Comment: Inequality in income distribution

A recent report by the United Nations University (UNU) said that the richest 2% of adults in the world own more than half of the global household wealth. The report is based on a study conducted by the World Institute for Development Economics Research.

This is the most comprehensive study of personal wealth ever undertaken and it also reports that the richest 1% of adults alone owned 40% of global assets in year 2000, and that the richest 10% of adults accounted for 85% of the world's total. In contrast, the bottom half of the world adult population owned barely 1% of the global wealth.

The research found that assets of $2,200 per adult placed a household on top half of the world wealth distribution in the year 2000. To be among the richest 10% of adults in the world it required $61,000 in assets, and more than $500,000 was needed to belong to the richest 1%, a group that - with 37 million members worldwide - is far from an exclusive club, the report said.

This is the first UNU-WIDER study of this kind and it covers all countries and all major components of household wealth, including financial assets and debts, land, buildings and other tangible property.

In the present day this is a rare report that highlights negative components of this new globalised economy. Most of the reports that are published today by international organisations and research groups are like fireworks and they show us the miracles of this mono polar global capitalist economy that almost all countries are following.

We learn about economic miracles in China, outsourcing and software businesses in India, hundreds and thousands of dollar salaries they earn. However, the reality in this global economy is bitter than those reports and this UNU report makes it crystal clear.

There are some other arguments in favour of the new economic order.

It is said following nearly two centuries of growth, global income inequality declined in the last decades of the 20th century. The major equalising force is faster than average income growth in China and South Asia, the industrialising regions where 40% of the world's people live. The present global economic order spreads industrialisation throughout populous poor regions of the world and thus globalisation most likely has reduced global income inequality.

It is hoped that this decline will continue over the next few decades, first, because of the continued industrialisation of poor regions and, second, because most of the growth in the world's working-age population will occur in the poor regions.

However, figures have proved that this "trickle down" argument of pro neo liberal economic advocates is a myth. For two decades the world follows neo-liberal doctrine prescribed by economists such as Milton Friedman. It was frankly practised by leaders of most countries.

They insisted that there is no need for active and progressive, redistributive measures because wealth will essentially redistribute itself. The idea is that prosperity will gradually 'trickle down' from the spending of the rich towards the poor, as money is spent.

The relentless pursuit of higher profits, tax cuts for the rich, government spending cuts, deregulation, privatisation and competition has been pursued under the theory that such policies will actually benefit the entire population. Yet twenty years of neo-liberal recipes and the 'trickle-down effect' have only brought greater inequalities and further injustice. The gap between the rich and poor has increased wherever neo-liberal policies have been applied.

This inequality in income distribution can be seen in every cross section of the world economy. In Sri Lanka, this is one of the main issues that the government has identified and is attempting to address.

Regional disparity of the economy is one face of the issue where over 50% of GDP is produced in the Western Province. Various proposals, programs and projects have been proposed to address the issue and various stakeholders are now implementing them under the poverty reduction banner.

The Government's attempt is bringing the development to the marginalised areas by attracting private investments. For this the government invests on infrastructure, and provide various concessions for the investors who invest in these areas.

In addition there are thousands of other projects under the name of poverty reduction and there are new concepts such as social mobilisation and empowerment in the vocabulary of those NGOs implementing them.

Millions of dollars are coming to the coffers of those organisations through various international channels. At the international level too NGOs are playing a major role in poverty reduction. Mega scale charities such as the Gates Foundation are attempting to do justice for the suffering masses in the world.

However, can the creators of the problem resolve these issues? Is it too simple an issue that NGOs can resolve or is it a serious political issue? Two recent incidents clearly show how this economic system looks at the issue and gives solutions. One of them is international and the other is local.

A few weeks ago Wal-Mart, the world's largest supermarket chain answered its worker protests with an appreciation program that extends an additional 10 percent discount on a single item during the holidays to all its employees. Wall-Mart is reputed for exploiting its workers.

To keep its prices low and increase profits Wal-Mart is seeking cheaper and more flexible labour force by capping wages, using more part-time employees, scheduling more workers at nights and weekends, and cracking down on unexcused days off. The workers demand higher wages and more decent working conditions but the company's answer is a mere discount.

On the local front, our estate plantation companies say that they can't increase the daily wage rate for the workers. They said that if the labour cost goes up the industry would face a crisis. The Labour Minister said that the companies and the trade unions should sort out the issue as the government does not have a direct role.

Estate workers are the poorest segment of the country's population and it is an issue of nearly 1.5 million people. Today an estate worker gets Rs.135 per day and the maximum working days per month is 20. According to the Central Bank, a four-member family needs Rs.16,500 per month to meet their basic needs. Under these conditions is there any simple solution such as wal-Mart's 10% discount to the estate workers' struggle.

The question is why should Wal-Marts exist without protecting the minimum rights of its workers? Why should the plantation industry in Sri Lanka continue if it is unable to keep its employees? We want an economic order and a business culture that can at least provide the basic needs of the employees and not companies that use them as slaves.