Jayati Ghosh: Rebalancing Power

In this episode of SystemShift, the renowned development economist, Jayati Ghosh, offers an eye-opening perspective on the different facets of inequality and the need for systemic change to address them, bringing together her interests in international trade and finance, employment patterns in developing countries, as well as issues related to gender and development. Ghosh argues for the need to redress the power imbalances which are reinforcing socially irrational and unjust policies. Through the prisms of gender inequality, social discrimination, and the global power dynamics between countries, Ghosh looks at how relational inequality impacts the ability of individuals or groups to influence the actions of others, affecting their agency and power. She delves into the undervaluing and under-rewarding of care work, to highlight the lack of power and voice that care workers and unpaid caregivers have in society compared to the significant influence of financial institutions and corporations. Ghosh also critiques the worldwide prevalence of crony capitalism and plutocracy, and – as an antidote to despair – she argues the need for mobilisation and collective action to increase the power of those who need it.

Carl Schlyter:
Welcome to this episode of Greenpeace Podcast System Shift.

Today, we’re thrilled to have the development economist Jayati Ghosh to offer her unique perspective on inequality and the need for systemic change. Jayati taught economics at Jawaharlal Nehru University in New Delhi for nearly 35 years, and since January 21, she’s been professor of economics at University of Massachusetts in Amherst. She is co-chair of the Independent Commission for Reform of International Corporate Taxation, and she’s also a member of the U.S. Secretary-General’s High Level Advisory Board on Effective Multilateralism and the World Health Organization’s Council on Economics for Health for All.

Jayati argues that the current explosion of extreme inequalities, environmental destruction and associated increased vulnerability to crises of different kinds are not the result of flaws in our economic system, but stems directly from it. According to Jayati, this economic system is one in which inequality has become the driving force with those who are already powerful, determining the legal and regulatory architecture that ensures their own continued enrichment in power and generating an economic and ecological trajectory that is extremely destructive for most of society.  She uses, for example, the COVID 19 pandemic to highlight not only the undervaluing and under-rewarding of sectors such as care work and unpaid caregivers, but also how the rich elites not only disproportionately shield themselves from the impact, but are even benefiting from this crisis while many millions are devastated. She pinpoints the worldwide prevalence of chronic capitalism and plutocracy and argues the need for mobilization and collective action to increase the power of those who need it. When the economic and financial systems are creations of human minds, we can in fact recreate them. We can change them. We can dismantle the terrible structures and institutions, and we can create better ones.

Jayati argues for a complete restructuring of the ways in which we have organized our economies. Calling for environmental and social justice. A re-balancing of state-market-society nature relations, fair and just transformative fiscal policies and a re-imagined multilateralism based fundamentally on global solidarity.

As always, our aim in this podcast is to inspire our listeners to think critically about the issues we face and envision a fairer, more sustainable world. We hope this conversation with Jayati will challenge your thinking and motivate you to take action towards a more just future. So sit back, relax and join us as we delve into the world of economic system change with one of the leading voices in the field. So without further ado, a warm welcome to you, Jayati.

Jayati Ghosh:
Thank you. It’s a pleasure to be here.

Carl Schlyter:
So what are the latest things you have been doing, research or topics that you have been developing lately?

Jayati Ghosh:
I’ve been looking a lot at the Nobel economy, the international economic architecture and the role that is playing in preventing us as humanity from dealing with some of the central challenges of our time, whether it’s climate change or pandemics. I’ve been involved in several international boards and commissions that are specifically trying to suggest alternatives. I’ve been doing a lot of research work around that as well.

Relational Inequality

Carl Schlyter:
That fits perfectly into the topic of this podcast because we really look for alternatives. I mean, when I studied your work, you also have a feminist perspective in finding these solutions. I think it’s kind of interesting when you talk about relational inequality and how it actually affects the development of the economy and equality. Could you explain this concept a little bit?

