Trapped at the short-end: Our fate foretold?

A 2011 report by the Organization for Economic Cooperation and Development (OECD), entitled "Divided we stand?" carries one of the most distressing news in an age of, not just rising, but exploding interests. In a study of 34 countries, including all OECD members plus a few others in Europe, it found that the "gap between rich and poor has widened . . . over the past 30 years," even more, that "inequality has become a universal concern." It is bad news when the slowdown and stagnation of the 2008-11 Great Recession still lingers in 2016. It predicted matters would worsen unless more investment was made in human capital (in education, health, and family care), employment opportunities expanded, and tax redistribution policies balanced the unequal growth (that is, tax the upper class more as its income was expanding faster).
From hindsight we know this predicament led to the triumph of Donald J. Trump in the 2016 US presidential election: declining inter-generational income-mobility pushed white, educated youths into his camp, while protectionist calls attracted the white working class in Michigan and Pennsylvania from the Democrat camp.
Yet, the United States fared better than almost all other European OECD members, meaning that 2016 might aggravate those inequality figures right across the Atlantic and selected other countries. Between 1980 and the 2011 report, the OECD income-gap widened from a 5:1 ratio to a 6:1 average ratio, but scaled to 10:1 in Italy, Japan, Korea, and the United Kingdom, 14:1 in Israel, Turkey, and the United States, and 25:1 in Mexico and Chile.
When depicted against the Fourth Industrial Revolution context, they portend more pessimistic future outlooks: based as it is on drones, robots, and artificial intelligence, this Fourth Industrial Revolution demands highly educated professionals to function fully; but this is becoming more and more privileged and increasingly internationalized. The net effects would see the OECD inequality ratios not only worsen in the foreseeable future, but also shift the intellectual nucleus gradually away from Australia, Canada, Europe, and the United States, where the key universities lie.
Does that mean Africa, Asia, and Latin America wherefrom students travel to the Atlantic zone, may witness more equitable growth? Hardly so. Those who return, as many increasingly do, only compound the inequality ratios back home. Latin America has traditionally boasted some of the worst inequality ratios, a feature unlikely to evaporate with the returning students, though that gap may soften, albeit slightly, rather than harden. African and Asian countries have traditionally shown lower inequality ratios, but as they become emerging/frontier markets, we are expected to see the asymmetrical class-based growth-rates replicate the OECD pattern of faster higher-income growth rate than lower income.
Bangladesh illustrates this pattern, as the Gini coefficient reveals. The index measures inequality, with higher figures representing higher inequality and vice versa. Bangladesh had slightly over 0.25 in 1985, which was among the lowest world-wide, climbed to over0.33 by 2005, then retreated to just over 0.32 by 2010, thence 0.31 by 2015. The overall Gini growth fits the growth rate of its ready-made garment (RMG) industry, though the decrease defies that relationship, and, in fact, displays the start of trend. It has over 35,000 millionaires compared to under a dozen at the time of independence 45 years ago, which could fuel the GINI growth; yet, the simultaneous microcredit financial revolution and rural miracles, as well as remittances by low-wage workers, favouring so many countryside dwellers, have also had an offsetting impact. Yet, upper-level growth continues to far outstrip lower-level income growth rates, thus contributing to the worsening plight over time: microcredit benefits are largely a one-time affair, while remittances cannot go on forever; however, upper-level incomes from business have a more open-ended future.
Whichever way we look at the malaise, industrialization has had a paradoxically intimate yet deceiving relationship with inequality. It, first of all, put inequality under the gun in a way no other human development or dynamic could: it created jobs, and, by marketing goods at the public level, opened up expectations and income. Yet, that income did not rise as much at the lower levels as it did at the upper echelons, with the result that, with every sophistication of industrial capacities, that gap only kept widening: much as Karl Marx predicted social peace was purchased by supplying the very gadgets to keep the middle and lower classes not plunge into a revolutionary mood or mode.
How governments get into the public appeasement business was demonstrated following the devastating 1930s depression and this was one of the hallmarks of 20th Century developments: from supplying, over decades, homes, cars, and every Internet paraphernalia available now to the middle and lower classes, then with the government chipping in with education, health, and social security, the contract worked fairly well, and revolutions were actually pre-empted.
So much so that, when the neo-liberal era dawned in the mid-to-late 1980s, the miseries of socialist living even camouflaged the deteriorating social contract for the middle and lower classes: they worked longer, harder, only to have periodical meltdowns wiping off their paltry saving, until today, poverty prevails over a middle-class peaceful mindset that anchored what we call the developed countries. This is a significant force behind 2016 being so pessimistic, but remains a taste of things to come. That we cannot put behind us the unequal station we were born in is a ghost to haunt all: piecemeal uplifting have been losing their appeasement appeal, meaning that the day when greater middle-class reactions ascend cannot be far away. Does a wealthier current human moment mean we can absorb the costs better than in the past? Unfortunately, too many have gotten bottled up below the middle class than ever before to provide the much-needed confidence. Something has to yield, somehow, somewhere.
Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.
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