The GINI coefficient (or index), published by the World Bank, is a well-accepted measure of income inequality: the higher the number, the larger the inequality. Within the Group of Twenty nations, our index level is below China and the US, but above Germany and Japan. (If the unaccounted income in India is taken into account, our index will surely go up further.) Economist Simon Kuznets had hypothesised 50 years back that, as an economy develops, inequality increases but later reduces. In other words, the shape of the Kuznets curve is like an inverted U. Japan, Germany and some other social democracies in Europe support the hypothesis. Are income inequalities integral to capitalist development as Marx argued? (But he also argued that all value addition comes from labour—completely ignoring the role of innovation, managerial inputs and entrepreneurship.) In Victorian England, the rentier class (big landowners, the progeny of the sovereign’s concubines or knights in another era) was dominant; those who actually had to work to earn a living were second class citizens, and had to use “tradesmen’s entrances”. The largest proportion of employees worked as domestic servants. Income inequalities were glaring. The situation changed in the 20th century, also in the US, first because of adult suffrage and president Franklin D. Roosevelt’s depression-era New Deal; it changed even more dramatically in the post-war decades. Manufacturing grew rapidly; strong unions helped increase wages leading to the rapid graduation of a majority of the working class into the middle class. The share of labour in national income grew even as that of capital fell. The pendulum started swinging back in the Anglo-Saxon economies in the 1980s with the coming into power of Margaret Thatcher in the UK and Ronald Reagan in the US.
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