Jayati Ghosh:
Yes, sure. People have generally been thinking about inequality in terms of distribution and economists especially, when we talk about inequality, we are thinking about distributional inequality, which is to say who has how many, of different things. Whether it is wealth or assets or income or access to health services, access to education. We’re looking at how all of these are distributed. Yet when you think about it, there is another very important aspect of inequality, which is tending to be ignored by social scientists. But it’s probably more powerful, and that is relational inequality, the ability to influence what someone else does. It reduces the agency of the other person, but it also means that you have power that extends well beyond just what you get as a share of the pie. Of course, it affects your ability to get the share of any pie as well. Gender inequality is a very good example of relational inequality, because typically across societies, men tend to have greater power over women. Over their actions, their mobility, their activities, their freedom, their capabilities. Similarly, you have different other kinds of relational inequality. Employers tend to have greater power over workers in terms of being able to influence their actions and agency. In social discrimination, in India caste, in the United States race, different ethnic groups in different countries. They’re not just different in terms of, let’s say, discrimination, but they’re also different in terms of hierarchy and the ability to influence people and their actions. That’s very important because that has a direct implication for economic activity as well, although we tend not to recognize that. In fact, you can even extend this to the global arena. You can talk about how some countries have power over what other countries can do. The G7 has inordinate power through its own actions on what happens to the rest of the world economy and how they are affected by it. And then therefore, in turn, what they can do. So to take a very current example, the G7 can decide to go in for a very, very loose monetary policy, low interest rates after the global financial crisis. That allows a whole lot of private capital to flow into different countries, poor countries, so-called emerging markets. So suddenly they are flooded with capital, which they may not have expected or know how to use or may not even necessarily want, but because the private markets have decided that they’re attractive, they get this capital. Then when the G7 countries decide that,no, it’s time to tighten monetary policy and raise interest rates and suddenly the capital is leaving. So these countries are then facing a capital flight which is not of their own doing, and not because of their own mistakes. And they find that they’re in debt crises, they have foreign exchange problems, they have domestic financial crises, again, not because of anything they’ve done. So there is a power, a relational power, you could say even that happens between people, between groups and even between countries in the global system.

Article 41 of the Irish Constitution

Carl Schlyter:
It’s actually enshrined in the Irish Constitution article 41. You want to talk about that, too, maybe?

Jayati Ghosh:
Yes, It’s very interesting. I didn’t even realize how extreme that was till I came across it quite by accident. The Irish Constitution actually makes it the duty of the state to ensure that women effectively have to stay at home and look after the family. They put it differently. They say that, you know, women should not have to go out and work, and find employment when their primary duties are towards their family. The state should do everything in its power to ensure that they can fulfill this primary duty. You know what this brings out to me so clearly is how much this social construction, because it’s entirely socially constructed. Yet what is seen as this set of immutable law and of course, the Irish it’s rare, I would say, among Western societies to have it put so blatantly. But it’s very common across most of the world. Deeply patriarchal attitudes, certainly in my own country, India, but across Asia, across many, many African, Latin American countries. There is this presumption that women are the ones who will be having to look after others. When you think about it, the biological part of that is literally the nine months of pregnancy and let’s say the six months after childbirth. So maybe one and a half years of actual physical, biological requirements of a mother. Everything else is socially constructed, but it is such a powerful social construct. It has persisted over millennia and it gets reinforced. Nothing seems to change it, unionism, capitalism, different forms of global finance, different market relations, different state relations. Yet this idea that women are the ones responsible for caring for others persists.

Gender imbalance in the care economy

Carl Schlyter:
So it’s just a social construct that is outdated today, but it’s still present. This is then aggravated and exploited by the current economic system. We saw during the COVID crisis when you needed a lot more health care and the state’s health care was not enough. So families had to take a greater responsibility. And when you have the economic downturn, we can see here also where this exploitation of women’s tendency to take greater responsibility for loving and caring, how that is exploited by the economic system, what can we change about that?

