Equal distribution of income/wealth

Discussion in 'Politics & Society' started by Yusuf, Apr 24, 2011.

  1. Yusuf

    Yusuf GUARDIAN Administrator

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    It was said that 10% of Indians own 90% of indias wealth. don't know if that ratio has improved or not as that figure was around the time I was in school.

    Now india is booming and everyone has an opportunity to make a good living. Still the income disparity is large and the govt is obviously blamed for it.

    Question is how much can the govt or it's policies can help reduce the gap? What was the case in the west when they faced such problems and how did they tackle it? It's not that the govt can do a robinhood. We have seen so many rags to riches stories in india. What stops the masses who are on the other side of the income divide to come over to the booming side?
     
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  3. pmaitra

    pmaitra Moderator Moderator

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    Yusuf,

    I do not know if that empirical value of 10%-90% thing is correct or not, but surely most of India's wealth is in the hands of a few.

    There are a few things that should be taken into account.
    • Financial transactions above a certain limit must be made mandatory with checks and/or demand drafts, so that there is accountability.
    • Private and small time business owners must be made to pay tax honestly because this is a largely unorganised sector with little or no audit, lacks transparency and lies in the gray market. How is that going to work? IDK. Maybe if large corporations are allowed to setup shop, like WalMart, minus the dumping of cheap Chinese products, or course more revenue can be generated and dishonesty minimised, more jobs created and money, in general, distributed widely among the demography of India.
    • People who deserve tax return must get back their taxes and on time. The revenue department indeed needs to be restructured and people should be able to enquire about the whereabout of their money.
     
  4. Tolaha

    Tolaha Senior Member Senior Member

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    I think income disparity is much worse in the US and China than in India. So probably we could look for Scandinavian countries for reference. But as these countries are less densely populated, we will have to come up with our own model.

    http://en.wikipedia.org/wiki/File:Gini_Coefficient_World_CIA_Report_2009.svg



    As for the second bolded part, I think when we read such statistics, we end up assuming that the top 10% remains fixed for decades. As in the same set of individuals languishing at the bottom 90%, continue to do so. This is probably not true. Statistics in this instance will not show us the churn that is going on at the top. This is just my opinion here that we'd probably have far lesser churn at the top than the US and maybe more than countries with "less open" economic model.


    Nothing should stop talent and hard work from succeeding. All that the government on its part, has to do is:

    1. Ensure basic amenities for all. Eg: Education, Finance, Infrastructure
    2. Open up the economy. For all our talk about it, there are far too many hurdles for newcomers to break the artificial barriers.
     
    Last edited: Apr 24, 2011
  5. Phenom

    Phenom Regular Member

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    I got three words: Trickle down Economics

    India tried "Wealth redistribution" throughout the 60s till early 90s, and we know how that ended up.

    The job of the govt is to ensure that the poor get good education and good healthcare. After that it is the job of individuals to create wealth, govt shouldn't interfere in that.
     
  6. mayfair

    mayfair Elite Member Elite Member

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    Hits the nail right on the head as always pmaitra. If I may, would like to add a few points of my own

    1. Financial transactions above a certain limit should be made less hasslefree. At the same time it may help to discourage the use of currency notes for large sums of money. For instance, Britain does not issue notes higher than £50, even those are difficult to get by for daily use. Most cash transactions there involve denominations no higher than £20. Ensuring that large transactions remain traceable on paper will be useful.

    2. Spot on with the second point. Anyone who's had the misfortune of asking for a cash receipt from one of the mom and pop stores would be left in no doubt on the amount of tax evasion that goes on. I believe Saral was an attempt to adress this but when your tax laws have more provisions on evading taxes than paying them, then something is not right.

    I would rather the government ensure equal distribution of oppurtunities for wealth generation and facilities for people. Phenom hit the nail right on the head, we've been down the other road and narrowly missed tumbling into a crevice.
     
  7. Yusuf

    Yusuf GUARDIAN Administrator

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    Guys what you are saying will only help in the tax compliance part and probably check parallel economy. That dies nit address the main point of equal opportunity to make money in a booming indian economy. Black or white, people have to make money and a lot of it to ensure good food, shelter, education for themselves.

    I think the micro finance thing that was a rage in BD that gave small farmers something to work with as finance is a major constraint for those who want to start their own business.

    I did not bring up the point to education because we have a lot of umemployed youths with decent education. Its the promotion of jobs and assistance to help them start something of their own and the mechanism of providing them with that assistance which is the key. So yes it's the govts duty to ensure more Indians go to schools and colleges, but what after that?
     
  8. JBH22

    JBH22 Senior Member Senior Member

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    In Economics there are 2 school of thoughts to address this issue.

