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Friday, July 10, 2020

Can the world learn from the Indian practice of reservation?

In his new book, Capital and Ideology, Thomas Piketty examines a trajectory of inequality in the world, with an optimistic suggestion on how to realise a better future for all.

Written by Pulin B Nayak | New Delhi | Updated: June 7, 2020 10:26:14 am
How the other half lives: Manmohan Singh entering the Parliament House to present the Budget on July 24, 1991. Liberalisation precipitously widened disparities again in India. (Photo: Express Archive) 

Thomas Piketty shot into prominence in 2013 with Capital in the Twenty-First Century which unravelled, with great acuity, the inherent nature of capitalism to sharpen inequalities of income and wealth. Capital and Ideology builds on it and is decidedly more ambitious. It opens with the arresting proclamation: “Every human society must justify its inequalities”, or the entire social and political construct could collapse. Scholars look at income inequality in purely economistic terms, but Piketty is among those who look at such issues holistically, in their economic, sociological, historical, political and even cultural ramifications. Such overarching scholars are a rare breed and are usually indebted to Karl Marx. In the Communist Manifesto (1848), Marx had asserted: “The history of all hitherto existing society is the history of class struggles.” Piketty offers another compelling perspective which is in agreement: “The history of all hitherto existing societies is the history of the struggle of ideologies and the quest for justice.”

Capital and Ideology analyses data across centuries in Western Europe, North America, India, China, Egypt, Mesopotamia, Iran, Africa and Brazil. France looms large, because Piketty is French. In 1789, when the world lived in serfdom, slavery, colonialism or hereditary monarchy, French revolutionaries had dared to speak of liberty, equality and fraternity. Piketty has tried not to neglect any historical, sociological or political detail of inequality regimes. This gives the book physical heft, and the intricate details are sometimes a bit too heavy on the mind. The first regime studied is a ternary society in medieval Europe, with three classes — the religious, the warrior and the labouring. Piketty reminds us that from the 10th century to the late 19th century in Europe, there was also a distinct group of serfs.

India merits a full chapter with her ancient and unique formulation of social stratification, caste. Despite the periodic resolve to rid our polity of its implications, it dictates India’s contemporary reality. British colonial administrators used it to tighten governance, and a decadal census enumerating caste was initiated in 1871. Then, Piketty examines slavery and colonialism, where inequality reached its pinnacle and was encoded in the minds of the rulers and the ruled. Elaborate ideological constructs justified these regimes. Scholars expounded on the efficiency of slavery and the role, nay, the necessity, of colonialism to civilise the natives. Even some of the more humanistic European philosophers believed in this myth.

Book cover of Capital and Ideology by Thomas Piketty, Arthur Goldhammer.

Capitalism attained maturity in the second half of the 19th century, about a hundred years after the spinning jenny, but its discreet charm came of age in 1880-1914, the Belle Epoque. The rich and the well-off could live well, but inequalities of income and wealth were getting sharper and peaked just before the beginning of World War I. The wealthiest 10 per cent in the advanced Western countries enjoyed 80 to 90 per cent of all property.

The unprecedented destruction of life and property in the Great War was followed by the Great Depression of 1929-33. Huge unemployment and human misery questioned the viability of the capitalist system. The genius of John Maynard Keynes offered a revolutionary fix but World War II intervened, and the mature capitalist countries put Keynesian prescriptions into practice only afterwards.

Piketty shows that in 1950-80, Keynesian management of the macro-economy and progressive income taxes kept income inequalities in check. By the end of the Seventies, with oil prices hardening and labour squeezed with rising inflation, stagnant earnings and pockets of persistent unemployment, the bloated government looked like the problem. The 1980s saw the Thatcher-Reagan confluence of free-market fundamentalism, along with the collapse of Soviet communism. Again, this created ideal conditions for the regeneration of inequalities.

The trajectory of inequality in India has conformed to trends in mature capitalist countries over the past century. In the late 1930s, the richest 1 per cent appropriated 21 per cent of the national income. After Independence, while Nehruvian socialism failed to breach the Hindu rate of growth of 3.5-4 per cent, progressive taxation and other statist measures kept a firm check on inequality. By the early 1980s, the share of the top 1 per cent was a mere 6 per cent of national income. But in 1991, liberalisation precipitously widened disparities again. The top 1 per cent now enjoys almost 22 per cent of national income, and the richest 10 per cent own 81 per cent of wealth, making India one of the most unequal countries.

Extensive deregulations in the US and major European economies in the past three decades triggered an unprecedented rise in inequality, beyond the levels of the Belle Epoque. It also led to the deep financial crisis triggered by the housing bubble in 2008. Multitudes of informal workers faced long periods of unemployment, and the unreliable gig economy was born. This provided fodder for the Occupy Wall Street movement, and the COVID-19 pandemic has now taken US unemployment to incredible heights.
Dialectical materialism led Marx to conclude that the pauperisation of peasants and workers would result in the violent overthrow of the propertied class, as in the Reign of Terror of 1789 and the 1917 October Revolution. But Piketty believes that a just society can be established through participatory socialism, with explicit power-sharing between workers and shareholders.
Piketty’s appeal lies in his unfaltering optimism to realise a better world for all. This rests on three vital suggestions. First, a progressive tax on income and property (the latter would secure a permanent circulation of wealth). Second, a universal capital endowment to ensure a flow of income and a dignified existence for all (not universal basic income, though the two are linked). And, third, on social inequality, Piketty believes that the world has much to learn from the Indian practice of reservation. It is gratifying to learn that in his assessment, the Indian state has played, on balance, a positive role in promoting equality in this hierarchical and fractured subcontinent.

Pulin B Nayak was a professor of Economics at the Delhi School of Economics

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