The Insecurity of Inequality


April 12, 2017

The Insecurity of Inequality

by Kaushik Basu

https://www.project-syndicate.org/commentary/rising-inequality-globalization-by-kaushik-basu-2017-04

Image result for kaushik basuKasuhik Basu

“In our globalized world, inequality cannot be left to markets and local communities to solve any more than climate change can. As the consequences of rising domestic inequality feed through to geopolitics, eroding stability, the need to devise new rules, re-distribution systems, and even global agreements is no longer a matter of morals; increasingly, it is a matter of survival”.–Kaushik Basu

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Global inequality today is at a level last seen in the late nineteenth century – and it is continuing to rise. With it has come a surging sense of disenfranchisement that has fueled alienation and anger, and even bred nationalism and xenophobia. As people struggle to hold on to their shrinking share of the pie, their anxiety has created a political opening for opportunistic populists, shaking the world order in the process.

The gap between rich and poor nowadays is mind-boggling. Oxfam has observed that the world’s eight richest people now own as much wealth as the poorest 3.6 billion. As US Senator Bernie Sanders recently pointed out, the Walton family, which owns Walmart, now owns more wealth than the bottom 42% of the US population.

I can offer my own jarring comparison. Using Credit Suisse’s wealth database, I found that the total wealth of the world’s three richest people exceeds that of all the people in three countries – Angola, Burkina Faso, and the Democratic Republic of Congo – which together have a population of 122 million.

To be sure, great progress on reducing extreme poverty – defined as consumption of less than $1.90 per day – has been achieved in recent decades. In 1981, 42% of the world’s population lived in extreme poverty. By 2013 – the last year for which we have comprehensive data – that share had dropped to below 11%. Piecemeal evidence suggests that extreme poverty now stands just above 9%.

That is certainly something to celebrate. But our work is far from finished. And, contrary to popular belief, that work must not be confined to the developing world.

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As Angus Deaton recently pointed out, extreme poverty remains a serious problem in rich countries, too. “Several million Americans – black, white, and Hispanic – now live in households with per capita income of less than $2 per day,” he points out. Given the much higher cost of living (including shelter), he notes, such an income can pose an even greater challenge in a country like the US than it does in, say, India.

This constraint is apparent in New York City, where the number of known homeless people has risen from 31,000 in 2002 to 63,000 today. (The true figure, including those who have never used shelters, is about 5% higher.) This trend has coincided with a steep rise in the price of housing: over the last decade, rents have been rising more than three times as fast as wages.

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There’s Poverty and  Increasing Income Inequality in America too–A Failure of Market Economics

Ironically, the wealthy pay less, per unit, for many goods and services. A stark example is flying. Thanks to frequent flier programs, wealthy travelers pay less for each mile they fly. While this makes sense for airlines, which want to foster loyalty among frequent fliers, it represents yet another way in which wealth is rewarded in the marketplace.

This phenomenon is also apparent in poor economies. A study of Indian villages showed that the poor face systematic price discrimination, exacerbating inequality. In fact, correcting for differences in prices paid by the rich and the poor improves the Gini coefficient (a common measure of inequality) by 12-23%.

The better off also get a whole host of goods for free. To name one seemingly trivial example, I can’t remember when I last bought a pen. They often simply appear on my desk, unintentionally left behind by people who stopped by my office. They vanish just as often, as people inadvertently pick them up. The late Khushwant Singh, a renowned Indian journalist, once said that he attended conferences only to stock up on pens and paper.

A non-trivial example is taxation. Rather than paying the most in taxes, the wealthiest people are often able to take advantage of loopholes and deductions that are not available to those earning less. Without having to break any rules, the wealthy receive what amount to subsidies, which would have a far larger positive impact if they were allocated to the poorest people.

Beyond these concrete inequities, there are less obvious – but equally damaging – imbalances. In any situation where, legally, one’s rights are not enforced or even specified, the outcome will probably depend on custom, which is heavily skewed in favor of the rich. Wealthy citizens can not only vote; they can influence elections through donations and other means. In this sense, excessive wealth inequality can undermine democracy.

