In their 1992 campaign for the White House, Bill Clinton and Al Gore liked to point out that the top 1 percent of Americans owned 40 per cent of the country’s wealth. They also said that if you eliminated home ownership and only counted businesses, factories and offices, then the top 1 percent owned 90 per cent of all wealth. And the top 10 per cent, they said, owned 99 percent! But once in office, Clinton and Gore did nothing to redistribute wealth more equally – despite the fact that their two terms in office spanned the economic joyride of the 1990s

In the eighteenth century, Vilfredo Pareto’s observed that in all countries and at all times, income was distributed in much the same way. This distribution, in his opinion, reflected the distribution of ability and talent in contemporary societies.

“Those deserving of wealth were small compared with the multitude deserving of poverty and those deserving of great wealth were very few indeed…”, this was Pareto’s Law of income distribution. “Normal inequality in the system” he thought, “is generally justified by initiative and talent”.

“In nearly all economic history, most people have been poor and a comparative few have been rich.” When it comes to economic inequalities, not much has changed in a world that has seen revolutionary developments in agriculture, industry and the knowledge economies. Billions of workers and poor people around the world realise that a country’s economic growth does not automatically result in rising standards of living for the majority.

Interestingly, some very successful societies have existed with enormous inequalities of wealth and income – ancient Egypt, imperial Rome, classical China, the Incas, the Aztecs and the United States of America in modern times. Why does, then, the truism of economic inequality make for political rabble rousing and emotional petitions for correction, especially during election times?

Inequality in the distribution of income or wealth plays, nevertheless, a central role in many development problems. Inequality has received attention in treatises on development, but what has recently begun to receive systematic analytical treatment is the functional role of inequality: the possibility that inequality, quite apart from being of interest in its own right, has implications for other yardsticks of economic performance such as the level of per capita income and its rate of growth.

One way to think about wealth… is in the form of bequest received from parents. This distribution determines the fraction of people who have access to capital for purpose of entrepreneurship and commerce. Those who do not have access to property and capital have no choice but to become workers. Starting distribution of wealth can give us a fair idea of the fraction of population that is shut out of entrepreneurship.

The Law of income distribution continue to determine our present economic status the way it determined the status of our forefathers. Yet, we are living in unprecedented times. For at least once, in the history of mankind, Pareto could be wrong.

New York Times Columnist, Tom Friedman in his latest book The World is Flat, has interestingly categorised these times as Globalisation 3.0.

He argues that capable individuals can now partake of economic opportunities beyond the constraints of their own countries. At first, countries were important determinants of the economic status of an individual. Firms and multinational corporations overshadowed countries in the second stage. In the third stage of globalisation – at the centre of economic activity… stands the individual. He sees this as a revolutionary reversal of a historical trend.

One way towards economic democratisation, for countries with great inequality would be a greater connectivity between the ordinary individuals and the global world of opportunity. This could be achieved by reducing infrastructural constraints such as lowering telecom costs, reduced cost of international travel, unrestricted movement of human capital, access to international seed funds, shared intelligent infrastructure for remote work.

“Should access to economic opportunities be as fundamental a right as basic political freedoms themselves”, asks C.K. Prahalad, Professor of Business Administration at the University of Michigan and author of Fortune at the Bottom of the Pyramid… but fails to provide any meaningful suggestion on the process of ‘access’.

In reality, it is not the empty rhetoric of the politician or the intuitive appeal of a greater economic equality but the collective effort of the capable that could alter the economic landscape of the country.

<B>Baljinder SHARMA

[email protected]</B>