On 21 January this year, Oxfam International, a charitable organisation that works towards eradicating poverty, released its annual report on inequality, titled “Private Wealth, Public Good.” The report was released ahead of the World Economic Forum in Davos, Switzerland. It highlighted that, in recent years, the wealth of the richest had increased substantially across the world, while the poorest continued to struggle. It attributed this crisis to governments not imposing enough taxes on the rich while underfunding poverty-alleviating public services such as healthcare and education. Oxfam found that in India, even though the wealth of the top one percent of its earners increased by 39 percent in 2018, the wealth of the poorest in the country increased by just 3 percent.
Shortly after Oxfam released the report, Rohit Inani, a journalist based in Delhi, interviewed its executive director, Winnie Byanyima. Formerly a politician in Uganda, Byanyima has led Oxfam since May 2013. She discussed Oxfam’s methodology, the state of inequality in India and whether the world’s economic model is designed to promote inequality. “Over the last two–three decades, the rich have negotiated themselves out of paying tax on their wealth,” Byanyima said. “The problem is governments giving a pass to the rich … the governments are fuelling [inequality] by not taxing wealth enough.”
Rohit Inani: The Indian government has various social-welfare schemes including those guaranteeing rural employment. But according to your report, wealth inequality in India is growing rapidly. Why do you think this is the case?
Winnie Byanyima: Inequality in India is the outcome of poor policy choices. On the one hand, the government spends [less than] 5 percent of the budget on health—one of the lowest levels of spending in the world—and [less than] 6 percent on social-protection schemes. Other emerging countries like Brazil or China spend far more. It often provides subsidies for the private sector. This means they have a very limited impact on people living in poverty.
At the same time, the government is facilitating a huge accumulation of wealth at the top. While India’s tax system is reasonably progressive on paper, taxes on wealth go largely uncollected in practice. It is worth noting that a large number of India’s billionaires come from rent-thick sectors, such as real estate, infrastructure, mining, telecom, cement and media. [Oxfam describes rent-thick sectors as those closely linked to access to natural resources or dependent on the state for licenses—sectors that benefit from a close relationship with the political class.] And there is, undeniably, a huge problem with corruption that saps resources that could have been spent to address inequality.
RI: India is witnessing jobless growth—the unemployment rate is at a four-decade high. But according to a June 2018 report by the AfrAsia Bank, India has 119 billionaires, and this number is expected to witness a threefold increase by the end of the next decade.
WB: The situation in India is potentially dire. A comparison with China is enlightening. Rapid economic growth in China was very broadly shared, and you have seen the emergence of an enormous middle class of hundreds of millions of Chinese people, who have in turn driven growing domestic demand and job growth themselves. Economic growth in India has been much more unequal, benefiting a small group at the top whilst life for ordinary Indian citizens remains little changed. In the long-term, such a growth model is completely unsustainable.
RI: In your report, you called out the “obscene inequality” in India and warned that it could lead to a “social collapse.” Do you think the high income and wealth gap pose a direct threat to democracy in India?
WB: People are not stupid. They look at their situation and they look at the situation of others. Despite working harder their situation gets worse. But for a few people the rewards are enormous—extreme wealth buys them impunity from justice and they lobby the government and parliament. And they use their wealth to buy the public voice—by buying the media and taking it over—in effect, taking over the democratic process. So people feel frustrated. And in that frustration, they express their anger.
RI: Recently, the Congress party announced that it would guarantee a minimum income for every poor citizen if it came to power. Do you think such a scheme can bridge the income inequality gap in India?
WB: If well implemented, a [universal basic income scheme] could be a powerful tool in the fight against poverty and inequality. However, it must be universal and generous enough to make a difference. The history of India is littered with schemes that sound rhetorically ambitious but are very poorly funded and simply don’t deliver.
It is also important that UBI is not seen as a replacement for well-funded public services and social-protection schemes or measures—these are the essential building blocks of fair and thriving societies. It should be seen as an additional tool in the social-welfare arsenal. It should go hand in hand with measures to ensure decent work and employment, where everyone receives a living wage. It should go hand in hand with the funding needed to ensure good quality education, health and other public services. With these and other progressive policies, UBI has the potential to help shift India to another economic model—one that generates a more equal, fairer and more humane economy.
RI: In India, before the economic reforms of the 1990s, when the state controlled public goods, it failed to deliver. Even today, the state has lagged in delivering basic education, healthcare and infrastructure to a large majority of poor people. This is also true of some other emerging nations. How can an inefficient state be trusted with delivering the public good, as Oxfam has proposed?
WB: You are right that many countries are failing to deliver public services properly. There is no shortcut to delivering public goods—the public sector needs to take the lead and increased public spending needs to support increased public delivery of health and education. In situations where governments are failing, resorting to the private sector is not the answer—not in the least because a government that is bad at delivering public services, is also likely to be very bad at regulating and organising the private sector to ensure they help the poorest. This is clearly the case in India where the private sector accessed by the poor is low quality, unregulated, and in the case of health,sometimes dangerous.
In terms of whether the Indian state can be trusted to deliver public goods, we think in India the huge variation between different states is extremely instructive. You have states that are failing to deliver on the public good, and others that are achieving progressive results in both health and education. In parts of India at least, the government can be trusted with delivering on the public good, and these states put the others to shame. Ultimately, there is no substitute for public action. Governments, including the government of India, needs to be pressured into taking much greater action.