Of course, in any well-run economy, a certain amount of inequality is inevitable and even needed, to create incentives and power the economy. But, nowadays, disparities of income and wealth have become so extreme and entrenched that they cross generations, with family wealth and inheritance having a far greater impact on one’s economic prospects than talent and hard work. And it works both ways: just as children from wealthy families are significantly more likely to be wealthy in adulthood, children of, say, former child laborers are more likely to work during their childhood.

None of this is any individual’s fault. Many wealthy citizens have contributed to society and played by the rules. The problem is that the rules are often skewed in their favor. In other words, income inequality stems from systemic flaws.

In our globalized world, inequality cannot be left to markets and local communities to solve any more than climate change can. As the consequences of rising domestic inequality feed through to geopolitics, eroding stability, the need to devise new rules, re-distribution systems, and even global agreements is no longer a matter of morals; increasingly, it is a matter of survival.

Jeffery Sachs on his new book, Building the New American Economy


February 27, 2017

Jeffery Sachs on his new book, Building the New American Economy–Smart, Fair, & Sustainable

 

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Money is politics is a serious problem in America today–Jeffery Sachs

Professor Jeffery Sachs discusses his new book, Building the New American Economy– Smart, Fair, & Sustainable. I agree with this Columbia University don that America needs a make over by a progressive President like a President Bernie Sanders. Unfortunately, Americans have to learn to live with a Republican President Donald J. Trump and a Republican controlled  House of Representatives and the Senate. To these politicians, sustainable development is a Grecian nightmare.

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Trust (s0cial capital) is diminishing in the Land of the Free and Home of the Brave. The last decade has been 10 years of greed and widening income inequality in American polity. Politics ought to return to the politics of IDEAS, says Sachs. Listen him and decide what you think of his book.  –Din Merican

Don’t be discouraged. Just click and you can watch it directly on youtube.com

Time to reject race-based socio- economic policies


October 23, 2016

Time to reject race-based socio- economic policies

by Wan Saiful Wan Jan, CEO IDEAS

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Tun Razak was wrong, Najib made it racist and utterly corrupt, so time to go back to Tunku Abdul Rahman’s Vision of Small but Pro-Business Government

The philosophy guiding how a government relates with the people is something that not many Malaysians talk about these days. But if we go back to the early days of this country, ideology used to matter.

In a speech delivered at IDEAS Annual Dinner on February 20, 2016, Tun Musa Hitam, Malaysia’s former Deputy Prime Minister who started his political career under Tunku Abdul Rahman, said, “In those early days of our history, politics was more ideological than material. There were indeed, yes, indeed, two camps in UMNO: the Tunku camp and the Razak camp.

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“The Tunku camp was clearly and unapologetically right-wing, pro-west and pro-business. The Razak camp was allegedly socialist-communist inclined, a brand enough to scare and scuttle people away all the way in those days when communist terrorists were the biggest threat to our independence.”

This was a telling statement, because Musa was suggesting that the liberal administration of the Tunku was eventually replaced by a socialist-communist inclined administration of Tun Abdul Razak Hussein, Malaysia’s second Prime Minister.

If we analyse history carefully, indeed we could see how Razak was leaning in a leftist direction. Among the most significant foreign relations built by Razak was with Mao’s communist China, when he visited the country in May 1974. Razak was also the one who introduced huge government intervention into Malaysia’s socioeconomic system when he introduced the New Economic Policy (NEP) in 1971.

Government domination of the economy is an important feature of a leftist ideology, and this naturally led to the government imposed ethnic-based affirmative action, and all its related policies, that plague our country until today.

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Razak’s ideology was almost completely opposite to the market economy envisioned by the Tunku when he said that Malaysia is a country that believes “in the system of free enterprise”.

We must acknowledge that government intervention has existed since the time of the Tunku. Several times the Tunku too used government powers to stifle dissent. But government interventionism grew much bigger and was formalised under Razak’s administration.

It was Razak’s desire effort to create an ill-defined “social justice” that gave birth to the New Economic Policy (NEP). As a result of their wrong definition of social justice, the NEP was implemented is such a way that nudged us to live our lives along communal lines until today.

Even worse, today we can’t even discuss this supposed temporary policy in rational way anymore. Today we live in a country where if you speak honestly on difficult and sensitive issues, you risk being accused of disloyalty to the country, or worse, being seditious.

