Thursday, 17 July 2014

Few words about the War and Gaza....

War is the ultimate human tragedy. The killings, mayhem, destruction and violence create their own string of violence. In an environment where reason and compromise are tossed aside and where the complete elimination of the other side is the goal, the human endeavor of a highest goal and maturity ceases to exist. Even with all the sound of death and chaos, there is a silence. The silence of an agonizing torture and a slow death of of a human spirit. The impact of a mortal shells and the hell from the sky do not ask for the permission to identify the real target for whom the bullets are intended. Very few wars have clear winners and clear losers. Most only have losers. Gaza is the latter.

Friday, 13 June 2014

Few words about Iraq and Afghanistan - has the journey accomplished its goals?

 This missive was written in 2011 and reflects accurately regarding what is happening in Iraq today. Afghanistan's fate is not different, either.

For a Military campaign. which divided the global community, killed 4500 American soldiers and countless Iraqi’s and cost the US taxpayer more than $800 billion dollars, the ceremony to end the US involvement in Iraq was small and had no grandiose look. I watched the ceremony on Al-Jazeera and my mind raced back to 2003 when I was asked by a senior Canadian official if the war would happen and I had said yes. Moreover, I also said that the US would not find anything because Saddam was telling the truth. He had destroyed the Nuclear weapon program as he said on many occasions but I knew that the war would go ahead. Saddam was brutal but not stupid. He knew that his army will not have a living chance to fight with the US army and that is why he told Dan Rather of CBC in February 2003 that he did not want the war and the US should not attack Iraq because there were no weapons in Iraq.

But now, here we are almost a decade in Iraq and Afghanistan with no clear answer and claim to victory. The Shia-Sunni divide which under Saddam was at least controlled, is now the reality of politics in Baghdad and a day to day life in Iraq. This sectarian divide will continue to define the Iraqi society and for this reason, Iraq has a very bloody road ahead.  Talibans - who were supposed to be an extinct species, are back in full force and are planning to open an office in Qatar. President Karzai has not been able to control the crony system in Kabul and Iran is very much involved in the Iraqi affairs. To a critical eye, those are not the benchmark for a victory by any standard.

The US withdrawal from Iraq is something Iran was patiently waiting for. The current Iraqi administration is in more tunes with Tehran than Washington and that is not a good news for the US administration. The last thing the US wants is the Iraqi government who is taking marching orders from Tehran. That was not supposed to happen. But that is now the reality in the region.

In Afghanistan, the situation is the same. President Karzai who is close to the Saudi Royal family, is talking with Talibans and by involving Saudi Arabia, President Karzai is trying to undermine the growing Iranian influence in the region. Moreover, the relationship between Kabul and Islamabad is at the lowest point. Pakistan has blocked the NATO supplies at the border with Afghanistan to show Pakistan’s protest to the US over the killing of Pakistan’s 27 soldiers by the US drone. President Obama tried to make a personal appeal to both President Karzai and President Zardari of Pakistan to re-start the negotiation and allow the NATO supplies to go to Afghanistan but they both refused. (President Zaradri did not even take Obama’s phone call). 

The US wrote the introduction for Iraq and Afghanistan after September 11, 2001. The rest of the chapters will be written by the regional powers and what they will write might not make the US very happy in the long run. But that is the cost you pay when know how to get in but do not have an exit strategy.

Two qualities are indispensable: first, an intellect that, even in the darkest hour, retains some glimmerings of the inner light which leads to truth; and second, the courage to follow this faint light wherever it may lead.

Karl Von Clausewitz
June 1, 1780 – November 16, 1831

Tuesday, 27 May 2014

The Piketty Moment and the Confused narrative about Inequality, Power and Redistribution

The wealth of nations depends upon an infinite variety of causes. Situation, soil, climate, the nature of the productions, the nature of the government, the genius of the citizens, the degree of information they possess, the state of commerce, of arts, of industry, these circumstances and many more, too complex, minute, or adventitious to admit of a particular specification, occasion differences hardly conceivable in the relative opulence and riches of different countries. The consequence clearly is that there can be no common measure of national wealth, and, of course, no general or stationary rule by which the ability of a state to pay taxes can be determined. The attempt, therefore, to regulate the contributions of the members of a confederacy by any such rule, cannot fail to be productive of glaring inequality and extreme oppression.

