Higher order of coexistence is needed between the four household segments of society

By Uma Shashikant

It is tough to overlook the inequality. Even as the Internet is flooded with pictures of new recipes being tried out, we hear stories of people going without food. If someone held a mirror to our society, the picture would stay ugly as long as someone goes to bed hungry.

We cannot oversimplify the problem and begin to look at charity as solutions. While the givers may be pleased with their generosity, the takers will feel small. Charity as that explicit and planned activity of support, is but a remedy for inequality driven partly by guilt, and partly by empathy.

Some advocate strict redistribution of wealth. They dislike capitalism for deepening inequality. But robbing the rich to feed the poor hasn’t survived as a sustainable strategy. We cannot destroy the essential incentives for wealth creation, or foster the economies of hiding and hoarding, where accumulating wealth is a crime and riches will be snatched away through taxes. It also creates no incentive for the poor to make the effort to raise themselves from poverty, and creates a culture of entitlement.

Not an easy problem to solve. We dislike the inequalities of capitalism and we know that socialism doesn’t work. We will find some new answers as we go along. What are the personal financial perspectives around these questions of income and wealth?

There are broadly four segments of household income and wealth. The first does not earn enough income to cover the basic needs of food and shelter. Therefore, there is nothing to save, and no accumulated wealth.

The poor who suffer from this inadequacy of income, might have other factors stacked against them. They may not have opportunities for employment. The migrants who have suffered the most in the current crises would not have left the comfort of home if they could find gainful employment. We continue to lean on the wheels of capitalism and competency of governments to get this done.

Poor health and nutrition lead to susceptibility to diseases; lack of facilities for education lead to lower levels of employable skills; and cultural and caste settings may lead to perpetuation of poverty.

Ensuring income adequacy for all is the responsibility of the state. Some governments offer unemployment allowances. Employment opportunity is the antidote to poverty at this level, and we do not know how this can be provided closer to home without migration. Concentration of opportunities in cities is a global phenomenon.

The second is the segment of people who earn enough, but do not save enough to have wealth they can fall back on. Either they do not earn enough, or they are big spenders. We see this problem around us. An otherwise well-to-do family in trouble as the EMIs and credit cards are too much to pay. Or the careless spenders who live for the present, falling short too often.

Saving is an acquired habit. Denial of spending indulgences is required to set money aside. Crises like these convert many who begin to save aggressively after. Making the effort to enhance the income of the household and saving to create wealth are both behavioural changes that households can bring about. Many refer to this segment as aspirational and willing to move to the next level by earning and spending better.

The third segment earns enough and can save consistently. It has wealth to fall back on. However, that wealth is mostly a store of income, not necessarily invested for growth. This is the segment that is smug about its ability to withstand a crisis and confident of its position.

However, the risk to this segment comes from the risks to the income. Maintaining a lifestyle means this segment may find its ability to take shocks limited by how much wealth is there and where it is kept. Slipping into bad times is a risk it faces if income is not protected.

The fourth is the wealthy segment that is not affected by the crisis, as it has enough income and enough wealth, accumulated and grown through investment strategies and business and entrepreneurial ventures. These households can take the plunge in stock markets and commodities in its stride, and have enough to last if the crisis is prolonged.

When one looks at how these segments coexist, we find systems that weave in the other are either absent, or not adequately present. Everyone knows their situation but no one cares. An employer fires employees, keeping an eye on revenue and profit; a regular income earner may not bother much about the livelihoods of unemployed people in his community; a spender may not account for the impact his money decisions have on people he lives with.

We all are like a large swarm of migrants and renters, with no stake in the communities we live in. We move where work and opportunity take us; we make the most of what is on offer; we earn and spend to maximise our desires; and we accumulate wealth without much of a plan for how it might be used effectively by society.

It is not clear if this crisis will show us the path to a higher order coexistence where we care and contribute. The goods and services we buy foster the economy around us. They are the triggers for employment of so many in our community. The goods and services we can offer to people around us hold the key to our income, its stability and our ability to build wealth.

It is the meaningful co-existence of producers and consumers in an ethical set up of care that can stabilise the income and wealth for society. Hopefully this crisis shines the light on the futility of exploitation for narrow ends.

Observe how nature works. The river supports so much life, nurturing abundance and prosperity. We can view it as water that is wasted into the sea; or as water that can take the wastes we drain into it. Maybe we should begin seeing it for what it is: a renewable source that feeds consistently. Trees laden with fruit for birds and bees, animals and humans, tell us the same story. That unbridled abundance for all is not inefficiency. It is nature’s order that can ensure prosperity for all.

(The writer is Chairperson, Centre for Investment Education and Learning)


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