FINALLY, EQUITY IN MAINSTREAM ECONOMICS
Dr Mohammad Manzoor Alam rejoices over a happy turn of discourse in his chosen field of academic activity
As a student of economics I have always been troubled by the concerns of most economists. Even while doing my Ph.D. I had always the question at the back of my mind as to why can’t we be a little more humane, a little more equitable, a little more concerned about human wellbeing rather than about GNP and GDP, standard of living and growth rate.
Fortunately for us, around the time I was finishing my Ph.D. gradually these concerns began to be addressed, albeit ineffectively. Economists began to worry more about the quality of life than mere standard of living, about expanding human freedom and choice rather than about GDP alone as a marker of development.
In the early years support for our ideas came from unexpected quarters – including the United States at the peak of the Cold War. John Kenneth Galbraith, who had been ambassador to India twice (and a Harvard don till now) was among the earliest in the “free world” – as opposed to the “unfree” Communist bloc – to have come up with the clear distinction between personal and social wealth. He made the point that both were equally important. Prof. Galbraith, an agile 97-year young, still holds on to his position.
To explain this distinction, one can take the example of someone from a developing country or a least developed country, who has somehow made a lot of money. He builds a pricey house with his personal wealth, but the area in which he or she lives does not have a children’s park or playground. The result is that person’s children cannot go out to play and are penned in most of the time. That shows one can buy a house with personal wealth, but a park or playground still remains a social wealth, without which life would lose much of its quality.
To explain it further, that person has bought a BMW car, but there are no good roads in the area where he or she lives. It’s clear that a network of good roads is a social wealth that individuals can’t have on their own. There are umpteen examples of the value of social wealth without which the quality of life would diminish radically. In the early 80s, former US army general, and later World Bank president, Robert S. McNmara made the observation in a university address that economic development which widened the gap between rich and poor countries beyond a point was not advisable.
This, too, was a relevant observation. Even the US manufactured products would not have an international market if the people in some countries would be economically so weak that they would not be able to purchase those products. If the scale of such lack of purchasing power was too great it would lead to massive job losses within America itself, besides other unpleasant economic, social and political fallout within America. The economic wellbeing of other people should be an American concern, not because of some altruistic or pious reasons, but simply because it was good in everybody’s interest.
Equality is not only good sociology and politics, but good economics as well. Quite naturally, because things are interconnected. We were happy at the drift of events, but such events were
not enough to change the entrenched habits of economic thought, which still emphasised fast growth even at the cost of growing inequality or loss of jobs.
The “trickle down” theory came along, which said that if some people grew rich, some of their riches would somehow percolate to lower strata in a small measure. At least one leftist intellectual derisively called it “some fat, overfed, rich people dropping some crumbs of bread from their table during a sumptuous dinner for the poor people sitting on the floor to pick it”.
In the meanwhile, economists like Milton Friedman rose to claim the Nobel and push the concerns of equitability to the margins. However, people with Islamic orientation and trained in economics stayed the course. I had been part of the Islamic economics scene for years and did make some modest contribution with my writings, including a well-received Perspectives on Islamic Economics (IOS, New Delhi, 1996).
The occasion for going down memory lane is the publication of the World Bank’s World Development Report 2005. It is interesting to not that it looks (and reads) like the more popular World Human Development Report brought out by the UNDP. Even its subtitle reads like the UNDP offering, “Equity and Development”. One heaves a sigh of relief to see this turn in discourse. Values like equity, freedom of speech and choice, democracy and human rights are part of the UNDP report’s reckoning, while traditionally the World Bank had been focussed on economic growth only, even if it is iniquitous or destroys jobs and livelihoods.
Obviously, this is time for rejoicing for us. But does the report reflect the thinking of the president, Mr Paul Wolfowitz (former US Deputy Secretary of Defence and a key figure in Afghanistan and Iraq war) and the countries that really “own” the World Bank, or is it merely the handiwork of the bank staff? We are told that it is the thinking of the staff who prepare it rather than that of the powers which decide its policy. That means the report is not going to carry us anywhere in the long run.
That also means that we are not going to see equitable distribution of wealth within countries, or equitable sharing of natural resources between countries for years to come. What possibly the bank’s report could initiate is thinking on the idea of “equal opportunity” in terms of access to education, jobs, healthcare and justice delivery system, besides of course other significant resources and fruits of development.
This could also be the time for considering the fact that if regions like Sub-Saharan Africa have not to fall further behind the developing and developed world their debt has to be written off immediately. For instance, Sub-Saharan Africa has already paid more than it had borrowed, yet it owes $300 billion to debtors. For inequity between regions to be checked from growing further this debt write-off is a must.
Ideas contained in the report should be implemented from here, to begin with. Such action also accords well with Islamic principles, which abhors interest-based economic systems just because they are iniquitous.g