Focusing on equality between nations

By Bharat Jhunjhunwala

NEW DELHI (JP): In its latest Human Development Report, the United Nations Development Program (UNDP) pointed out that inequality between rich and poor people and countries was increasing. It said that narrowing the "gaps between countries should become explicit global goals". Yet, in doing so, UNDP holds that inequality between countries is inevitable and all that can be done is to "narrow the gap".

It fails to appreciate that this inequality is but a temporary phenomenon which tends to dissipate itself. The inequality between people within a country, on the other hand, is permanent. In encouraging developing countries to squander their resources in combating inequality between people, it actually seeks to perpetuate the temporary inequality between countries.

Technological developments lead to both greater inequality between people and nations. New technologies increase the productivity of labor. A farm laborer with a sickle produces 100 kilograms, one who drives a tractor may produce 100 tons. But this does not mean that the tractor driver will earn more. The reason is that the wages of the tractor driver are determined by the supply and demand of tractor drivers. If more workers are willing to drive tractors, the wages are pushed back down to subsistence levels despite a thousand-fold increase in productivity. Thus, the Economic Report of the President, 1998 tells us that in the United States between 1988 and 1997, real wages declined at the rate of 0.3 percent per annum while productivity increased 1.1 percent.

It is for this same reason that historian J. D. Bernal writes that the advance of iron technology did not translate into an improvement of the conditions of the common man: "The beauties of the Greek cities, temples, statues and vases blind us to the fact that the way of life for most people in civilized countries at the fall of the Roman Empire was much what it had been 2,000 years before when the old bronze age civilization had collapsed."

Lower wages along with higher productivity implies that the difference between the rich and poor within a country will necessarily increase.

The impact of technology on inequality between nations is entirely different. The character of technology is that it spreads on its own and finds its level like water in the sea; car assembly plants in Thailand use the same technology as those in Detroit.

A historical precedent makes the situation clearer. England rose to a position of global influence on the strength of the technology of the steam engine, and the country was then called the "Workshop of the World". Its monopoly was mainly due to her head start in harnessing the technology. When other countries industrialized, it ended automatically. World War I saw independence granted to Canada, South Africa, Australia and New Zealand. World War II led to the same for India and most other colonies. These countries have now become "equal" to England. New technology leads to an initial increase in inequality between nations but, in the long run, equality is established at the higher level.

There is a fundamental difference between the inequality between people and that between countries. The former is both inevitable and perpetual. Therefore, we have no choice but to live with increasing inequality between people. The inequality between countries, on the other hand, is temporary. Therefore we should strive toward equality between nations which is both natural and feasible.

The UNDP, however, presumes that increasing inequality between nations is as inevitable as is inequality between people. Therefore, it advises the developing countries to adopt a beggar approach vis-a-vis the industrial countries by asking for more aid, for example.

UNDP's conclusion is that developing countries should spend their scarce resources in mitigating the inequality within. They must break their heads in trying to reverse something that is inevitable and, in the process, not work for equality between nations, which is, in its view, only natural. The agenda of the UNDP is to restrict the developing countries from seeking equality.

The writer obtained his Ph.D. in economics from the University of Florida. He formerly taught at the Indian Institute of Management and is currently a freelance columnist based in New Delhi.