Times They Are A Changin': The New Wealth of Nations

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[L-R: Bunty Chand, Dr. Surjit Bhalla and Dr. Rajiv Lall]

On December 4, Asia Society India Centre hosted Dr. Surjit Bhalla, Member of the Prime Minister’s Economic Advisory Council and Dr. Rajiv Lall, Founding Managing Director and CEO of IDFC Bank, for a discussion around Bhalla’s latest book, The New Wealth of Nations.

Dr. Bhalla arrives at an innovative method to analyse wealth and income distribution by making the argument that education is, in essence, wealth.  The spread of education is the fundamental reason why developing nations like China and India have grown at remarkable rates since the 1980s. To stress the importance of these growth rates, Dr. Lall asked the audience if they thought that income inequality has increased or decreased over the past few decades. While the audience voted overwhelmingly in favour of the former, Dr. Bhalla stressed that global income inequality is at its lowest recorded since 1870. This, again, he attributed to the global spread of education, especially in the developing world.

Steering the discussion towards current affairs, Dr. Lall enquired whether the rise of Trump, and similar nationalistic movements in the West can be explained by education and income disparity. In response, Dr. Bhalla explained how those who had college degrees saw incomes rise by about 1% per annum since the 1980s, while those who didn’t, saw their real wages decline annually. This disparity, coupled with the fact that the lower wages and availability of labour meant that jobs and businesses moved to countries like China, increased resentment amongst the lower income classes. All this while, the upper class benefitted due to their rise in income, and the drop in prices of goods due to outsourcing to developing countries. This dichotomy eventually led to the “Trump phenomenon”, as we know it.

In another interesting exchange, Dr. Bhalla argued against the validity of famed French economist Thomas Piketty’s conclusion in a recent paper that inequality in India is one of the worst in the world. He explained that Piketty’s model makes incorrect assumptions about Indian savings behaviour, and that he is much more optimistic about income inequality in India. The discussion then moved towards addressing the gender gap in the workforce, and how education has empowered women. Citing how markets don’t discriminate based on gender, Dr. Bhalla was optimistic about the increase in the percentage of women in the workforce, especially in boardrooms of corporate companies. The trend is likely to improve, given the rise in education attainment in women, and provided a change in attitude among Indians.

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