Kaushik Basu destroying Democracy

 Fighting takes strength and uses up resources. The worst off can't do very much fighting before they keel over and die of exhaustion and inanition.

Kaushik Basu doesn't understand this. He writes in 'Project Syndicate'

The world must fight inequality to safeguard ideals of democracy

The ideals of democracy were first realized in highly unequal countries which became more and more unequal while subjecting darker skinned people to intense exploitation. In recent years some rich countries have slaughtered plenty of Muslims in the name of democracy and human rights. This has worsened economic inequality.  

Neoliberals got it wrong: Pursuing greater equality without reducing incentives is entirely feasible

 What is even more feasible is that pursuing greater equality will lead to much more inequality.

Globalization of finance and supply chains has enabled wealthy and powerful countries to affect the well-being of people far beyond their borders.

For the better- sure. The weak and the poor can make stuff for the strong and the rich who will pay them more than they could otherwise gain. Moreover, rich countries often export very useful goods and services which enable the poor to rise up in terms of productivity and security.  

In these tumultuous times, it often feels like one shock quickly eclipses another. Just a few weeks ago, the war in Ukraine dominated headlines, but the recent outbreak of violence between Israel and Hamas has since taken centre-stage.

Basu won't admit that Hamas attacked Israel in a barbaric manner. 

To be sure, during times of crisis, our instinct is to focus on extinguishing the fire that is closest to us. But it is equally crucial to understand and address the root causes so that we have fewer fires to fight.

No. Fight a fire close to you or run away from it. Don't hang around trying to understand why there is fire. 

As populist forces have polarized electorates and deepening social divides worldwide,

 The Dynasty Basu served was and is populist. It does not claim any special knowledge or skill in governance. It just says 'we are angels. Modi is the devil'. Currently, it is using caste and creed to divide India. It seems to be encouraging separatism. 

the global political climate has grown increasingly volatile. While determining the causes of this shift will undoubtedly take some time,

No. We are aware that China has risen, Iran's position has improved, and that America is becoming isolationist and losing its lead in various technological fields. That is why the global political climate has deteriorated for America. 

one could argue that the rapid advance of digital technologies, unchecked globalization and rising inequality have transformed our political and economic systems, fuelling sociopolitical unrest.

Trump checked globalization. Digital technologies became ubiquitous a dozen years years ago. Inequality fell under Trump. There has has been no 'transformation' of Western, or Indian, 'political and economic systems'. 

While the debate over whether economic inequality has increased over the past few decades is still on, the question is moot.

No it isn't. The question is irrelevant. Voters showed they didn't care about equality from the early Seventies onward.  

We know for certain that global economic inequality increased steadily between 1820 and 1910.

We know for certain that political inequality fell during that period. So what? It is obvious that as new tech becomes available, some will rise much faster than others. Moreover, assets will get concentrated in fewer hands where there are 'non-convexities'.  

Since then, it has fluctuated, and any estimate depends on the specific methods and metrics researchers use.

Wars and Reconstruction can reduce measured inequality though it may actually be rising.  

But the data clearly show that economic disparities have reached intolerable levels, with the world’s richest 1% gaining 38% of the increase in global wealth between 1995 and 2021, compared to just 2% for the bottom 50%.

But wealth isn't just about financial assets. It is defined as the stock of assets needed to generate current Income. For the working class, it doesn't matter if they have no assets for which they have to provide 'depreciation'. What matters is their real income or material standard of living. It makes sense to have no assets if you are living off means-tested benefits.  

Moreover, it is undeniable that the concentration of wealth continues to increase.

A good thing for poor people like me because I don't know what sort of tech is worth investing in. I want smart peeps with 'skin in the game' and 'residuary control rights' to control enterprises which generate my considerable 'consumer surplus'.  Most older people live off 'transfers'. It is in their interest to run down their asset base. Once you die, you can't spend.

Between 1995 and 2021, global wealth grew by 3.2% annually.

No. It grew much much more than that. China and even India increased their resource base by so much that they can afford to give transfers and thus end 'extreme' poverty. Sadly, as Partha Dasgupta points out, this may not be sustainable for environmental reasons. It is likely that ageing populations will end up net debtors not creditors of the Economic system. Thus, even if they have no assets, still State Pensions and Health Care will be providing them an income for longer than was envisaged by actuaries. 

If you have an entitlement which won't suddenly collapse- e.g. a 'triple locked' State Pension- then you have wealth in the Economist's sense even if you have no assets. This is not picked up by the Statistics.  

