ECONOMIC inequality — income disparity and wealth concentration — has been on the rise since the early 1980s in nearly all world regions and has reached a level never seen in human history. The World Inequality Report 2018 (December 14, 2017) finds that the richest 1 per cent of humanity reaped 27 per cent of the world’s income between 1980 and 2016. By contrast, the bottom 50 per cent got only 12 per cent.
According to Oxfam’s Reward Work, Not Wealth (January 22, 2018), 82 per cent of the wealth created in 2016 went to the richest 1 per cent of the global population while the 3.7 billion people who make up the poorest half of humanity got nothing. The year 2016 also saw the biggest increase in billionaires in history, one more every two days. The wealth of billionaires increased by $762 billion in just 12 months (March 2016–March 2017).
The Oxfam report notes, ‘This huge increase could have ended global extreme poverty seven times over.’ The World Inequality Report warns, ‘… if rising inequality is not properly monitored and addressed, it can lead to various sorts of political, economic, and social catastrophes.’ In its The Global State of Democracy 2017: Exploring Democracy’s Resilience, the International Institute for Democracy and Electoral Assistance echoes the concern: ‘Inequality undermines democratic resilience. Inequality increases political polarization disrupts social cohesion and undermines trust in and support for democracy.’
Inequality and democracy
WERE the nineteenth-century French diplomat, political scientist and historian Alexis Tocqueville alive to see these awful distributional patterns, he would be most concerned about their impact on democracy. According to him, democracies with severe income inequality are unstable. It is difficult for democratic institutions to function properly or be maintained in society sharply divided by income and wealth, especially one that does little to redress this situation or, worse, actively exacerbates it.
Democracy may have different meanings for different people; but in theory, democracy assumes a society of free, equal, and autonomous individuals. That is, in an ideal democracy, all individuals are supposed to have equal standing. In other words, each individual is equal before the law, has the same vote as other individuals, the same right to express in the political sphere and, perhaps most importantly, the same potential to influence what government does even if they may not exercise that potential. Democratisation refers to achieving voice through fair processes.
Money is supposed to be irrelevant to one’s standing within this theoretical construct of democracy — both the rich and the poor are equal before government — all citizens have the same access to governing institutions. This conception of equality, known as ‘procedural equality’, is not usually concerned with the distribution of resources, wealth and income, but with how individuals stand in relation to one another. Individuals can have more than others provided they are equal in terms of their legal and political status.
Procedural equality is particularly critical to democratic society since it helps to secure another essential condition: personal freedom, a necessary condition for individuals to function autonomously. The greater their autonomy, the more likely they are to participate in the democratic process. Individuals are free to pursue their own goals and objectives — or, self-interests — as long as their pursuit does not interfere with others’ ability to pursue their goals and objectives.
However, as Tocqueville observed, there cannot be real political equality without some measure of economic equality as well for reasons cited above. For Amartya Sen, the capability that a person has ‘the substantive freedoms he or she enjoys to lead the kind of life he or she has reason to value.’ Such freedoms are the basis of individual autonomy. But citizens lacking in wealth and income may not enjoy the same access to political and policy officials as those who possess wealth and income and may find that their ability to pursue their goals and objectives are limited.
In practice, democratisation could mean, inter alia, achieving greater equality through the redistribution of resources aimed at achieving the equality of end result. But with a greater concentration of wealth at the top, elites are in a better position to use their wealth towards the attainment of their political and ideological objectives. Those at the top of the distribution enjoy disproportionate power and cannot only limit redistribution but also shape the rules of the political game in their favour.
Therefore, economic inequality could pose serious problems in a procedural democracy.
Inequality, participation and social capital
ECONOMIC inequality not only distorts procedural democracy — how institutions and political actors respond to different levels of income, but it may also profoundly impact the development of ‘social capital’. According to political scientist Robert Putnam, underlying social capital is the notion that civic virtue, such as ‘trust’, is most powerful when it is embedded in a dense network of social relations. Trust is critical for governance; a government can lose its legitimacy if inequality continues to rise.
Obviously, this is worrying for democracy as it encourages governance by the wealthy (plutocracy) and not by the people.
A vibrant democracy requires active participation of citizens in the affairs of their communities. This goes beyond mere voting. Studies have found that civic participation is greater among the middle class. Growing economic inequality and polarisation mean the shrinking of the middle class and, hence, decline in civic engagement. This can lead to ‘democratic deficit’.