It will take a lot more time to change this situation. But it is important for those of us who dream of a more liberal future for the country to persist. We cannot allow the country to continue on the trajectory of big government paved by, as Musa Hitam puts it, Razak’s “socialist-communist inclined” thinking. Instead of a big government philosophy, I propose that we should return to the philosophy of a liberal, small and limited government as originally envisioned by the Tunku for this country.

The liberal belief stems from a commitment to the principle of liberty, which is commonly described as the right to live our lives in any way we want to so long as we do not do any harm to others. It is important to stress the second part of the description: “as long as we do no harm to others”.

A liberal way of life a highly responsible one. We take it as our responsibility to do no harm to others and we acknowledge that we will have to account for any harm that we do. Yes we want to live our lives how we wish. But we also undertake not to harm others. Tunku Abdul Rahman puts it nicely when he said that “Life in this world is short. Let us make use of our lives in the pursuit of happiness and not trouble.”

In fact, the Tunku even put in the Proclamation of Independence that one of the roles of government is “ever seeking the welfare and happiness of its people”. It is not the role of government to stop us from enjoying our happiness in the way we want. Instead the role of government is to help and to allow us to seek our own happiness in our own ways.

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The By-Product of Malaysia’s NEP

As I said above, it will take time before we can truly enjoy the fruits of the Tunku’s vision for liberty for this country. The liberal journey of this country was disrupted in 1970 and that disruption continues until today.

We need to realign the country back to the right trajectory. And the realignment process needs to start with us appreciating the importance of having a philosophy based on freedom and liberty to guide all our policies.

Wan Saiful Wan Jan is the chief executive of the Institute for Democracy and Economic Affairs, (IDEAS)

Source: MYSINCHEW

A Toast to the Right to Development


New York

June 22, 2016

A Toast to the Right to Development

by Martin Khor

http://www.thestar.com.my

Many problems threatening the world can be addressed through the lens of the Right to Development – that should be celebrated on its 30th anniversary.

THE Declaration on the Right to Development is 30 years old. Adopted by the United Nations General Assembly in 1986, it has had an illustrious history, having great resonance among and giving a boost to people fighting for freedom and more participation in national affairs, as well as to developing nations striving for a fairer world economic order.

It has been invoked by the leaders and diplomats of developing countries on numerous occasions, when they try to convince their counterparts of the developed countries to show more empathy for the needs of the poorer countries.

It has a central place in the Rio Principles of the 1992 Earth Summit, and most recently it was mentioned in the 2015 Paris Agreement on climate change.

On this 30th anniversary, it is fitting to recall the important elements of this right to development. It is human and people-centred, an inalienable human right “to participate in, contribute to, and enjoy economic, social, cultural and political development, in which all human rights and fundamental freedoms can be fully realized.”

Politicians and policy makers should take human beings as the central focus of their development policies, and ensure they can actively participate in the process of development and development policy, as well as benefit from the fruits of development. (Article 2.3).

But the Declaration also places great importance on the international arena. States have the duty to cooperate with each other in ensuring development and eliminating obstacles to development (Article 3.3).

And effective international cooperation is essential in providing developing countries with appropriate means and facilities to foster their comprehensive development (Article 4.2).

The right to development recognises that there are national and international obstacles to the realisation of the right to development, and it calls for states to take steps to eliminate these obstacles.

It is useful to identify some present global problems and how they affect the right to development.

First, the global economy in crisis. The economic sluggishness in developed countries has had adverse impact on developing economies.

They are facing low commodity prices, and reduced export earnings. They face great fluctuations in the inflow and outflow of funds, due to absence of controls over speculative capital flows and fluctuations in the value of their currencies due to lack of a global mechanism to stabilise currencies.

Some countries are on the brink of another debt crisis. There is for them no international sovereign debt restructuring mechanism and countries that do their own debt workout may well become victims of vulture funds.

Second, the challenges of implementing appropriate development strategies.

There are challenges in developing countries to have policies right in agricultural production, ensuring adequate incomes for small farmers, and national food security.

Industrialisation involves the challenges of climbing the ladder, moving from labour-intensive low-cost industries to higher technology industries and overcoming the middle-income trap.

