The Great Gatsby Curve and the Dying of the American Dream

Timothy Noah, journalist and blogger suggests in his recently published book - "The Great Divergence"- that growing income disparity may be the most seminal change in the US over the past couple of generations. He writes that the world's richest nation has gone from one that viewed "the prospect of growing inequality to be unacceptably antidemocratic" to one that's economically beginning to "resemble a banana republic". Joseph Stiglitz, Nobel Prize winning economist, in his book "The Price of Inequality" points out that, at $90 billion, the combined wealth of the six Walton family heirs to the Wal-Mart fortune is equivalent to the entire bottom 30% of Americans. Even more damning is evidence found by Miles Corak,a University of Ottawa economist. Corak studied income levels across generations within families in a set of developed countries and plotted the classical measure of income equality, the Gini coefficient against a factor which measured income mobility across generations that he termed Inter-generational Earnings Elasticity. The result is, what in some economic circles, is called the Great Gatsby Curve. The import of the Great Gatsby Curve, put in simple terms, is that as income inequality increases in a society the chances of the next generation of poor remaining poor increases. And over the last two decades income inequality has increased to be the highest in the US among the rich countries. The dream of achieving a better life than one's parent is fundamental to the American identity and rising income inequality is striking at the very roots of American society. How will this great society respond to this challenge? Will it let the American dream die? Will the 1% who are the rich realize that they too will be hurt when inequality spirals into economic dysfunction for the whole society and let the politicians they control take the needed drastic measures? Will the poor rise and take control of their own destinies? These are questions the answers to which will shape the 21st century for the US. What about the rest of the world? While income inequality is also rising in the rich societies of Western Europe the effect is not as fundamental because in the ethos and cultures of these societies upward mobility is not as fundamental a concept as it is in the US. Further many of these countries are welfare states that cushion the psychological impact of inequality (the societal impact of the welfare state crumbles in many of this country is likely to be of much greater consequence but that is another story). In many Asian and African countries GINI coefficient will be way beyond what it is in the US. But this is not a new phenomenon in our societies and the entire cultural and social edifice is built around concepts that make inequality palatable to the poor and keeps them quiescent. Opium for the masses and all that. But as the 21st century takes the information revolution down to the masses, revolt will simmer. The Arab Spring was the simmering up of this revolt in highly repressed societies. China is no less repressed but an economic miracle that has lifted huge numbers up the economic ladder, keeps the lid on the simmer among it's poor. But how long before the lid blows off? And what about incredible India? Among the world's more open societies with one of the world's highest GINI coefficient, India is an outlier. The openness of its society does not repress the simmer and it is more and more evident every passing day. Reminds me of the conditions described in VS Naipaul's book from over a decade go "A Million Mutinies Now". To Naipaul the ferment he saw was creative and foretold the forging of a great society. Is the ferment still creative or has it soured into destruction? Is the openness of Indian society allow the ferment to cause structural changes which will launch India into a new trajectory? Will the rich in India perceive the opportunity they have to lead in the creation of a great society? Will our politicians learn to get out of the way? Answers to these questions, I believe, will shape India in the 21st century.

The Emperor’s New Clothes

Go together,
You precious winners all; your exultation
Partake to everyone. I, an old turtle,
Will wing to some withered bough, and there
My mate, that’s never to be found again,
Lament till I am lost.
- Shakespeare, The Winter’s Tale
A civilization as old as India ought to measure achievement differently from shiny new ones.
Instead we want to strut on the world stage to the rhythm of other people’s drums.
The result can only be the kind of farce that Delhi has been witnessing over the past two months (some would say the past sixty three years). It would be hilarious if it was not so tragic.
What about China you would say. An old civilization that stuns the Western world in most things it does including Beijing 2008.
But China discovered itself again when it started walking, about three decades ago, to its own drums. Going beyond the labels of communism and democracy, it discovered a system and an engine of prosperity that is entirely of its own making.
India’s Westminster style of democracy is a borrowed idea. In sixty three years we have not innovated one bit in the way we govern ourselves. Indian business and the Indian people in the meantime have, with no help from the State, reinvented themselves. Today, I believe, there are extant, Indian business and cultural ethos that are original and rooted in quintessentially Indian values. And this is the principle reason why India has finally found its voice.
It is urgent that we the Indian people, use this new found voice and vigour, to find ways and means to reinvent the Indian State. Otherwise this behemoth, cannibalizing the hard-won prosperity of the Indian people, will continue to strut on the world stage, in garbs that can only disgust. And more menacingly threaten ours and the well being of our children.
The alternative is the escapism of the old, so wonderful captured in the Shakespearean verse reproduced above.

