Column: Billionaires and crony socialism

Feb 07 2014, 20:43 IST
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SummaryThe survival rate of crony socialism matches that of a cockroach

President Barack Obama mentioned inequality in his State of the Union address: “inequality has deepened” in the US. A few days later, Christine Lagarde, managing director of the IMF, stated, in her Dimbleby lecture, that both the level of, and increase in, inequality was a major problem in the world. She stated that “Seven out of ten people in the world today live in countries where inequality has increased over the past three decades … In India, the net worth of the billionaire community increased twelvefold in 15 years, enough to eliminate absolute poverty in this country twice over”.

I am quite prepared to accept that inequality may have increased, and increased substantially, in the US as both Obama and Ms Lagarde are stating. But it is by no means a slam dunk conclusion. Further, what does inequality deepening in the US have to do with billionaire wealth and poverty reduction in India? The fact remains that per capita income in the poor developing countries has increased substantially faster than incomes in the West, and this has led to a radical decline in world inequality. At around a Gini level of 0.61 today, the world is the most equal since 1890. (A Gini level of 1 represents perfect inequality, one person has all the income; and a Gini of 0 means perfect equality, everyone has the same income.) It does not take an IMF to do a back-of-the-envelope calculation on trends in world inequality. Since 1980, for four-fifths of the world’s population residing in the developing world, per capita income has been growing at a significantly higher pace than the developed world. This leads to an increase in world equality. Further, it can be the case that even if in every country inequality worsens, world inequality can improve.*

Billionaire wealth: Forbes data (the only source!) for 1999 indicated that there were six dollar-billionaires in

India with $5.3 billion in assets; in 2013, that number had expanded to 55 billionaires and $183 billion in assets. This is an increase of over 34 times the 1999 value. On a per billionaire basis, the increase is only 3.8 times. Over the same time-period, both per capita income and the Sensex (in dollars) have expanded in a near identical fashion by 3.5 times.

Three conclusions follow from this quick perusal of Indian data. First, the joint wealth of dollar billionaires has expanded 34 times, well in excess

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