Rajan warns against rising inequalities within countries

Reserve Bank of India Governor Raghuram Rajan on Saturday cautioned against growing inequalities within countries, even as it is diminishing between the nations. He emphasised on the role of education and healthcare to restore faith in markets in these circumstances. 

He talked of different kind of tolerance in society — about the virtues of money — and took on criticism of money by US political scientist Michael Sandel in his book — What Money Can't Buy: The Moral Limits of the Market. Rajan pointed out that money is a great equalizer and helping Dalits start businesses would do more benefits to them than any kind of other affirmative actions. 

"Today, even well-run market economies seem to be favouring those who already have plenty... The income inequality is on the rise, with some having colossal incomes and others worrying about the next meal," he said in his address at a convocation in Shiv Nadar University in Uttar Pradesh. 

In his address, titled Money and Education, the RBI governor attributed the growing inequalities partly to skills and capabilities have become much more important in well-paid jobs. As such those born in good circumstances have a much better chance at acquiring these. 

"The winner-take-all nature of many occupations, where a few of the most capable entrepreneurs and the best workers take most of the income (think apps, architecture or acting, for example) accentuates the value of early childhood preparation; and hence the benefit of being born to the right parents in the right community," the governor said. 

In these circumstances what can be done to restore faith in markets, he asked and provided solution. He said we have to work to provide effective access to schooling and healthcare for all, a non-discriminating job market with many jobs, equal opportunities for further advancement regardless of gender, race or background. 

All this will increase the perceived legitimacy of wealth and society’s willingness to broaden the areas where it is spent. 

Thoughtful philanthropy can further help enhance society’s acceptance of great wealth, he said. 

The governor's oberservation becomes importat since the International Monetary Fund (IMF) recently warned India and China, the two fastest growing large economies, about rising inequalities.

Rajan countered many observations of Sandel about money. He said  while Sandel's real concern is perhaps with the unfair distribution of money, he seemed to have ignored the virtues of anonymity in money.

In a free market, all it takes to buy what you want is money. "You do not need a pedigree, a great family history, the right table manners, or the right fashionable clothing or looks," he said. 

It is because money has no odour, because it is the great equalizer, that so many people across history have been able to acquire resources and invested them to make the world we live in, Rajan said. 

"Indeed, making it easy for Dalits to start businesses may do more for their social status because money empowers than many other forms of affirmative action. Rather than prohibiting the use of money and wealth, let us think about increasing society’s tolerance for its use," he added.