Jayati Ghosh:
There is a fundamental imbalance in the way in which this is constructed, because as I said, the Irish Constitution is explicit, but it’s a social norm that is pervasive across many societies. Girls are brought up to think that, yes, they should be looking after other people. There’s always a lot of discussion about how women are more nurturing and more caring and more loving and all of that and how people need a mother’s care. You know, it’s kind of enervating. Nobody talks about how men should be nurturing and loving. Boys are not even trained, brought up to think along those lines. It’s slightly different now, I think, in the younger generation, but broadly, that’s the way in which these rules are assigned. The difficulty is that there is a very strong emotional element in care. This is an effective element. My colleague Nancy Folbre in the University of Massachusetts Amherst Economics Department, she puts it very well. She says, you care about those whom you care for. You’re not just caring, because, of course, that is the basic thing. This has to be done to then have to be looked after. Elderly people have to be looked after. It’s part of life. People have to be cooked for and houses have to be cleaned. All of that has to happen. But that happens, the allocation of this to women is something that is created by society and continuously impressed so that we all internalize it. Then, of course, the very act of caring. Yes, you do care about those people. So if you have a small infant and you’re not going to say, well, I’m not going to look after this child because society isn’t helping me, or the man in the house is not helping me. If you have an elderly mother and the state denies you any kind of assistance, you’re not going to say well I would just leave her out on the street. You care about them, so you will care for them. Now that means you cannot withdraw that care. It means, therefore, that you do not have the only power of the worker, which is the power to strike. Finally, that’s all workers can do. They can deny their labor. Here is a case where you will not deny that labor because you care about those people. Now, this is something society has used. This is something employers use and this is something the state uses. They know that this will actually be a job that has to be done and you will do it because you care about those people.

This is therefore what drives a lot of the heavy reliance on austerity policies which reduce the sort of provision of care services, because they know that someone in the household, in the community is going to step up and do it. Maybe at a lower level and maybe not as much, but the basics will get done. And therefore I call a lot of macro policy, a lot of economic policy, not gender blind, so much as gendered exploitative. It’s not that you don’t know, you know, and you are able to exploit that.

Carl Schlyter:
Nancy’s book is called “The Rise and Decline of Patriarchal Systems”. How could we bring about the decline of it then?

Jayati Ghosh:
Yes, I told her and said this is a very optimistic title. Of course we all have to be optimists, otherwise, we would all just crawl under our beds. Nancy is arguing that, in fact, things are changing and possibly it’s true in the advanced countries in the richer capitalist, western capitalist world. There are shifts in social patterns. I see this in the younger generation. I see more stay at home dads, for example, with very high achieving wives who are doing lots of interesting things. I see more sharing of domestic work burdens in a lot of young couples. I see that even among the more wealthier elites in some developing countries as well. But in general, I don’t see this broader shift.

Policy frameworks against Gender Inequality

Carl Schlyter:
But what policy could then bring about such a shift you think?

Jayati Ghosh:
Well, the most essential thing is actually recognizing, valuing, rewarding and representing care workers. You know, we basically treat care work as this massive underbelly of our economy. We don’t recognize that it’s the basis on which all recognized economies are resting. Therefore, those who perform it, especially in unpaid form, are undervalued as people and of course have less power because our economies only value anything that is monetary. Our GDP is entirely the sum total of monetary exchanges. Those who do not earn money are therefore also not valued. So basically, feminist economists have been arguing for some time that what you really need to do with regard to the care economy is what we call the five Rs. You have to recognize it first of all, and recognize also includes measuring it. You have to time your services so you know who is spending how much time on what. The results, whenever they’re done, are always very stark. About 70% of unpaid work is done by women and girls globally. It doesn’t exist in the GDP, it’s not there because it’s unpaid. So first of all, we have to recognize it. Then secondly, we have to try and redistribute it. That is to say don’t keep everything to women burdening alone in their homes and communities. We have to distribute this between state and public provision, co-operative provision, private provision and families. Of course, within families ideally redistributed between men and women. Okay, so we have to redistribute this care work. Then we have to actually reward care workers better. Those who are actually in paid care work, because one of the problems with having so much unpaid care is that when you do it as paid employment, that also society undervalues. They say this is work done by three, four women so why should a nurse get that much? And there’s an assumption that the less skilled and not so valued. We saw this during the pandemic. There was a lot of pretend celebration of care workers, you know, banging of boards and singing, applauding from windows. 

Jayati Ghosh:
Exactly. All of that. But they were not paid better. They had terrible conditions. They suffered immensely. They have disproportionate rates of dying through the pandemic. Subsequently,things have remained terrible for them. We have to reward them. We have to also represent them. We have to actually make sure they have a voice in the policies that matter for them.

