Syllabus: Inclusive growth and issues arising from it
How Equality is Misrepresented
- Public debates wrongly portray equality as irrelevant compared to poverty reduction alone.
- Equality is often presented as anti-entrepreneurship and hostile to market incentives.
- It is also depicted as requiring heavy bureaucratic control by the State.
- Discussions on equality are framed as resentful socialist levelling down of wealth.
- These claims ignore the pragmatic role of equality in sustaining growth and stability.
Inequality and Poverty Reduction
- High inequality weakens the growth elasticity of poverty, limiting gains for the poor.
- When income gains concentrate at the top, aggregate growth benefits fewer households.
- Unequal societies underinvest in health, education, sanitation, and social protection.
- India shows malnutrition, learning deficits, wage stagnation despite long-term economic growth.
- Poverty reduction without addressing distribution faces structural limits in unequal societies.
Impact on Growth and Investment
- Extreme wealth concentration suppresses consumption demand, thereby weakening private investment.
- Equality supports broad-based growth by expanding wage growth for the majority.
- In human-capital intensive economies, inequality is more likely to slow growth.
- Historical evidence shows high inequality impedes long-term economic expansion.
Inequality and Entrepreneurship
- Wealth concentration enables political capture and regulatory bias favouring powerful incumbents.
- Access to credit, education, and networks becomes restricted by inherited wealth.
- Unequal societies limit risk-taking and entry of new entrepreneurs.
- High inequality causes misallocation of talent towards rent-seeking activities.
- Finance, lobbying, and regulatory arbitrage crowd out productive innovation.
State Power and Oligarchy
- High inequality often requires greater discretionary state intervention.
- Governments provide subsidies, bailouts, and selective tax enforcement to powerful firms.
- Universal public services reduce discretion and weaken political capture.
- Universalism is simpler and less corrupting than targeted patronage systems.
Social Trust and Democracy
- High inequality erodes social trust, increasing demands for regulation.
- Wealth concentration translates into political influence and loss of democratic agency.
- Oligarchic power distorts political agendas and public values.
- Equality functions as social insurance for capitalism and democratic stability.
