The three US based economists who got Nobel Prize for 2024 for their research on historical economic inequality among post-colonial states colonized by Europeans have laid focus on inclusive socio-political institutions practising democratic governance to ensure prosperity of nations.The increasing global inequality ,wealth difference between countries show a clear role of societal institutions that helped in shaping the growth and distribution trajectory of nations. The three researchers say if the institutions are non-inclusive and extractive in nature and managed by elites without political commitment to people then the result is not towards a change for the better. Societies which are not recognizing rule of law and democratic principles over decision making power do not lead to growth.
James A Robinson,University of Chicago and Simon Johnson both are British American and Daron Acemoglu ,Turkish -American, works at MIT, were recognized for their work that unearths the causes of global inequality continuing till to day and identifies the non-economic factors such as societal institutions and political governance including economic systems having much to do with economic growth and prosperity of nations.
Their articles and books -The Colonial origin of comparative development: An empirical investigation(2001), and why Nations fail, the origins of power,prosperity and poverty(2012) show how the different role of post 16th century Europeans colonizers impact the prosperity of nations , how they played a role in building inclusive political and economic systems similar to their own countries for their long term benefit and in the reverse the colonizers also exploited the native population and extracted natural resources for their benefit. The colonizers were more influenced by their mortality rate in those days, the colonies where they could not settle due to a number of factors such as diseases and fear of natives and instead, set up extractive institutions to serve their purpose that impacted growth.
The historical processes in setting up institutions relevant for socio-political and social-economic progress has been very vital. It is being said that non-economic factors are equally responsible for economic growth and the distribution of wealth is also equally important. The democratic institutions which frame the policies and take decisions on behalf of the people are responsible for economic progress.
There are exceptions too such as China having a different political setup may not be similar to other democracies . The research on inequality will help people to think the various causes of inequality and take informed decisions while they are choosing their representative in democracies. India which despite experiencing a long colonial past have managed to move ahead with growth but the internal distribution mechanism in the country is not inclusive because of graded unequal caste based social systems and weak economic policies of successive democratically elected governments which are not radical but mostly influenced to serve upper class social elites and crony capitalism.
There are many forms of inequality in the world that are based on colour ,caste ,social identities ,gender and most importantly unequal ownership over productive assets such as employment , income, land ,education and capital. The wealth and income as well as consumption differences between countries of the world have been increasing.The economic situation during colonial era has not improved much in post-colonial time; rather the new challenges of Neocolonialism has emerged which has been influencing the economic agenda of poor and developing nations in form of unfair trade , dollar dominance exchange rate , debt, and diplomatic interventions. The world is witnessing new forms of political challenges such as war,narrow nationalism ,revival of religious fundamentalism,racism, communalism, xenophobia, emigration and domination of rich nations over the resources of poor countries and increasing interfering role of transnational corporations and financial institutions in the economic affairs of developing nations. The corporations often influence the political agenda and economic policies of a country which is a danger to democracy and in building inclusive societies. Political institutions ,constitutional bodies , are often managed and manipulated to serve the interest of the ruling elites, not the masses who mandate them.
Today ,the income gap between the richest and poorest countries goes unabated and how to reduce the ever growing gap is one of the major challenges.The GDP per capita of the richest 20 percent of the countries of the world is now about 30 times richer than the poorest 20 percent countries. The recent IBRD/ World Bank report poverty ,prosperity and planet report 2024,Pathways out of the poly-crisis -showed that the world’s 26 percent of the poor countries is home to 40 percent of its most poverty stricken people. About 1 in 10 people globally is multidimensionally poor. The report says global poverty reduction has slowed to a near standstill and about 9 percent of the world lives in extreme poverty, living on less than 2.15 dollar as income or consumption per person per day, based on purchasing power parity dollars of 2017. People living in poverty are from rural areas and with less education.The poverty in low income countries is greater than before the COVID-19. If inclusive growth and distribution does not take place it will take decades to eradicate extreme poverty. The WB suggested to improve the income of labour to create more jobs and investment on education and skill along with infrastructure and basic services to overcome the crisis. For a global fight against poverty, equality among nations is highly required.
Manas Jena ,social activist ,writer and columnist based in Bhubaneswar
