- 2018-11-12
Inequality in India
French economist Thomas Piketty argued in his best-selling book "Capital in the Twenty-First Century" that the capitalist economy has the ability to incubate highly unequal income and wealth distribution. Natural tendency. Now Piketty and Lucas Chancel are co-authoring a new paper entitled "Income Inequality in India from 1922 to 2014: From British Rule to the Rule of the Rich?" "(Indian Income Inequality, 1922-2014: From British Raj to Billionaire Raj?).
Based on complex personal income tax, national accounts, and household survey data, Piketty and Chancer concluded that the top 1% of high-income people in India received 22% of the national income in 2014, the largest since the personal income tax was levied in 1922. Share. The income share of this group fell sharply between 1951 and 1980, and then rose again between 1980 and 2014, especially after the start of economic liberalization in 1991.
There are two problems with their argument. One is a statistical problem, and the other is their failure to distinguish between different types of inequality. In addition to such issues, the article also implies that from a distribution perspective, India’s era of socialist planning is fair, and the subsequent era of "pro-commercial market deregulation policies" is unfair. This is half true at best.
The two authors admitted that they mixed survey, tax, and national accounts data "full of methodological and conceptual difficulties." So they tried to prove it with a series of alternative hypotheses. However, the problem of "rubbish in, rubbish out" (rubbish in, rubbish out) applies to all such models.
In 1922, more than 40% of India was ruled by more than 500 princes instead of the British. These princes and their nobles are very wealthy, but they don't have to pay British taxes. The level of inequality in that era was of course far greater than it is now.
Piketty and Chancellor’s use of tax data to assess income is problematic. The tax authority treats capital gains as income. But capital gains do not constitute value-added, so they are not included in the gross domestic product (GDP). Therefore, their calculated income-to-GDP ratio should not include capital gains.
The two authors stated that in the era of high taxes and nationalization, and into the 1980s, inequality was greatly reduced. Did ordinary Indians benefit? Alas, they did not benefit. In the 30 years since independence in 1947, the poverty rate has remained basically unchanged, and the population has almost doubled. So the absolute number of poor people almost doubled during this period.
In contrast, although inequality has certainly risen during the first decade of this century’s booming, 138 million people were lifted out of poverty between 2004 and 2012, the highest record in Indian history. The liberalization of inequality has achieved what socialism that advocates equality cannot do.
People should not be surprised. Rapid growth provides opportunities, which may be more important than socialist equality. The Economic Survey 2010-2011 (Economic Survey 2010-11) provides the Gini coefficient of consumption in various states in India. The Gini coefficient is an indicator of equality. 0 means complete equality and 1 means complete Inequality. In every state, the Gini coefficient of the city is much higher than the Gini coefficient of the country. However, all immigrants came from relatively equal villages to unequal cities. People vote with their feet to support opportunity rather than equality. The rural Gini coefficients of Bihar and Assam are the lowest at 0.17, but these two states are disappointing and economically stagnant, and they are not a paradise for everyone to be equal. Millions of people in Bihar go to work in a richer but more unequal state.
The second highest rural Gini coefficient (0.29) comes from Kerala. This is the state with the most advanced social development in India, with the lowest infant mortality rate and illiteracy rate. It also has the highest salary levels and the best student-teacher ratio. Kerala has benefited a lot from globalization-the state has the largest number of people going to work in the Gulf region among the Indian states, and it has benefited from the remittances of these workers. This has led to inequality, but the standard of living is much higher than in the more equal states of Bihar and Assam.
Dalit, once known as the "untouchable", is at the bottom of the Indian caste system. Economic liberalization has created new business opportunities and produced 3,000 Dalit millionaires. In the data of Piketty and Chancel, this would prove to cause inequality. But this is some kind of inequality that should be praised. India needs more social mobility and self-made stories.
If you ignore the technical flaws in the analysis of Piketty and Chancellor, liberalization does exacerbate inequality. But the following is also true. With the increasing momentum of liberalization after 1991, companies can expand at an unprecedented rate. Those with skills and access to the global market benefit greatly, while those who lack skills or access in rural areas lag behind.
Piketty and Chancel did not discuss this huge inequality in opportunities. Imposing heavy taxes on the wealthy is not the way-we have known this since the socialist era. India needs to build decent schools, health centers, roads, electricity supplies and Internet connections in every village. It needs clean, responsible and competent government employees. Great achievements have been made in economic liberalization, but now it should be supplemented by high-quality public goods.