The Modern tale of Ant & Grasshopper: Global Inequality -Lessons for India

When I was in the engineering college I came across with a modern version of the ‘The Ant and the Grasshopper’ from the Aesop fables. In short the story goes like this:

The Old Version: The Ant works hard in the withering heat all summer building its house and Laying up supplies for the winter. The Grasshopper thinks the Ant is a fool and laughs & dances & plays the summer away. Come winter, the Ant is warm and well fed. The Grasshopper has no food or Shelter so he dies out in the cold.

Indian Version: The ant works hard in the withering heat all summer building its house and Laying up supplies for the winter. The grasshopper thinks the Ant’s a fool and laughs & dances & plays the summer away. Come winter, the shivering grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed. While others are cold and starving. NDTV, BBC, CNN show up to provide pictures of the shivering Grasshopper Next to a video of the Ant in his comfortable home with a table filled with food. The World is stunned by the sharp contrast. How can this be that this poor Grasshopper is allowed to suffer so?

Arvind Kejriwal stages a demonstration in front of the Ant’s house. Anna Hazzare goes on a fast along with other Grasshoppers demanding that Grasshoppers be relocated to warmer climates during winter. Amnesty International and UN criticize the Indian Government for not upholding the fundamental rights of the Grasshopper. The Internet is flooded with online petitions seeking support to the grasshopper (many promising Heaven and Everlasting Peace for prompt Support as against the wrath of God for non-compliance). Opposition MPs stage a walkout. Left parties call for ‘Bengal Bandh’ in West Bengal and Kerala demanding a Judicial Enquiry. CPM in Kerala immediately passes a law preventing Ants from working hard in the heat so as to bring about equality of poverty among Ants and Grasshoppers.

The Ant is unable to cope its retroactive taxes, its home is confiscated by the Government and handed over to the Grasshopper in a ceremony covered by NDTV. Arvind Kejriwal calls it ‘ A Triumph of Justice’. CPM calls it the ‘Revolutionary Resurgence of the Downtrodden’. UN invites the Grasshopper to address the UN General Assembly. The PM takes the credit for always caring about the ‘aam’ Grasshopper.

Many years later, The Ant has since migrated to the US and set up a multi-billion dollar Company in Silicon Valley, hundreds of Grasshoppers still die of starvation despite reservation somewhere In India, and as a result of losing lot of hard working Ants and feeding the Grasshoppers, India is still a developing country.’

At that time it made so much sense to me as why there is inequality in the world. I wondered why just people can’t be just like ants, work hard for themselves, save, invest and be wealthy. I didn’t realize the story of the world isn’t as simple as the above story. But now, after acquiring some basic knowledge of the world, I think there are few assumptions in the story which doesn’t hold true in the real world. First, Ants and grasshoppers don’t have the equal access to the resources in the real world. Secondly, they are not equally equipped to use those resources. Third the world doesn’t work in isolation. The ants are dependent on grasshoppers and vice versa. There is a certain kind of hierarchy in place which make this relation and the whole context a bit complex. Over that there are so many sociopolitical realities which can’t be ignored. Keeping all these flawed assumptions in mind, this story doesn’t capture the core problem of chronic inequality of India and the world. As Thomas Piketty said, “Intellectual and political debate about the distribution of wealth has long been based on an abundance of prejudice and a paucity of fact.” Thus, this phenomenon should be analyzed by more than mere stories, opinions and fantasies.

Thomas Piketty’s recent book ‘Capital in the Twenty-First Century’ tries to that. His approach was simple. He collected the data on income and wealth and then defined the two basic categories, wealth and income, broadly and assertively but in a way nobody had really bothered to before. The book’s terms and explanations are utterly simple; with a myriad of historical data, Piketty reduces the story of capitalism to a clear narrative. Piketty’s argument is that, in an economy where the rate of return on capital (r) outstrips the rate of growth (g), inherited wealth will always grow faster than earned wealth (r>g). (Thomas Piketty, 2014)

Now, this huge wealth inequality where world top ten percentile controls the 90 percent of the world wealth, shows that there is something wrong with the way current world is operating. If we see most of today’s global system of production are capitalistic. And in Capitalism, there are two major players firms and the workers. Now the firms represent the demand and the workers as supply data. By way of combining different variables, which broadly cover the household, personal, labor market characteristics, the results of our paper tend to suggest that wage function in India is bound up with conventional variables predicted by human capital theory, personal and social dualistic identities, and human development. (Bino Paul, D & Krishna, 2012). But there is one important distinction here i.e. firms have capital with them and capital itself can earn generate income which cause the wage gap to grow exponentially. Whereas the workers’ only source of income is through jobs which are again dictated by the firms most of the time, and amidst the risk of the markets and without the proper social security nets, things become even worse for workers.

