• Friday, Oct 23, 2020
  • Last Update : 03:12 am

OP-ED: Springtime for oligarchs

  • Published at 09:19 pm October 1st, 2020
money stacks
US billionaires have seen their wealth soar during Covid-19 BIGSTOCK

The pandemic has not been too bad for the super-rich

Not everybody is experiencing what the World Bank says is the worst international contraction of the global economy since 1870, and potentially the greatest depression since any kind of records have been maintained. 

This is because it’s now clear that the richest few amongst us have thrived throughout our collective pandemic predicament, and their power has grown commensurately.

Make no mistake about it: We are now officially living in an age of unprecedented inequality.

The numbers are exceedingly stark: America’s 643 acknowledged billionaires saw their wealth soar in the last six months, even while 200,000 of their fellow citizens died from Covid-19. 

Meanwhile, amongst other glaring red flags, the BBC says Singapore is suffering “a pandemic of inequality” and the International Monetary Fund head, Kristalina Georgieva, warns that, “without urgent action, we risk deepening the divide -- globally -- between the rich and poor.”

It is exactly at the same juncture in India that the public learned Mukesh Ambani (who is intimately close to Prime Minister Narendra Modi) has continued to add an estimated $12 million to his net worth every hour since the “world’s strictest lockdown” was implemented in March. All through the painful months of our Covid-19 doldrums, the billionaire has kept leapfrogging much closer to being “the richest person on Earth.”

That unlikely truth illuminates the obviously deteriorating situation, where most of the gains of the world economy are being captured by minute fractions of what used to be called “the one percent.” We might be close to the point of no return.

“The dangers of increased concentration of wealth in fewer hands are manifold,” says Kishore Krishnan Sharma, who is senior economist at the United Nations. He told me, “widening inequalities lead to erosion of social cohesion, and an increase in crime, discord, and political instability. At another, and even more dangerous level, there could be a capture of the policy-making process. These trends correlate with an erosion of the middle class, which has tended to have a stabilizing effect.”

In our conversations, Sharma scrupulously refrained from zeroing in on any country. Instead, he said: “In economies where there is a large concentration of power in a few oligarchs, there is a risk that tax policies could be devised in a manner that favours the very wealthy and facilitates tax avoidance. If this goes hand in hand with an erosion of the middle class tax base, then the necessary revenues to finance society would suffer, and contribute to ever widening inequality and the vicious cycle outlined above.”

This is precisely what is happening with especially pernicious implications in India. In the giant country of the sub-continent, state capture by the wealthiest few is almost complete. “We are on the road to being an oligarchy,” is how Pratap Bhanu Mehta put it earlier this week.

“When oligarchs become intertwined with the government, it leads to what is called crony capitalism,” says the economist Rupa Subramanya. “We’ve seen this in other countries like Russia, and now there are signs of this in India, with a lot of investments and deals going to a few powerful tycoons that are well-connected to the government.”

Subramanya is usually aligned with what passes for the Indian right. Yet, she told me: “The BJP leadership and Modi promised they would keep top business people at arm’s length. For a few years that seemed to be the case. But lately, with so many big investments going to a few important industrialists with well-known ties to Modi, it’s hard to avoid the conclusion there’s perhaps an unhealthy nexus between big business and politics. Public disgust about cronyism helped to defeat the UPA government with Modi promising to clean things up. Now it seems it’s back to business as usual.”

Look at the most recent findings from Oxfam International, and the situation seems irredeemable: Close to 75% of the wealth generated in India’s economy goes to the top 1%, and the total wealth of Indian billionaires is much higher than the union budget.

Oxfam International says: “The richest have cornered a huge part of the wealth created through crony capital and inheritance. They are getting richer at a much faster pace while the poor are still struggling to earn a minimum wage and access quality education and health care services, which continue to suffer from underinvestment. These widening gaps and rising inequalities affect women and children the most.”

This means we have an extremely arduous road ahead. 

Subramanya told me: “I’m not very optimistic about the future of India’s growth story. The pandemic continues to rage out of control, and the economy is in free fall. It’s unlikely that even the recent economic reforms are going to have an impact any time soon. It’ll take many years for the country to get back to a high growth trajectory.”

Vivek Menezes is a writer based in Goa, India.

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