Amid all the talk of two Bharats, do we see a time horizon where India’s elite could abandon the country’s poor and vulnerable?
This is a question I’ve been thinking about for a few months now. My curiosity peaked a few days after the presentation of the recent EU budget: in an analysis of the document, I argued that the macro-fiscal priorities of the current government appear to be blindly indifferent and/or ignorant of the poorer and unorganized citizens of India
For more evidence, see the below-average advertised expenses for key social development priorities in the areas of health, nutrition programs for children and the Mahatma Gandhi National Rural Employment Guarantee Act, as well as a massive reduction observed in overall spending, the all with the aim of driving growth at all costs.
Putting the nation on a high growth trajectory is of course essential, especially when India’s real growth has been weak every year in a row for the past seven or eight years. But the quality of the growth and the processes we put in place for its distribution also matter.
For some time now, the social and economic safety net of the poor and vulnerable across India has been steadily eroding. At the same time, the corporate-rich (or dependent) upper classes continue to thrive on waves of profit maximization, even during the pandemic years.
The real question is: don’t the elite care enough about the need for redistribution?
Before attempting to answer the question, it might be useful to first explain what I mean by the words “visible” and “surrender” in the context of elite behavior (often explained as a group or a class of people enjoying greater control over the creation-distribution of economic resources).
In 1899, Thorstein Veblen, an economic sociologist, offers a theory (and idea) of “conspicuous consumption” in context to understand the behavior of the leisure class (the elite), their preferences. Veblen argued that wealthy individuals often consume highly visible goods and services in order to publicize their wealth, thereby achieving higher social status.
“In order to gain and retain the esteem of (female) men, wealth must be shown, as esteem is granted only on evidence,” Veblen wrote. According to social custom, the proof consists of unduly expensive goods which fall within the “accredited canons of conspicuous consumption, the effect of which is to keep the consumer at a level of high cost and waste in his consumption of goods and his use of time. and effort”. ”.
The details of Veblen’s arguments naturally invite the interpretation that conspicuous consumption reflects a useful signal to explain the behavior of the leisure class or elite in a given economy. The need to conspicuously consume luxury goods may increase further in deeply unequal societies where the wealth/income gap between the richest 10% and the poorest 50% is marked.
Veblen’s work distinguished two motives for consuming ostentatious goods: ‘odious comparison’ and ‘pecuniary emulation’.
“Disparaging comparison” refers to situations in which a member of a higher class ostensibly consumes to distinguish themselves from members of a lower class. “Pecuniary competition” occurs when a member of a lower class conspicuously consumes in order to be seen as a member of a higher class.
In modern terms, these motivations are the essence of what explains elite consumer behavior among the upper and lower classes (including in India). Members of the upper classes voluntarily incur costs to differentiate themselves from members of the lower classes (odious comparison), knowing that these costs must be large enough to discourage imitation (pecuniary emulation).
Given how badly private consumption and private income have been affected for the poorest 50% of the Indian population in recent years (see above: more than 77% reported having suffered losses of income during the pandemic), arguing for the case of “pecuniary competition” (members of the lower classes conspicuously consuming) would be inconclusive.
Yet, given the degree of inequality between the richest 10% and the poorest 50% in recent decades (see figure below), the case of the upper classes voluntarily consuming more luxury goods, allowing trips abroad, sending their children abroad for education, investing abroad – all indicating “odious comparison”, is found more prominently.
Deep-rooted inequalities between income and wealth fueled conspicuous consumption among the elite. When there is social and economic mobility among other income classes, the aspiring middle class reorients the macro consumption basket. But, we have not seen a burgeoning middle class, or the same level of private consumption levels seen among lower-middle income groups over the period 2002-2010.
Even the surge in GST revenue this fiscal year is largely due to high GST collections on import goods, signaling the source of higher indirect tax revenue at the cost of the current account deficit ( the net balance of exports minus imports).
Towards “the abandonment of the elites”?
In the future, an overt consumption cycle fueled by greater inequality could shift the behavior of elites away from the poor. Undistilled faith in the neoliberal economic path has already ensured the permanence of structural inequalities. An ‘elite abandonment’ can be seen as the result of exacerbated regimes of inequality over time.
In every nation, the time horizon of the elite determines how they govern. In deeply unequal societies, a question deserves to be studied: does the elite treat its country like a luxury watch, which it takes care of only for future generations, or like a stolen purse full silver ?
It is difficult to say how confident the Indian elite is about India’s future. The poor and vulnerable have no choice but to believe in the vision of an ‘Amrit Kaal’. They have no alternative.
But, one way to understand the behavior of the business elite is to study the level of growth of domestic private investment over a given period. Growth in domestic private investment levels in India for almost a decade has been stagnant (see figure below).
The richest and creamiest 10% seem happy enough to sit on piles of money or accrued profits, but are not ready to invest big in India. “Big capital investments” in certain areas (like infrastructure) are increasingly monopolized or oligopolistic, due to a few players in the mix.
A low rate of domestic private investment says a lot about India’s business elite: maximizing profits in existing businesses, conspicuously consuming, investing overseas for good.
These actions will naturally be at the expense of the poor, or worse, extensive appropriation/exploitation of labor for their own gains, which, in Veblen’s words, would aim to continue a cycle of conspicuous luxury consumption. Given all that is going on in the government’s vision of pushing for growth at any cost, with little regard for its social welfare priorities, this outcome seems more inevitable than before.
Deepanshu Mohan is Associate Professor of Economics and Director of the Center for New Economics Studies, Jindal School of Liberal Arts and Humanities, OP Jindal Global University.