In India the inequality gap is as stark as US and the reasons are not that different. There is a huge disparity among the wages of the workers, supervisors, managers and top executives. And not only that the real wages of the workers didn’t increase much with respect to the inflation whereas the supervisors, managers and top executives earned huge premiums in formal manufacturing sector in India (Krishna et al., 2017). The wages of the workers has been defined as functions of different variables, which broadly cover the household, personal, labor market characteristics. The study conducted by Bino Paul and Krishna concluded that the wage function in India is bound up with conventional variables predicted by human capital theory, personal and social dualistic identities, and human development (Muralidharan, D, & Murti, 2014)

The lessons which can be drawn from Piketty’s book can be used be India. According to Piketty, there are forces of convergence and there are forces of divergence which acts on the inequality gap. Now India has a huge labour supply and as per Piketty there are two major forces of convergence for the huge inequality gap: The law of supply and demand and the diffusion of knowledge and skill. As the supply is already in abundance, it will be prudent to focus on diffusion of knowledge and skill. The education system from the grassroots level needs to be inclusive of people from the all different strata of the society. Education and opportunity to education is the biggest equalizer of all. Scandinavian countries have understood it well and we can see the difference not only in their wealth equality but also Human development index and other indicators. Thus, focus on inclusive public education system which helps in diffusing the knowledge and skills is one of the most essential step towards reducing the harrowing wealth gap.

Acting against the forces of convergence are the forces of divergence which are the inequality r > g, combined with the inequality of returns on capital as a function of initial wealth, and these can lead to excessive and lasting concentration of capital: no matter how justified inequalities of wealth may be initially, fortunes can grow and perpetuate themselves beyond all reasonable limits and beyond any possible rational justification in terms of social utility (Thomas Piketty, 2014).

To curb these forces of divergence, Piketty recommends progressive tax and as much as 80% to the top and present it as a utopian idea. He says,

“If democracy is to regain control over the globalized financial capitalism of this century, it must also invent new tools, adapted to today’s challenges. The ideal tool would be a progressive global tax on capital, coupled with a very high level of international financial transparency.”

IMG_3504Thomas Piketty is right about Progressive tax: It will be able to take away the undue advantage of the rich people compounding their wealth. Now progressive tax is a regulatory mechanism that can in some way reduce the gap but it comes with its own set of caution. It certainly allows to put a check on wealth accumulation but on the other hand, it start punishing some people for their work ethics and risk taking abilities. It takes away the motivation to work hard, to go that extra mile to acquire the skills which takes months or years. Thus, there has to be a fine balance in using progressive taxes because regulations curb freedom and as Milton Friedman has rightly said,

 

“A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.”

To conclude, ants and grasshoppers of today need freedom and equality of opportunities. Then the story of ant and the grasshopper will hold somewhat true in actual world. Because in the world there will always be some ants and there always be some grasshoppers and there should be something for everyone. Let us not punish ants for working hard and let’s not condone the laziness of the grasshoppers but before that we have a long way to go. First we need to achieve the equality of opportunity for all.

References:

Piketty, T., & Goldhammer, A. (2014). Capital in the twenty-first century.

D, B. P. G., & Krishna, M. (2012). Labour Market in Urban Agglomerations : A Case from an Indian Global City, 3, 453–478. https://doi.org/10.1177/097172181201700306

https://www.ft.com/content/202ed286-6832-11df-a52f-00144feab49a

Krishna, A. M., Bino, P. G. D., Indian, S., Relations, I., Issue, S., Krishna, M., & D, B. P. G. (2017). What Explains Wage in India ? Published by : Shri Ram Centre for Industrial Relations and Human Resources Stable URL : http://www.jstor.org/stable/23510794 What Explains Wage in India ?, 48(3), 487–499.

Muralidharan, T., D, B. P. G., & Murti, A. B. (2014). Should Real Wages of Workers Go Up in Indian Manufacturing ?, xlix(30), 153–162.

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