Over the same period, the richest 0.000001% increased their wealth by 9.3% per year.

So what? Extreme poverty has fallen farther and faster than ever before in human history. Sadly, there are some places where inequality has fallen. They are referred to as starving or Socialist shitholes. People run away from them. 

When future generations look back at today’s world, they will likely be shocked by

the ignorance and stupidity of Bengali economists 

the extreme levels of inequality and social injustice we tolerated, just as we are horrified by our ancestors’ acceptance of practices like slavery and feudalism.

Practices which caused productivity to stagnate and inequality to be much less than it became once serfdom ended and the Industrial Revolution took off.  

Beyond their inherent immorality,

It is inherently immoral that smart or beautiful or hard working people have more money than lazy, talentless, sods like me.  

the political implications of today’s economic disparities often go unnoticed.

Not by Bengalis. They try to emigrate to where there is more inequality. Basu isn't teaching in Cuba or Venezuela. 

In this age of digital connectivity and globalized commerce, excessive wealth concentrations undermine democracy in two main ways.

What undermines democracy in India is Dynasticism.  

First, the globalization of finance and supply chains has enabled wealthy and powerful countries to affect the well-being of people far beyond their borders.

This much more the case back when there was mercantilist Imperialism. Globalisation meant that poor countries could start to climb up the manufacturing value chain. That's what lifted 700 million Chinese people out of extreme poverty. 

But while citizens of Burkina Faso, for example, cannot vote in US presidential elections,

Whereas, when it was a French possession, its people voted in French elections- right? On the other hand, it is true that people in poor African countries are eagerly invited to vote in Cuban or North Korean elections. 

the decisions of US presidents affect their daily lives as much as those made by their own leaders.

But, what the Chinese do is more important still. But, if there is a coup, the people of that country are likely to blame France.  

Imagine a scenario where only residents of the District of Columbia were allowed to vote in a US presidential election—such a system would hardly be called a democracy.

Nor would a situation where every Chinese citizen were given a vote in American elections. 

This dynamic suggests that globalization erodes global democracy.

No. This suggests Basu is as stupid as shit. There is no 'global democracy' for the same reason there is no global monarchy. The world is not a unified political entity with a King or a President.  

Yet, there is not much that developing countries can do to challenge American hegemony,

the Taliban may beg to differ.  

given that the US is not going to let the whole world participate in its presidential elections.

which country is? Will the good folk of Burkina Faso permit all the citizens of India and China to vote in their elections? 

Incidentally, stuff done by a small group of people based in Afghanistan triggered the 'war on terror' which cost Americans thousands of lives and about two trillion dollars. Does this mean Americans should get to vote in Afghan elections?  

Second, given that extreme wealth often translates into political power,

As does being the widow or the son of a previous Prime Minister who was the widow or son of a previous Prime Minister. Basu was happy enough serving such a dynasty. He didn't raise a peep about democratic backsliding. Incidentally, it was Manmohan's economic policies which caused inequality to rise greatly in India. This was a good thing for all Indians. Nobody wants to go back to the days of the license-permit Raj.  

the concentration of wealth in a few hands is anathema to democracy.

No. It is anathema to Communist dictatorships.  

This is particularly evident in the age of Big Tech, when billionaires can gain an outsize influence on public discourse by taking over critical media platforms or manipulating search results.

Basu is battling Elon Musk. But Musk is smart. Basu is stupid and useless.  

One can hope that advances in generative AI will level the playing field in the technology sector and thus help curb inequality.

No one can't.  The reverse is more likely. No doubt, Basu is under the impression that peasants in Burkina Faso are using generative AI and quantum computers to develop new operating systems and large language models.

As an economist,

a shit one 

I recognize the potential damage that poorly designed interventions can cause.

Nobody will let Basu intervene in shit. Manmohan only tolerated the fellow as window dressing. The same was true of Raghuram Rajan.  

History is replete with examples of well-meaning but ill-conceived policies that sought to reduce inequality, only to backfire and inadvertently bolster the right-wing narrative that all government intervention is inherently problematic.

History is replete with examples of 'moral panics' about things which did not matter in the slightest. It wasn't the case that the presence of a a Jewish minority harmed Democracy or the Commonweal. Nor is it true that greater inequality isn't a good thing. Entrenched privilege- e.g. the right of the Dynasty to rule the country even if it is as stupid as shit- is a bad thing but Basu had no problem with it.  

Nevertheless, by combining moral intentions with thoughtful design, such policies can yield significant returns.