Investing in health care workers

Carl Schlyter:
But then when we talk about rewarding, we also saw during the pandemic how we had endless amounts of billions to help banks and financial institutions. How come we don’t have the same funds when we come to rewarding our health care workers?

Jayati Ghosh:
We’re back to relational power again. Basically, the huge mass of workers, not just the paid workers, but the unpaid workers in our societies do not have power. They don’t have a voice and they don’t have power. And as a result, those who have power are able to influence the policies of states. We are told that this bank is too big to fail or that the bank looks not big enough to fail, but it might have some domino effects on other banks. We have to rescue them. We find that enormous amounts are available to save financial players, to save large corporations. That continues as we speak. to provide subsidies for fossil fuel companies. Huge amounts are available. Are these funds even considered for insuring living wages for care workers? No. Are they provided for reducing the care work of unpaid workers? For example, women across India are having to walk miles to fetch water. No.  That’s not an essential investment. It’s going to happen anyway. These women will be doing it, so why should we bother? So there is a deep aspect of relational power here. Some of it has to do with also the lack of adequate gender representation at so many levels of policy making. I’m not saying that it’s going to solve the problem, but it is certainly the case that, you know, men who don’t do it and don’t think about this as work, don’t recognize the significance of this in economic policy. So you need enough women out there, not one or two, not the tokens, but enough a minimum of a third to a half.

The need for Mobilization and Social Action

Carl Schlyter:
What in our current economic setup could reduce the power of those who have power and increase the power of those who need more power.

Jayati Ghosh:
It can only happen through large scale mobilization and association. You know, we are talking about the extreme plutocracy, really that is prevailing across the world today, and it’s very evident in some countries. In my own country chronic capitalism is rampant, for example. But it’s true also in the United States in most of Europe, where a large corporations, particularly in finance, the digital corporations and some of the very large multinationals introduction, are able to influence government policies, regulations, fiscal strategies in their own favor. They also control the media so people get fed the same thing over and over again, so they start believing it. The myth, for example, that when there’s inflation, even if it just push inflation, that you have to raise interest rates. There’s no option but to raise interest rates, make people’s mortgages go up, make them get thrown out of their homes, make them lose jobs, have more unemployment. In other words, people who could lose jobs themselves are trained to want unemployment as a way of reducing inflation, which is a lie. But it is so continuously repeated in the media. So this is, in a sense, what we’re up against. We’ve got this massive thing loaded against us. How do we confront it? Only by cooperating, by creating coalitions, by mobilizing hugely. It has to be people power versus corporate power, but that people power has to actually be willing to work together.

Carl Schlyter:
And it’s not enough to sit and click likes on a Facebook thing. You actually need people activating themselves physically, also going out on the streets, meeting each other.

Jayati Ghosh:
Certainly you need people on the streets and meeting each other. But also you need a better understanding of what specifically we must demand. I’ve been to some of those Fridays For Future marches by Greta Thundberg and others. It was wonderful to see that energy, enthusiasm, commitment, and passion. But, you know, it’s a very general demand. Do something. That’s not good enough. You know, you need to say, why have you done X, Y, Z? Why are you not doing A, B, C? We need very specific demands and they do exist. But even those who care, even those who want to do something, haven’t been fully informed about what their own governments are doing that is going the other way. What their own governments could do that is relatively easy to do, that could shift things. So we need to spread knowledge about specific policies, their implications and the alternatives that are available. I think that’s the missing link between increasingly popular mobilization around issues like climate change and inequality. But the specific actions that then have to be either prevented or undertaken. 

Impact of inflation in India

Carl Schlyter:
What have you seen now in India as a result of this inflation and this lack of purchasing power among people?

