On Oxfam's wealth inequality index

Oxfam's recent inequality report said that top 9 wealthiest in India own wealth equal to that of the bottom 50%. Note that it is not top 9%, it is top 9 individuals. Before proceeding further, it is important to distinguish wealth and income. Wealth is stock while income is flow. Income is what you get on a regular basis. If one saves or buys assets using that income, income turns into wealth.

The report has received several criticisms. In this specific example, Prof Ila Patnaik criticizes the report on two counts.

1. Since wealth is net of assets and liabilities, if one borrows a loan, their wealth decreases, that's reflected in wealth statistics. The loans increase their future income and hence is not necessarily bad, as the wealth statistics would make us believe.  Given that India pushed MUDRA recently, it is bound to decrease the wealth of the poor.

2. As the poor gain income, they do not use the additional income to save or convert it into assets. They instead increase their consumption. So, wealth statistics do not reflect the increasing incomes of people and the number who are out of poverty.

I do not find these two criticisms appealing, for the following reasons.

1. It is true that borrowing loans is good for the future, which is reflected negatively in wealth statistics. But, one must note that borrowing is not a new phenomenon. If it were to benefit in the future and result in accruing wealth, borrowing in the past would have reflected in the wealth statistics now. But, the Oxfam reports have consistently shown the same trend of wealth inequality. This puts the optimism of wealth accruing ability of loans in question.

2. The second criticism of wealth not capturing increasing incomes is unfair. The report says it measures wealth and does that. It doesn't measure income. Blaming a wealth index for not capturing income is akin to blaming a weighing machine for not capturing height. The interpretation of the index is the issue here and not the index itself.

Any index that tries to capture inequalities will have shortcomings. Moving beyond the technicalities, one must focus on the larger picture, which is the growing inequality in India.  Indices are only a constant reminder of this problem. The limitations of the inequality indices should not be used as a reason to brush aside the problem. 

Malabar Exercise: India's deferential approach towards China

Malabar exercise is an annual trilateral navy exercise between India-US-Japan in the Bay of Bengal. Its significance has grown in the context of Chinese aggression in the South China Sea. India has repeatedly rejected Australia’s request to be part of the exercise. Some perceive this as a deferential approach towards China as India is concerned that China might get threatened if Australia is included. Including Australia will add a defence angle to the Quad.

At the same time, others argue that disproportionate focus is being given to this one metric. While Tanvi Madan argues that India’s decision on Huawei is a more important metric, Dhruva Jaishankar cites India’s other engagements in the IOR region to suggest that India is not being deferential.

While it is true that India has undertaken several other initiatives in IOR to balance Chinese threat, the Malabar exercise has special significance.

India’s all other initiatives are only diplomatic efforts and operational (like collection information) at best. None of these initiatives does anything concrete militarily and hence does not pose any concrete deterrence. Besides, India has a history of non-confrontational approach towards China in the IOR. For instance, India refused US’s offer for joint patrols in the South China Sea in 2016. Similarly,  after courting Mongolia for a while, India backed out of supporting Mongolia when it was choked by China, for the fear of Chinese retaliation. This suggests a clear pattern: India avoids any direct confrontation with China, a pattern of deferential approach towards China unless it’s upon our direct border as in Doklam.

India’s rejection of Australia’s request should be seen in this context. Counting the “number of initiatives” in IOR is not an appropriate metric because all of them do not pose the same threat to Chinese and hence do not send the same message. It is confusing quantity for quality.

It is true that India has done air exercises with Australia but Malabar exercise is different because of the involvement of 4 Quad nations giving it a more credible deterrence signalling capability.

In other words, if we look at the initiatives that pose a concrete threat to Chinese, there’s hardly any, and India has been backing out of all such opportunities.

One might argue that the decision to reject Australia’s membership in Malabar should be seen in the light of Post-Wuhan spirit. But, one must not forget that the Chinese temporary lull is tactical. It is just pausing its aggression as it is tied with trade war and does not want to aggravate it. Once the US-China tensions subside, China can be back.

In long term, India cannot compete with China economically. In that scenario, in the Indian Ocean, increasing the maritime threat in IOR is often advocated as a strategy to contain Chinese threat at India’s land border. With this deferential approach, there’s no hope that India would pursue such an approach.

While China has taken every opportunity to push India to the wall (Doklam, NSG, Azhar Masood, CPEC), India hesitates to take even small steps. China openly violates India’s sovereignty in PoK, but India is afraid to even include another country in naval exercises.

