Equality isn’t enemy of growth. High inequality erodes social trust

Indian Express

Context and Central Argument

The article intervenes in a long-standing debate in development economics: whether inequality is a necessary by-product of growth or a threat to sustainable economic and social progress. It challenges the popular belief that redistribution undermines efficiency, arguing instead that excessive inequality weakens institutions, corrodes social trust, and ultimately constrains growth itself.

The core thesis is that growth and equality are not oppositional goals; rather, unchecked inequality becomes economically and politically self-defeating.

Key Arguments Presented

1. Inequality as a Structural Risk, Not a Moral Abstraction

The article argues that:

• High inequality undermines trust in markets, institutions, and governance
• Social cohesion is essential for long-term economic stability
• Inequality increases perceptions of unfairness, weakening rule compliance

Inequality is framed as a systemic economic risk, not merely a social justice concern.

2. Growth Does Not Automatically Trickle Down

The author contends that:

• Recent growth episodes have disproportionately benefited capital over labour
• Wealth concentration suppresses broad-based consumption demand
• Unequal growth produces fragile economies reliant on elite spending

This challenges the assumption that growth alone will correct distributional distortions.

3. Social Trust as an Economic Asset

A central contribution of the article is linking:

• Trust → institutional legitimacy → economic efficiency
• High inequality → resentment → regulatory capture and policy distortion

The argument suggests that economic systems require social consent, which inequality steadily erodes.

4. Policy Biases Favouring the Wealthy

The article highlights:

• Tax systems, subsidies, and regulatory structures often favour asset-holders
• Public policy increasingly responds to elite interests
• This reinforces inequality in a self-perpetuating cycle

Inequality is thus not accidental, but policy-mediated.

5. Equality as a Precondition for Sustainable Growth

The author argues that:

• Redistribution, social investment, and inclusive institutions enhance productivity
• Education, health, and social security expand the effective workforce
• Equality strengthens democracy and economic resilience

The article reframes equality as growth-enabling, not growth-limiting.

Author’s Stance

The author adopts a progressive political-economy stance:

• Strongly rejects the idea that inequality is economically efficient
• Aligns with contemporary empirical economics that link inequality to instability
• Supports active state intervention to correct distributional imbalances

The tone is corrective and evidence-based, not ideological rhetoric.

Biases and Editorial Leanings

1. Redistribution-Friendly Bias

The article:

• Assumes redistribution is largely efficiency-enhancing
• Underplays risks of poorly designed redistribution such as fiscal stress or moral hazard

2. Limited Attention to Incentives

There is:

• Less engagement with how excessive redistribution may affect entrepreneurship or risk-taking
• Minimal discussion of trade-offs between equity and innovation

3. Macro-Perspective Over Micro-Variation

The analysis:

• Focuses on aggregate outcomes
• Does not deeply examine sectoral or regional variations in inequality dynamics

Pros and Cons of the Argument

Pros

• Integrates economic, social, and institutional dimensions coherently
• Counters simplistic “growth vs equality” binaries
• Aligns with global empirical research on inequality
• Offers a strong framework for GS answers on inclusive growth

Cons

• Understates implementation challenges of redistribution
• Less attention to fiscal capacity and administrative constraints
• Normatively persuasive, but operationally less detailed

Policy Implications

1. Economic Policy

• Growth strategies must integrate redistribution and inclusion from inception
• Taxation, labour policy, and social spending must be rebalanced

2. Governance

• Reducing inequality enhances trust in state institutions
• Limits policy capture by concentrated economic interests

3. Social Policy

• Investment in health, education, and social protection is economically productive
• Equality strengthens democratic legitimacy

Real-World Impact

• Persistent inequality risks social polarisation and political instability
• Weak social trust undermines reform acceptance and compliance
• Inclusive growth improves resilience to economic shocks

For aspirants, the article provides a conceptual bridge between economy, society, and governance, useful across multiple GS papers.

UPSC GS Paper Alignment

GS Paper III – Economy

• Inclusive growth
• Inequality and economic development
• Role of fiscal policy

GS Paper II – Governance and Social Justice

• Social equity
• Policy capture and institutional trust

GS Paper I – Society

• Social cohesion
• Class and inequality

GS Paper IV – Ethics

• Justice and fairness in public policy
• Social trust and moral economy

Balanced Conclusion and Future Perspective

The article convincingly argues that inequality is not the cost of growth, but a constraint on its sustainability. While redistribution must be carefully designed to preserve incentives and fiscal balance, ignoring inequality risks hollowing out social trust, democratic legitimacy, and long-term economic dynamism. The future challenge lies not in choosing between growth and equality, but in designing policies that embed equity within growth itself, ensuring that economic progress strengthens, rather than fractures, the social contract.