Jayati Ghosh:
India is unbelievably one of the countries that has some of the worst nutrition indicators in the world. Some states in particular, because you know we are a very disparate country with many different regions and so on, if they were countries, they would be ranking in the bottom five. Down there with Chad and Somalia. We have really terrible nutrition indicators. Which is a comment on our ability in India to use inequality, to be blind to massive inequality and to really, not consider how our growth has been so incredibly concentrated that really it’s the top 10% or at most the top 20%, that have benefited even over the last decade. We saw during the pandemic a massive destruction of livelihoods. Before that, we had other crazy policy decisions. We had an unbelievable demonetization experiment in November 2016, where 86% of the currency in circulation was suddenly just declared illegal. In a country where 95% of all transactions were in cash and the informal economy, that’s 85% of all workers, runs entirely on cash. And so, you know, everybody was just completely thrown. It led to devastation of the rural economy and informal workers, casual workers. Then you had the pandemic. We had a lockdown with 4 hours notice and it was treated like a military curfew. You would be shot if you were out on the road with 4 hours notice, no time to prepare, no time to get medicines, no time to get provisions, no time to do anything. On a population with state governments themselves not even warned in advance. It was ridiculous, but it meant, again, informal activities were completely devastated. And we have almost no social protection aid to so many. 90% of our workers are informal without any social protection. There’s some food rations provided through the public distribution system, but a lot of people, at least 150 million poor people, are left out of that. So it was a mess and it’s remained a mess. So, you know, we’ve had so-called recovery. Everybody’s talking about how India is now a fast growing economy because we’ve collapsed so much, we declined so much during the pandemic that now we’re getting recovery. But it’s really a recovery based on that top 10 or 20%. Real wages are lower than they were before the pandemic, and that was already flat over the past decade. Nutrition indicators are terrible, and children’s nutrition has been so badly affected and that has terrible implications for the future development. We’ve had very terrible indicators for women’s recognized employment participation. Most of our women now work unpaid work at home, including things like fetching water, fetching your wood, you know, kitchen gardening, in addition to all the care work and so on. We really have a very unequal economy in which there’s already significant deprivation and hunger and income poverty. Then we’ve had inadequate attempts to provide the most minimal social protection at a time when global food and fuel prices have been going up.

Capitalism and Social protection

Carl Schlyter:
Isn’t that actually a key? Because providing running water, providing basic social help and services to people, wouldn’t that be an indication of liberating many women from many hours of unpaid work?

Jayati Ghosh:
Absolutely. That’s precisely the point. And why hasn’t it been done in 75 years, in all these years since independence? Why has this been such a major policy priority? Because it gets done anyway. That’s the critical thing. There’s a deep cynicism embedded in public policy where you can assume that families are going to cope somehow with the other. And yes, women will have to make many, many trips to the well or to the river. In fact, they’re making more and more because water sources are drying up. But fine they’re going to do it. So we will eventually get down to this. But it’s not a top and immediate priority.

Carl Schlyter:
But isn’t this actually rather indicative of today’s capitalist system where things external effects are ignored, might be biodiversity, might be climate, might be other environmental indications, might be social implications? How can we rein in this system within the system limits of equality or biodiversity or climate?

Jayati Ghosh:
Well, you know, these are not things external to the system. These are aspects of nature and social relationships that are actively exploited by the system. Capitalism is a very extractive system and it’s also a bit like an octopus. It just sort of takes over and grabs everything around it. So if it finds a very discriminating social system like caste, perfect you can use that to create segmented labor markets. If you find lots of gender hierarchies and discrimination, excellent. Once again, segmented labor markets, unpaid labor, and different types of exploitation can all be used. So capitalism is a system that relies on all of these different social relationships and relationships with nature.

Limits to growth: Alternatives for the future

Carl Schlyter:
So if we want to change this, how do we go about, do we go about from underneath and reducing these inequalities, or do we need to attack the top of the  financial system and regulations as such? Or what’s the way forward? I mean, including what we said before about mass mobilization, of course.

