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India’s Uber Rich: How they Should Behave.

Others | Strategic Philanthropy | Dec 23, 2016

This is an edited version of Rohini Nilekani’s conversation with Vikram Singh Mehta at the 2016 Times Lit Fest in Delhi.

When my family happened to get rich a few years ago, I had to grapple with the question of what to do with this wealth. As someone who was a journalist, and who grew up thinking about issues of social justice, the wealthy were always a class that seemed very distant from myself. So suddenly I was in a position where I now had to think about how I should behave because now I was on the other side. I think we do need to question how the wealthy, including myself, should hold themselves up to the responsibility of that wealth.

It’s an interesting question both in India and around the world. Today, most of the world’s wealth is concentrated in a few hands. The recent Credit Suisse report stated that 1% of India’s wealthy owns 60% of India’s wealth. I’m afraid that includes myself, but is this right? Can we envision another model? Why is this happening, and how does it concern everybody else? These are the questions that we need to consider. There needs to be more public pressure on the wealthy. The issue of who makes money and what they do with it should be on the table, especially in a democracy like ours.

The Journey of Philanthropy
As Vikram Singh Mehta points out, traditional models of philanthropy meant that the uber-rich simply signed cheques to hospitals or temples. However, with the rise of first generation wealth creators there has been a sea change in attitudes towards philanthropy. Post-liberalisation there was an explosion of wealth within a few hands in some sunrise sectors like IT and pharmaceuticals. Many of the old industrial families were able to capitalise on these openings created by economic liberalisation, and were able to not only consolidate their old wealth but become fabulously wealthy in the last 25 years. However, in spite of the criticisms of wealth in the West, they have made it impossible for people to be extremely wealthy without being extremely philanthropic. As is frequently said, “If you own Ferraris, you better be running some foundations as well.” I think we are all influenced by that to a certain degree. There are such stark differences in our society that people cannot ignore it, but we should be doing a lot more than we are right now.

The beauty of philanthropy is that it is voluntary. My journey in serious philanthropy started in 1999, when I became a part of the Pratham network in Karnataka. I was invited to join the Akshara Foundation, which was set up by the state government. I didn’t have that much money then, but I thought it was a huge opportunity to understand how to get into a sector at scale. So I gave some of my money and a lot of my time, towards our collective goal of getting every child in school and learning well. This goal allowed us to think of universalising education as a basic right. It meant we had to figure out how to build partnerships with wealthy people like myself, as well as the state government, civil society organizations, parents, teachers, and the school system.

We needed to come together to move the needle on what is one of India’s biggest tragedies. We’re still continuing to work on that problem today. It’s not so easy to solve deeply complex problems like this. Currently, Nandan and I have started another initiative in education called EkStep, which we are putting substantial money into. In 2001, I had also set up Arghyam with the money that came to me, and we have been focusing on water issues for the last 12 years. These are vast and complex problems, but we need more people to use their wealth, time, talent, and resources to engage with them.

In India, when we go deep into any sector to look at the root causes of problems, we inevitably find governance failures which need to be addressed either through institutional mechanisms or some other way. For example, we could think about why water is becoming such a huge crisis in the country. One of the reasons is that most of our public infrastructure building has gone into surface water. We have spent around 400,000 crores to build canals, irrigation mega-systems, and dams. In fact, each year the value of that reduces because our optimisation of that infrastructure is reducing due to siltation and other issues.

On the other hand, we have 30 million bore-wells, mostly in private hands, drawing out more groundwater than America or China. 250 billion cubic meters of water are sucked out from our aquifers every year, which is draining our rivers as well. We have no institutional infrastructure to manage groundwater, and it remains the most unregulated key resource in India. So some of our work is in the absence of institutional design. We have to think about what Arghyam could support to make sure that we behave in a more water-wise way. To that end, we support a lot of institutions around the country that are doing participatory groundwater management. We use collective knowledge, science, and data to try and make that invisible water visible. We try to create broad social protocols to manage water better, by cutting back on one crop, changing cropping patterns, securing lifeline bore-wells separately, etc. Learning from that experience and its success, we are moving towards influencing public policy in order to create better groundwater management laws and institutions.

The Question of Inequality
In a society where people believe they have equal opportunity and a chance to do better, they won’t resent the rich for having yachts, islands, diamonds, or planes. If people feel that they can also become wealthy, I think the wealthy would not be judged very harshly. But if you are from the working class and you see that your income and job opportunities are stagnating, then they begin resenting the one percent and say, “We’re fed up of this, we want our opportunities back.” So how the wealthy behave is also a function of the kind of economic opportunities that exist in their society.

