poor rich gap

​​Make the poor richer without making the rich poorer

A pragmatic approach to reducing the rich-poor gap is by maximising economic growth, minimising unemployment, lowering the tax burden and providing a safety net for the poor

economic disparity between the rich and the poor in India and worldwide

 1 It is simply incontestable निर्विवाद that the economic disparity between the rich and the poor has widened alarmingly over the last two decades, not just in India but across the world.

 2 politicise this serious issue 

by quibbling over which political party’s tenure has exacerbated economic inequality. 

3 The fact is that the world is becoming more and more unequal and it is not in the larger interest of any society to let this fester. 

The gap between the rich and the poor can be bridged 

१ by either making the rich poorer or the poor richer or both.

 २ एक हाथ से लो दूसरे हाथ से दो 

If the answer is yes, then the thinking to achieve a more equal society is shaped by what sociologists call a ‘Pareto Optimum’, under which it is impossible to make one person better off without making another worse off. 

Developed nations, that can only grow slowly, are forced to adopt a ‘Pareto’ path to reducing inequality. 

But developing nations that can grow much faster need not. This is the fundamental philosophical difference across the ideological spectrum to solving inequality.

‘Fix the system’

The idea of a wealth tax 

to extract from the super rich and give to the poor stems from a ‘zero sum’ thought to reduce economic disparity.

 question : if the rich acquired their wealth through fair means and perhaps most don’t in countries like India. 

 If the system is corrupt to let a few acquire wealth illegitimately, then fix the system, not tax it in the garb of bridging inequality.

economic growth is necessary 

1 In the current stage of India’s development cycle, economic growth is necessary for increasing the size of the overall economic pie.

2  Economic growth needs investment. A confrontational ‘make the rich poorer’ policy attitude can hinder investments and trigger flight of capital.

3 India’s inequality is a result of lopsided economic growth and taxation. It is well established that India is experiencing jobless growth where headline GDP growth does not translate into jobs, incomes and prosperity for a large majority.

Headline GDP

 is a term that refers to the final monetary value of a country's goods and services produced over a specific period of time, usually a year.

•  every percentage of GDP growth today generates less than one-fourth the number of formal jobs than it did in the 1980s.

•  This is mainly due to contemporary economic development models that  support  capital over labour for efficiency. 

key to reducing economic disparity

is to rebalance the capital-labour skew through labour market focused policy incentives. 

 some of the Congress manifesto promises such as the 

• right to apprenticeship for youth, 
• employment linked incentive schemes for corporates
•  and promote unskilled labour intensive economic activities.

The other driver of India’s inequality is the imbalance in taxation 

where the common person pays more than the corporates in the share of taxes.

 Out of every 100 rupees that India collects in taxes, 64 rupees come from the poor and middle class through indirect (GST) and income taxes, while only 36 rupees come from rich corporates. 

Essentially, the poor and common person suffers a double whammy where they are not only excluded from the gains of economic growth but are also taxed more vis-à-vis corporates. This is why the manifesto promises an overhaul of India’s taxation structure through a simpler, lower GST indirect tax rate and a new direct tax code.

It is important to ensure a social security net through welfare programs 

for the poor until they can reap gains of economic growth. Such programs can be funded through a combination of faster growth, higher tax buoyancy and efficient welfare delivery without having to resort to penalising the rich.

A pragmatic approach to reducing the rich-poor gap

is by maximising economic growth, minimising unemployment, lowering the tax burden for the common person and providing a safety net for the poor.

 This involves a delicate balancing act of labour market incentives, welfare safety nets and attracting investments. But punitive and spiteful taxation of the rich to pay the poor is not workable, wise or welcome. India can reduce inequality by making the poor richer without having to make the rich poorer.

Source the hindu