countries such as Denmark and Norway are in the lower left corner of the figure, with both low inequality and a low IGE, and some very stratified Latin American countries such as Brazil and Peru are at the upper right corner, with high inequality and a high IGE. The United States falls just about in the middle.
Mr. Corak, whose work on the IGE is an input into Mr. Krueger’s Great Gatsby curve, explained to me via email that he couldn’t compute comparable data for India on IGE, which is why we don’t appear on the curve. But recent research by the World Bank suggests that India’s Gini has been rising steadily, even as extreme poverty drops, and was measured at 0.33 in 2005.
As inequality continues to rise in India, I would conjecture that India today would be close to where the United States appears, around 0.40, although we’ll only know for sure when the latest numbers have been crunched.
If India conforms to the “Great Gatsby” curve — and there’s no reason to believe it would be an outlier — that would mean the country would have an IGE of around 0.4, corresponding to a Gini coefficient of 0.40. This IGE implies that if Indian citizens are earning 50 percent more than the average income today, their children will earn 20 percent more than average in their generation.
Whether we want to admit or not, the Great Gatsby has, in my judgement, come to India.
It’s unlikely that Mr. Krueger was aware of the delicious irony, in an Indian context, of the name he gave the figure. Writers about India are increasingly reaching for America’s Jazz Age, or its even earlier Gilded Age, as tropes to help explain India’s dizzying mixture of rampant inequality and corruption, marked by the rise of a new class of super-rich entrepreneurs whose wealth – much like that of Fitzgerald’s title character – often seems to derive at least as much from proximity to power and shady dealings as it does to hard work and productivity.
So where can the culprits be found for rising inequality, whether in America or in India? Here the tales diverge.
There’s an increasing consensus that for the United States and other rich countries, the double whammy of technological change, which favors the educated and skilled, and globalization, which has led to the loss of blue-collar and lower-end white-collar jobs, has taken a heavy toll on the incomes and life prospects of the poor and the lower middle class.
In India, there’s heated debate among scholars about whether India’s increasing integration into the global economy since the economic liberalization of 1991 has amplified inequality or attenuated it. The impossibility of observing what economists call the counterfactual scenario, that is, what would have happened without globalization, makes it possible for partisans on both the right and the left to stick to their guns.
The truth is surely more nuanced than either ideological extreme would suggest: while some have wildly benefited from the opportunities that participation in the global economy presents, others are, as yet, left out.
For every Jay Gatsby that the “new India” has produced, there are many others for whom the dream is elusive, if not illusory.