The present economic system needs to be made more egalitarian
Today, October 17, the world observes the International Day for the Eradication of Poverty. The observance epitomizes the fact that, globally, people are suffering from poverty -- hunger, starvation, lack of health care, inadequate housing, inaccessible education, violence, and fear.
In today’s world, billions of people are living in poverty. If we estimate using the World Bank’s framework, nearly 10% of the global population, ie, 700 million people, are forced to survive with an earning of less than $1.90 per day. Moreover, 25% of the global population (nearly 1.75 billion) live with an earning below $3.20 a day. There is widespread disparity across regions, and reduction of poverty is minimal if we consider absolute numbers instead of percentages. The situation demands us to ask: How can we eradicate poverty?
The eradication of poverty is a global agenda. We formulate goals and plans so that the world becomes free of the menace of poverty. In our pursuit towards poverty eradication, for instance, Millennium Development Goals (MDGs) have been replaced with Sustainable Development Goals (SDGs). But I am afraid, after 2030, the world will have more extreme poverty than it sees today. As Thomas Piketty argues in Capital in the Twenty-First Century, to come out of poverty we must put the question of wealth distribution at the heart of poverty analysis.
What causes poverty?
In our efforts to fight poverty, we must first provide an honest answer to this question. Though we have not yet experienced a global apocalypse as a consequence of profit-making ventures as required by the existing capitalist system, it is intricately related to the structure of inequality in the world.
The world is starkly unequal even though we always hear about economic growth, the rise of per capita income, and reduction of poverty itself, among many other indicators which stand for development. This rhetoric of progress creates an illusion of advancement. However, the reality is quite different.
The cause and extent of the shocking level of global poverty will become clearer if we explore the ways global capitalism works today.
In 2019, the GDP of the world was $88,081.13 billion but almost 79% of it went to the top 20 economies. We do not seem to care about the role of all the other countries in this economic growth.
The present form of capitalism has separated the locations of production and realization and the appropriation of values. This trend is now robust and is even spreading further across the globe. A recent briefing by The Economist confirms that the world is more import-dependent today than it was 20 years ago.
In such an economic system, the production bases earn an extremely low rate of profit while the capital owners take the maximum surplus value. For instance, in our garment industry, the wages of the workers only make up 3% of the ultimate retail price.
Dispersions of production to locations with untapped human resources are producing surplus values which can be extracted and transferred to another location -- the capitalist centres. Thus, poverty is created and sustained amid exceptional economic growth.
The World Inequality Report 2018 has revealed ,that since 1980, the top 1% of the population captured 27% of total growth while the bottom 50% captured only 12%.
Hence, distribution of global labour income is extremely unequal. For instance, ILO has identified that, in 2017, the top decile earned 48.9% of all labour income, whereas the poorest 50%, ie the global workers, earned just 6.4%.
An immediate result of such unequal distribution of wealth is the fact that, despite increased food production, we still have hungry people in the world. WHO estimated that 820 million people did not have enough to eat in 2018. The number of food-hungry people had increased for the third year in a row.
What justifies inequality?
Unless the inequalities are justified in some way, society faces danger of collapse. Piketty in Capital and Ideology argued that every epoch has developed “ideologies” that legitimize inequality in society. Certain discourses support the economic, social, and political rules that justify the existing social order.
The mega-narratives that dominate today’s world centre on property, entrepreneurship, and meritocracy. Modern poverty, ie, inequality is perceived to be “just” because it supposedly results from a “freely chosen process.”
The neoliberal ideology professes that every individual gets equal access to the market and to property. Thereby, the wealthiest individuals are treated as the most enterprising segment, and it is believed that, even if they amassed billions of dollars in assets, it will benefit the entirety of society in a trickle-down process.
Modern capitalism relies on he illusion that everyone has the potential to gain anything that the richest have -- the possibility of realizing the “great American dream,” for instance.
The justifying ideologies enable changes that produce “free labour” to be ripped off as “profit.” For instance, after the independence of Bangladesh in 1971, trade liberalization and privatization policies had a significant impact on employment and the earnings of the poor. Overall, these processes contributed to extreme economic and social polarizations.
The means of production became concentrated in the hands of the rich, and peasants were turned into wage labourers either to survive or to complement their income. Hence, a booming garment industry sector followed, where thousands of workers are denied a living wage. In the recent past, many workers even died in “accidents” such as the ones at Rana Plaza and Tazreen Fashions.
The reality of meritocratic discourse is far from reducing inequality or poverty. Globally, we are facing possibly the most unequal society in history. The world today justifies this inequality by blaming the poor as lacking talent, virtue, or diligence.
The question of distribution
How can we ensure a fair distribution of wealth? This is the question that should occupy us in our fight towards eradication of poverty.
As in the past, we are experiencing massive economic changes. The distribution of “income and output” is a primary issue as, in the long-run, it does not naturally balance out. The problem of poverty is really a problem of distribution among different segments, and at present, inherited wealth is becoming more decisive in sustaining inequality.
Hence, the capitalist process of wealth accumulation and distribution leads us towards increasingly higher levels of inequality. To come out of this circle, the world should move towards a progressive tax on capital globally. To this end, we will need an unprecedented degree of international cooperation.
If we do not radically transform the present economic system to make it more egalitarian, we risk the further rise of xenophobic/nationalistic populism as we have already started to witness across the world recently.
Mohammad Tareq Hasan is an anthropologist and teaches at the University of Dhaka.