Jayati Ghosh:
Well it’s every possible way. In other words, it’s not only one thing that has to be dealt with, because as we’ve said, the problem is massive. I am not one who says that we have to wait for the final end of capitalism and then we fix things. We have to chip away at whatever we can. So I’ve been involved in two recent attempts to suggest sort of larger alternatives, and I just talk a little bit about both. One of them is a report called Earth For All, which is a report by the Transformational Economics Commission of the Club of Rome. Now, the Club of Rome, you may remember, produced this very famous book, Limits to Growth in 1972. 50 years later, it is an attempt to look at the last 50 years and consider what lies ahead. Two of the original authors are also part of this, and I was proud to be associated with this. What’s disturbing is that a lot of those original projections came true. They actually have been validated by subsequent reality. So now there are further simulations and projections which are pretty dire. In fact, there’s an over-optimism in my mind, considering business as usual. It’s over optimistic because they haven’t really planned for the absolute planetary catastrophes that would happen with two degrees plus. But nonetheless, there’s a business as usual scenario. There were several scenarios, and then we chose one, which we call the giant leap forward. To change things, transform things. And we argued that this requires five major transformations. The first is the elimination of poverty, because the whole idea that dealing with the environment and climate change requires lack of development and for some people to stay poor, etc. That’s nonsense. So the elimination of poverty; reduction of inequality, very significant reduction of inequality; the empowerment of women; the transformation of food systems, and the energy transformation which essentially relies on much greater renewable energy and electrification of as much as possible based on renewable energy. We’ve talked about the different pathways for these five transformations, which are all obviously interrelated. You don’t do one differently from another. Now, all of this, of course, requires local, national, regional strategies, but it also requires an international architecture. In that respect, I have been involved with another board. 

The Secretary General of the UN setup a board on effective multilateralism. It was something that came out of his report, Our Common Agenda, and it’s supposed to suggest some strategies for the Summit of the Future which will be held next year. We’ve just submitted it a few weeks ago and in fact, today, a bit later, there will be a discussion of this. Responses to this by Member States of the UN and NGOs and other participants. In that report, we have looked at four elements. We’ve looked at the issues around planetary governance and nature; we’ve looked at international financial architecture; we’ve looked at digital governance and issues of peace and security. These are the areas that the Secretary-General also was particularly keen on. I am really focusing right now on the first two. If you look at, for example, everything I mentioned about these five transformations, they cannot happen without a major dramatic re-haul of our international financial and economic architecture. It requires big changes in how we govern finance, how we control and regulate internal and cross-border finance, and how much we allow large financial players to really hold the rest of the economy to ransom, which is what’s happening at the moment. It requires major changes in the international financial institutions. They’re really not fit for purpose today. They’re not serving the things that they were set up for, and they are not relevant for the kinds of challenges that we face today. The climate change challenge, the pandemic challenge, they’re not really up to the mark. They’re not flexible enough.

Carl Schlyter:
Or they were designed to just increase growth using debt all the time.

Jayati Ghosh:
Well and not even achieve growth. I mean, I think growth is a terrible aim. I don’t think growth is the relevant aim at all. The point is that even that is not achieved, because they must adapt, right? They can’t deal with debt crises, they can’t deal with a whole bunch of things. So there are many areas in which we’ve made very specific recommendations of what has to change, both to make it more inclusive and more democratic, really in its functioning, but also just to prevent some of the really bad stuff and the bad stuff continues unabated. 

Wealth Redistribution

Carl Schlyter:
So how do we make people leave poverty without destroying the planet and without exploiting another group under them?

