As the wealthy converge on Davos to discuss the world’s problems, a case for taxing the rich

The billionaires and the political class flocked to Davos in the Swiss Alps yet again to discuss economic concerns and global challenges at the World Economic Forum that began on Sunday. On Monday, non-governmental organisation Oxfam released some pertinent data.

The Covid-19 pandemic, Oxfam said on Monday, has created a new billionaire every 30 hours while one million people could fall into extreme poverty at the same pace amid soaring inflation and a difficult road to recovery.

In India, the wealth of industrialist Mukesh Ambani, for instance, grew at Rs 90 crore an hour, according to the Hurun India Rich List 2020 while at the same time, 24% of the country’s population was struggling to make Rs 3,000 per month.

The wealth of businessman Gautam Adani grew 12 times over in the last two years to Rs 9.5 lakh crore in 2022 while half of India’s working population – 90 crore people – lost hope and even stopped looking for livelihood options.

While the pandemic has foregrounded the significance of strong social protection and resilience, but according to neoliberal illogic, this is neither desirable nor feasible.

In a conversation, which is transcribed below, social activist Harsh Mander and economist Prabhat Patnaik discuss the possibility of universal social and economic rights through a wealth and inheritance tax on the top 1%.

Mander: The world as we see it is in enormous crisis and turmoil. Enormous wealth has been created, but the neoliberal promises ranging from everybody being better-off with decent work opportunities created, people being able to buy everything they want from the market to corruption being controlled with reduced regulations are in question today.

And the last decade-and-a-half in India has been not only one of growth in joblessness, but also of the rapid decline of formal decent work employment. Instead, we are witnessing that the only kind of work that is available to millions of our people are the ones uncertain and unsecured.

You have been speaking about universal social rights as perhaps the key of an alternative imagination. I heard you somewhere say that it is the new class struggle. So how would you explain this idea of universal social rights? And where do you see it as offering an alternative imagination?

Patnaik: I would not say it is the new class struggle. But, fundamentally, we have an idea that class struggle is organised around the economic demands of the class itself. Which is obviously not true, because class struggle is organised around demands that actually affect people as a whole.

So, the moment you see class struggle in that way, it is around an agenda that becomes historically relevant in particular periods of time. I believe the agenda that is relevant, certainly in the South today, is an agenda about rights.

Mander: I am sure you would still think of yourself as a Marxist scholar. A lot of traditional Marxists have opposed the idea of human rights.

Patnaik: It is important for the people to develop a new community, a new sense of solidarity. capitalism is a spontaneous system – any struggle for individual rights is not something capitalism is going to concede to. For instance, no capitalist country can ensure the right to employment because capitalism cannot function without a substantial reserve army of labour.

That being the case, you would have to struggle and build solidarities to fight for these rights. Therefore, if you achieve these rights, if at all, you would achieve them in a world which is socialist in itself. Now if it is possible that an individual can achieve some rights within capitalism, the individual can proceed to fight for other rights.

Mander: So, the idea of universal social rights has of course been attacked much more by the Right than the Left. When I saw [former Prime Minister] Manmohan Singh functioning, I saw that he genuinely believed that the ideas of welfare and social rights were actually going to harm the economy, and restrict its untrammeled potential of massive growth – which would solve all problems in the end.

Patnaik: The idea of the efficiency of the market really got discredited about 90 years ago. The fact that the market uses resources efficiently implies that all resources must be used. If you actually have huge unemployment, unutilised capacity, food stocks laying around, the system is obviously not functioning efficiently.

What about the idea of growth? I think simply amassing larger and larger means of production does not really solve the problem of poverty, and so on as you mentioned in your introductory remarks. In fact, as [Karl] Marx had said, capitalism’s spontaneous tendency is to produce wealth at one pole and poverty at another. Therefore, the sheer production of wealth is something which is not a panacea for overcoming poverty. It is simply the other side of the accentuating of poverty.

In fact, I would like to make one comment about what you said earlier. In the period of neoliberal capitalism in India, not only is the case that inequalities have increased, but you actually find that there is an increase in absolute deprivation.