Only in the sense that they can yield cats who are actually dogs when they aren't busy as pigs with wings.  

In a recent paper that I co-authored with my students Fikri Pitsuwan and Pengfei Zhang, we explore the megaprofits generated by Big Pharma and Big Tech companies.

How can we ensure that only China ends up with a big pharma or tech industry? Listen to Basu.  

While imposing patent waivers might reduce the incentive to innovate, just as placing profit caps can cause production to fall, it is possible to design mechanisms that limit excess profits without sacrificing efficiency.

Excess profit is monopoly profit and, ceteris paribus, is associated with lower output and a bigger dead weight loss to the economy. Thus mechanism design should raise allocative efficiency while getting rid of 'super-normal' profit. However, dynamic efficiency may work in a different way. Still, assuming 'the best monopoly profit is a quiet life', it is possible that the monopolist might use his accumulated profit to prevent 'disruptive technology' from burgeoning. This can be done by increasing compliance costs and creating artificial barriers to entry.  

One such strategy is to use a commodity tax to cap the profit of a group of companies.

This may cause total tax revenue to fall. Supply may be way more elastic than you think. You can harm some of your own companies. But other countries may be more sensible.  

By heightening competition within the group, this intervention can neutralize the incentive to cut production.

But competition may come from outside the group. 'Dumping' is a real thing.  

We must also recognize that beyond a certain threshold, what matters most to people, including the wealthiest, is relative rather than absolute inequality.

No. What matters is the absolute standard of living. People want more cool shiny stuff. They don't care if other people have way more cool shiny stuff. Nobody wants to be the least emaciated beggar in a shithole country. They'd rather be the poorest slob in a rich country provided they can afford a lot of beer, pizza, and a 75 inch telly. 

Therefore, we can levy significant taxes on the rich without reducing their incentives, provided that they maintain their relative standing.

You can't levy significant taxes on people who are smarter than you or who have more elastic supply into your jurisdiction. The incidence of the tax will fall on the inelastic factor or else on the consumer. 

India had significant taxes on the rich. They maintained their relative standing. But, they also did very little. If a scion of a business family had the itch to build big new industries, he fucked off to Indonesia or Thailand and did it there. 

In other words, as long as billionaires like Elon Musk and Jeff Bezos understand that such taxation will not alter their rankings among the world’s wealthiest individuals, they will remain motivated to increase their earnings, and the rest of us will reap the rewards of their efforts.

Musk and Bezos were motivated by the ambition to improve their world ranking. If America decides to turn into a Socialist shithole, they will move elsewhere so as to remain ahead of Chinese or Indian or French entrepreneurs. Alternatively, they might just spend more time having sex with super-models or focusing on their own pet projects. 

In short, neoliberals got it wrong: pursuing greater equality without reducing incentives is entirely feasible.

There is no incentive to 'pursue greater equality'. Poor people don't care if Musk is as rich as fuck. We get that he is hella smart and can deliver cool tech. Maybe that stuff is good for the planet or helps the Ukrainians. What is certain is that he isn't a lame ass libtard loser.  

By mitigating inequality and curbing the outsize influence of a few ultra-wealthy individuals, we can establish a fairer society.

Basu can't establish shit. Nor can his students. They may be able to earn a modest living saying 'boo to inequality!' but, meanwhile, some of their peers are getting rich working on the next Amazon or the next Tesla. Consumer surplus matters. Tech can greatly increase it. That is the welfare effect which swamps all others. There's a guy in India named Poonawalla whose wealth increased greatly during COVID because he was producing the vaccine serum. But the billions he made are nothing compared to the trillions in consumer surplus gained by people all around the globe. We don't grudge Poonawalla his wealth any more than we grudge J.K Rowling or Celine Dion her wealth. They generate consumer surplus like nobody's business.  

If we want to save democracy, we cannot afford to wait.

Which democracy has Basu saved? Did he go underground to battle Indira's Emergency? Did he protest when her son succeeded her and then that son's widow succeeded him? Has he expressed any reservations about the moon-calf Rahul remaining the INC's candidate for PM? 

Jimmy Carter said Chavez held 'the best elections in the world'. Chavez certainly tackled inequality and was unafraid to tax the rich. What was the outcome? Democracy got fucked in the ass. Smart Venezuelans ran away. Then more and more followed simply so as to avoid starvation. No doubt, Basu would say this was because of an exogenous shock- viz. the collapse of oil prices. But where there is profit, there is risk. You can't rely on the golden goose delivering more and more golden eggs more particularly if that goose can fly away.