The Widening Gap between Rich and Poor

Jayati Ghosh

We all know that the world is an unequal place, both across and within countries. We also know that across the world, people are expressing their anger and disgust at this inequality. This is increasingly revealed in extreme and often paradoxical political results. In the USA, a vote against the establishment has just delivered to power the ultimate crony capitalist, Donald Trump. In the United Kingdom people voted to leave the European Union in the false expectation that curbing migration will improve their own life chances. In India the poor, disgusted by a corrupt self-enriching elite, support a bizarre and drastic demonetisation that leads to their own further impoverishment while leaving the supposed targets, the corrupt rich, relatively unscathed.

But here’s the thing: inequality has been a hot topic of international discussion for around a decade, but in that time, it has got worse, not better! Since the time when international organisations took up this issue and Thomas Piketty published his global bestseller on inequality, the evidence is that the problem has intensified, not reduced.

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Unreal in Pampered India

Sunita Narain

Many years ago, when Delhi’s air pollution was as high as it is today, my colleague Anil Agarwal and I had gone to meet a high-ranking, responsible government official. This was in the mid-1990s, when air was black because we did not even have the most rudimentary fuel quality and emission controls. The official was genuinely stumped by our demand that government should take steps to control runaway pollution. He kept asking, “But is Delhi really polluted?” I was equally flummoxed; air was foul and black. How could he miss it?

Then I realised that his world was not mine to see. He travelled from his home, located in luxuriantly green Lutyens’ Delhi—also known as the New Delhi Municipal Council (NDMC), where government resides—to his office, also in the same verdant surroundings. Nowhere did he see any dirt; nowhere did he smell the air. And as it was not seen, it could not exist, so nothing needed to be done.

This incident came to my mind when I read that the Government of India had decided to select New Delhi—Lutyens’ Delhi—for the smart city makeover. Under this scheme, 20 cities have been selected based on “rigorous” criteria to improve urban living. The Government of India will now provide funds and expertise to make the city “smart”—defined as innovative approaches to improvement in urban services. This means that the government will spend on facilities to make its own living area even better and more removed from the squalor, poverty and pollution of the rest of India.

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World Bank Researchers Punch South Africa’s Poor and Coddle the Rich

Subsidized white capitalists and oppressed activists are amongst those who must “not be named”

By Patrick Bond

“South Africa can claim to have one of the world’s most redistributive public purses,” argues Johannesburg Business Day newspaper associate editor Hilary Joffe, drawing upon World Bank research findings. But not only is this nonsense. The Bank’s silences about poverty and inequality speak volumes.

To illustrate this in next-door Lesotho, Stanford University anthropologist James Ferguson’s famous book The Anti-Politics Machine criticized the World Bank’s 1980s understanding of Lesotho as a “traditional subsistence peasant society.” Apartheid’s migrant labor system was explicitly ignored by the Bank, yet remittances from Basotho workers toiling in mines, factories and farms across the Caledon River accounted for 60 percent of rural people’s income.

Ferguson explained: “Acknowledging the extent of Lesotho’s long-standing involvement in the modern capitalist economy of South Africa would not provide a convincing justification for the ‘development’ agencies to ‘introduce’ roads, markets and credit.”

Using Michel Foucault’s discourse theory, Ferguson showed why some things cannot be named. To do so would violate the Bank’s foundational dogma, that the central problems of poverty can be solved by applying market logic. Yet the most important of Lesotho’s market relationships – exploited labor – was what caused so much misery.

Three decades on, not much has changed. Today, the Bank’s main South Africa research team reveals a similar “Voldemort” problem. Like the villain whose name Harry Potter dared not utter, some hard-to-hear facts evaporate into pregnant silences within the Bank’s latest “South African Poverty and Inequality Assessment Discussion Note.” Bank staff and consultants are resorting to extreme evasion tactics worthy of Harry, Ron and Hermione.

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Let Them Drink Pollution?

