There is an
interesting podcast on Freakonomics about the inequality and compensating
inequality. The link for the podcast can be found here. It is a
two part podcast, the second of which is being awaited. But given the
trajectory and the points of view expressed in the first of the series, some
points could be discerned and can be discussed at some length in this post.
There is no
doubt about the deeply embedded racial and class inequality that persists not
just in the US but also across Europe, Australia and Canada among other
countries. These inequalities have not arisen out of recent events but are
deeply interlinked to the historical trajectories. In Australia, the
inequalities are linked to the White treatment of the Aborigines while in New
Zealand, the Maoris have suffered historical injustices. The White Man’s Burden
might have been formulated by Kipling but was in practice for decades before.
In fact Karl Marx advocated his own version of White Man’s Burden when he
sought to defend the British Rule in India in 1852 by referring to his
historical duty of civilising the Indians who were stuck worshipping ‘monkeys’.
In the US, it was not just the Blacks or the African Americans but the Native
Americans too suffered as they did in neighbouring Canada too. The abolition of
slavery rather ending the inequalities led to another form of inequality
emerging, an instance being the Jim Crow laws.
Inequalities
caused by past actions move farther away from the normal thus accentuating and
widening the differences. The causes could be natural or induced. There are
occasions perhaps when some exercise of individual preference independent of
others result in an aggregate that is diametrically opposite of the intended
objective result in natural inequalities building. Segregation theories
propounded by Schelling, Becker etc. refer to these natural issues. Some
instances wherein these differences might arise naturally and unintentionally
are discussed in the post “The
Economics of Segregation”.
There are other
occasions when inequalities are the outcome of induced and intended decisions. Either
way these differences across strata when viewed through the prism of social or
economic are an outcome of a path dependency. The path dependency might have
been unintentional something like Columbus discovery of the US. Alternatively,
the policies deliberately intended to promote socio-economic imbalances in
favour of certain social section generate a path dependency that might be
difficult to bridge. There might appear to inefficient path to take but it
might appear a deviation from the current might result in sub-optimal outcomes.
These are probably relevant in the unintended path dependencies. Yet in the
context of an induced inequality across social sections, the continuation of
the current path in the disguise of possible sub-optimal outcome through course
correction is without doubt indefensible. The Freakonomics post essentially
targets this induced segregation that is at the root cause of the current round
of the racial conflict in the US. George Floyd was not an isolated incident or
new phenomenon but deeply rooted in government policies undertaken over decades
or centuries.
The focus of the
podcast is on the racial inequities that have crept up in the US and the
possible solutions to eliminate the disproportions. There are examples taken up
to illustrate how inequalities are induced. The first example is from totally
unrelated field like women’s soccer. Women’s soccer was discouraged at the
beginning of the twentieth century. The First World War saw men going out to
war while women managed the factories. It was in these factories that the women
began to play soccer and soon began to attract attention and crowds. By 1920,
the women’s football match attracted a crowd of more than 50,000. This was
something unheard even in men’s football. Therefore, the men began their
countermove to eliminate the possible competition from women. The Football
Association (FA) which ran UK soccer banned women’s soccer on allegedly health
grounds and used their power to force FIFA, the international governing body to
follow suit. This meant women had practically no avenues to play soccer till
the ban was lifted in 1971. By then, a lot of water would have flown through
the Thames thus creating permanent inequity between men’s and women’s soccer.
The roots of the current pay dispute by women soccer players in the US can be
traced to this historical injustice suffered by women soccer players across the
world.
Analogous to the
same is the Federal Housing Policy announced by Frank Roosevelt as part of New
Deal. The New Deal promised ease of housing ownership. To create employment,
housing construction got a boost. Among the incentives were interest rate
relaxations as with the down payments. There were greater incentives for the
Veterans returning from War. Yet, in this entire exercise the African American
community found itself at a disadvantage. In fact in some townships in New York
among other places, the blacks were explicitly prohibited from ownership. The developer
had to sign a deal with the Federal Housing Agency not to sell housing units to
the African Americans and going further to prohibit resale to the African
American community. Thus there was direct induced mechanism to exclude Blacks
from house ownership.
In economics,
the current consumption is a function of wealth and income. Income might be a
flow variable thus subject to uncertainties but wealth is a stock variable that
enables the level of marginal propensity to consume. These housing units when
passed to generations appreciated tremendously in value thus enhancing wealth
thus widening the differences that already were in existence. Current wealth
and thus marginal propensity to consume is a function of past wealth and
retention of past wealth. These are perhaps the key causes of the emergent
inequities.
The solution
that seems to be floating around many circles is the reparations. There are
injustices and redressed needs compensation to those disadvantaged by these prejudices.
Yet, there are many dynamics at work. While historically reparations have been
imposed from Napoleon to Versailles to post World War II. Yet the context was
geopolitical and the unit was the country and the victim too was another
country. Herein, the reparation will have to be made to a community that is perceived
victim of past play and the current government has to pay for the same. There are
dimensions such as the scale of payment and its possible impact, the efficacy
of such reparation, the groups that would be the beneficiaries of such
reparations and the precedence it sets not just for the future but for other
countries as well. Should India demand reparations from Britain for colonial
resource and human exploitation? These need detailed analysis something that
can be taken up in subsequent posts.
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