Jayati Ghosh:
You know, what’s very interesting is that the real destruction of nature, the planet, the environment, etc. doesn’t come from just average incomes. It comes from the rich. So whether you’re looking at carbon emissions, half of all carbon emissions today come from the top 10% richest people on the planet, which are mostly in Europe and the U.S., but they’re also in China, India, Brazil, and Russia. So it’s the rich. We have to really do something about inequality. That’s why controlling inequality is so essential. In fact carbon emissions is a good proxy for all other exploitation of nature. The rich countries today got rich not just by exploiting people, but by exploiting all of the world’s resources. By exploiting land and primary products everywhere and mineral resources and waters and everything. So how do we then ensure that everybody in the world can have a minimally decent standard of living by focusing on bringing up those? Among the interesting data that came out from the various modeling exercises of the Club of Rome was that just to meet the basic needs of your broad population. Most countries don’t really achieve that until they get to about $15,000 per capita. Right? We should say that pretty much all of the advanced economies, and a lot of the middle income countries, you would say that there isn’t extreme poverty of the kind that we know in India or sub-Saharan Africa. People have got the minimum basic standards of living, and that happens with around $15,000 per capita. Countries below that, yes, you definitely need to keep growing GDP as well. Although I think GDP is a terrible indicator, it has to be a better distributed GDP. But yes, it has to keep growing. For the other economies in the world. It’s not necessarily GDP that needs to grow. You have to think of the things that make quality of life better and focus on those. Adequate nutritious food, access to good health facilities, access to good education, access to the public spaces, public parks, public museums, public events. Abilities to socialize, to have relational activities. These are things that improve quality of life, relatively few of them require increased GDP. You could have a terrible polluting, congesting, disastrous, unhealthy system of privatized transport, as we have in most of our countries and in Asia today, for example, that would generate a lot more GDP than a clean, green electrified system of public transport. You can provide a better quality of life if you’ve changed the directions of investment. Do you remember when there was the Occupy movement, the 99% against the 1%? Since then, most inequality rates have dramatically increased since the Occupy movement. So really, we’ve just allowed it to go berserk and it has to be reined in. It’s gone beyond anything minor and it’s completely dysfunctional. So we really have to rein in this massive wealth inequality. There are many ways of doing it. Wealth taxation, forcing countries to make asset registries and share the information across countries so you can tax people’s wealth wherever they hold it. You can actually make sure that multinational corporations pay the same tax rates as domestic corporations by reducing that ability to shift the profits around different jurisdictions. These are obvious low hanging fruit, yet countries don’t do it because they’re all influenced by big corporate lobbies. That’s why we need people power.

Carl Schlyter:
It’s always more difficult also to push through redistribution schemes rather than actually a pre-distribution scheme when this inequality is not permitted from the beginning. Like the financial architecture is made such as this, extreme inequality will not even happen as such. 

Jayati Ghosh:
There are some parts of this financial architecture which are just mind boggling in how they happen to all, let’s take the idea of share buybacks. Why should a company be allowed to buy back its shares? What’s the purpose? What is gained? Nothing. The only people who benefit are shareholders because their value goes up and the managers who gain in stock options, no one else benefits. It doesn’t lead to greater investment. In fact, it reduces investment. It reduces investments in R&D. Pfizer, for example, has spent more in share buybacks, five times more in share buybacks than it just spent in R&D over the last 30 years. It’s got 48 billion out of the vaccine, which was entirely funded by public support. 

Commodity Futures

Carl Schlyter:
When Ukraine was invaded by Russia you saw that the majority of all wheat futures contracts that were born, were born by bankers. Setting up paper contracts with no intention whatsoever to trade in wheat. Just speculate and that actually triggered inflation pressure all over the globe.

Jayati Ghosh:
Exactly. Again, why is that allowed? Why are financial players, allowed to trade in commodity futures? There used to be a rule, a perfectly decent rule that you could trade in a commodity future only if you have an active interest in that. So let’s say an aviation company that buys fuel will be trading in the oil market. Why should a financial company be trading in the oil market?

Carl Schlyter:
Well, the purpose, I think, was after the dot-com bubble in the U.S., many banks were hanging loose and then they deregulated this for them to increase profits. I think that was the original reason actually, 20 years ago.

Jayati Ghosh:
Well, exactly. It’s all designed to benefit the financial sector, and that doesn’t benefit anyone else in the economy. It’s all a myth that we need finance to explode in this way. In fact, the greater the size of the financial sector, the more fragile and vulnerable the rest of the economy is. So, you know, we think that all this has to happen, but these are all creations of human minds.

How could the new financial architecture look like?

Carl Schlyter:
But isn’t that hopeful, though? Isn’t that hopeful? Because then it means we can change them?

Jayati Ghosh:
That’s precisely my point. If these are creations of human minds, we can in fact recreate them. We can dismantle terrible structures and institutions, and we can create better ones.

Carl Schlyter:
What would a better structure look like? Like if you try to vision beyond what is written in the different reports you have been active in lately. Just like if you have an elevator pitch for, How could the new financial architecture look like? What would you say then?

