Cold truth about income inequality

(Mains GS 3 : Inclusive Growth and issues arising from it.)

Context:

• A particularly compelling case for ‘Selfish Rich Inequality’ is constructed based on an analysis of the Gallup World Poll of 2018; that is, whether the rich are richer than the poor because they have been more selfish in life than the latter. 

Demonstration of the study:

• Analysis demonstrates that the non-productive grabbing behaviour of the rich is typical of countries with weak institutions, stemming from a weak rule of law, malfunctioning bureaucracy and corruption. 
• Hence, people in such countries are more likely to believe that the rich have become richer because they have been involved in selfish grabbing activities. 
• Support for the selfish rich inequality hypothesis rises with the level of corruption and decreases with an individual’s rank in the country’s income distribution. 
• This study’s final analysis shows that popular belief in selfish rich inequality is positively associated with broad agreement that inequality in their country is unfair and that the government should aim to reduce it.

 Infested with criminality:

• The research analyzes the beliefs of respondents and not the actual behaviour of the rich and further as the age of the respondent rises, the belief in the rich inequality hypothesis becomes stronger. 
• In a variation, if state influence is interacted with the incidence of crime (measured as the number of convictions per lakh of population), a significantly large number of respondents corroborate the rich inequality hypothesis. 
• Or, a significantly large number of respondents are prone to believe that in an affluent state infested with criminality, the rich get richer through illegal, grabbing activities (rich traders, for example, evade local taxes by bribing officials).

Inequality hypothesis:

• However, it is intriguing that the state corruption index, obtained from the India Corruption Report (2019), is negatively associated with the rich inequality hypothesis, implying that more respondents in highly corrupt States reject this hypothesis. 
• It is of course plausible that more corruption you observe in your community and elsewhere makes you immune to corruption among the rich. 
• However, respondents in States which are more corrupt and display greater extreme inequality are more likely to believe in corruption of the rich and thus corroborate the hypothesis.

Trust issue:

• The central argument of the research provides insight that the rich are richer because they engage in non-productive grabbing behaviour in countries with weak institutions, stemming from a weak rule of law, malfunctioning bureaucracy and corruption, is largely corroborated in India. 
• The feasibility to strengthen public institutions in the present context seems a tall order, however, our trust in these institutions may be fast approaching a cliff effect, marking a very rapid erosion and a sharp worsening of the inequality driven by the selfishness, criminality and corruption of the rich.

Conclusion:

• B.R. Ambedkar had issued a grim warning in 1949 that if we continue to deny social and economic inequality for long, we could “blow up the structure of political democracy”.