US and others gave a benefit of doubt to China hoping that prosperous China would become more democratic and less aggressive. Clearly, it has not happened, in fact, the reverse happened. It would only be detrimental to India’s interest to give any such benefit of doubt to China. India should pursue all opportunities to contain China!

Is trump upending the current liberal world order or inadvertently correcting it?

Laying down rules for co-existence and means to enforce them has been a perennial problem in human history. The concept of social contract and the state address this issue at a territorial level. The international equivalent of this is what's called the world order. World order simply is the "concept held by a region or civilisation about the nature of just arrangements and the distribution of power thought to be applicable to the entire world" (Henry Kissinger).

The ingredients of the current world order evolved post-WW-II, mainly as an attempt to prevent the mistakes of the past. This broadly includes sovereign equality, non-interference in internal affairs of sovereign states, and promoting values of liberty, democracy, fostering free trade, protecting human rights etc. This is sought to be achieved through a range of institutions and agreements such as UN, IMF, NATO, World Bank etc. The US played a major role in instituting this world order through its support to war-affected countries (Marshal Plan), extending security cover to its allies and so on. Hence, the current world order is often termed as "US-led liberal international order".

Owing to the recent events in international relations, there is a debate on the status of the current liberal international order. While some scholars like Graham Allison argue that there was never such liberal order, to begin with, a vast majority argue that there is a threat to the liberal world order. 

Some attribute the cause of threat to the rising assertion of China, while some attribute it to the US's actions under President Trump. While Chinese aggression does certainly pose a challenge, in this post, I focus on Trump's actions. In short, I am going to argue that Trump's actions are not upending the liberal international order to the extent claimed, instead they are inadvertently correcting the aberrations in the current order that were posing threat to the ideal of liberal international order.

To examine this, let's consider the concept of world order, the way US's actions are posing threat to this, and suggestions by scholars to correct this. In the end, I point out that Trump's actions are exactly same as the suggestions by the scholars to correct issues of the current world order, albeit it's not a result of grand strategy but a mere coincidence or a side effect of his America First policies.

New threats to India's social and economic order

A great social churning is going on in India, some of it publicly and some of it underground. Apart from the much talked about the factor of religion, there are other undercurrents in the social order.

1. Meritocratic hubris due to the increasing middle class: Standard economic and political theories suggest that as the size of the middle class grows in a country, it leads to increase in tax collection, more focus on public goods, and political maturity that focuses less on identity politics.

There's a downside to it too. The increasing size of the middle class leads to meritocratic hubris.  Michael Sandel describes meritocratic hubris as the belief of "I came to this better position in life because of my hard work alone. It is me and only me that made it possible." The implication being, those who are poor are in that state because they are not hard working.

This line of reasoning ignores the huge role of socio-economic constraints in people's lives. It emphasises merit over other social factors. Hence, there will be increasing pressure to reduce spending on social welfare programmes, as such programmes are seen as a waste of money spent on lazy people who are just living off the government. Any social welfare programme is now seen with contempt. The middle class thus delegitimizes the social welfare architecture. It attacks the fundamental morality of redistribution.

Added to this, the Indian middle class has found its own solutions for education, health and security in the private sector. They thus don't make any efforts to improve the public services in these sectors, which are the only available option for the poor.

If this delegitimization of morality of social welfare programmes and neglect of the public sector in critical areas like education, health etc. is seen along with the jobless growth and rising inequality, it's hard to say that it's not dangerous for India.

2. The proliferation of "tech-education" leading to insensitivity on social issues: India witnessed an IT revolution in the 1990s and 2000s. It resulted in a proliferation of engineering colleges and an increased emphasis on technical education.

We now have a large section of youth, graduates in technology, with no exposure to social sciences. Their worldview is simplistic and technocratic with no sensitivity and appreciation of social issues, and social factors that play a role in one's life. Any discussion on social injustices is met with scorn.  It is amplified by the fact that this tech zombies are the early adopters and often the influencers in social media, shaping the discourse.

A large section of population insensitive to the social context leads to a situation where even the deep-rooted social problems are not even recognized, much less addressed. When left unaddressed, the discontentment can explode in unpredictable ways.

The rising desire for authoritarianism as reported by several surveys and the emerging anti-reservation undercurrent are a manifestation of the simplistic and technocratic view of the tech zombies.

