus if lagging countries like India and Nigeria wish to improve conditions of misery in their countries, aside from measures of the earlier note, a hugely increased proportion of the budget would have to be spent on health and education rather than progressive increases of salaries of government employees much is excess of what most in the country earn and temporary gifts that may bring votes in an election. It is true that health and education do not bring the same hefty commissions to the bureaucracy as for example infrastructure spending to the corrupt among the bureaucracy. For this very reason the pressure to increase budgets in these necessary area for well being of people is less. A wise leadership must necessarily overcome such pressures for progress of a nation.

As an example a lot of social spending in India has gone on providing homes to the poor. These are of poor quality and where provided they turn into hell holes soon after. A wiser approach would be to to work on alleviating poverty and provide the poor plots to build homes on in well demarcated areas with roads, water supply and drainage to build their own homes. At the most a toilet may be built. The poor will then gradually build their own homes in it even starting with a mud hut and end up with much finer homes eventually. However, in this latter approach there are no series of commissions between the officials and contractors.

Unless corruption is eliminated all other measures howsoever well meant shall fail.

Update October 14, 2017:

The Consequences of Inequality

While GDP growth has taken place in India, inequality has grown too, leading to rampant hunger as brought out by this study.

https://timesofindia.indiatimes.com/india/india-ranked-100th-among-119-as-hunger-gets-worse/articleshow/61060319.cms

The precise details and methodolgy of this report can be contested but the presence of much hunger and malnutition cannot be debated. India cannot afford to make policy choices that lead to growth as for example by rate cuts by the central bank while also leading to inflation. Food inflation in India is leading to not just to hunger but also deaths of its children with one of the highest infant mortality rates in the world. India needs to focus not on inflation of commodities like steel and cement because the poor can survive in mud huts but they cannot survive without food. Food inflation has to be the central focus for policy. The trickle down economics theories of earlier years have been thoroughly discredited as homelessness and hunger has even entered the richest countries of the world such as US and UK. The world now looks to Scandinavian countries for more just models of economy where social spending, health and education for all is the priority.