For instance, you look at per capita food intake. The proportion of people [consuming] below 2,200 calories per day in rural India, which is supposed to be the benchmark for poverty, in 1993-’94 was about 58%. You look at 2011, it was 68%. In urban India, corresponding, it was 57% and 65%.

What has happened now is that education and healthcare are much more expensive, none of which gets captured in the consumer price index. As a result, people are forced to spend so much on these that they actually skimp on buying food.

Mander: I was struck by the latest World Development Report. It is perhaps the first major admission by the Bretton Woods set of institutions [World Bank and International Monetary Fund] that we may not be able to produce jobs, that jobless growth is actually not an aberration, but is almost written into the nature of [the] neoliberal model. But the solution that they want to give is universal basic income.

Prabhat Patnaik: Exactly. However, suppose everybody gets a certain amount of money, but with no school or government hospital within their radius. In that case, the idea of simply handing you money just does not help. It is very important that actual essential services and commodities must be made available to everybody, including work opportunities. And this is what the welfare state actually promised you.

Harsh Mander: Suppose I have a child with disabilities, I have many more economic needs than someone who does not. So a basic income and top-up idea is also blind to those questions.

My next question is with the conversation about universal social rights, which rights are we speaking about?

Prabhat Patnaik: Well, you can think in terms of a very wide range of rights. In my writings, I have essentially been talking about five economic rights. But I am not sticking to just those five, and neither am I saying that these five should take priority over other kinds of rights.

Harsh Mander: And these five are: employment, healthcare, school education, pensions, and food and nutrition.

Prabhat Patnaik: That’s right. So I am talking about just these five because I made some calculations based on them.

Mander: Just looking at the politics in India today, I think we are passing through such a difficult moment. There was a cartoon I saw the other day where there is a curfew outside and a man trapped inside. He is begging to get out. He is the economic crisis. Today, we see a different face of the economic crisis. A crisis in which if I do not have work or all my social rights, at least I am becoming a part of a “powerful Hindu nation”.

Elsewhere in the world, we are seeing the rise of political leaders very similar to the one we have elected. So, do you even feel that the conversations around universal social rights are going to emerge?

Patnaik: I think the Hindu Right has hijacked the political discourse. In some sense, we have to recapture the political discourse around the question of the improvement of the economy and the living of the people.

Mander: This has been a fascinating discussion. But the last question I have for you is about the critique on the idea of utopia since it is not feasible and we don’t have the money. As an economist, you have done your calculations. Obviously, we will have to reorganise how we spend the existing public resources. But how would we be actually able to raise the kind of resources that we require for the idea of universal social rights, even if we stay with just the five you spoke about?

Patnaik: There are two levels at which this question can be answered. Firstly, financial resources. My calculations show that you require about 10% of the GDP [gross domestic product] as additional expenditure in order to realise those five rights. And 10% of GDP can be quite raised financially.

For one, I made a calculation that if you look at the total net worth of India today. It is about Rs 570,00,000 crore. And if you take the top 1%, which owns roughly 60%, of it and you tax 2% of wealth, then you can raise about Rs 6,60,000 crore. And then any wealth tax is naturally accompanied by an inheritance tax, because otherwise you would simply divide it up.

So, even if you assume that the 5% of this wealth of the top 1% keeps changing hands every year, and you take away one-third of it, which, by the way, is perfectly compatible with the self-justification of capitalism... Capitalism says that you have wealth because you are talented. In that case, there is no reason why your child should have wealth, unless the child shows his talents. So, now if you do that, you get another Rs 5,50,000 crore, totalling to Rs 12,00,000 crore. And frankly speaking, in order to spend 10%, you need to raise resources which are less than 10%. Because any such expenditure has multiplied effects, therefore income increases, resulting in some tax revenue.

Mander: While all of this happens, another difficulty could be of state capacity. Do you think the state has the capacity to deliver universal social rights?

Patnaik: You know, that state that institutes universal social rights would also have the capacity. [British economis] Joan Robinson has a very good statement. She says that any state which can rectify the ills of the capitalist system can actually do away with the system altogether. And any state that cannot do away with the system, lacks the will to rectify the mistakes.

Watch the full interview below:

This interview was conducted under the auspices of the Centre for Equity Studies. It was transcribed by Oishika Neogi.