The Psychology of Extravagance and its Socio-Economic Implications (GS Paper 1, Society)
Introduction:
- In India, a stark contrast exists between the lavish lifestyles of the country's elite and the widespread poverty that affects millions.
- This disparity has been highlighted in a study titled “Income and Wealth Inequality in India, 1922-2023: The Rise of the Billionaire Raj,” conducted by economists Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty, and Anmol Somanchi.
- The study reveals how the wealth of the top 1% has grown disproportionately compared to the rest of the population.
A Case of Gross Disproportion:
Recent statistics paint a vivid picture of inequality in India:
- Top 1% Wealth Distribution: The top 1% of income earners hold 22.6% of the total income and 40.1% of the total wealth in the country. This segment of the population possesses an average wealth of ₹54 million, which is about 40 times greater than the wealth of the average Indian.
- Top 10,000 Individuals: The wealthiest 10,000 people in India have an average wealth of ₹22.6 billion, representing a staggering 16,763 times the wealth of the average Indian. This level of disparity underscores the extreme concentration of wealth at the top.
Wealth Disparities Across Castes:
The concentration of wealth is also deeply intertwined with India’s caste system:
- Upper Castes: Upper castes hold nearly 90% of the wealth among billionaires. This dominance reflects the historical and ongoing socio-economic advantages that upper castes enjoy.
- Other Backward Classes (OBCs): OBCs control less than 10% of the billionaire wealth, indicating significant disparity within this group.
- Scheduled Castes (SCs) and Scheduled Tribes (STs): SCs own only 2.6% of the wealth, and STs are not represented among the wealthiest, illustrating severe economic exclusion.
Abject Poverty and Nutrition:
Despite efforts to reduce poverty, many Indians still struggle with basic necessities:
- Food Security: A significant portion of the population faces food insecurity. The NITI Aayog reported that between 2016 and 2021, 135 million people escaped multidimensional poverty. However, as of 2022, 56.5% of Indians could not afford a nutritious diet, estimated at approximately $4.20 PPP per person per day. Nearly 790 million people are unable to spend ₹350 daily on healthy food, highlighting the disparity in access to basic nutrition.
Contrasts in Spending: Weddings vs. CSR:
The juxtaposition of extravagant spending and charitable contributions reveals ethical concerns:
- Extravagant Weddings: Recent events, such as a wedding costing $600 million, starkly contrast with the amount spent on corporate social responsibility (CSR). This highlights the tension between lavish personal expenditures and corporate commitments to social good.
- CSR Spending: In 2022-23, the same family’s business group spent ₹1,271 crore on CSR, raising questions about the balance between personal indulgence and societal contribution.
Thorstein Veblen and Conspicuous Consumption:
Thorstein Veblen’s concept of conspicuous consumption provides insight into the psychology of the wealthy:
- Theory of the Leisure Class: In his seminal work, Veblen argues that the affluent use extravagant spending as a means to display their wealth and social status. This behavior is intended to reinforce their superiority and create a visible distinction from lower socio-economic groups.
- Invidious Pecuniary Comparison: Veblen's theory suggests that the wealthy engage in conspicuous consumption not only to showcase their affluence but also to foster envy and admiration from others, thereby maintaining social hierarchies.
Michael Sandel and the Entitlement Mentality:
Michael Sandel’s analysis sheds light on the moral and psychological aspects of wealth:
- The Tyranny of Merit: Sandel argues that many wealthy individuals believe their success and wealth are entirely self-earned, disregarding the role of external factors and social support systems. This entitlement mentality leads them to view their wealth as a reward for personal merit, rather than recognizing the broader societal context.
- Obligations to Society: Sandel emphasizes that success should be seen in the context of communal support and that the wealthy have a moral obligation to contribute to the common good, acknowledging that their achievements are interlinked with the well-being of the wider community.
Classism and Social Exclusion:
Extravagant events often reinforce social divisions:
- Classism: High-profile weddings and events can act as symbols of classism, excluding the lower classes and celebrating the elite in isolation. Such events reinforce social hierarchies and the separation between the wealthy and the ordinary populace.
- Social Segregation: By hosting exclusive celebrations and maintaining separate spaces for different social classes, the wealthy reinforce their position of privilege and marginalize those who are economically disadvantaged.
Psychological Capture of the Middle Class:
The middle class's perception of wealth reflects broader societal beliefs:
- Myth of Meritocracy: Many middle-class individuals accept the existing distribution of wealth as fair, attributing success to individual hard work rather than structural advantages. This acceptance is influenced by the myth of meritocracy, which suggests that success is solely a result of personal effort.
- Psychological Capture: This mindset often leads the middle class to admire the wealthy and accept their status as deserved, rather than challenging the systemic factors that contribute to inequality.
Religious Perspectives on Wealth:
Religious doctrines offer alternative views on wealth and its distribution:
- Koran’s Doctrine of Trusteeship: The Koran views wealth as a divine trust, which should be shared with the less fortunate. This perspective emphasizes the moral responsibility of the wealthy to support the underprivileged and contribute to social equity.
- Ethical Considerations: The doctrine suggests that wealth should not merely serve personal interests but should be used to restore dignity and promote equality, reflecting a broader ethical framework for wealth distribution.
Conclusion:
The article concludes that the extreme wealth inequality in India, highlighted by the extravagant displays of the ultra-rich, underscores deep socio-economic and psychological divides. Addressing these issues requires:
- Mindset Shifts: The wealthy need to reconsider their approach to spending and philanthropy, recognizing the impact of their wealth on social structures.
- Equitable Policies: Implementing economic policies that promote fair wealth distribution and enhance social cohesion is crucial to ensuring that all citizens benefit from the nation’s progress. This includes fostering a greater sense of social responsibility among the wealthy and addressing systemic inequalities.