The tragic crisis in Flint, Michigan, where residents have been poisoned by lead contamination, is not just about drinking water. And it’s not just about Flint. It’s about race and class, and the stark contradiction between the American dream of equal rights and opportunity for all and the American nightmare of metastasizing inequality of wealth and power.

James K. Boyce

The link between environmental quality and economic inequality was spelled out more than two decades ago in a memorandum signed by Lawrence Summers, then chief economist of the World Bank, excerpts of which appeared inThe Economist under the provocative title, “Let them eat pollution.” Starting from the premise that the costs of pollution depend on “the forgone earnings from increased morbidity and mortality,” Summers concluded that “the economic logic of dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that.”

A different logic is supposed to underpin U.S. environmental policies. The Federal Water Pollution Control Act mandates that water quality standards should “protect the public health” – period. Its aim, as former EPA administrator Douglas Costle once put it, is “protection of the health of all Americans.” Under the law, clean water is a right, not something to be provided only insofar as justified by the purchasing power of the community in question.

Even when cost-benefit calculations are brought to bear on environmental policy, the EPA uses a single “value of a statistical life” – currently around $8.7 million – for every person in the country, rather than differentiating across individuals on the basis of income or other attributes.

In practice, however, the role of costs and benefits in shaping public policies often depends on the power of those to whom they accrue. When those on the receiving end are poor, their interests – and their lives – often count for less, much as the Summers memo recommended. And when they are racial and ethnic minorities, the political process often discounts their well-being even more.

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The Plutonomy Is Doing Fine

Matias Vernengo

The new issue of the Credit Suisse Global Wealth Report (2015) has been published. Below is the distribution of global wealth.

regional composition of global wealth distribution

Nothing has changed much since we posted the previous version here. As I commented regarding the previous version, the poor are fundamentally in Africa, India, and Asia-Pacific (mainly Bangladesh, Indonesia, Pakistan, and Vietnam), while the wealthy are in the United States, Europe and Asia-Pacific (i.e. Japan). China has more people in the middle section of the wealth distribution than at the extremes.

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Letter from Delhi, Part 1

Air Pollution as Environmental Injustice

This is part 1 of a two-part series from UMass-Amherst professor of economics and regular Triple Crisis contributor James K. Boyce. This part focuses on disparate exposure to air pollution in Dehli. Part 2, to be posted next week, focuses on solutions to the problem.

James K. Boyce

Arriving in Delhi in January, at the height of the winter pollution season, you notice the air as soon as you step off the plane. A pungent smell with hints of burning rubber and diesel fumes assaults the nose and stings the eyes. On the highway into the city center, a digital screen shining through the smog displays the current level for suspended particulate matter. You don’t need to understand what the number means to know it’s bad.

Delhi has extensive parks, broad avenues, beautiful buildings (like the tomb of Mughal emperor Humayan, shown below), and a vibrant culture. But casting a pall – quite literally – over it all is the worst air pollution of any major city in the world.

Humayan's tomb

Humayan’s Tomb

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Mapping Environmental Injustice

Race, class and industrial air pollution

Klara Zwickl, Michael Ash, and James K. Boyce

America’s corporate polluters are not color-blind. Nor are they oblivious to distinctions of class. Studies of environmental inequality have shown that minorities and low-income communities often bear disproportionate pollution burdens (for overviews, see Ringquist 2005 and  Mohai et al. 2006). In other words, rather than being an impersonal “externality” randomly distributed across the population, the distribution of pollution mirrors the distribution of power and wealth.

These disparities result from decisions by firms to site hazardous facilities in the most vulnerable communities and from decisions by government regulators to put lower priority on environmental enforcement in these communities. To some extent, the disparities may also reflect demographic changes as pollution leads affluent people to move out, neighborhood property values to fall, and poorer households to move in. But even after controlling for income differences, racial and ethnic minorities typically face higher pollution burdens, a finding that implies that disparities are a result of differences in political power as well as purchasing power (Boyce 2007).