This inequality would itself be sufficient in America to work the eventual destruction of the Union, if any mode of enforcing a compliance with its requisitions could be devised. The suffering States would not long consent to remain associated upon a principle which distributes the public burdens with so unequal hand, and which was calculated to impoverish and oppress the citizens of some States, while those of others would scarcely be conscious of the small proportion of the weight they were required to sustain. This, however, is an evil inseparable from the principles of quotas and requisitions.

The Federalist Papers No. 21
Other Defects of the Present Confederation
Alexander Hamilton
December 12, 1787

There is no doubt that the logic dictates that the mass hysteria is a terrible emotion. It does not contribute anything meaningful to anything. In fact, it does pollute the fabric of a civilized dialogue and healthy disagreement through immature outbursts; low level attacks mostly personal and immature judgement on serious matters of the society. The barrage of conventional wisdom driven analysis in regard to explaining and defending ideas is a brutal way to trivialize grave issues and substantive ideas about politics, economics, ideology and social order. This, in a nutshell, is a level of debate regarding Thomas Piketty's new book, Capital in the Twenty-First Century. The book has created a shouting storm among academics and policy makers,and sad truth is that the majority of the debate is conducted through some type of ideological prism (right, left, centre, up, down) and that, in my assessment, is the biggest scandal around the debate on this book and its main topic, inequality and capitalism. When one undertakes a Herculean task of studying and reflecting on the gigantic questions surrounding inequality, capitalism and social order, one must invariably be driven by the reality on the ground, data, and facts, and not rhetoric and sound bite. In a world of savvy journalism and social media, the serious and thought-provoking debate is losing its appeal. It seems that we live in an age where men and women of all social disciplines, and all political faiths, seek the comfortable and the accepted. The man of controversy is looked upon as a disturbing influence on the so-called normal discourse. The ideological divide picks and chooses from the accepted wisdom. Even today, Adam Smith's Wealth of Nation finds support from all ideological angles. Still, professor Piketty's capital has created a huge storm of responses and rebuttals from all corners of the ideological prism. There have been few noteworthy responses to professor Piketty's book; yet the majority of the discussion regarding this book and inequality remains obvious and superficial. Inequality is a too serious of an issue to be treated in that manner. It deserves an analysis which shuns all labels of ideological understanding and political biases.

Any work, either academic or otherwise, regarding great questions concerning inequality, capitalism and social order, must be judged based on its claims, theory, findings, and analysis. In general, the books on economics, do not generate public sensation and loud response from all corners of the discourse. Yet, this one has. Professor Piketty, it seems, has touched a nerve of the global public discourse. But one cannot deny that the subject of inequality and how it relates to Capitalism is a reflection of our times. The general economic anxiety in the world and the social nervousness regarding the level of living standards and the erosion of the social contract are the ripe ingredients to initiate the debate about the inequality, capitalism and social order. Nevertheless, it is not a new occurring. One must be well-versed in history to realize that during economic uncertainty and challenges, the issue of inequality makes a comeback. Mass deprivation and poverty are never the topic of du jour; only when the crisis of economic confidence hit the entire society. An honest and critical reflection is the only positive outcome of the crisis. 

