Inequality in India

By 2011 the BRIC economies had some of the highest rates of income inequality adjusted to the Human Development Index among developing nations.  At the same time, the BRIC countries had consistently had the highest GNP growth versus the previous 10 years among developing nations.  How is it that there is not a parallel growth of the Human Development of its citizens?  The answer and one of the biggest challenges for the BRIC countries is the fact that a large amount of the GNP is distributed among small elites that control their market economies.

Economists and investors such as O’Neill, Krugman and others largely emphasize the expected growth of the BRIC economies as indicators of where to invest their money.  Unfortunately, they have not paid the same interest to what many other economists consider important: the human development of the people.  Fortunately, there are still some economists who since the decade of 1970 paid a lot of attention to the issues of freedom and equality.  Economists leaded by Milton Friedman, the Economics Nobel Prize of 1976, argued that economic policies should be focused in the freedom of its citizens as a primary value.  To them, stressing equality per se could lead to economic inefficiency as well as it would put in risk Freedom itself.  However, the same economist argued that it was necessary for developing economies that the government took a central role in poverty alleviation in order to keep the pace with the economic growth of its economies.  Unfortunately, this poverty alleviation is not being done in the BRIC countries and the economic difference between the poorest and the richest continues to grow. Since the 60s, a large group of economists emphasized the negative effects of not paying attention to a free and equal development in emerging markets; economists like Friedman and Hayek wrote a lot in this regard and even recently Elinor Ostrom’s ideas, who won the Nobel Prize in Economics in 2009, are still not listened by those who have forgotten the importance of good governance economic policies.

India is the country in which this income inequality versus human development is more pronounced.  Currently, India occupies the position #93 with an IHDI of 0.392 and the country has descended in the rank many positions since the last decade.  Inequality in the earnings among Indians has doubled over the last two decades, making it one of the worst performers among developing economies.  Why? This is again the result of the failed attempts by the Indian government to combat corruption, bad administration and under-payments and also of the unawareness of foreign investors.

The fact that foreign investors have no interest in securing the welfare of the Indian people is a problem.  To them, the investment opportunities of this specific BRIC country are of value until they find a better economy to move their money to.  However, the real stakeholders are not the foreign investors but the Indian Government and its groups of interest who should aim to secure the welfare of all of its citizens now that they have a chance.  While the growth of this economies will continue the effect it will have in such unequal societies will result in some of the worst rates of poverty and hunger ever seen in history. By 2025 India will be the most populous country in the world but also, it will have 268 million people (20.3%) living still with less than US$1.25 a day as reported by economists in the World Bank. The Indian government should go aligned with the current trade liberalization in order to support higher productivity in the private sector and to exploit its comparative advantage of having a labor-intensive industry to foster the production of goods and services.

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Milton Friedman and Social Security Taxes

Agreeing with the economist Milton Friedman,

“one of the things that have always shocked me is how people, whom I would have trust with my pocket book in their private capacity and of whom I would never question their integrity, will in their public capacity -because they believe it is in the best interest of other people- lie to the American People.”

And this is exactly what happens with Social Security in the U.S. and with the immense Nanny State in Europe and with the corrupt welfare systems of Latin America; all of which I have been able of knowing.  I invite you to take a look to this short video of Milton Friedman (1975) explaining how the Social Security taxes are fundamentally a lose-lose option for employees, employers and society.

Againts Greed and Crony Capitalism

Morality
Image by tdietmut via Flickr

“This economic system that they call Capitalism has no moral or ethical core to it.” Michael Moore

This time, the American Sensationalist Director Michael Moore was right. He explained in one sentence what thousands of men are right now protesting against in the streets and we support them. Why?

Capitalism is a social system that is based upon the foundations of individual freedom, respect for individual rights and property rights, and reason as man’s only mean to achieve their goals.  However, the current economic, political and economic system in which large parts of the world are now living is not really a Capitalist economy.

The correct name for this system is “crony capitalism” and its foundations are privileges, irrational greed, expropriation, and violation of human rights (individual rights and the rights to property). It is this system that we need to fight against and fight a moral revolution against to.  In the following video, you’ll hear a wonderful explanation of what that Irrational Greed is all about. The second video, is very interesting and portrays an interesting image of how TNCs (Transnational Corporations) have established Billion Worth Business all over the world without caring for what should matter most to them: Their Consumers.

I hope you enjoy them and understand that we are together in this fight,

Video: Milton Friedman On what is commonly understood as greed and on what is the result of ethical profit (via: Casey Hendrickson)

Stossel On Crony Capitalism Part 1/6