Poverty, the Pope and Mr Piketty: Poverty and income distribution

Economist Jagdish Bhagwati has an interesting proposition for Pope Francis. He has offered to write a joint encyclical with the Pope about what should be done to reduce poverty. “Because the Pope, though good-intentioned, is clueless,” said Bhagwati, who shares a Jesuit connection with him by dint of having attended a Jesuit school. In a keynote lecture that elevated economics from esoteric income evaluations to a humourous engagement with social reality, Bhagwati tested the springboards of economist Thomas Piketty’s feted theory on income redistribution, and addressed the question of how the Pope’s global call to reduce poverty could best be answered.
Piketty – whose monumental book could give Bhagwati hernia if he carried it around, he claimed – has only been repeating what India has been working towards since Independence. “The question of where the money is going and how to bring the bottom 30% up to snuff is something we’ve been working on since my time on the Planning Commission almost 50 years ago,” said the Columbia academic at his session, ‘Poverty, the Pope and Mr Piketty: Poverty and income distribution’.
The Pope is not a hypocrite, he practices what he preaches, unlike poster boys for the green economy, like Al Gore who owns a heated swimming pool. But the Pope is behind the times, Bhagwati noted. “In the last 50 years we have actually managed to reduce poverty, and it’s not through a miracle like manna falling from heaven, but through policy interventions,” he said. Policies not unlike what Prime Minister Modi is currently attempting to do by scaling up the successful Gujarat model of trade and investment to a national level.
The problem of income parity won’t be solved he believes, by making the rich poorer. They can evade taxes, as history shows. “Picketty was also wrong in assuming the top 1% is a static group. One can’t predict what will happen to wealth in the future; there are new people coming into the group.”
An openness to foreign trade would lead to more growth, which would in turn reduce poverty, a correlation that’s supported by sufficient study. “High rates of economic growth are related to high rates of openness to investment. Each spurs the other. Take a country where wives are bad cooks and husbands bad lovers. “What causes what you can’t say,” he chuckled. "Is she a bad cook because he's a bad lover?"
The old leftist idea that growth was a trickle-down strategy, a spillover of the spoils from the table of the rich to the flagstones of the poor, is a notion best turned on its head. “Instead of trickle-down, I’d call it a pull-up strategy, offering people the opportunity to rise above the poverty line," Bhagwati said.
Gurcharan Das, who engaged Bhagwati in conversation following his address, pointed out that the discussion on equality could distract us from the moral imperative to lift people out of poverty, something the Indian government has been doing since the 90s, at the rate of 1% of the population every year, which went up to 1.8% from 2003-7. Bhagwati observed that economic growth helps implement social legislation too. “A woman who want to get a divorce but worries if she’ll get a job to support herself after that will be better served by an economy with sufficient jobs,” he said, underscoring another benefit of growth: “A growing economy doesn’t need higher taxes. Instead, the budget constraints of the government will improve and social spending will rise.”