    1 Utilitarianism Principle which state that everyone must get equal share of economic pie (Impossible as you all know)

    2 Symmetry Principle where people get what they deserve according to their economic contribution (Better if you ask me)

    However as you mentioned its the govt duty to give these 2 basic things to help each Indians to fight for themselves which are free education and health care this will give us a healthy educated population and give everyone equal footing to fight for themselves.

    Wealth redistribution is a bad idea leftist will cause our downfall with such stupid ideas.
     
  9. sky

    sky Regular Member

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    To me the best thing the government can do is invest in education which will not only help one achieve more out of life and opportunities that go with it. But much more then this it help's you make the right choice's which can enrich your life and help you get what you won't.

    Here in Britain parent's try very hard to get there children to pass the selection test ,so they can go to grammar school's.These schools provide world class standards of education.

    Those that go to grammar schools have a very very bright future.

    Invest in world class education..
     
  10. Sabir

    Sabir DFI TEAM Senior Member

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    'Equal distribution of wealth' is a hard target to achieve, specially a densly populated country like India. (USSR tried to do that by controlling economic activities and collapsed. The key is in increasing economic activity not controlling it. )So a more realistic target is to set a minimum standard for everyone in terms of human development (education, income, health etc) and work hard to achieve that within certain time limit say 2020...
     
  11. gogbot

    gogbot Regular Member

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    It has improved but its still a minority that hold most of the wealth

    Not true , growth has been fairly exclusive to those from cities . It spread into the rural area's is still ingoing
    And only in certain states.

    Half the states in India have yet to start Participating in the economic engine in big way.
    The North East is practically untouched.

    Government can only do so much look at the scale of the problem they have , 100 of millions of people and the politics of various different states to slow thing down

    There is no parallel in recent history to compare our problems to other than with china , the size of our population , the fact that they are mostly in rural areas and the lack of industrialization make us a unique case. And even today we are quite poor comparing the size of the population and the size of our economy.

    Some thing as basic as providing the minimum number of toilets between Indians would be considered the largest civic engineering project in human history.
    Improving a standard of living for all of them is very monumental task , especially when many still live in rural area's. Where government investment is sometimes non-existent. GoI can't tax the rich and give to the poor as the might hurt the very economic growth that dragging the country into the 21st century. And Hand outs and subsides have done nothing to help the economic status of the people in the country

    In all likelihood we should see the same trends as in China with people moving to cites more and more.

    Other options exist primarily though private sector enterprises investing in Rural farming , to manufacturing hubs turning villages into towns. All those idea's revolve around land and the proper land rights. Which has been an issue in the past

    Reasonable speaking GoI best move at this point to use their new smart card identity systems to set up some sort of very minimal and very basic social security system , help put those people earning less than $2 a day in higher brackets. Enough so that most people can stand on their feet and not resort to drastic measures.

    Then focus the entirety of their resources on infrastructure and public services . Education and Health Services being at the fore front , followed by the police and judiciary.
     
    Last edited: Apr 26, 2011
  12. amoy

    amoy Senior Member Senior Member

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    /quote/ Wealth redistribution is a bad idea leftist will cause our downfall with such stupid ideas. /unquote
    In fact it's not stupid and is what happens in the developed world and is going to happen in such as China.
    * property tax << not levied in China
    * estate tax (death duty) << not levied in China
    * personal income tax << now China is to cut it by raising threshold
    There're plans to implement such taxes and some key municipalities are piloting property tax that can be very very heavy. By so doing wealth is redistributed to the disadvantaged. Of course such taxes can still be averted by emigration or property registration under dependents.

    Above all for a country of such a size to keep on generating job opportunities is imperative. Entrepreneurship shall be encouraged to offer employment and innovation for wealth creation, ahead of "distribution".

    Meantime migration of industries esp. labor intensive to under developed areas (usually inland/west) from developed areas (mostly coastal or hub cities) is another way of income/wealth distribution (or trickle-down effects ).

    Rich people tend to save a large chunk of income instead of consuming while poor spend more %% of their income on necessities / consumption. The whole economy may run to a standstill if wealth is concentrated in a few's hands, needless to mention "boosting domestic consumption" as another engine. Besides a "harmonious" society can't be sustained on massive poverty. Therefore distribution is of vital importance.
     
    Last edited: Apr 26, 2011
  13. pmaitra

    pmaitra Moderator Moderator

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    Actually, if you see, organising the unorganised sector, exempli gratia, replacing the mom-and-pop stores with Walmart like corporations minus dumping of cheap Chinese products will:
    • Generate jobs.
    • Regularise tax collection.
    • Thus, help distribute wealth and allow the government, now flush with more revenue, to pursue other promotional schemes to boost the trickle-down effect.

    One good approach would be to force the large shopping complexes to sell domestically made products to some extent. While I do not support overt protectionism, partial protectionism will allow for domestic seller making money as well. You kill two birds this way.
     

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