But the US is a big country, and it is not homogenous. Electoral politics, social movements, industrial structure, residential segregation, and even laws and regulations differ greatly across the regions. The extent and pattern of environmental inequalities may vary, too.

In a recent study (Zwickl et al. 2014), we examine regional variations to tackle two key questions. First, is minority status or income more important in explaining environmental disparities? Second, is higher income equally protective for whites and minorities in affecting pollution exposure?

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Is All Growth Good? The Case of China

Sara Hsu

Since the seventies, with the assertion by Gunnar Myrdal that economic development should prioritize equality, economists have increasingly come to believe that not all types of growth are wholly “good.” Growth that ignores human well-being and equality are viewed as problematic.  Certainly growth that results in severe environmental destruction, as in the case of China over the past twenty years, cannot be classified as good, either, despite the country’s much-lauded successes during this period.

Real-world views of growth depicted in the mainstream media do not fall in line, however, with the economic development literature. The focus on China’s growth in the news has distracted from a more balanced view of the looming inequality problems or polluting production methods in the world’s most populous nation.  As China’s growth has slowed, headlines have read, “China’s Economic Growth at Stake,” “China’s Economic Growth Slows,” and “China’s Second Quarter Growth Slows.”

Even when inequality and pollution problems are described, they are considered separate from the growth process—as “side effects” of growth rather than issues that detract from the extent of growth itself. Headlines read, “China Blocks Access to Air Pollution Data,” “China Declares War on Pollution,” or “China’s Wealth Disparity Erupts in Protest.” It could, however, be argued that such destructive types of growth both take away from “good” growth and dampen positive growth in the long-run, so we should read about growth and its associated externalities within the same context. This is clearest in the case of pollution, where natural resources are destroyed and rendered unusable to future generations.

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Pollution Inequality and Income Inequality

James K. Boyce

This interview with regular Triple Crisis contributor James K. Boyce (Political Economy Research Institute, University of Massachusetts-Amherst) appeared originally at The Real News Network. Prof. Boyce describes the findings from his recent study showing that, in the United States, inequality in exposure to air pollution is even more unequal than inequality in income. The study, issued by the Institute for New Economic Thinking, was co-authored by Boyce with Klara Zwickl and Michael Ash.

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Is Rising Income Inequality Inevitable?

C.P. Chandrasekhar and Jayati Ghosh

Rising inequality is now a concern on everyone’s minds, even amongst the rich. Unequal societies are actually more unpleasant and dangerous for everyone, not just for those deprived by the system. High and rising inequality can be dysfunctional for the economy: for example, many now argue that growing inequality and the suppression of wage incomes combined with the effects of financial deregulation to generate the Global Financial Crisis of 2008, and that the subsequent poor performance of most economies is related to the slow and limited recovery of labour incomes. Policy makers seem to recognise that addressing inequalities is important not only for justice and social cohesion, but also for continued material progress.

This may partly explain the recent proliferation of academic studies on global and national inequalities, as well as the numerous reports on the subject that have come from UN organisations and other multilateral organisations. The huge media attention devoted to one academic study—Thomas Piketty’s Capital in the 21st Century—is a sign of the times. The spotlight that is shone on the rising share of incomes of the rich and the substantial empirical data that have been brought to bear on establishing this are indeed welcome. But that book, like many other recent analyses of inequality, tends to ascribe some sort of inevitability to the process, as the result of the working of some inexorable economic forces. Piketty, for example, argues that there is a general tendency for wealth and income inequalities to increase because the rate of return on capital tends to exceed the rate of growth of the economy. There are various analytical concerns with this formulation, which relies on assumptions of full employment over the process of economic expansion and returns to factors like capital being determined by their marginal productivity (itself a problematic concept that is also impossible to measure).

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September 23, 2014 | Posted in: Uncategorized | Comments Closed