Our Government and Us

This Republic Day I could not but help meditate between the increasing disconnect between those who run the State- the politicians, the bureaucrats, the judiciary, the police etc – and we the ordinary people.

Is it only because we perceive most everyone in “Government” as corrupt and/or inefficient?

Or does it go deeper and also have to do with what we perceive the government’s role in our lives to be?

I believe the perception of Government of our intelligentsia is shaped by a Western world view.

A view that is shaped by a desired primacy of the individual and hence Government as a necessary evil constantly to be watched and kept in check.

This paranoia results in everybody in government to be seen, by the ordinary man, as ‘alien’- somebody outside and separate from us.

But is this the only possible view of Government?

Consider what Martin Jacques, author and China expert, writes in this week’s Newsweek:
“Government is seen by the Chinese not as an alien presence to be constantly pruned back, as in the West, especially the US, but as the embodiment and guardian of society. Rather than alien, it is seen as an intimate, in the manner of the head of the household. It might seem an extraordinary proposition, but the Chinese state enjoys a remarkable legitimacy among its people, greater than in Western societies. And the reason lies deep in China’s history. China may call itself a nation-state (although only for the past century) but in essence it is a civilization-state dating back at least two millennia. Maintaining the unity of Chinese civilization is regarded as the most important political priority and seen as the sacred task of the state, hence its unique role: there is no Western parallel.”

Is there an Indian parallel? Should there be one?

The Hindutva mantra of BJP has a ‘guardian of civilization’ ring to it but suffers from very poor branding fundamentals that unnecessarily limit the appeal.

We all instinctively know that there is an “Indian” identity that is not defined by religious or ethnic identities. Amartya Sen in his brilliant book “The Argumentative Indian” makes a well-researched case for it.

Is it then possible that India could be the first great society that marries democracy, capitalism with an uniquely Eastern view of the State?

More pertinently is that our only way to achieve the greatest good for all our people?

Do we need a political revolution that begins not with the form or function of our State but in our perception of the role of our State?

Could it be that the rot in our system is because of a counterproductive fusion of the worst of the Western framework of Government and the basest of Eastern instincts of individual and narrow interests?

Questions with no easy or simple answers but worth posing, I would think, as another 26th of January passes by and we wonder what the next 60 years of being a Republic holds for us.

The Rich Co-Mingle; the Poor Fight

Imagine forming a mutual admiration society and economic block with China, not being at odds with Bangladesh, Sri Lanka and yes, being at peace with Pakistan.

Think about it and we see a contiguous and prosperous zone of 2.5 billion people.

Look around us and we see that richness is a corollary of peace and harmony. Be it richness of the soul, the mind and the body.

Because ’coming together’ in the principle on which the universe is built.

Energy (even the physicists do not know what energy is ‘made of’) of which everything in the universe is a manifestation, is in its essence, a concert.

Is it then worth then, as a nation, treating the finding of lasting solutions to our conflicts, within and without,as our largest most important economic project.

Perhaps the famed drive of the Indian entrepreneurial spirit is the boost our political and bureaucratic classes need to get-on with this vital task of nation-building.

Are the captains of industry, the corporate honchos, the media moguls and the opinion-builders listening?

They will when they realize it is key to not just fulfilling big ambitions but,in the long term, surviving.

Otherwise the rich will continue to co-mingle without us.