Economic Disparity and Nationalism – Part 1

By Dr. Lionel Bopage

The cold war in the form that existed in the last century disappeared with the collapse of the state capitalistic model of ‘socialism’ as was practised in the Soviet Union and the Eastern Bloc. The world is left with a few countries that follow the same state capitalistic model. Despite the belief that the cold war ended with the collapse of the Soviet Union, a new cold war appears to have emerged with a vengeance. Though the protagonists of this appear to be the corporate capitalist interests of the United States and its allies versus the Russian Federation and its oligarchs, the real focus of the west’s fear and ire could be the Peoples’ Republic of China.

Since the collapse of the Soviet Union, the corporate capitalist system has reigned supreme almost all over the world, with its attendant severe socio-economic and cultural crises. Peoples’ democracy in the proper sense of the word has not been able to survive with the reappearance of unbridled capitalism in the corporate and state sectors. Such crises have made many western capitalist societies almost dysfunctional. Under open economy and free market conditions, economic disparity has continued to surge, mainly due to the regulatory environment imposed by the ruling corporate interests and the free hand given to them to increasingly monopolise global resources.

Historically and in the present era, governments elected by the populace that are not compatible with the interests of powerful capitalist conglomerates and states have been overthrown by killing tens of thousands of men, women and children to bring to power corporate friendly tyrants. The United Nations is also not immune; it has been made to toe the line of neo-liberal and conservative regimes with threats of sidelining it financially. It has been used against those who oppose the new neo-liberal agenda. In this sense, the United Nations has turned out to be an impotent, stranded entity, a mere voyeur, made to watch impotently as blood is been spilt in every corner of the world.

Economic Disparity

Corporate economists are neither concerned about humanity nor are they compassionate. They do not care about economic and income disparity; for them people are either consumers or units of production. Their logic is that people need to work harder to access upward social mobility. Income inequality they argue, keeps their motivation up. They assert that wealth redistribution through social security measures and other welfare programs are expensive. So, despite many faiths preaching compassion, the world has become a more miserable place. Opportunities for economic growth and development have tumbled further downwards.

International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) are not institutions propagating humanitarian views. Yet, they have concluded that income inequality is affecting economic growth. The Center for European Economic Research (ZEW) has contested these findings, but realpolitik indicates that income inequality is on the rise and low-income households increasingly find it difficult to invest in higher education. Thus, their opportunities for upward social mobility are impaired.

According to the World Inequality Report, income inequality in all regions has increased in recent decades, and in the Middle East and sub-Saharan Africa inequality is obscenely high and persistent. Inequality in India and China are also of massive proportions. The gap between these countries and those in the west has become narrower, thus reducing global inequality. The global Gini Index  has dropped to 65 due to rapid economic growth in several Asian countries. By 2035, the Index is expected to drop to 61.

Rise of nationalism

Accordingly, global income inequality between nations though high is reducing, however the gap between the rich and the poor within countries has widened. Such trends as a whole and individually may explain the rise of populism, nationalism and protectionism in some parts of the world. Regimes pursuing a capitalist path of development have found it difficult to reverse or control this trend of increasing inequality. As recommended and sometimes demanded by the IMF and the World Bank, structural reforms in the form of privatisation of public assets have been carried out in many such countries with devastating results impacting on social fabric.

Regimes in Sri Lanka have pursued a similar path. The global experience during the past several decades is that such measures have made these countries rich as a whole, but with income inequality predominating. In this process, governments have become poorer. According to the World Inequality Report, this is one of the major factors restricting the ability of regimes in tackling inequality.

The current situation in Sri Lanka exemplifies this process. It is characterised by the loss of confidence in both state and corporate sectors and institutions, erosion of social bonds and increasing uncertainty about the future. Widening inequality has significantly affected economic growth and macroeconomic stability. Inequities related to accessing education, health care, and finance have become prevalent. Thus, certain segments of society are being subject to persistent disadvantage.

The article is part of a four part series by Dr. Lionel Bopage.