Vantage point

Thursday, December 22, 2005

Global Inequality

I was first pointed out this article in the Telegraph - UNEQUAL GAINS as having been written by a Professor at Delhi University. Naturally I read the article without paying attention to its byline. Towards the end of the article, I was shocked that this article had been written by a Professor of Economics. SO I went to the byline and realised that I had jumped to conclusions. The author, Achin Vanaik is professor of international relations and global politics, Delhi University.

Ah Ok!

Well, I am going to give the good professor the benefit of doubt and assume that the mistakes he has made in the article are genuine.

He first quotes from the UNDP report and tells us that the gap between the richest and poorest countries has only grown. And this has happened in what he calls the neoliberal era. Hence, he commits the classic flaw of confusing correlation with causation and jumps to conclusion saying that neoliberal policies have actually caused inequality.

There are several flaws in this argument. Let's take them up one by one.

1. Calling it a Neoliberal "Era" - This implies that there is a consensus on neoliberal policies, and each and every country in the world has in fact embraced them. The reality is actually just the opposite. A majority of the world still continues to labour under interventionist policies, especially the poor ones. In fact, as the Economist says, wherever we have seen Neoliberal policies applied, such as China or India, poverty has reduced. SO let us stop this "neoliberal era" nonsense.

2. Selective data-mongering - Notice that the good Professor has mentioned that the ratio of the per capita GDP of USA and Bangladesh was 88:1 3 decades ago. Bangladesh was then the poorest country in the world, in terms of per capita GDP. Now if one were to compare the impact of the following three decades, wouldn't it be logical to compare the same two countries again? But no, the good Professor goes to Guinea Bissau, because it is the poorest country in the world right now. Doesn't anyone see anything wrong in this? WHat happened to Bangladesh?

I'll tell you what happened to Bangladesh. A little help from Wikipedia and the calculator tells me that the ratio of the per capita GDP of USA and Bangladesh is now 22.6:1.

Which means the disparity has reduced in leaps and bounds between USA and Bangladesh.

One can go on fisking the article, but the crux of the matter is this. Even if, for the sake of the argument, one assumes that the rich have gotten richer while a bulk of the poorer have gotten poorer. Is it that the rich have gotten richer at the expense of the poor? Or is it that the poor just haven't been able to grow as rapidly as the rich?

If the answer to the first question is yes, then yes, there is something majorly wrong with the way the richest countries do business.

If the answer to the first question is no, and to the second one is yes, then we need to examine which are these poor countries which are getting poorer and why?

Is it because of neoliberal policies? Do all or most of the countries follow neoliberal policies and are yet getting poorer by the day? If yes, then by all means criticise neoliberal policies.

But if the answer is no, and it is in fact seen that the poorest countries are often the ones which follow policies exactly opposite to what the neoliberals suggest, which is actually the case, then opposing neoliberalism is what increases inequality and not neoliberalism itself.