In other emerging countries like China and Indonesia, we are seeing significant turnarounds in health—for example, with major new investments. There is no reason why India should continue to lag behind the rest of the world in this critical area for inclusive growth.
RI: According to your report, the 26 richest people on earth have amassed the same wealth as the poorest half of the population. The Indian and foreign press have criticised Oxfam’s report, stating that it is indicative of wealth inequality and not income inequality, and that the former is not as severe as the latter. [Wealth refers to the stock of assets owned by an individual and income refers to the flow of money in forms such as salaries and wages.]
WB: It is true that income inequality is not as wide as wealth inequality, but it is wide. It is not hard to see why—globally, labour wages are stagnating and those at the top, including shareholders and executives, are maximising it for themselves. Income inequality is increasing, but wealth inequality is more alarming. I am aware of the criticism of our methodology but the fact isthat fraction [of difference between what the critics claim is the figure reflecting inequality and what Oxfam claims it is] is so small that even if we discount it, extreme wealth inequality remains.
RI: One of the solutions Oxfam has proposed in its report is imposing more taxes on the top one percent to decrease the gap between the rich and poor.
WB: Yes, we propose to tax the top income group more. We remind people that tax rate was around sixty-two percent in 1970, but now it is 38 percent, and even lower in some places. In India, even if it is 34.6 percent on paper, the effective corporate tax rate in India is around twenty-three percent.
We are saying that there is room for more taxation without hurting growth. At the same time, we urge governments to close the loopholes in tax avoidance, which stands at $170 billion for developing countries alone.
RI: A 2018 Oxfam report said that inequality in India dropped between 1950 and 1980—a time of growth-stagnation and nationalised means of production. Moreover, after the liberalisation of its economy in 1991, inequality increased manyfold. This raised a question—was Oxfam advocating for more state control over means of production, or was it not in favour of the liberalisation reforms?
WB: India is a typical example of a place which is achieving a high rate of growth but the growth is captured by a few at the top. Instead of giving people politics-free public healthcare, India continues to empower a commercial health sector. What’s the result? India has one the highest infant mortality rates in the world. Three children die every minute for lack of sanitation, water, nutrition, all that—three babies.
Oxfam is not suggesting that the government takeover the economy and run it. We want an economy that is managed for the benefit of the majority, not a few. It’s plain common sense to say that the rich should pay their fair share of tax. That’s not communism. That’s not state control. It’s fair taxation—globalisation with common sense.
RI: You infer in your report that “our economy is broken, with hundreds of millions of people living in extreme poverty.” Do you think globalisation is failing the majority of the world’s people even if it lifted a billion people out of poverty in India and China?
WB: The problem with the economic model is that it rewards the owners of capital, and leaves out the rest who are hard working or add value to capital. Last year, the wealth of the top billionaires was going up by $2.5 billion a day, while the wealth of the bottom half of humanity was sinking by $500 million a day. Over the last two–three decades, the rich have negotiated themselves out of paying tax on their wealth, and according to our findings, only four cents to a dollar [in terms of revenue] come out of taxing wealth. The governments are fuelling [inequality] by not taxing wealth enough.
This model is flawed. Even the World Bank tells us that the rate at which poverty is declining has fallen. If we don’t reduce this extreme inequality by 2030 there will be 200 million people living in absolute poverty, that is, below $1.9 a day. Half of humanity is just a medical bill away from sinking into extreme poverty. We have set the bar low [for counting] people who are middle class and happy. But the fact is, and the World Bank tells us that almost [3.4 billion] people live on less than 5.5 dollars a day. The idea of the middle class is not there, and if it is there, it will not hold out because the majority of people are so vulnerable.
It is true that we have seen an incredible number of people rising from poverty in the last 30 years and improving their standard of living. But the path of China and India is not like the path of Japan and South Korea, [which followed] a model that delivered high economic growth without high income inequality. China had very high rates of inequality in the 1980s. The Chinese government realised only recently that growth alone cannot address the problem of poverty and inequality. They started investing in rural development and public services. So there is something to learn there.
RI: Angus Deaton, the 2015 economics Nobel laureate, has said that “the greatest inequalities in the world have come from the greatest successes—from the industrial revolution 250 years ago to innovation and new inventions.”
WB: Yes, an amount of inequality is inevitable in society. Those who are more entrepreneurial, those who have more talent and so on. Hence, some inequality will exist. But extreme inequality is not inevitable. In fact, it is unacceptable—it traps millions into poverty and denies them opportunity. Let me give you an example. There are little girls in my village who are herding goats and who could be the next rocket scientist, while there are others who are getting away without paying their fair share. This is not right.
RI: Deaton has also said that in the developing world “inequality is often a consequence of progress” That raises the question that has troubled policymakers, of what is better—equality without growth or growth with inequality?
WB: This question has been closed, and by none other than the International Monetary Fund, which promoted this thinking for years that “first you can achieve growth and then you can redistribute to achieve equality.” Now, the IMF has said that extreme inequality hurts long term sustained growth. Even the World Bank has said that extreme inequality slows down rate of poverty reduction. So this debate is closed.
But let me tell you this: the language of Angus Deaton is the language of an economist, and mine is the language of a human-rights activist. I talk about the rights to life. I don’t look at people who are dying as an inevitable consequence of globalisation. Their deaths are the unacceptable consequence of government failure to manage the economy on behalf of the majority. When we make an argument for higher and fairer taxation, I know that we are on the right side of history.
This interview has been edited and condensed.