One could say with utmost certainty that the Central Point of the history of economic thought deals with the ills and benefits of the wealth and the accumulation of wealth; individually, and socially. The free exchange of goods and services and money making as a practice and how it shapes the social order, are all parts of the larger question of wealth and wealth accumulation. The Greeks dealt with those questions with eloquence and intense inquiry, so, did the Romans. The Bible has its own verdict (mostly negative) on the wealth and wealth accumulation. The Medieval and Renaissance world had lots to say about the wealth and wealth accumulation. Although the central premise of Enlightenment was to celebrate the power of reason; yet in the background it was the issue of wealth and its accumulation. Yet, it was Marx, whose critical eruption about the capitalism, is the holy grail of capitalist critique. If capitalism has an eternal critic, it is none other than Marx. Every economic and financial crisis brings Marx back in the collective discourse to re-analyze and re-understand capitalist economic order and the crisis of capitalism. Quite cleverly, professor Piketty's book also contains the word Capital. Imitation, as it is said, is the highest form of flattery. Marx's critique of Capitalism remains the holy ground for those who pursue the path of scholarship, which provides the critical view of the capitalism and how it shapes the society, politics of any given society, which worships the Gods of capitalism.

But one must ponder, why a book and especially a book dealing with the subject of economics, wealth and inequality, would get such a response? It is an ambitious and big book with an impressive amount of data, equations and, charts. The author has attempted to provide a political economy theory of everything capitalism and how it changes the dynamics of the society. The language is also quite difficult for those who do not know the subject. But that is not why this book has touched a nerve at a large scale. The central reason for this very noisy reception on this book has to do with the issue of inequality and redistribution and how to properly assess the trajectory of growth in the modern economic era where there are huge uncertainties regarding jobs, pensions and rising debts. As a subject of inquiry, inequality can be exhausting and taxing on those who are desperate to understand this complex puzzle of human society. That is why, it is only during the economic turmoil, that the subject of inequality and redistribution surfaces with vigour and enthusiasm. One could also add the concept of power when one truly wishes to understand the link between capitalism, inequality and social order. Power, as a concept, has never penetrated into broader economic discipline and that is one of the essential elements one must recognize to ask: how and what role does the power play in regard to inequality and what are the implications for the entire political, economic and social order.

Inequality, as a scale, is part of a human history. Inequality in physical appearance; intelligence (emotional and mind) and strong physical abilities are some of the most stark examples of an uneven world. In social, political and economic affairs, inequality predates capitalism. Yet, what one must acknowledge that the human affairs (social and economic) and political arrangements do determine the rules of social and economic principles in a society and how those principles are implemented, is the true hallmark of the rise or decline of an inequality - regardless of the economic system the societal practices. Power, it turns out, is the outcome of human affairs and political arrangements. It is the unevenness of power and authority and how this plays out on a broader social affair, poses the long - term threat to any society. Inequality is one of those threats.

Power, specifically, is the true scale to assess the concept of inequality - financial or non-financial. If the human affairs and political arrangements favour a certain group or individuals, social order runs the risk of chaos and anarchy. The outcome of human affairs and political arrangement is a "system" and as long as "system" is believed to be rigged in favour of those who have created it, masses would consider the existence of  inequality and unfair system. Financial crisis may distribute wealth; Inequality in political affairs faces no crisis -unless of course through a revolution. That is why, it is through the political eloquence and power, wealthy defend their spoils. Redistribution of financial assets may be tolerated; redistribution of power is another matter and that applies to all societies. At some point, when the social tensions are high, no one pays any attention to capital-to-income-ratio. Desperation at a mass scale and the distrust in the system is the true threat to stable order. The age of revolution may be over; the age of social rage not. Inequality in that context is the real inequality. 

Capitalism has gone through various transformations since the Industrial Revolution and, Power, as a concept played an instrumental role in shaping the capitalist economic system. In modern times, the Western hemisphere, after two bloody wars and the Great Depression, came to create a system which combined the liberal democratic political and economic order whose main belief was simple: by working hard, one can get ahead in life and reap the benefits of the market economy. The creation of the Welfare State was an essential part of that post-war economic structure. This equation had an awesome impact on the economies of Europe, the US, Australia, Japan and Canada. It is not that the post-war era eliminated inequality. Yet, the new economic and political order created a set of rules of the system which rested on the idea of meritocracy, hard work and skill building. With the right mix of college degree and hard work, one had a chance to have a decent life. The affluent were still there so were the wealthy. But because the economic system generated enough work and decent living, the majority of the people, especially in liberal democracies, trusted their system to be fair and just in regard to economic security and employment opportunities. Wealth did get accumulated at the top; but so did the economic growth and employment opportunities. 

