Sunday, October 08, 2017

Not just individuals, even states are unequal.

Disagreeing with Thomas Piketty, SA Aiyar wrote, "Fantastically rising inequality? Piketty has got it wrong." "Consumption survey of the National Sample Survey Organisation show a modest Gini increase from 0.3 in 1983 to 0.36 in 2011-12. Businesses that were bound hand and foot during the licence-permit raj were unbound, and soared. So the increased inequality is unsurprising." Gini coefficient measures inequality in any society, wherein 0 indicates complete equality and 1 indicates total inequality. Piketty and Chancel wrote a paper in which they claimed that the top 1% in India earn 22% of income. "The top 1% of earners captured less than 21% of total income in the late 1930s, dropping to 6% in early 1980s and rising to 22% today," they wrote. During 1970s and 1980s India's growth rate was at the lowest level. What the authors do not explain is whether an equal distribution of poverty is better than an increase in total national wealth even if the top 10% get most of the benefit. Piketty says that the rich hide their income but Aiyar wrote that the poor have equal incentive to lie about their income, to take advantage of the various social schemes instituted by the center and state governments. Dalits have benefited hugely from economic reforms of 1991, wrote CB Prasad. In a village in UP, the upper caste Thakurs own most of the land, live in big houses and have mango orchards. The Dalits live in small houses, have small landholdings and no mango tree. But, "Dalit women around Lakhmir Gadhi village don't visit Thakur homes, leave alone work for them. Dalit men trek to nearby Khurja town each morning to find work in the pottery industry. Dalit children crowd school buildings." Clearly, there has been an immense increase in equality of status even if not in wealth. A lot of inequality is due to the huge population of India. The poor migrate to towns and cities where they resort to wage-cutting to secure some income, wrote Prof T Thachil. There is inequality not just between individuals but between states, and it is rising. "The ratio of per capita state income levels as between the richest three and the poorest three of the 12 largest states has been skyrocketing for the past quarter century, and today stands at well over 300%," wrote Prof V Dahejia. Liberalization of the economy resulted in "initial income gaps becoming locked in through economies of scale, network externalities, and agglomeration economies". However, the greatest inequality is in that of education where children of poor families are falling behind. It is not that someone is a billionaire, what is really unfair is that there is no escape from the rut. That is where Piketty is wrong.

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