IT’S ALL ABOUT THE GINI STUPID

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The Supreme Court’s direction to the CBI to treat the big fish among the corporate beneficiaries of the telecom scandal exactly the same as the nameless middle-level pawns has hit the nail upon the heart of the matter. At one level, this is about following the simple logic of the law. At a deeper level though, the observations go to the very core of the debate about corruption: the seething anger at a basic system of inequity that allows a handful of well-connected elites to manipulate it with impunity.

For the middle classes, this shatters the mythology and the illusion of a meritocratic and just society.

For those below them on the social scale, it gets subsumed within a larger narrative of everything being loaded against them, especially at a time when prices are rising spectacularly and the government seems powerless to do anything.

A sense of unfairness is particularly palpable in a society where the inequalities are rising. It feeds existing malcontents and the fact is that for all our growth rates, India today is a much more unequal society than even 10 years ago.

The most common economic method of measuring inequality is the ubiquitous Gini coefficient which operates on a scale of 0 to 1 (0 being a perfect score where everyone earns equally). The higher the Gini coefficient, the higher is the disparity and India’s Gini coefficient has risen from 0.32 in the mid-1980s to 0.36 in the mid-2000s.

With inflation at an all-time high, it is no solace that most other big economies are facing the same problem of rising income disparities. The American Gini co-efficient, for instance, has gone up from 0.34 in the mid-1980s to 0.38 and China from 0.28 to 0.4.

Even so, it was by no means inevitable that we should have been following the same broad trend. Brazil, for instance, is among the few that has been doing something right and has seen the opposite trend, with income inequalities actually reducing in the same period.

The problem of equity is not just a moral issue of doing the right thing. When wealth gets disproportionally concentrated in the hands of few, it has catastrophic consequences. The current global economic crisis, which originated from the US, coincided with its most inequitable time in recent decades.

According to the economists Emmanuel Saez and Thomas Picketty, the top 1 per cent of American households earned as much as 18.3% of national income in 2007.

Their share had never been higher than 10% from the 1950s to the 1980s. Tellingly, the last time things were so unequal was in 1929, just before the Great Crash.

The IMF’s former chief economist Raghuram Rajan has even argued that such inequalities directly led to the current financial crisis because politicians tried to paper over social divides by backing cheaper credit to those who couldn’t afford it.

And it doesn’t need a Sherlock Holmes to deduce that the wider the wealth disparities in a society, the worse off it will be on social indicators, from life expectancy to crime.

The global bestseller ‘The Spirit Level’, written by two British epidemiologists, crunches mountains of data to show how inequality affects everyone, in surprising ways.

Human beings are such social animals that the feeling of being inferior causes chronic stress, leading to a range of pathologies when they find themselves at the bottom of the pyramid.

For example, a study of British civil servants found that messengers, doormen and those with lower status were much more likely to die of heart disease and some cancers and had much worse health than others.

Inequality undermines social trust and corrodes societies as a whole in obvious ways but also in unseen ways that we are just beginning to fathom.

This is why we should be as worried about our deteriorating Gini coefficient as we are about 8% growth. And this is why the Supreme Court is absolutely right in reiterating that everyone is equal and no one Forbes list millionaires or otherwise should be considered above the law.