In that manner, one could conclude that it is that belief in the system which is under threat and has been for a long time in a global age of economic uncertainty and prospects of not having an access to decent employment opportunities. Moreover, the fiscal strains on the affairs of the Welfare state have further created doubts on the economic and political system of many liberal democracies.The reality of stagnant incomes and employment anxiety even after acquiring an education and skills, has created an anger and a belief that the system is rigged and favours those who are at the top of the food chain. This belief is widespread in the western liberal democracies. The mistrust in the overall system and how it rewards certain individuals is also materializing in other emerging economies. The institutions of the authority and how they are used is the largest inequality issue. That and that alone must be the preoccupation of those are in the decision making authority. Without addressing this lurking threat, the income inequality will continue to climb with no end in sight.

As people live longer and access to health care improves, labour market is getting crowded and crowded, creating further pressure on many societies, to create employment and generate enough jobs to avoid their own Arab spring. The entry of India and China in the global labour force has pushed the wages down further, particularly in the western economies; eroding any gains made through productivity and technology. In other words, it is an issue of wages and unemployment and not so much wealth inequality and distribution. Yes, the economic growth has lifted many in the world out of poverty. Yet, many are still trap in the vicious cycle of poverty and economic destitute. This is a lethal mix in any society - even in those who promise the economic reward after paying your dues. It is the stagnant economic order and power inequality, which is the real danger to the long-term stability of any system. That and that alone must be the preoccupation of those who are in the decision making authority. Without addressing this lurking threat, the income inequality will continue to climb with no end in sight.

One of the chief drawbacks of the book capital is that it avoids discussing politics and power. In fact, in the real world, politics do matter and the vested interests do play an essential role to enhance the wealth and also, inequality. It is because of this shortcoming, the prescription offered by professor Piketty to reduce the inequality has no chance to be put into practice. A global tax on wealth does not exist and will not exist in reality. The capital remains very mobile and the speed of its mobility will only intensify. The absence of a supranational authority on the affairs of the global economy is the reality on the ground. Economic models are terrible tools to really assess and measure the real world economy. They do baffle the untrained eye; yet, they do not deceive those who live in the real economy and are well versed in the history of economics, politics and power. Linear thinking serves no real purpose when one attempts to understand the link between economy, society and power.

I once wrote: Inequality is the biggest social shame. Unemployment is the other. A stable social order is only possible when the citizens are confident that they have an access to equal economic opportunities to thrive and prosper. Rising inequality and decreasing upward mobility are threats to stable social order. Within this context, the real challenge for government policy in the advanced capitalist world and, also in the following fashion: how to maintain a rate of economic dynamism that will provide increasing benefits for all while still managing to pay for the social welfare programs required to make citizens' lives bearable under conditions of increasing inequality and insecurity. There is no doubt that different countries will approach this challenge in different ways, since their priorities, traditions, institutions, demographics and economic characteristics vary. But a logical starting point might be the rejection of both the politics of privilege and the politics of resentment and the adoption of clear-eyed view of what capitalism actually involves, as opposed to the idealization of its worshippers and the demonization of its critics.

Thursday, 24 April 2014

The Pitfalls of the Geostrategic Poker and The Unintended Consequnces of Immatuare Policy Making

The Sublimity of administration consists in knowing the proper degree of power that should be exerted on different occasions. 

Montesquieu 1689-1755

The cold and calculative assessment of national strategic objectives in regard to other nations is a monumental undertaking. Serious and mature foreign policy requires a concrete analysis of national interests. However, it must also understand the aspirations, histories, instincts, ideals and fears of other nations. Ambiguity of any type in conducting international affairs by any nation is a dangerous approach with deadly long-term consequences. A long-term approach in conducting foreign relations demands clarity and consistent national goals. Within this context, it could be said without a doubt that the serious and mature foreign policy must always be grounded along the strategic assessments of its goals and objectives and how to achieve those goals and objectives. Anything else is everything but the serious and mature foreign policy. 

