Essay on Inequality Can Be Reduced By The Power Of The Market Rather Than The Government

Inequality refers to the phenomenon of unequal or unjust distribution of resources and opportunities among members of a given society. Economic inequality is measured using distribution of income or wealth. Social inequality is measured by distribution of basic services like education, health, good living conditions etc. Despite high and consistent economic growth in India post 1991, it has seen a rise in inequality too. The following steps can be useful in targeting inequality-

An inefficient market that rewards the rich by giving them more and punishes the poor by taking away what they have needs to be replaced by an efficient market system. Regulatory bodies like SEBI and RBI can play a big role here. Corporate governance norms that put a ceiling on remuneration of directors, CEOs and ensure salary equality among the employees can be big reforms towards equality of the society. Similarly, reforms to provide more micro loans to individuals and MSMEs can bring more financial equality in the country. The government needs to work as a watchdog so that the market can bring more economic and social equality.

India is witnessing a reversal of proportion of Direct to Indirect taxation. A progressive society needs more distribution of income through direct taxes but in India, more than 50% of government revenues come from Indirect taxes. This increases inequality in the country by taxing the poor more. Inequality can be reduced only if distribution of income happens from the rich to the poor and not vice versa.

Qualitative and free Education, universal and free healthcare are the pillars of an equal society because they help in enhancing the productivity of the poor to compete with the rich. The Government and the private sector need to work together to enhance productivity of the have-nots so that they can move up the ladder of prosperity.

A global corporate tax to equalise taxation of corporates where they earn money can also help in better distribution of resources globally. Presently, many MNCs earn a significant portion of their revenues from developing countries like India but they take away all their profits to developed tax havens. This affects distribution of income between developing vs developed countries.

Labour reforms can empower the employees so that they are not exploited by the corporates and they have the freedom to climb the ladder of progress. Presently, labour codes of India limit expansion of both employees and employer, affecting inequality.

Inequality is not limited to finances or social access. It also encompasses happiness and fulfilment. It is the responsibility of the state as well as the market to ensure that no individual is exploited. True equality can only be achieved when everyone is free in the mind.

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Inequality is the condition of not being equal. It refers to the phenomenon of unequal or unjust distribution of resources and opportunities among members of a given society. Economic inequality is measured using distribution of income or wealth. Social inequality is measured by distribution of basic services like education, health, good living conditions etc. Economic inequality is the unequal distribution of income and opportunity between different groups in a society. Despite high and consistent economic growth in India post 1991, it has seen a rise in inequality, too.

Inequality of outcomes occurs when individuals do not possess the same level of material wealth or overall living conditions. Inequality in opportunities are outcomes of inequalities in income, education, gender, caste, and class. If there is an inequality of opportunity, an increase in income inequality tends to become entrenched, which limits the potential and prospects of low-income earners, and stymies long-term growth.

The following steps can be useful in targeting inequality:

• An efficient market system: An inefficient market that rewards the rich by giving them more and punishes the poor by taking away what they have, needs to be replaced by an efficient market system. Regulatory bodies like SEBI and RBI can play a major role in this regard. Corporate governance norms that put a ceiling on remuneration of directors, CEOs and ensure salary equality among the employees can be big reforms towards equality of the society. Similarly, reforms to provide more micro loans to individuals and MSMEs can bring more financial equality in the country. The government needs to work as a watchdog so that the market can bring more economic and social equality.

• Proper distribution of income: India is witnessing a reversal of proportion of direct to indirect taxation. A progressive society needs more distribution of income through direct taxes but in India, more than 50% of government revenues come from indirect taxes. This increases inequality in the country by taxing the poor more. Inequality can be reduced only if distribution of income happens from the rich to the poor and not vice versa. The concept of ‘rich becoming richer and poor becoming poorer’ needs to be rejected in our country, and more income should move from the haves to the have-nots. The government and the private sector need to work together to enhance productivity of the poor people so that they can move up the ladder of prosperity.

• Quality education and healthcare: Economies prosper when people are well educated and healthy. Qualitative education and universal, free healthcare are the pillars of an equal society because they help in enhancing the productivity of the poor to compete with the rich. India has been placed 151st on the index for public spending for healthcare, education, and social protection. Indian government’s expenditure in these sectors is low and more often than not, subsidizes the private sector. Supply-side measures to strengthen education and health systems must be complemented by demand-side measures to help families accumulate human capital by easing financial constraints, for instance, through conditional cash transfers, or reconnecting workers with jobs. Pandemics including Covid-19 have also highlighted the need for stronger, more resilient, and equitable public-health systems. • Corporate Taxation: Since corporations’ shareholders tend to overlap with individuals in the upper end of the income and wealth distributions, taxing corporations can be considered a handy tool to curb the degree of personal inequality. In fact, corporate tax changes might directly compress the distribution of post-tax disposable income, especially at the very top. A global corporate tax to equalise taxation of corporates where they earn money can also help in better distribution of resources globally. Presently, many MNCs earn a significant portion of their revenues from developing countries like India but they take away all their profits to developed tax havens. This affects distribution of income between developing versus developed countries. The corporate income tax also ensures that foreign owners of domestic corporations pay taxes in the host country.

• Labour reforms: Evidence shows that there have been significant inequalities in labour markets in India. The problem of inequality can be found across sectors, wages and earnings, quality of work, labour market access, and between organized and unorganized sector. Reducing labour market inequalities is important for the sustainability of growth, reduction in poverty, and a rise in human development in India. Macro policies, sectoral policies, skill related policies, education and social protection policies are important for the reduction of labour market inequalities. India has to be prepared for technological revolution and its implication for employment. The country has to address the fundamental challenge of improving human capital for all the workers. Political economy issues have to be tackled in order to address raising inequalities. Labour reforms can empower the employees so that they are not exploited by the corporates, and they have the freedom to climb the ladder of progress.

The World Social Report, 2020 says that inequality is growing for more than 70 per cent of the global population, exacerbating the risks of divisions and hampering economic and social development. But the rise is far from inevitable and can be tackled at a national and international level. Inequality can be reduced by a strong political will coupled with economic development with markets as its engines. It can also be understood that inequality is not purely economic, and is not limited to finances or social access. It also encompasses happiness and fulfilment. It is the responsibility of the state as well as the market to ensure that no individual is exploited. True equality can only be achieved when everyone is free in the mind. All in all, a progressive taxation policy coupled with policies to address socio-cultural disparities are essential to bring equality