Wealth Inequality

There was a recent paper that said that economic inequality in India has increased so much that it’s worse today than even during the British Raj – it’s the era of Billionaire Raj, it proclaims. Apparently the first version of this paper was published in 2017; and what we got now was the updated version.

 

Pranay Kotasthane isn’t convinced by the paper. He reminds us of a question that was asked about the first version – how does one find out the wealth of individuals? The original paper had used “survey data to estimate the incomes of the non-rich” and was “relying on income tax data to estimate the incomes of the rich”. Many had argued that the methodology was wrong on both fronts – (1) plenty of rich people don’t pay taxes (as we know all too well) and (2) who answers surveys honestly, let alone on a topic like how much wealth they have. Weirdly, the second edition of the paper doesn’t address these questions on its methodology, he points out.

 

Second, he says that while the wealth of the richest has indeed increased hugely since British times, it is “testing the limits of tone deafness” to claim that “the life outcomes of a non-rich Indian relative to a rich Indian today are worse than during colonial rule”.

 

The last part of the paper that Kotasthane disagrees with are its prescriptions on how to address the problem of rising wealth disparity. The paper recommends a “super tax” on net wealth. But:

“India did have a wealth tax that failed miserably.”

The solution, as Kotasthane rightly says, is “not Robin Hood taxes” – rob the rich, and give the money to the poor! He ends by quoting Bertrand Russell:

“If a philosophy is to bring happiness, it should be inspired by kindly feeling. Now, (Karl) Marx is not inspired by a kindly feeling. Marx pretended that he wanted the happiness of the proletariat, what he really wanted was the unhappiness of the Bourgeois. And it was because of that negative element, because of that hate element, that his philosophy produced disaster. A philosophy which aims to do good must be one inspired by kindly feeling, and not by unkindly feeling.”