The national political discourse, including the political leadership, must be fully prepared and trained to dissect and assess every intended or unintended consequence of its actions internationally. Any international adventure specially which involves the military, taken without fully evaluating its impact, generates deadly consequences for many years to come. Hence, it is not just prudent, but a required duty of the state to seriously undertake an exercise, which counts at all facets of any international intrigue.  This, without a doubt, is a very tall order to pursue with consistency. Foreign policy decisions and actions based on conventional wisdom of the established ideology erode the credibility of a nation within the global system. It, likewise, dilutes the power of a state to carry out the next military or foreign action internationally. This is how we must look at the failed interventions such as Afghanistan and Iraq. Moreover, this is how we should see and analyze the ongoing Ukrainian situation and the Western, particularly the US reaction to Russian advancement towards Ukraine.

On a wider scale, the current universal order is facing some grave and profound challenges. The forces of instability, both political and economic, from Jakarta to Jordan and from Santiago to Shanghai are testing the limits of the global political and economic order. The new era of global order has so far failed to tamper the rising ideological clashes within states (Egypt, Syria, Libya), renewed nationalistic resurgence outside the state border (Iran's support for the Shia majority in Iraq, Bahrain, Saudi Arabia) and a territorial occupation by a larger country such as Russia (Crimea). The now - defunct Israeli-Palestine dialogue which this author has predicted last August, is part of this broken and tired international system, which is unable to keep a handle on either chronic or emerging challenges of the global community.

What has also compounded this wobbly global situation is the confused and misguided policy response from Washington to these challenges. This assessment can be applied to the entire Western policy making apparatus where there has been a clear lack of focus and strategic analysis regarding the changing of the times and how best to prepare to have an ability to continue to operate under the cardinal umbrella of the national interest. In a manner, the NATO expansion file has been handled is just a one grave example of this immature foreign policy making system. The strategic assessment of the world's oldest alliance should have been the priority after the fall the Berlin Wall, but it never occurred and only the expansion part was pursued with vigor and enthusiasm without taking into account the Russian sensitivities and geopolitics. The West did not have any clear policy regarding Russia, either. The Western confusion as to how to deal with the continues Russian involvement in Ukraine is a symptom of failed policy making structure, which never sought to create a Post-Soviet- National-Interest-Driven-Strategy.

When legendary US diplomat George Kennan penned his extraordinary assessment of the Soviet Power and how the West and especially the US could counter the Soviet ideology in 1947, he, in fact, laid out a systematic and strategic design for the Western world. Kennan's deep and thoughtful understanding of the Soviet State, paved the way for developing a multi-faceted strategy which combined the components of economic, military and political with a single view of the Soviet Containment. Yet, the actual excellence of Kennan's argument did not reside in his ability to develop a clear and focus plan for the West; the real beauty of his argument was that he understood the transformative nature of his time. He was profoundly aware of the fact that the post-World II global order is nothing like the pre-war global order. His appraisal was a bold vision which cleverly grasped the international order of that era and how the West and particularly the US must respond to post-WWII era. In other words, the Soviet Containment as an ideology became a national interest for the West and particularity, the US.

Our current era is also in a midst of a profound change. The rise of non-state actors and the threat of economic isolationism, including the cracks in the global economic system along with the availability of nuclear know-how, the current epoch oozes instability and chaos. Yet, the political and analysis cadre both in the US and the West in general is badly fitted to react to new emerging challenges with wisdom, grace and consistency. This approach has allowed the forces of instability such as religious fundamentalism, rampant nationalism and ideological oppression to reach new heights, where now these forces of instability are superior enough to challenge the legitimacy of global norms and standards.