There are the challenges to providing social services like health care and education and water supply, lighting and transport as well as developing financial services and commerce.

This policy-making is even more difficult due to premature liberalisation, some of which is due to loan conditionality and to trade and investment agreements which also constrain policy space.

In particular, many investment agreements enable foreign investors to take advantage of imbalanced provisions and shortcomings in the arbitration system that cause countries to lose a lot in compensation and also have a chill effect on their right to regulate and to formulate policies. A review is needed.

Third, climate change is an outstanding example of an environmental constraint to development and the right to development. There is an imperative to cut global emissions as sharply and quickly as possible. But which countries and which groups within countries should cut emissions, and by how much?

The danger is that the burden will mainly be passed on to developing and poorer countries and to the poor and vulnerable in each country.

The Paris Agreement of December 2015 was a success in terms of reaching a multilateral deal.

But it is not ambitious enough to save humanity, and it also failed to deliver confidence that the promised transfers of finance and technology will take place. Much more has to be done and within a few years.

Fourth, the crisis of anti-microbial resistance brings dangers of a post-antibiotic age. Many diseases are becoming increasingly difficult to treat because bacteria have become more and more resistant to anti-microbials.

The World Health Organisation Director General has warned that every antibiotic ever developed is at risk of becoming useless and that we are entering a post-antibiotic era.

The World Health Assembly in 2015 adopted a global plan of action to address anti-microbial resistance but the challenge is in the implementation.

Developing countries require funds and technology such as microscopes and diagnostic tools; they also need to have access to existing and new antibiotics at affordable prices.

Fifth, the challenges of implementing the Sustainable Development Goals, which are closely linked to the right to development.

For example, Goal 3 is “to ensure healthy lives and promote well-being for all at all ages”. One of the targets is to achieve universal health coverage, that no one should be denied treatment because they cannot afford it. But unless there are sufficient funds, this will remain an unfulfilled noble target.

The treatment for HIV/AIDS became more widespread only when generics were made available at cheaper prices, and since then millions of lives have been saved.

Many of the new cancer drugs and the new “biologics” are priced above US$100,000 (RM408,850) for a year’s treatment. Unfortu­nately, due to global patent rules, most patients have no access to cheaper generics.

For the SDGs to succeed, finance and technology have to be transferred to developing countries and some international rules on trade and intellectual property have to be altered if they are found to be obstacles to the right to development.

All the above global challenges have to be diagnosed as to where they comprise obstacles to realising the right to development, and the obstacles should then be removed.

That is easier said than done. But the Declaration has thrown light on the way ahead.

Martin Khor (director@southcentre.org) is executive director of the South Centre. The views expressed here are entirely his own.

 

 

 

Chris Hedges: America 2016


May 23, 2016

Chris Hedges:  America 2016

Erudite “ChrisHedges  is an American journalist, activist, author, and Presbyterian minister. Hedges is also known as the best-selling author of several books including War Is a Force That Gives Us Meaning (2002)—a finalist for the National Book Critics Circle Award for NonfictionEmpire of Illusion: The End of Literacy and the Triumph of Spectacle (2009), Death of the Liberal Class (2010), the New York Times best seller, written with cartoonist Joe Sacco, Days of Destruction, Days of Revolt (2012), and his most recent Wages of Rebellion: The Moral Imperative of Revolt (2015). http://www.wikipedia.org.

I like his views about government-big business– big bank partnerships.  His comments also seem to resonate well, especially among young American voters since The Bern (Bernie Sanders) has been making headlines in the US  primaries by giving Hillary Clinton a run for her money. So I thought I should share them with you on my Double 7 Day. And of course, I expect responses from all of you.–Din Merican

 

 

 

The Panama Papers– Watch Video


 

May 11, 2016

The Panana Papers– Watch Video

Staggering  amounts of dubious/illicit money are involved. No small wonder the rich are getting richer and the gap between the filthy rich and the miserable poor is widening. The rest of us in between are suffering suckers who are made to bear the burden of heavy taxes.

It makes me wonder what central bankers and monetary and fiscal authorities around the world are doing to keep the financial system honest.–Din Merican