3.  The assertion of the upper castes against the so-called lower castes: The agrarian distress weakened the economic situation of the traditional upper caste feudal landlords giving them a sense of loss of power and identity. This, along with the economic progress of the so-called lower castes, might lead to a form of violent assertion of their traditional power, over the rest. 

4. Politics no more an avenue to assert equality: The typical urban elite has contempt for caste politics. They see it as a disease to be cured.

Such a view discounts the underlying reasons for the emergence of such politics. In a hierarchical society with deep social inequalities, where an individual is not seen as a social equal, the oppressed perceive politics as an arena to assert their equality. A person of their caste in a position of power gives them a sense of pride and confidence, to push back against the daily inequalities they face in the society. It is a strive for dignity.

However, two things happened in the past few decades.

One, caste politics have turned into caste-ist politics. Leaders used the issue of caste only for transactional purposes, the purpose of elections, leading to loss of their legitimacy.

Two, the emergence of the middle class, the tech zombies, and a narrative of "growth as the only purpose of politics", is deemphasizing the role of identity and more broadly the sociological role of politics. Politics is drifting away from being an avenue to seek refuge from the humiliation in social life. Politics is assuming a mere technocratic role.

When the sociological role of politics is diminished, with the social inequalities and daily humiliation intact, it removes an important avenue to vent out the steam of anger. The simmering anger can burst out in any form.

Ideas for solutions to these requires another post but some pointers below:

1. Social science-liberal arts education to make people more sensitive to the Indian social context so as to preserve the morality of redistribution and affirmative action.

2. Improving the policing and service delivery - the two important avenues where citizens face the most humiliation. This reduces the burden on politics to assume a sociological role.

3. Improving the quality of education and health. It must be emphasized that apart from improving the quality of education in schools and universities, university education should be made affordable. I explained it in a previous post here on the need to expand the definition of "basic education" from school education to university education.

Why does Indian foreign policy not reflect vengeance against its invaders and colonizers?

Francis Fukuyama in his new book “Identity” talks about the emergence of identity as the locus of many movements worldwide. As per Fukuyama, the issue of identity also explains the behaviour of states like China and RussiaThe NYT review summarizes it as
"Fukuyama suggests that we are living in an era in which the sense of being dismissed, rather than material interest, is the locomotive of human affairs. The rulers of Russia, Hungary and China are driven by past national humiliations. Osama bin Laden was driven by the treatment of Palestinians. Black Lives Matter has been driven by the fatal disrespect of the police. And a large swath of the American right, which claims to loathe identity politics, is driven by its own perception of being dissed." (emphasis mine)
This brings us to the question — Why does Indian foreign not reflect the desire to seek vengeance against its invaders and colonizers? (Or Does it?) The vengeance here necessarily needn’t be against particular countries. It’s more about a desire, in general, to assert and dominate the world, and to feel confident so as to heal the troublesome past wounds.
Consider this:
India was also once one of the prosperous nations. It was also attacked and destructed. colonized and humiliated.
The revival of the feeling of “we were a great once upon a time” took a turn of reviving ancient achievements, often exaggerated and false ones, but it did not turn into a desire to again become prosperous and seek vengeance.
The experience of colonization and thereby humiliation led to scepticism towards anything western in the early days of independence but it did not turn into vengeance against other states.
Memories of violent invasions took a communal turn but it’s not manifested in foreign policy in form of vengeance against those other states.
Why? What explains this? Some hypotheses on the top of my mind
  1. Is it due to the different nature of humiliation?
  2. Is it because the former humiliator, Britain is no more great, unlike the case of Russia whose rival is still in a position of power? Because, after all, what’s the use of vengeance against someone not great?
  3. Because of our inability to do so considering our economic state?
  4. Because we are too caught up with other problems that we did not find bandwidth for this?
  5. Because of leaders of the independence movement and early independence who did not promote hatred?
  6. Maybe we reacted but it took a different shape — nostalgia turning into religious rejuvenation etc?
  7. The generations that felt the humiliation has passed and new generations don’t remember?
  8. Is it because different regions of India had different experiences hence can’t articulate a unified version?
  9. Is the practice vengeance because of the autocratic nature in Russia and China? Or autocracy is the result of the need to become great?
  10. Maybe, is it because of the historical roots of India that makes it not look at the world in a hierarchical manner? As former foreign secretary, Shyam Saran says, India is comfortable with a cosmopolitan world and have no issues coexisting alongside multiple powers?