How to deliver economic justice to the deprived lot?

ONE of the subtle but defining trends in 21st century eco-politics is the advent of the concept of "economic justice". The world is split into one for the haves and the other for the have-nots. The concept itself is not new. There are metrics like the Gini coefficient that defines how well incomes are shared in a society. The Gini in Sweden is 24 (2012) while that in China is 73. The lower the number, the more equitable is the distribution. It is tracked to see if the distribution improves over time.

The concept acquired political significance when governments were voted in or out based on how effectively and perceptively they presided over a "just" distribution of incomes, wealth and prosperity. In many cases, the lack of such economic justice was the trigger for popular revolutions, from the Gdansk gathering in Poland to the Arab spring in Egypt and other countries. In these countries, the electoral system was weak or not seen by people as a good vehicle for change. Hence resentment took the form of protests. Governments changed after the hustings, if they were seen as too capitalistic or too paternalistic. It is interesting to note that a paternalistic regime, even if it conferred better living standards to the bottom percentiles of the population, was still seen as "unjust" as the process of income redistribution was not natural and was not based on "dignity for all". Socialistic, welfare-led, liberal and left-leaning slogans have caught people's attention.

In a world where 25 per cent of the population is represented by aspirational youth (age 10-24) and possibly by the social media generation, this feeling of lack of "economic justice" can be infectious. Their "dissatisfaction" vote can disturb electoral majority decisively. Governments have had to scurry to redefine the economic structures, opportunities, benefits and economic rights.

In Singapore, for instance, the role of new immigrants has been under scrutiny as perception gathered that citizens were competing for the better jobs rather than being preferentially considered. This led to policy changes. In countries across Europe, Africa and Asia, elections in the past three to four years brought to the fore economic fissures. The hot button issues that made the headlines were jobs and unemployment, public health, education, retirement age, working hours etc. GDP growth, modernisation, foreign policy and even national security were relegated to the second bench.

The strong economic needs articulated by the people meant that governments ramped up welfare programmes and budgets, not without adverse consequences. Deficits of many countries tested fire. Greece is the only one that came close to imploding, but there were other culprits that flew under the radar. Belgium, (yes, Belgium, never mentioned alongside the notorious PIIGS countries in Europe) for instance, ran up an unsustainable debt of over 100 per cent of GDP. The Congress-led Indian government that ruled up to 2014 focused single-mindedly on welfare policies and ran up huge bills that potentially could become unpayable. It is estimated that the eurozone consumes a staggering 26 per cent of its budget on welfare and social programmes.

However, if ballot voice is strongly linked to social benevolence and outcomes, as evidenced in elections, what is the alternative to economic justice? Perhaps none, but the question remains as to what are the better routes to achieving it. Subsidies and cash transfers met from expensive debt are certainly not the responsible way. Brazil just got its sovereign rating downgraded by S&P to "junk". Raising taxes is more fashionable in debates than in practice, as its limitations are well understood. Further, in a globalised world, countries are struggling to cope with increasing tax competition. Cross-subsidisation is a viable option. If a country needs to spend more on educating the poor and underprivileged, can the affluent pay more to fund such a move? Equality principles may be compromised for economic justice, in such a case.

A progressive system of payment for public services (health, transportation, education, housing) is an interesting model to evaluate. Most countries shy away from this, as it could impact another vote-bank, the "well-off". Dipping into reserves and income from sovereign investments is an option for zero-debt nations but countries like Singapore are few. Some countries have effectively "transferred" costs to the private sector by mandating more liberal pension, insurance and other contributory schemes. Again, globalisation may work against this, as it demands a flexible wage structure to prevent wholesale job movements. Austerity is a standard textbook (and IMF) solution to fund deficits (and indirectly, welfare schemes) but they run out of juice fairly quickly. Public endorsement for austerity is difficult to earn without political sacrifice. There is also a rising call for pruning the global defence budgets to finance more needy schemes like poverty upliftment, unemployment cover, etc. The top ten defence spenders have actually ramped up defence expenditure. Who will bell this cat? Meanwhile, political fortunes will continue to be inextricably linked to economic justice. There is a further danger that the "middle-class" may also identify itself with the deprived lot.