Charging the US for this instability because of ill-conceived missions in Iraq and Afghanistan only tells half of the tale. The other half is the inability of the entire foreign policy making establishment in the US to focus on the pure national interest of the US and link that to the changing nature of the global order through long-term assessment and strategic analysis with the laser-like focus. The poor response by the West and the US to Russian advancement  is a reflection of that chronic habit of preparing a policy on the go without giving a serious thought to any consequences. It is anyone's guess to truly anticipate the Russian sincerity and cooperation on issues such as Syria and Iran after the way the entire Ukrainian saga has been handled.  

Moreover, putting the blame of not having a coherent national interest strategy on the Obama administration is an easy way out type of analysis. The previous administrations were also incapable of defining the true purpose and national interest of the US in a post-Soviet World. The entire Western political and policy thinking mind was drunk with the concept of peace dividend and did not attempt to really evaluate the shifting nature of the global challenges after the fall the Berlin Wall. Yes, everyone recited the Mantra of the New World Order. Yet, none could clearly and coherently describe it with systematic analysis. 

The contemporary world has various similarities with the pre-World War 1 where strategic errors, geo-political miscalculations and changing nature of the global order brought the catastrophe of the First World War. The only but very big difference is that because of the intensity of the communication and military technology combined with the global economic interdependence, any miscalculation and strategic error specially the ones which deviate from the core national interest, can ignite a crisis in one corner of the world and before anyone can really assess the situation, the impact is already felt on the other side of the globe. This poses a unique challenge of policy making in a world which has shrunk on many levels, but the realities of the ethnic, religious and nationalism are still very much active and have the potential to cause an immense instability in a short span of time. 

One must constantly be mindful of its own shortcomings in order to produce a lasting remedy. Yet, that could only happen when one is really dedicated to taking concrete steps to repair the past mistakes through self-realization and understanding invisible forces which shape one's environment. As the forces of change continue to modify the contemporary global order, it is crucial to have a focus and will to respond to these challenges through assessing the long-term interests and how those interests will impact the overall foreign relations strategy. 

The legitimate pursuit of a national interest rests on the ground reality and not rhetoric. It avoids empty threats and lofty gestures. Rather, it contains iron will and historical understanding of epic proportions to be able to respond to emerging challenges with focus, precision and seriousness. It does rely on drones and covert operations. But it also has an ability to sketch out the overall framework in which the national interest of the nation is always at the forefront without always using the military option. In some instances, the pursuit of the national interest would need to cater all the help a nation can commit to a group or groups to fight a brutal dictator. Yet, it also maintains a sharp eye on historical lessons learned during another conflict where a one superpower provided all the help it could to defeat another super power and once the conflict was over; the true logic of national interest was not followed and those who received all the help from now a triumphant and sole superpower, turned on their previous masters. Afghanistan was never too far away from the US national psyche.

The legitimate pursuit of the national interest sets out clear goals and objectives when dealing with other nations. It leaves no room for confusion and ambiguity in its totality. Moreover, and perhaps most importantly, it clearly understands and knows the difference between immediate needs and long-term requirements. That and that alone, is the crux of the serious and mature policy making in regards to achieving the national interest.

Wednesday, 22 January 2014

The Anatomy of the Catalyst Leader

Asked what he thought of the French Revolution and its impact, Chairman Mao replied: It is too early to say. It seems, a Historical judgement is a faulty faculty for two reasons. First, it comes way too late to have any impact on the present and second, when the great volumes about a personality or an event are written, many of the characters are long gone to have an opportunity to explain or defend their position. The analysis of the past events and personalities is an established discipline but once you cross the line between analysis and judgement, there is a risk of colouring your assessment with a subjective paint and that could be a tricky path to provide an objective assessment of an event or a personality.

