Public Debates on Economic Equality in India

The discourse surrounding economic equality in India often associates equality with four perceived negatives:

• Poverty vs. Inequality:
  • Poverty reduction is prioritized over inequality, with the latter dismissed as a distraction.
  • High inequality can hinder poverty reduction by weakening the growth elasticity of poverty.
  • Concentrated income gains lead to fewer absolute gains for the poor, despite impressive growth rates.
  • Unequal societies underinvest in essential public goods like health, education, and social protection, limiting durable exits from poverty.
• Equality and Entrepreneurship:
  • Equality is often seen as a threat to entrepreneurship.
  • In reality, inequality can lead to political capture and regulatory bias favoring incumbents, which undermines new entrants.
  • Extreme inequality limits who can afford to take entrepreneurial risks, restricting the pool of potential entrepreneurs.
  • High inequality misallocates talent toward rent-rich sectors instead of productive innovation.
• Bureaucratic Control:
  • Equality is assumed to entail greater state control, yet high inequality often requires more discretionary state power.
  • Egalitarian strategies focusing on universal basic services can reduce administrative discretion and political capture.
• Resentful Socialist Levelling Down:
  • Egalitarian policies aim to prevent inequality from corroding social and economic conditions, not pulling the top down.
  • High inequality can erode social trust and contribute to over-regulation due to low social trust.

Pragmatic Reasons for Equality

Equality should be considered seriously for pragmatic reasons, irrespective of its intrinsic moral value:

• Equality can be a precondition for growth that is broad-based and capable of delivering wage gains for the majority.
• In modern economies, high inequality is more likely to impede growth than sustain it.
• Equality expands the pool of potential entrepreneurs by lowering entry barriers and reducing catastrophic failure costs.

Misunderstanding Resentment

Resentment is not directed at wealth itself but at its translation into power that undermines political dignity and agency:

• The political force of resentment against wealth is often exaggerated.
• People are more concerned with the pragmatic consequences of inequality for growth, entrepreneurship, social trust, and institutional integrity.
• For a social contract to tolerate wealth inequality, it must ensure such inequality does not hollow out democratic citizenship.

Conclusion

The relationship between growth, entrepreneurship, and inequality is complex. Misguided public discourse dismisses equality without acknowledging its potential to support growth and entrepreneurship. Those opposing discussions on inequality may be protecting oligarchies rather than the poor.