A Socialistic Plutocracy

Posted: November 2, 2011 in humor, Humour, Random nonsense
Tags: , , , , , ,

Numbers are sometimes useful in clearing a cynic’s attic. Here goes. A quick comparison of UK and India:

Entry car price / average graduate starting salaries: UK = 35-40%. India = 75-80%.

Petrol prices are about equal, so are personal income tax rates, so are real-estate rentals/capital values  (in Tier 1 cities). I could go on…

…so I will.

So are cappuccino prices, so are typical eat-out prices, so are F1 ticket prices (sans mongrel performances)…

The NHS in the UK, though battered and bruised, does its job decently well, generally. So does Social Security. (St. Paul’s Cathedral tent-bearers and Occupy Wall Street notwithstanding).

Indians are self-governing NHSes, each individual relying on instant outlays from one’s already tax-lightened wallets to ensure continued healthy existence. Health Insurance claims? They discharge their wallet weight reduction responsibilities reasonably well; while taking great care to ensure their own coffers are well-inventoried.

Probably it makes sense to peer at the Gini Index (a measure of income inequality. 0 being no inequality, 100% being maximum inequality). India figures at about the same levels as UK but below China.

However, it is important to zone in on how the things that count are counted.

Scratch the surface a bit and it turns out that the Indian measure has historically considered consumption expenditure and not incomes in measuring inequality. Given the each-to-his-own Social Security situation, saving rates are higher than the West. When income is taken into account, India races ahead of China on inequality.

So, we have a situation where prices of common consumption goods are generally on par with UK, income inequality is higher than its self-confessed economic competitor, China; service levels leave much to be desired…and yet, prices keep inching up.

While this grand entertainer is underway, the economists powers-that-be claim inflation is 10-11%. A few trips to the countryside will quickly puncture this hypothesis. A burger in a rural town costs only slightly lower than in a Tier 1 city. Considering that store rentals are a fraction of a city outlet, not to mention income levels, it is intriguing to see outlets prospering with such pricing.

Many will be quick to pounce on me, alleging that I have presented only a rudimentary picture of reality. It is probably a good idea (for the pouncers) that I stick to rudimentaries. When one pencils in the chasm in service quality levels, the divergences in consumption versus incomes become stark.

We are moving towards a picture of reality that points to the following:

  • Indian consumption patterns are evolving. And, rapidly. An increasing share of an individual’s wallet is being directed towards consumption. As a result, prices are galloping ahead of income growth and is likely to continue to do so. I can hear the dusty debt clock ticking
  • The parallel economy continues to exert a major influence on prices. A thorn named Anna Hazare could prick this bubble. While one remains skeptical, sustained momentum on this anti-corruption/black money front could trigger a reflexive correction in prices

The above scenarios point to two divergent implications for investing. If the first dominates, consumption appears to be an enticing story. If the latter gains ascendancy, the opposite positioning is called for.

More importantly, on the humour front, the contradictions are noteworthy. The supposedly capitalistic UK (and West, in general), debt-drowning problems notwithstanding, has a socialistic character; while the economic plutocracy known as India masquerades as a socialism!

The supposedly poor live in ornately constructed mansions in the countryside, deriving incomes from farming and land-leasing that generally do not disturb the tax coffers. But (un)surprisingly, they continue to appear poor. The wealthy, on the other hand, live in cities but do their best to re-emphasize their roots to poverty and/or farming at every possible opportunity. The incentive system goads the poor to continue remaining poor, or at least project an illusion of poverty; while the  wealthy are heavily incentivized to continue in their state of inertia.

What about the unwearying middle-class, tax-paying common man?

Source: Unknown

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