The Office of the President of the United States is a favourite entity to assess and analyze by those who are in the business of politics, academia and commerce. Most recently, the unwritten rule was that there must be a gap of at least two Presidents before one could attempt to analyze the occupier of the White House. But, in a world of constant communication and social media, it is no surprise that the indictments on President Obama and his Presidency started way back in 2011 and it continues until today

When it comes to Obama Presidency, the sense is that there will always be two camps . First camp believes that Obama was left with such a mess (militarily and economically) that even the two terms would not be enough to undo the damage from the Bush Administration. The second camp believes that the continuous blame of Bush administration is a side show to avoid Obama's own faults such as lack of leadership and a strategic vision regarding the US - both economically and militarily. My sense is that these two camps will be a central point for Obama's legacy - for better or worse.

But, is this the whole story or are we missing a larger point regarding what Obama Presidency has or has not done? Before anything else, what one must really acknowledge that the real issue lies with the unreal expectations the US populace and the World had for Obama when he took office in 2008. After eight years of controversial Bush presidency, the US and the global community were in awe of this man who campaigned in poetry but was about to find out that the you govern in pros with a very polarised political environment and structure around you. What Obama quickly learned that in fact, there are blue states and there are red states and depending on the color of the state, your chances to pass an agenda through Congress can be a easy ride or a nightmare journey. Off course by the time he realized that, the 2010 came knocking and he lost the majority in the House. The GOP has a firm control on the US House of Representative and the Senate democratic majority continue to swim on the thin ice. The upcoming 2014 Congressional elections do not point to a good news for President Obama. 

Perhaps, an individual, no matter how powerful and influential, is not fully capable of transforming the entire social and political order - let alone the global order. Perhaps, a judgement on an individual, is not a just attempt, since the power and decision making structure is way more complex.

Friday, 10 January 2014

The Relationship between Capitalism and Inequality - an elusive balance to achieve or a natural outcome to accept?

Where there is no bread, there is no Law; where there is no Law, there is no bread.
Rabbi Elezar ben Azariah
Chapters of the fathers


The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition is the great and most universal cause of the corruption of our moral sentiments.

Adam Smith (1723-1790)
The Theory of Moral Sentiments

Saint-Augustine considered inequality to be the most serious threat to God’s world. Jean-Jacque Rousseau wrote extensively about the evils of inequality and how it could threaten the social contract. Most recently, Amartya Sen, a Harvard economist, in his most recent book on the Indian political and economic landscape, details India’s rising inequality and how it could danger India’s economic, political and social fabric. It seems, inequality has made a comeback. But why now? Why inequality has become subject du jour?

Before the beginning of the economic crisis in 2008, the focus on income inequality in the US and elsewhere within the modern capitalist economies, was subdued and under the political and economic radar. This is because as long as your income is growing – even if not nearly as quickly as financiers on Wall Street – it’s not hard to foolishly convince yourself that you have a same shot at those riches as the millionaire next door. But when the music stops, the story changes. Inequality is a problem, politically and economically, precisely because of a secular stagnation. In that sense, the intensity and longevity of this great economic recession have brought the issue of income inequality within the public forum with the renewed interest and analysis from all ideological corners. 

Obviously, much of the analysis and commentary on inequality, circles around the dogma of the left and right-less or more government intervention type of discussion that seriously undermines this serious social and economic issue.  This ideologically obsessed analysis of inequality, within the print and electronic media, does not really offer any thought provoking discussion on this crucial matter of public and economic policy. What is really needed is an open and strategic discourse that discusses this serious economic and social matter without any ideological bend which is capable of analyzing inequality from all possible venues. In a universe of hyper partisanship, I understand it is a tall order, but the attempt must be made for the sake of stable political and economic order across all modern capitalist economies.

As an economic system, the rise, success, and challenges of capitalism are one of the most sought after subjects in the History of Economic thought and history. According to universally acknowledged definition, capitalism is a system of economic and social relations marked by private property, the exchange of goods and services by free individuals, and the use of market mechanisms to control the production and distribution of those goods and services. Some of its elements have existed in human societies for ages, but it was only in the seventeenth and eighteenth centuries, in parts of Europe and its offshoots in North America, that they all came together in force. The triumph of the Capitalist economic order unleashed a burst of innovation, technology and new ideas in many societies – regardless of their geographical destiny. Yet, there is another side to this economic triumph. Capitalism’s intrinsic dynamism, also, produces insecurity among societies so its advance has always met with suspicion and resistance. 