Jayati Ghosh:
I would say that I would want finance to be doing what it was meant to do. Which is to serve as a bridge between savers and investors, provide a reliable, secure savings function for those who need it, and a secure and reliable means of financing productive investment. Which really means good old basic, plain vanilla banking. You know, where your banks were taking deposits and lending out for investors. What we have today is a very, very complex system in which you financialized pretty much everything. The idea is that you’ve then created layers and layers of intermediaries, all of whom are taking their cuts, their fees, their commissions, their shares, and then they’re playing among themselves to create these bubbles. These bubbles then create an illusion of wealth and prosperity. When they burst, that cost is borne by the real economy. But when they are growing, the benefits are taken only by this small group of people involved in finance.

The blindness to international suffering

Carl Schlyter:
If you would say what are the most unknown negative impacts of the economic system from the West on the South? What are people least aware of?

Jayati Ghosh:
You know, I find people in the advanced economies are pretty much unaware of everything. I’m sorry to say this, they have no idea. You think, oh my God, we have such a cost of living crisis. We can’t afford the fancy bread anymore, or we can’t take our second holiday. They have no idea of the extreme precarity, the material insecurity, the absolute hunger that the bottom half of the global population faces on a daily basis, not even in a crisis period, on a daily basis. I think there’s a real ignorance of the extremely dire material conditions of most of the world. 

Carl Schlyter:
How can that be? How can we be blind for such extreme suffering?

Jayati Ghosh:
You know, the way in which it’s presented in the media here, there are extreme cases. So there would be a famine in the Sahel and you’ll see pictures of starving babies. Then you will find aid being flown in by a few nice white Samaritans, distributing food among these desperately starving little babies with big bellies and so on. Then it’ll blow over and you’ll move on to the next thing. There will be no recognition and there is no recognition of the structural relationships of trade, investment and exploitation. Not just in historical terms, but currently that are enabling that continuous poverty or that continuous proneness to famines, to other disasters. The lack of any capacity to protect after, let’s say, in Pakistan, you had major floods destroying something like 16% of the assets and international support minimal. Now they’re turning around and going to the IMF, begging for some relief and the IMF says, okay, we’ll give you relief but first you get rid of the subsidy you’re giving to poor families for electricity.

Carl Schlyter:
So historically, we have seen slavery. We have seen mass murdering and genocides. And then today, 100 years later or so, we start realizing, okay, that was bad. How can we fast forward this? That is bad logic so we stop doing it now.

Jayati Ghosh:
Well, yes, I’m sorry to say it’s still happening now. Look at what happened during the pandemic with vaccines. There was a vaccine grab by the rich countries. The US took five times what it needed. Canada bought 11 times what it needed. European countries, anywhere between 2 to 6 times what they needed. Then when they had a whole bunch that has to be destroyed or is about to expire, then you send it off to developing countries as a great gesture and it arrives two weeks before the expiry date. Anyone who does vaccination knows that you cannot use vaccines when they arrive at the port two weeks before expiry date. So there was that vaccine grab. There was the fact that you prevented the big pharma companies based in the North from sharing the technologies. You allowed them to keep the intellectual property rights for vaccine knowledge that was paid for by public subsidies. That means they controlled production and they charged very high prices, both to taxpayers in the north and to developing countries. In fact, it was really disgusting that during the pandemic, attempts to waive the TRIPS treaty just for the pandemic related pharmaceuticals, was blocked continuously by European countries.

Carl Schlyter:
This was not even discussed here in public.

Jayati Ghosh:
That’s my point. So, you know, when you say what needs to change in terms of knowledge, I do find that people in advanced countries are incredibly poorly informed about what’s happening in the rest of the world, or even their own governments’ roles in creating those inequalities.

Carl Schlyter:
That is exactly why it was such a great pleasure to have you here, Jayati, because you actually opened a few eyes, I hope, in this podcast episode.

Jayati Ghosh:
Thank you so much, it was a very interesting discussion and a pleasure to talk with you.

Jayati Ghosh taught economics at Jawaharlal Nehru University, New Delhi for nearly 35 years, and since January 2021 has been Professor of economics at the University of Massachusetts Amherst. She is co-chair of the Independent Commission for the Reform of International Corporate Taxation and a member of the UN Secretary-general’s High-Level Advisory Board on Effective Multilateralism and the World Health Organization’s Council on the Economics of Health for All.