The selfishness and graft of the rich drive inequality

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G.K. Chesterton, the writer, asserted in The Flying Inn (1914): “The rich are the scum of the earth in every country”. Perhaps not all but many.

Our contention is that their selfishness, criminality and corruption aggravate inequality. Much experimental evidence corroborates this hypothesis.

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Some insights

A particularly compelling case for ‘Selfish Rich Inequality’ is constructed by Almåsa et al. (2022), 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. They demonstrate 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.

A distillation of our econometric analysis using the Gallup World Poll Data of 2018 for India, along with the Fairness-Across-The-World module provided by FAIR–The Choice Lab, NHH Norwegian School of Economics, offers rich insights. Note that this is an analysis of respondents’ beliefs and not the actual behaviour of the rich. Also, as these responses are focused on the rich inequality hypothesis, we cannot disentangle these from beliefs about selfishness of the rich per se; we restrict our analysis to the inequality hypothesis.

As the age of the respondent rises, the belief in the rich inequality hypothesis becomes stronger. We also find that religiosity of an individual reinforces this belief.

The cold truth about India’s income inequality

State-level characteristics yield rich insights too. State affluence is measured in terms of net state domestic product per capita. There is a strong negative association between the rich inequality hypothesis and state affluence. Or, more specifically, significantly larger respondents in more affluent states do not support this hypothesis. Whether better employment opportunities, health care and schooling more than offset the beliefs in this hypothesis are plausible. However, if more affluent states also are those with higher income inequality (measured as a ratio of share of the top 1% in total income divided by the share of the bottom 50% a la Piketty (2014), it is confirmed that significantly more respondents believe in the inequality hypothesis. In other words, if growth is not inclusive, it engenders resentment against the rich and a strong belief in the hypothesis in question.

Criminality and corruption

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).

Poverty rose but income inequality fell

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 in question.

States, their governments

The overall state political and economic environment conditions the principal (voters)–agent (public institutions in a State including the State government, judiciary and the police) relationship. The lower the trust/confidence in the agent, the harder it is to sustain growth, and maintain accountability and transparency. The National Democratic Alliance regime, led by the Bharatiya Janata Party (BJP), has overcentralised decision-making and pursued, aggressively, Hindutva, negating, if not destroying, State autonomy. While minorities have been humiliated, assaulted and killed, often without provocation, there are also serious allegations of promoting crony capitalism. So, it is not just some billionaires who have flourished but their criminality and corruption have been sidestepped, if not ignored altogether.

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In order to probe the outcomes of drastic policy shifts, we have classified States into those ruled by the BJP and others. We do not find any association between BJP-ruled States and the rich inequality hypothesis. However, when we interact BJP-ruled States with the corruption index, we get the striking result that the association between the hypothesis in question and the interacted variable is positive. In other words, more respondents in BJP-ruled States with high corruption corroborate the rich inequality hypothesis. So, while the BJP is not responsible for the inequality associated with the rich, in an environment of high corruption with the BJP as the ruling party, more respondents corroborate this hypothesis.

Issue of trust in institutions

To conclude, the central argument of Almåsa et al. (2022), 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. Whether it is feasible to strengthen public institutions in the present context seems a tall order. Indeed, as argued by us elsewhere, 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.

Aashi Gupta is a doctoral student in Economics, Delhi School of Economics, University of Delhi. Vani S. Kulkarni is a Research Affiliate, Department of Sociology, University of Pennsylvania, U.S.; Raghav Gaiha is a Research Affiliate, Population Aging Research Centre, University of Pennsylvania, U.S.