Refugees and resources

Is a wealth tax on the super rich the answer to the problem?

By Prabhat Patnaik
  • Published 15.08.18

Three kinds of argument are usually advanced against allowing an influx of refugees into a country, each of which has been invoked by the ruling party with regard to the so-called 'Bangladeshi influx' into Assam. The first of these sees a security threat to the country arising from such an influx; and the use of the word, 'infiltrator' for these hapless people, which typically conjures up images of ISI-trained terrorists clandestinely crossing from Pakistan into Kashmir to create trouble, is a deliberate and mischievous ploy to underscore this threat. But obviously nobody can seriously believe that four million people living peacefully for years in a particular region, who, let us make the absurd assumption for argument's sake, are all immigrants from Bangladesh, can suddenly pose a security threat, that too when India's relation with that country has been generally free of conflict.

The second argument, which is typically advanced in the European context, emphasizes the threat posed by immigrants to the culture and the way of life of the original inhabitants. This argument, no matter what one thinks of it, can have any pertinence only when the original inhabitants have a homogeneous culture and way of life, while the immigrants represent something different altogether. But Assam itself has always represented a composite culture, housing a large number of dissimilar groups; and immigration from an adjoining region, which happened to get assigned to a different country at the time of Partition, can hardly be seen as the intrusion of a vastly different culture. The Bharatiya Janata Party, of course, defines 'culture' in terms of religion; this, however, is not only baseless, but its acceptance, and any discrimination based upon it, will also undermine the Constitutional foundation of our polity. Even the BJP therefore, while continuing to remain fixated on religion, is aware that it cannot push this argument far.

This is where the third argument comes in, namely that refugees are a burden on the limited resources of their host region; by snatching resources away from the original inhabitants, they reduce the latter to penury. Populations in the third world, despite being more impoverished than the populations in advanced countries, have normally been more hospitable to refugees than the latter. One hears so much about the 'refugee crisis' in Europe, the influx of Middle Eastern and North African immigrants into the European Union. But what is less known is that more than half of the stock of émigrés from countries of the MENA region have migrated to other countries within this region itself, which, despite their own abysmal poverty, have accepted them without fuss.

This generous acceptance on the part of common people, however, is typically disrupted by fascistic or quasi-fascistic elements, fomenting divisive movements with ulterior motives; and such movements find a particularly nourishing soil in a period of economic crisis. The view that the acute misery to which people are subjected, especially in a period of crisis, is the consequence of 'others' coming in and snatching resources away from them finds readier acceptance during such a period.

In fact, it is a hallmark of fascistic and quasi-fascistic movements which, nurtured as they typically are by big business interests, trace the origin of the crisis not to the functioning of the system, but to the existence of an 'other'. Thus a Donald Trump traces the misery of the American workers not to the functioning of neo-liberal capitalism but to the Mexican 'infiltrators' or the Chinese workers 'stealing jobs' from Americans, or to Muslim immigrants being a drag on American resources. All over Europe, there is a similar hue and cry in the midst of that continent's current economic travails, the only difference being that in countries like Britain the 'other', portrayed as a job or resource stealer, consists of Eastern European immigrants, who, coming from European Union countries, have a right to move freely within the Union.

Now, expectedly, the BJP has advanced this very argument in favour of getting rid of 'illegal immigrants', namely that these 'illegal Bangladeshi immigrants' snatch away resources from the local people, and are the cause of their misery. Ironically, this is being said at the very time when the prime minister from the same party openly flaunts his proximity to big industrialists whose wealth has grown by leaps and bounds in the neo-liberal era generally and during the BJP's tenure in office in particular. The ruling party's objective clearly is to appeal to unreason, to bank on a lack of awareness on the part of the people while playing on their fears and frustrations.

To put matters in perspective, consider a simple calculation. Let us make the absurd assumption that all the 40 lakh persons in Assam who do not figure in the final draft of the National Register of Citizens have simply been living off the local inhabitants and have not contributed one iota to the production of goods and services in the region where they reside. Let us also make the extravagant assumption that their average income is the same as the per capita income of the region of their residence (this is obviously untrue since they belong to the bottom segments of the population). But even on these assumptions, if their entire income is to accrue to the rest of the population, then the amount that would so accrue, assuming Assam's per capita GDP in 2017-18 has been Rs 72,000 in round numbers, would be just Rs 28,800 crore.

But a 0.1 per cent wealth tax on the top 1 per cent of private households in the country would fetch at least as much revenue for the government, which could then distribute it among the people in the form of direct transfers. If we assume a wealth-GDP ratio of 4.5 to 1 (which is of the same order as the incremental capital-output ratio), and also make two other very conservative assumptions, namely that private wealth accounts for only two-thirds of the total wealth in the country, and that the top 1 per cent owns 60 per cent of the total private wealth (according to the data provided by Credit Suisse , it is much higher by now), then a 0.1 per cent tax on the wealth of the top 1 per cent of households, precisely the ones with whom Narendra Modi hobnobs with such great pride, would have fetched close to Rs 30,000 crore in 2017-18.

Such a wealth tax, it may be thought, would adversely affect investment and, hence, the GDP growth rate (let us ignore for the moment the desirability of having such growth rates). But this is not true. Since a wealth tax is imposed on all forms of wealth, investment as such, or addition to wealth in the form of capital stock, need not suffer. As for people shifting their wealth out of the country because of such a tax, the non-convertibility of the rupee puts a constraint upon such shifting; and most other countries have a wealth tax unlike India which would discourage such shifts.

The ruling party spokespersons need to explain, if they are so concerned about the poverty of the people, why they would rather deport lakhs of innocent persons for alleviating such poverty than impose a minuscule wealth tax on the super rich.

The author is Professor Emeritus, Centre for Economic Studies, Jawaharlal Nehru University, New Delhi