Much of the political and economic history of capitalist societies revolved around the record attempts to ease or cushion those insecurities mostly through state interventions. In that manner, it was only the creation of the modern welfare state in the middle of the twentieth century that finally enabled capitalism and democracy to reconcile in relative harmony. But that harmony between capitalism and democracy, as we have seen, has been under serious strain as the costs of the welfare state have risen dramatically. The ongoing recession has compounded the tension between capitalism and democracy in modern economies as the growth rates have remained low and the rate of unemployment remains stubbornly high. 

The rapid rise in technology, finance and international trade have caused the new waves and forms of insecurity for many modern capitalist economies where the life has become increasingly unequal not only the lower and working classes but also for the middle class as well. It should not surprise anyone that the percentage share of worker's wages as a proportion of total national income is sinking throughout the developed world.

In the developing world, especially in China and India, the situation regarding inequality is similar. Latin America is also on the same boat. The current African situation regarding inequality is well documented- even though the growth rates in many African nations have been amazing.

The political response to inequality goes like this: the right, in many modern capitalist societies, believe that less, not more regulation and let-the-market-decide-approach is the suitable way to tame inequality; while the left has sought to minimize it through government action, regardless of the costs. Neither approach is viable in the long run. The modern capitalist societies need to accept that inequality and insecurity will continue to be the inevitable result of market operations and find ways to shield citizens from their consequences-while somehow still  preserving the dynamism that produces capitalism's vast economic and social benefits in the first place. 

A growing recognition of increasing inequality within the modern industrial societies has naturally led to discussion of what can be done about rising inequality. What must be acknowledged right from the start that there is not one magic formula which can reduce inequality. If the society is serious about reducing rising inequality, all options must be a part of a grand solution. Yes, education must be reformed where the vocational training and trade school must be a part of an overall reform strategy. There is no harm to reassess the tax code. Fiscal instruments such as the transfer payments should not be out of question. Yes,economic growth must remain the priority but if that growth does not translate into creating jobs with decent salaries, the inequality issue will persist. But the economic growth alone is not sufficient, either. It is interesting that some relatively equal countries suffer from extremely high unemployment (Portugal) while some relatively unequal countries are seeing fast growth and low unemployment (Singapore). What I am trying to suggest is that all policy options must be a part of an overall strategy to tame this social and economic malaise. 

If the society is serious about reducing rising inequality, all options must be a part of a grand solution. Yes, education must be reformed where the vocational training and trade school must be a part of an overall reform strategy. There is no harm to reassess the tax code. Fiscal instruments such as the transfer payments should not be out of question. Yes, economic growth must remain the priority but if that growth does not translate into creating jobs with decent salaries, the inequality issue will persist. But the economic growth alone is not sufficient, either. It is interesting that some relatively equal countries suffer from extremely high unemployment (Portugal) while some relatively unequal countries are seeing fast growth and low unemployment (Singapore). What I am trying to suggest is that all policy options must be part of an overall strategy to tame this social and economic malaise.

I once wrote: Inequality is the biggest social shame. Unemployment is the other. A stable social order is only possible when the citizens are confident that they have an access to equal economic opportunities to thrive and prosper. Rising inequality and decreasing upward mobility are threats to stable social order. Within this context, the real challenge for government policy in the advanced capitalist world and, also in the emerging economies, can be summarized in the following fashion: how to maintain a rate of economic dynamism that will provide increasing benefits for all while still managing to pay for the social welfare programs required to make citizens' lives bearable under conditions of increasing inequality and insecurity. There is no doubt that different countries will approach this challenge in different ways, since their priorities, traditions, size, and demographic and economic characteristics vary. But a useful starting point might be the rejection of both the politics of privilege and the politics of resentment and the adoption of a clear-eyed view of what capitalism actually involves, as opposed to the idealization of its worshipers and the demonization of its critics.