Why there’s an urgent need to curb ‘wealth obesity’

Thursday July 11 2019



Professor Zulfiqarali Premji

Professor Zulfiqarali Premji 

The term ‘wealth obesity’ here refers to an excessive wealth disorder: the problems caused by extreme concentration of wealth in a few individuals or institutions.

In this piece, I focus on the policy and political distortions usually created by inordinate inequality in society.

I’m not against people getting rich. In fact, I totally with President John Magufuli that he’d like to see more Tanzanian billionaires created. But, in my view, this should go hand-in-hand with significant poverty reduction across the board.

If there will not be perceptible poverty reduction, then Tanzania will have created an affluent class of a few people with ‘wealth obesity’ – in contrast with an overwhelming proletariat masses!

The issue is twofold: how the wealth was acquired in the first place; and, secondly: how one spends it.

One example of unacceptable conspicuous consumption in some developed countries is that they do have gold-plated toilets, and donate loudspeakers to mosques in third-world countries where children are dying of malnutrition! This is inhuman.

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While popular discourse has concentrated on the really affluent ‘one per cent,’ at issue here is the role of the 0.1 per cent – or, maybe, the 0.01 per cent: the filthy rich – not the middle/working class. This is really a tiny group, but one that exerts huge influence over policy.

Where does this influence come from, pray? People often talk about campaign contributions; but, those are only one channel.

In fact, there are at least four ways in which the financial resources of the affluent ‘0.1 per cent’ distort policy priorities:

• Raw corruption: We like to think that simple bribery of politicians isn’t an important factor. But, it’s surely a much bigger deal than we think.

• Soft corruption: These are the various ways – short of direct bribery – in which politicians, public officials and people with policy influence stand to gain financially by promoting policies that serve the interests of the wealthy. ‘Soft corruption’ includes the ‘revolving door’ between public service and private-sector employment; think-tank fellowships; fees on the lecture circuit, etc.

• Campaign contributions: These matter – and are responsible for creating more corruption.

• Defining the agenda: Through a variety of channels – media ownership, think-tanks and the simple tendency to assume that being rich also means being wise – the affluent ‘0.1 per cent’ have an extraordinary ability to set the agenda for policy formulation in ways that can be sharply at odds with both a reasonable assessment of priorities and public opinion more generally.

There’s no reason to believe that the policy preferences of the wealthy are based on any superior understanding of how the world works.

The wealthy, on average, push for policies that benefit them, even if they hurt the economy. The sheer wealth of the wealthy is what enables them to get a lot of what they want.

So, reducing the extreme concentration of wealth isn’t just desirable on socioeconomic grounds; it’s also a necessary step to a healthier political system.

Clearly, Society at large needs to intervene. Excessive wealth disorder is wrecking lives. Any serious policy agenda on combating inequality by raising the living standards of all must focus upon the ultra-rich who wield disproportionate financial power.

What can we do? We need to adopt a plutocracy-prevention programme, with functional policies on reducing the power of the ‘0.1 per cent’ elite.

There should be an effective statutory strategy to reduce gross inequality. Currently, the gist in Tanzania is about reducing poverty. This isn’t the same as reducing (financial) inequality.

Reducing differences in pre-tax incomes can, for example, reduce income differences via redistribution through taxes and benefits.

Dealing with tax havens and other methods used by rich individuals and large companies to avoid tax is crucial; the amount of money lost to tax havens by developing countries exceeds the international aid they get.

This not only increases global inequality; it also means that a higher proportion of public expenditure has to be funded by taxpayers in lower income groups. In many countries, taxation has ceased to be significantly redistributive.

Forms of ‘economic democracy’ – such as employee ownership, employee representation on governing boards, employee share ownership, mutual and cooperatives – tend to reduce income inequality, and help equality to become more embedded in society.

These are more long-lasting cultural changes than can be achieved through tweaks to the tax code. These forms of business institutions also provide a more stable basis for community life, and perform well in ethical terms.

Given all that we now know about the effects of inequality, it seems clear that we should both monitor inequality, and commit to realistic but courageous targets to reduce it.

Zulfiqarali Premji is a retired MUHAS professor. His career spans over 40 years in academia, research and public health.