Economic inequality could also lead to ‘political anomie’ — a ‘condition in which society provides little moral guidance to individuals.’ It is the breakdown of social bonds between an individual and the community, resulting in the rejection of self-regulatory values and leading to an unruly situation. This happens as those below the median or at the bottom drift further from the social norm or the mainstream and, thus, may also experience greater alienation while those with greater resources may see those with less as both more distinct and undeserving.
When resources are severely unequally distributed, those at the top and the bottom are unlikely to see themselves as sharing the same fate and, hence, have less reason to trust each other. Declining trust when inequality grows results in apathy acrimonious relations leading to less civic participation.
For Joseph Stiglitz, social capital is the glue that holds society together; if individuals believe that the economic and political system is unfair, the glue does not work and society does not function well.
Inequality, populism and identity politics
TOCQUEVILLE’S fear with growing inequality is not so much democracy’s sudden replacement by autocracy as a gradual decline in its quality, even in high-income mature democratic countries, as we see the rise of identity politics in the United States, and Europe, including the United Kingdom. The super-rich or ‘plutocrats’, who control the media, easily diverted mass frustration and attributed breakdown of trust to the ‘others’ — migrants, Latinos, Muslims, etc.
Thus, ‘plutocratic populism’ has become a signal feature of the contemporary democratic world.
To the ordinary people, the falling share of income and declining real wages are successfully presented as the result of ‘others’ taking their jobs, not of manifold obnoxious rise in executive salaries, or machination of the system to the plutocrats’ favour. The tycoons’ detestable amassing of wealth is portrayed as a ‘fair’ and ‘justified’ reward for their ‘genius’ while workers’ demand for a ‘decent living wage’ is met with state violence. In a ‘reverse Robin Hood’, the tycoons are given tax cuts at the expense of social expenditure and public services that benefit the common citizens — all in the name of strengthening the long-term viability of the economy.
The plutocrats may have succeeded in managing and keeping the mass of the people divided and docile. But it does suggest that inequality is certain to rise and soaring inequality might not only distort democracy but stymie the economy too, in the end.
The Bangladesh story
PARADOXICALLY, Bangladesh, once termed the ‘bottomless basket’, topped the list of 10 countries in terms of increasing rich population, ahead of China, Vietnam, with the United States at the bottom. According to the World Ultra Wealth Report 2018 (September 5, 2018), the ultra-high net worth population (ie, billionaire) in Bangladesh increased at a staggering rate of 17.3 per cent over the past six years (2012–17) when the economy grew by around 7 per cent a year. This means that a disproportionately large share of growth went to a few at the top while the Asian Development Bank reports that 24.3 per cent of Bangladesh’s population lived below the national poverty line in 2016.
Thus, a recent study by the Centre for Policy Dialogue finds that in 2016, the top 5 per cent of Bangladesh’s income-earners earned 121 times more than the bottom 5 per cent, in a jump from 31.5 times in 2010. This means that the top-income earners have almost quadrupled their share of the total national income. The latest Household Income and Expenditure Survey (HIES 2016) by the Bangladesh Bureau of Statistics shows that the share of the poorest 5 per cent of the population fell sharply from 078 per cent of overall income in 2010 to 0.23 per cent while the share of the richest 5 per cent grew to 27.9 per cent, up from 24.6 per cent in 2010.
The CPD study reveals that income inequality, measured by Gini coefficient — a common measure of inequality on a scale of 0 to 1, in which 1 represents perfect inequality and 0 signifies perfect equality — stands at 0.48 while wealth inequality Gini is at a shocking 0.74.
Ironically, all this happened in a country which adopted socialism — meaning ‘economic and social justice’ — as one of the four pillars of its constitution and was much egalitarian at the time of its independence with an income Gini of around 0.28 in the early 1970s. A further irony is the rapid rise in inequality — after about two decades of remaining stable — happened since the country restored democracy — the other pillar of its constitution — in 1990 when the income Gini was at around 0.30.
Sadly, this occurred under the watch of the political parties and prominent left-wing politicians who once professed socialism and democracy.
Is it then a surprise that our democracy is facing an existential crisis?
Anis Chowdhury, an adjunct professor at Western Sydney University and the University of New South Wales (Australia), held senior United Nations positions in New York and Bangkok during 2008-2016.
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