Our wealthy have to get interested in social issues. The question of inequality is now very much in the public consciousness, and the wealthy cannot run away from that question anymore. We need to ask how wealth is created in any country or society, and if it’s not being created in the right way, we need to ask why that is. Due to crony capitalism or by any other means, are only a few people garnering the value which should be distributed better? I don’t mean the Marxist sense of the term ‘distribution’, but just common sense. We can’t have 600 million people standing outside the glass ball, while only a few people are inside. We have to figure out ways for our society to become one where people have more opportunity and a level playing field.

Unfortunately, the over-financialisation of today’s global economy has made it possible for money to beget money. Rousseau said something that still holds true today — money is the seed of money, and the first guinea is sometimes much more difficult to acquire than the second million. We need to ask ourselves whether this is the kind of society we want. What responsibility does it place on the wealthy? Whose wealth is it? Taxation and finance also have a huge role to play in this. India is one of the least taxed countries in the world As taxation and finance become more liberal, we must consider whether the wealthy should either hold that money in public trust or pay tax. Is India ready for an inheritance tax like America? I think if we see that happening, people will become philanthropic very quickly.

In terms of CSR, I do think that the bazaar has to be very responsive to societal needs, however the 2% law is the government outsourcing something that the state should be doing. States can partner with corporations in some things, but in India if the bigger companies use that 2%, which is a tax by other means, to actually improve their inside fence activities and reduce their negative fallout on the environment and society, we might not need CSR to solve societal problems. A lot of problems in India are caused by corporations dumping their externalities on to society. The way contractual labor is treated and the way our effluents are dumped and poison our rivers is extremely concerning. I wish that 2% was spent inside the fence of corporate India to improve its own house first because that might help society more. If corporations would focus on minimising their damage to the environment, the concentration of wealth created by their business practices and breaking the rule of law, that is as philanthropic as any other activity that they could do.

There has been research done all over the world, and increasingly, they have found that employees want to work for companies that are ethical and that practice philanthropy. If employees want to work for a company like that, it also incentivises the corporate sector to be different. Today people want to give meaning to their lives and not just have a job, which is a great trend. I hope we see a lot of response from the large multinational corporations towards resolving some of these big cross-country questions of malpractice, and do more outreach in communities instead.

Opportunities and Challenges
Corporations and individuals will always want to use philanthropy to brand themselves. Even people who give to charity put their names up on hospital wards, and that’s not such a bad thing. But the real work and opportunity for the wealthy is to absorb risk, innovate, and take big bets. If we look at the Bill and Melinda Gates Foundation, not everybody agrees with everything that they do, but they have huge goals. They say, “We’ll wipe out malaria in this world, and we’ll back science to solve some of humanity’s biggest problems.”

The wealthy can afford to do that in a way that governments can’t. Governments need some things to be proven before spending public money on it. That’s what the opportunity of really big wealth is — to underwrite big innovation to solve complex societal problems.There are also a growing number of intermediary organisations that can help people make more informed decisions about philanthropy, like Dasra. Some of us are supporting and building out the ecosystem of giving so that donors know about the issues and about the organisations working in that space, and therefore can make more informed choices.

While doing charity or philanthropy, we have to keep in mind that the poor don’t just want money, they want justice, respect, and opportunities. It’s important for those who give in the name of wanting to improve society to make sure you’re empowering people to become part of the solution and not remain part of the problem. We have about 200-300 million people in this country who have become ecological refugees, urbanisation refugees, or refugees from poor agricultural policy. So we need to keep this in mind when framing social issues, and listen to people on the ground.

McKinsey had carried out a study about India’s demographics and they had found that about 11 crore Indians are excluded, i.e. they are at the bottom of the bottom, much below the poverty line. They don’t have a shelter over their heads, and they’re scattered all over the country. So can the policy makers and the business community come together to address this 11 crore, which is larger today then what it was when they wrote the study? I sincerely hope we can. I attended a panel discussion about the Maoist territories and the situation in places like Dantewada. So many of us are disconnected from the fate of 200 million people in this country. We cannot have a country with such great economic growth, without at least trying to achieve prosperity for all. That is the challenge before us.

We still need to build out a lot more infrastructure and institutions in India. But what we’re looking at now, with something like EkStep, is how to use technology to build those platforms at a fraction of the cost and in a way that is accessible to all. We are trying to develop a platform where everyone can collaborate and come together to do what they do best, in order for children to access better quality learning. But the Indian wealthy need to be much more philanthropic and strategic in their giving, and I hope we are heading there. The E&Y does a survey every year, and last year’s report stated that, for this GDP of our country and the kind of wealth we have here, India is actually becoming an outlier. More people are giving more money away faster than other countries were at this stage of their economic growth. So there’s hope yet.

We need to become as much a moral superpower as an economic superpower. We live in such fascinating times because we can unleash so much innovation.The wealthy are there in this country. The opportunities are there. So many technologies are also converging. There are huge opportunities for us right now, if the wealthy take up that responsibility.

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